The seller of the property is required to disclose whether the property is on public sewer or septic tank in the Transfer Disclosure Statement. You should have signed that as part of the disclosures to the buyer during the sale of the property.
If you told your agent and your agent didn't fill out the paperwork correctly, then you may need to get reimbursed from your agent.
It's unusual for the title company to hold funds to see if the seller gets sued.
Answered on Feb 08th, 2016 at 4:07 PM