Short Sale Process

In the current housing market, many homeowners are struggling with increases in Adjustable Rate Mortgages (ARMs), job losses, etc. and find themselves in danger of foreclosure or bankruptcy. One escape for the borrower with only a single/primary loan and the lender to avoid losing more money on a home loan that goes to foreclosure auction is to use a technique called a short sale in which the lender accepts a discount on a mortgage.

Prepare a Preliminary HUD Settlement Statement Early

While a HUD Settlement Statement, which shows all expenses and disbursement of funds involved in a residential real estate transaction, is part of the standard closing paperwork, a preliminary HUD-1 statement is also part of the short sale package. Real estate professionals handling a short sale transaction need to prepare a HUD Settlement Statement early and accurately to avoid unexpected borrower expenses at closing and to use as a negotiating tool.

An Important Negotiating Tool

Since most title companies will not do numerous preliminary HUD-1 statements on short sales, it is imperative that the realtors or attorneys involved learn how to complete the HUD-1 form and present it to the lender. A preliminary HUD-1 is the most important tool in the process of negotiating with the lender to accept less than full payment on an outstanding loan.

As part of the short sale negotiation, the attorney or realtor gives the lender preliminary HUD statement showing an amount the lender can expect to receive from the sale (short sale net proceeds).

Accurate Calculation of Loan Expenses & Proceeds

To prepare a HUD-1, the attorney/realtor must assemble outstanding and future expenses that could affect the closing, including transfer taxes, broker commission, attorney fees, release fees and any other items that will be paid out of the proceeds of the sale. In a short sale, the lender receives the net balance, after all closing fees are paid. When you calculate closing costs accurately, the lender can expect to receive net proceeds shown on the preliminary HUD-1 Statement.

Once the lender has agreed to accept the amount as shown on the preliminary HUD-1, if the final expenses on the HUD-1 are greater than the agreed amount, the seller must pay the difference or the short sale approval will have to be renegotiated. A correct listing and calculation of all possible seller expenses on the preliminary HUD-1 can help you avoid unexpected seller costs at closing.

Easysoft’s HUD Software to the Rescue

Real estate professionals and attorneys nationwide use hud software to prepare HUD Settlement Statements for all residential real estate transactions, including preliminary HUD statements used to negotiate short sales.

Easy HUD has all the features you need to ensure that your short sale transaction preliminary HUD-1 Statement is one the lender can easily understand and that will help them make a timely decision on whether or not to accept the short sale proposition you present on behalf of the borrower.

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