Q&A: My Title Company Deposited My Mortgage Payoff in My Checking Account Instead of Paying Off the Loan. What Do I Do?

This is a real question sellers ask, usually in a panic, a day or two after closing. The home sold, the deal funded, and then a much bigger number than expected landed in checking. A quick look at the loan account shows the balance is still there. The payoff went to the wrong place. Here is the plain version of what happened and what to do about it.

At closing, the title or escrow company acts as the clearinghouse. It collects the buyer's funds, pays off your existing mortgage, pays commissions, taxes, and fees, and wires you whatever is left. Each of those payments goes out on its own wire with its own instructions. If the payoff wire is misrouted, the lender never receives it and your loan stays open. The money in your account is not your proceeds. It is the lender's payoff, misdelivered.

First, do not spend it, invest it, or move it. Leave it where it is until it is sorted out.

Second, call your escrow officer the same day. Tell them the exact amount and date it posted. They have the settlement statement and the wiring records and can see where the instructions went wrong. Ask them to correct the disbursement and to put the plan in writing.

Third, call your lender's payoff department. Let them know what happened and ask for an updated payoff letter. Interest on your loan accrues daily, so the number from closing day is already stale, and someone has to cover the difference. Ask the title company directly how that gap is being handled, since the error was not yours.

Fourth, follow it through to the end. Once the lender is paid, ask for the release of lien, sometimes called a reconveyance, and confirm it was recorded with the county recorder. Until that document records, the public record still shows a loan against a house you no longer own.

Keep every email, statement, and payoff letter in one folder. If the title company is slow to respond or you are not sure what you are being asked to sign, talk to a real estate attorney before you do anything else.

What trips people up is the bank balance. It looks like a windfall. It is a liability with a clock on it, and the fastest way out is to treat it that way from the first phone call.

This is general information, not legal or tax advice.

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Jon Hegreness, REALTOR / Associate Broker, Howe Realty
(623) 826-0888 / JonHegreness@gmail.com / License BR540940000
9059 W Lake Pleasant Pkwy, B-200, Peoria, AZ 85382
previewarizonahomes.com