ArcaMax

Reader Question: On the Closing Disclosure of the house I just closed on, there was a credit of $9,000 earnest money. The deal is done, but we have realized that we never actually put the earnest money in escrow. The title company obviously screwed up; we talked to the buyer, and they got all their money. What is our liability of informing the title company that they never took our earnest money? Or is this their mistake to catch?

Monty's Answer: When you close on a property, the Closing Disclosure serves as the official accounting of all financial transactions in the home sale. If your statement shows a $9,000 credit for earnest money that was never actually deposited, this represents a material accounting error.

You've mentioned that the seller received their proceeds as if the earnest money was deposited. This suggests the title company absorbed this discrepancy in their accounts rather than the seller being shortchanged. Have you looked at your financial records and confirmed you never paid $9,000 to the broker, the seller, the title company or anyone else? The purchase agreement called for earnest money of $9,000, and you did not make that payment, yet received credit for it on the Closing Disclosure?

If I'm understanding correctly, the title company gave you credit for $9,000 that you never actually paid, and the transaction closed successfully. I'm not certain how long it will take, but you should expect a call or letter at some point in the not-too-distant future. When the title company balances their monthly escrow accounts, they will discover they're short $9,000. This is highly unusual but not unheard of.

As far as how you should proceed, this is ultimately a personal decision. Some people would proactively contact the title company to determine if there was an error, while others might wait to see if the phone rings. The title company likely has errors and omissions insurance to cover such mistakes, but they need to know about the error to file a claim.

From a legal perspective, this represents a clerical mistake made by the title company, not fraud on your part -- assuming you didn't intentionally misrepresent anything. However, the $9,000 credited essentially reduced what you needed to bring to closing by that amount, giving you an unearned benefit.

While it might be tempting to remain silent, doing so could potentially constitute unjust enrichment -- a legal concept where one party benefits at another's expense without legal justification.

Remember that real estate transactions create long-term relationships within communities. Maintaining your reputation for honesty often has value beyond one-time financial gains.

Most real estate agents or attorneys would advise that you have an ethical obligation to notify the title company of their error, and I fall into this camp. However, I recognize that ultimately this is your decision to make based on your own values and risk assessment.

On the liability side, laws regarding unjust enrichment vary from state to state. If you're considering keeping the money without disclosure, I would strongly recommend seeking a legal opinion specific to your jurisdiction.

Richard Montgomery is a syndicated columnist, published author, retired real estate executive, serial entrepreneur and the founder of DearMonty.com and PropBox, Inc. He provides consumers with options to real estate issues. Follow him on Twitter (X) @montgomRM or DearMonty.com.

----

Copyright 2025 Creators Syndicate, Inc.