Ten Tips to getting a HUD -1 Approved for a Short Sale the First time!

    Ten Tips to getting a HUD -1 Approved for a Short Sale the First time!
    Short sales can be very time consuming, and overlooking the smallest detail can delay a short sale by days or even weeks. In some cases simple mistakes can cause your short sale to be completely denied. When it comes to a HUD-1, there a few simple tips that can help you potentially save a substantial amount of time by getting it right from the beginning.
    Brandon Brittingham teaching a short sale class
    To help alleviate any potential delays or issues when it comes to short sales we have constructed instructions to use as a checklist prior to providing a short sale HUD.
    1. Buyers and sellers full name and address have to be on the HUD, and you cannot have the same address for both parties. However the property is currently deeded for the seller and how it will be deeded for the buyer has to be on the HUD-1 correctly. The buyers and sellers full name have to be on this and have to match how it will be recorded. Also, the buyers and seller’s address cannot be the same, even on a preliminary HUD
    2. Lender’s full information must be on the HUD, name, address, etc…This seems to get overlooked all the time. Make sure the lenders FULL information is on the HUD from the beginning.  Buyer’s title company name and address also need to be filled in.
    3. Please review the contract to make sure all information regarding closing costs for the buyers is correct. I have had many short sales where a term of the contract, like a seller concession to the buyer was missed. It is important to double check the contract to make sure it matches the terms on the HUD. Any expenses that will affect the seller’s net proceeds need to be included.
    4. In almost every case, short sale lenders do not allow admin fees for the seller, even on the buyer’s side. It is pretty standard that an admin fee will not be paid on a short sale on the Seller’s side and many banks will not even allow it to show on the HUD-1 on the buyer’s side.
    5. EVERY HUD should show $3000 relocation money to the seller in the 500 series(or more depending on investor guideline) It is always important to request relocation funds for the seller and where you do it is on the HUD. Failure to do so could cause issues with investor net requirements or could cause time delays if you remember it later.
    6. Please check for the correct amount of any prorated fees for HOA, water, sewer, taxes and any other possible proration. Once a HUD is submitted for review and approved, it is very difficult to get additional expenses approved. Make sure all proration fees are 100% accurate. This is probably where the most mistakes are made and this has to be triple-checked. The HUD you submit is what the bank uses to approve fees, it is imperative that all proration amounts and fees are accurate. Having one proration wrong or one fee missing can potentially derail your short sale approval!
    7. If you charge fees on the seller side it all has to be wrapped into one fee called “settlement fee”; typically banks will pay up to $750-1000 for this fee. This figure needs to include release fees, and any and all settlement charges from the title company to the seller (lender). If the title company lists the charges separately on multiple lines this can cause a delay and the possibility of the fees being declined by the bank. Multiple fees on the seller side outside of this “settlement fee” usually are not approved and delay the process significantly just by asking for them.
    8. I always advise on a judgment and lien search prior to preparing the HUD. Short sales are complicated and time consuming for all parties, if there are additional liens or potential title issues, it is better for this to be resolved at the beginning. In some cases, if there are additional liens or title issues, a short sale may not be possible.  Simply put, if you can’t pass clear title, you can’t sell the property.
    9. During the process you will probably need multiple HUD revisions; generally you are on a 24-48 hour turnaround when asked for changes on the HUD. Any delay in the process can cause the short sale to be closed. Make sure you are always on time with your corrections!
    10. The HUD must always zero out at the bottom and show the Seller receiving no funds. If relocation funds are approved they have to be in the 500 series of the HUD and the HUD has to show a zero balance on the seller’s side at the bottom.
    These are just a few basic tips to shave you some serious delays and headaches, for more information check out my site www.moorebrittingham.com or contact me anytime!

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