(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
434-973-7474
Tucker@TGBlaw.com
http://www.tgblaw.com/
http://www.tgblaw.blogspot.com/
Apr 22, 2010
Tip 16-2010: New GFE and Transfer Tax [recording cost])
(NEW GFE and Transfer Tax [recording costs]) Under the New GFE rules, the lender is responsible for disclosing to the Purchaser the “Transfer Tax” (we call it the recording costs or taxes). These are usually based on the contract amount and are calculated at $3.33 per $1,000. If the lender makes a mistake in disclosing this amount on the GFE then the lender has to pay any overages in the recording cost at closing.
I am already aware of several cases when the lender has made a mistake and had to “eat the extra cost.” The usual mistake is due to the fact that the Clerk’s Office will base the recording cost on the purchase price or the local tax assessment, whichever is higher. The lender needs to check with the local assessor to verify what is the current tax assessment in order to correctly calculate the “Transfer Tax” for the GFE. Should the lender use the contract price, and the tax assessment is higher, the Clerk’s Office will base the recording costs for the Deed on the higher amount (which is more than the disclosed amount on the GFE).
There is however another group of errors regarding the Transfer Tax that the lender can avoid with the realtors help. In these situations the Contract does not properly identify the property being sold. The contract should include the legal description and correct address and names of the Seller. In addition, if there are more than one parcel being sold, be sure to describe each parcel individually in the contract. Even if there is a combined description, attempt to identify the individual descriptions or at least include in the description that there are X number of parcels being conveyed. By working together, we can eliminate some of the problems posed by the new GFE.
Please contact me if you have any questions.
William D. Tucker, III
Tucker Griffin Barnes P.C.
Charlottesville, Virginia
434-973-7474
Tucker@TGBlaw.com
http://www.tgblaw.com/
http://www.tgblaw.blogspot.com/
I am already aware of several cases when the lender has made a mistake and had to “eat the extra cost.” The usual mistake is due to the fact that the Clerk’s Office will base the recording cost on the purchase price or the local tax assessment, whichever is higher. The lender needs to check with the local assessor to verify what is the current tax assessment in order to correctly calculate the “Transfer Tax” for the GFE. Should the lender use the contract price, and the tax assessment is higher, the Clerk’s Office will base the recording costs for the Deed on the higher amount (which is more than the disclosed amount on the GFE).
There is however another group of errors regarding the Transfer Tax that the lender can avoid with the realtors help. In these situations the Contract does not properly identify the property being sold. The contract should include the legal description and correct address and names of the Seller. In addition, if there are more than one parcel being sold, be sure to describe each parcel individually in the contract. Even if there is a combined description, attempt to identify the individual descriptions or at least include in the description that there are X number of parcels being conveyed. By working together, we can eliminate some of the problems posed by the new GFE.
Please contact me if you have any questions.
William D. Tucker, III
Tucker Griffin Barnes P.C.
Charlottesville, Virginia
434-973-7474
Tucker@TGBlaw.com
http://www.tgblaw.com/
http://www.tgblaw.blogspot.com/
Tip 15-2010: New Move Up Tax Credit
(New Move Up Tax Credit): The recent amendment to the First Time Homebuyer’s Tax Credit included a provision allowing existing homeowners to receive up to a $6,500 tax credit for purchasing a replacement home. This new provision requires that the homeowner must have owned and lived in his existing house for at least five consecutive years during the prior eight years, the new home price can not exceed $800,000, and the new residence must be under contract by April 30, 2010 with a closing by June 30, 2010.
There are some income limitations, but there does not appear to be any requirement that the homeowners have to sell their existing house nor do they have to buy a more expensive house.
This new provision should be considered for all current homeowners who may want to downsize and benefit from the excellent opportunities in our real estate market, along with the low interest rates available from our local lenders.
Hopefully with the warmer weather, more existing homeowners and first-time homebuyers will take advantage of this government program set to expire soon.
Please contact me if you have any questions.
William D. Tucker, III
Tucker Griffin Barnes P.C.
Charlottesville, Virginia
434-973-7474
Tucker@TGBlaw.com
http://www.tgblaw.com/
http://www.tgblaw.blogspot.com/
There are some income limitations, but there does not appear to be any requirement that the homeowners have to sell their existing house nor do they have to buy a more expensive house.
This new provision should be considered for all current homeowners who may want to downsize and benefit from the excellent opportunities in our real estate market, along with the low interest rates available from our local lenders.
Hopefully with the warmer weather, more existing homeowners and first-time homebuyers will take advantage of this government program set to expire soon.
Please contact me if you have any questions.
William D. Tucker, III
Tucker Griffin Barnes P.C.
Charlottesville, Virginia
434-973-7474
Tucker@TGBlaw.com
http://www.tgblaw.com/
http://www.tgblaw.blogspot.com/
Tip 14-2010: HAFA and Short Sales
(HAFA and Short Sales) On April 5, 2010, the next addition of the government’s HAMP program (Home Affordable Modification Program) goes into effect. HAFA (Home Affordable Foreclosure Alternatives) is intended to bring some guidelines and order to the existing chaos and uncertainty of the short sale landscape. Although not required to be followed, if a lender elects to participate in HAMP, it has to offer HAFA to any homeowner who does not qualify or fails in a HAMP modification.
HAFA provides certain incentives to both the homeowner ($1,500.00 move-out allowance) and the lender ($1,000.00 for allowing $3,000.00 of the sales proceeds to be paid to the second). Another benefit to the homeowner is that the deficiency on the first and maybe the second has to be forgiven. Benefits for the realtor include that a full commission is allowed and the process is supposed to be streamlined. There is even a provision whereby the seller can request pre-approval of a property price for a short sale (ARASS).
As the program is still being developed, there will be a significant learning curve, but hopefully HAFA will be more successful than the HAMP program. If you have a short sale that will occur after April 5th, 2010, contact the lender about whether HAFA is applicable or call your attorney for more details. (I will continue to monitor and report on the implementation of HAFA as it could provide a significant improvement for future short sales.)
Please contact me if you have any questions.
William D. Tucker, III
Tucker Griffin Barnes P.C.
Charlottesville, Virginia
434-973-7474
Tucker@TGBlaw.com
http://www.tgblaw.com/
http://www.tgblaw.blogspot.com/
HAFA provides certain incentives to both the homeowner ($1,500.00 move-out allowance) and the lender ($1,000.00 for allowing $3,000.00 of the sales proceeds to be paid to the second). Another benefit to the homeowner is that the deficiency on the first and maybe the second has to be forgiven. Benefits for the realtor include that a full commission is allowed and the process is supposed to be streamlined. There is even a provision whereby the seller can request pre-approval of a property price for a short sale (ARASS).
As the program is still being developed, there will be a significant learning curve, but hopefully HAFA will be more successful than the HAMP program. If you have a short sale that will occur after April 5th, 2010, contact the lender about whether HAFA is applicable or call your attorney for more details. (I will continue to monitor and report on the implementation of HAFA as it could provide a significant improvement for future short sales.)
Please contact me if you have any questions.
William D. Tucker, III
Tucker Griffin Barnes P.C.
Charlottesville, Virginia
434-973-7474
Tucker@TGBlaw.com
http://www.tgblaw.com/
http://www.tgblaw.blogspot.com/
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