Sold my Mom's estate home. Buyer asked for a home warranty and we agreed and paid $400 for it at closing to the title company. Title company arranged the warranty . 4 mos later the buyers realtor calls my wife who acted as my realtor and says the buyer declined the warranty and they want the $400 released to them. We felt like the buyer declining the home warranty was his decision and if anyone should get a refund it should be us. We fulfilled our part of the contract.We know The buyer buys homes and turns them into rentals and if he does this 10 x a year and gets away with it he's pocketing an extra 4 grand. We told them no but I'd bet 7 out of 10 actually release the funds to him. Title company and my wife's broker both agreed with us.

Had he asked for a $400 concessionto buy his own home warranty before closing I may or may not have agreed to it but this just felt like a cash grab to me

Since the title company bought the warranty they have to get the refund and they have agreed to send it to us. Will probably be some sort of handling fee but I'm good with that as long as it's not stupidly excessive , but my real question was more around is this buyer running a cash grab scam that perhaps he tries over and over again with multiple sellers. Anyone heard of something similar?

At closing, did the title company send $400 to a warranty company on behalf of the buyer?

I don't really think it's a scam.

The buyer could have been more transparent that he just wanted the cash, but they're essentially choosing not to use the provided warranty and taking the money instead.

Don't know that I would necessarily care either way as the seller...but that's your perogative.

My lender hat says any funds earmarked for closing costs not used for closing costs are returned to seller. Key points, buyer declined coverage, did not accept and cancel later.
If the cash was given to seller it could be construed as an illegal, undisclosed inducement to purchase by a non arm's length party.

I wouldn't consider a warranty closing costs but what do I know?

Good question

I was expecting something about the title company didn't purchae it, then something happened and they were coming back to you.

For $400 I wouldn't care. I would just be glad to be done with the house.

If you do it 10-20x a yr it adds up was my thought .

We were done with the house at closing . He had no leverage .

I don't know . I'd have to go back and look at the docs but think the title company bought it on behalf of the seller for the benefit of the buyer.

I've seen it floating around in clickbait articles as a "Want extra money from closing? Check out this wacky tip!" type thing. At least with both of our home warranties, they were in our names as buyers. We could have done anything we wanted with them after close, including refund it.

I read it as the buyer called to cancel the warranty, realized it was in either the seller or the title company's name, and reached out to collect the refund. Maybe I misunderstood that. Deats you are absolutely correct in your comments above. I don't think that the buyer is trying to hide LTV ratios with 400 bucks, just citing a common thing I see on warranty cancellations on investment assets. Usually provide a good security blanket until the house is occupied or the maintenance crew runs through

No, just extra cash . Not suggesting they buy the homes for the warranty rebates but it could be a way to squeeze a little extra out of deals . As Deats said, this is small potatoes but it could be bigger.

Not really relevant to this discussion but this guy did several shady things before we got to closing. He listed the house for rent online before we even had a contract with him with pics stolen from the online sale listing on realtors.com for example. That was fraud There were several other things after that. He was not an ethical operator imo which is part of why I dug my heels in on the warranty thing

Nm

Quote:

---

Did no one else read that they declined, not wanted to cancel? The warranty was never purchased.

---

I'm 99% sure it was purchased at closing and buyer is trying to cancel for a refund 4 months after closing. It was not "declined" prior to closing.

Not shady at all. Warranty companies suck and rarely cover anything. Maybe the buyer tried to get them to cover something, they declined the claim, and so buyer is asking for a refund.

Agree that warranties and warranty companies generally suck but as I understand it the buyer never had the warranty activated before declining it. It was not a cancellation of an active warranty , it was a flat out I don't need this which seems odd since it was zero cost to him. I will agree with you on this, if the warranty was in service and he wasn't happy with them and he cancelled it due to poor performance then yes, any refund should be due to him but that is not what happened from what I have been able to piece together.

Then why did his realtor call my realtor to ask for my
Permission to release the funds?

Martin Q. Blank said:

---

Quote:

---

Did no one else read that they declined, not wanted to cancel? The warranty was never purchased.

---

I'm 99% sure it was purchased at closing and buyer is trying to cancel for a refund 4 months after closing. It was not "declined" prior to closing.

Not shady at all. Warranty companies suck and rarely cover anything. Maybe the buyer tried to get them to cover something, they declined the claim, and so buyer is asking for a refund.

---

Not sure what you do for a living but specific language was used. Declined means they killed it before it was purchased. In our business, cash rebates are a big deal.

halfastros81 said:

---

Agree that warranties and warranty companies generally suck but as I understand it the buyer never had the warranty activated before declining it. It was not a cancellation of an active warranty , it was a flat out I don't need this which seems odd since it was zero cost to him. I will agree with you on this, if the warranty was in service and he wasn't happy with them and he cancelled it due to poor performance then yes, any refund should be due to him but that is not what happened from what I have been able to piece together.

---

Look at your closing statement. Was the $400 to the warranty company on there or not?

Quote:

---

Then why did his realtor call my realtor to ask for my

Permission to release the funds?

---

If the warranty was never purchased, and instead "declined", why are there funds somewhere?

Quote:

---

Declined means they killed it before it was purchased.

---

So why are the funds sitting at the title company? Where did they come from?

Because I paid the title company to purchase the warranty. It's on the closing statement

If the buyers agent hadn't called and asked for us to release the funds to the buyer I would have never known the warranty was never active. I'd have been fat, dumb and happy . That's why it's such a head scratcher to me that the buyer declined the warranty. He could have just accepted the warranty as his and as someone suggested he may have been able to cancel it for poor/nonperformance and got the refund for himself but that's not the way it went down.

halfastros81 said:

---

Because I paid the title company to purchase the warranty. It's on the closing statement

---

Smart man
It was being held on the sellers behalf to purchase the warranty that was promised in the contract, but then declined by this buyer. Therefore, being that it was in escrow, it reverts back to the seller.