Firstly, as others have stated, you shouldn't use any XML processing. Just read the file as a text file.

Secondly, your umlaut characters showing up as '�' is due to an incorrect charset (encoding) being used. The charset error may be in your code, or it may be the XML file.

The original XML file contains encoding="windows-1252", but it's unusual for XML to be encoded in anything other than UTF-8, so I suspect the file is really a UTF-8 file and the encoding it claims to use is not correct.

Try forcing UTF-8 when reading the file. It's good practice, regardless, to specify the charset when converting bytes to text:

String xml = new String(
    Files.readAllBytes(xmlFile.toPath(), StandardCharsets.UTF_8));

Assuming doc is your instance of org.w3c.dom.Document:

TransformerFactory tf = TransformerFactory.newInstance();
Transformer transformer = tf.newTransformer();
transformer.setOutputProperty(OutputKeys.OMIT_XML_DECLARATION, "yes");
StringWriter writer = new StringWriter();
transformer.transform(new DOMSource(doc), new StreamResult(writer));
String output = writer.getBuffer().toString().replaceAll("\n|\r", "");

I'd use Java's XML document libraries. It's a bit of a mess, but works.

String xml = "<response>\n" +
             "<returnCode>-2</returnCode>\n" +
             "<error>\n" +
             "<errorCode>100</errorCode>\n" +
             "<errorMessage>ERROR HERE!!!</errorMessage>\n" +
             "</error>\n" +
             "</response>";
Document doc = DocumentBuilderFactory.newInstance()
                                     .newDocumentBuilder()
                                     .parse(new InputSource(new StringReader(xml)));

NodeList errNodes = doc.getElementsByTagName("error");
if (errNodes.getLength() > 0) {
    Element err = (Element)errNodes.item(0);
    System.out.println(err.getElementsByTagName("errorMessage")
                          .item(0)
                          .getTextContent());
} else { 
        // success
}