Sep 12, 2012

Tip 32-2012: Short Sales & Final HUD Approval Nightmare

Guess what?? Another problem with Short Sales.

Short Sale lenders, even after the written approval letter, still require additional time to approve the final HUD before the short sale can be closed. Some recent Short Sale Approval letters are requiring up to five business days to approve the Final HUD. Additionally, they usually require that both sides of the HUD needs to be completed (especially if the Short Sale lender is allowing a closing cost credit to the Purchaser). This can create the problem of "two objects on a collision course" with no flexibility from either direction.

The Purchaser's lender may not have the final figures available for the HUD until the day before, or sometimes the day of closing. But the Short Sale lender needs to approve the HUD (with the final Purchaser's figures included) five days before the settlement. Therefore, the closing that was supposed to occur on Friday (with the HUD not normally completed until Friday) can not close until the short sale approval of the HUD the following Thursday. What a mess!!

The best approach to deal with this problem is to beg the Purchaser's lender to provide the final closing figures several days in advance of the scheduled closing. In this way, the HUD can be completed the necessary days before the closing, which gives the Short Sale lender enough time to approve the Final HUD.

As a realistic matter, obtaining the Purchaser's figures well ahead of time is not always possible. Accordingly, the person dealing with the short sale negotiator may need to beg the Short Sale lender for a quicker approval. In any case, just prepare everyone for this possible problem, which may delay the completion of the closing.

PS - As a reminder, never allow a short sale closing to be completed and all documents recorded for the Purchaser until there is an approval of the Final HUD by the Short Sale lender.

William D. Tucker, III
Tucker Griffin Barnes P.C.
Charlottesville, VA (434-973-7474)

No comments:

Post a Comment