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Northeast Ohio Short Sales: What is a HUD-1 and why does it matter on a short sale?

Northeast OH – Here is something that drives inexperienced short sale agents crazy. It is a HUD-1, also called a HUD. HUD is the Federal Agency, the Department of Housing & Urban Development, also called HUD.

A HUD-1 is a document regulated by HUD. It is the financial accounting for a real estate sale. Here is why it is important to a short sale.

Discover how other sellers successfully did a short sale to avoid foreclosure by clicking here.

Before a short sale lender will accept a short sale, they want to know what they will net from the sale. A HUD-1 breaks down all the projected closing costs so the lender can see their net.

Most agents are familiar with a HUD-1. They see them at the closing of every home they sell. But, seeing a HUD-1 at a closing is not the same as the familiarity you learn on short sales.

See, if you mess up on that HUD-1, then it puts the short sale transaction in jeopardy. The short sale lender will look at a projected HUD-1 and agree to accept a certain number.

If unexpected costs get added to the HUD-1, then that net goes down. (There are always unexpected costs on a short sale. I can tell you from personal experience.) Now, the agent has to go back and re-negotiate with the short sale lender. That can drag out the process another 60-90 days.

The buyer will usually get frustrated and cancel the contract. Then, the agent has to re-sell the house and start the process all over again.

This is what causes many agents to hate short sales. They didn’t take the HUD-1 seriously and had problems on a short sale. As a result, they think all short sales are impossible.

To truly be successful at short sales, the agent must understand HUD-1s inside and out. They need to make sure that every single projected expense is added to the HUD-1 at the beginning of the negotiations.

Adding them after you have negotiated isn’t going to work. Thinking about a short sale?

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