Apr 22, 2010

Tip 17-2010: Short Sale and HUD-1

(Short Sale and HUD-1): To insure a successful short sale, it is extremely important that the initial HUD-1 is completed correctly before it is submitted to the short sale lender. If the proposed HUD-1 does not contain all the estimated expenses, the short sale negotiator will not allow normal closing costs to be added later because someone forgot to include them on the HUD-1. Examples of costs left off the initial HUD-1, which can not be added but still must be paid by someone are termite inspections, water and septic tests, HOA dues and real estate tax prorations.

Another problem is underestimating the costs on the initial HUD-1. You should always include a full real estate commission (as most short sale negotiators are now allowing full commissions). Do not underestimate legal fees and other normal settlement charges. The short sale negotiator can always lower the allowed costs on the final HUD-1, but I have never seen a negotiator raise an allowed cost because it was initially too low.

Ask for help with the HUD-1 to make sure that nothing is left off. A good practice tip is to have more than one person review each proposed short sale HUD-1 to avoid mistakes.

Please contact me if you have any questions.

William D. Tucker, III
Tucker Griffin Barnes P.C.
Charlottesville, Virginia

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