Thursday, April 22, 2010

seller questions HUD-1 after closing

Hi, I came across your web site after doing a few google searches on the topic of HUD-1 errors.  We closed this past Friday on selling our house, and received the HUD-1 form today, Wednesday.  We looked over it, and saw that the attorney (this is in NY) for the buyer (who prepared the HUD-1) did not put the buyers earnest money in line 501, and did not include our $300 credit to the buyers for small repairs anywhere I can find it on any page.  So that is $1300 extra that we are listed as getting.  Additionally, the closing costs are about $700 less than was estimated by our attorney, but there are several charges listed on the estimate our lawyer made up for us that do not show on the HUD-1, inc. money transfer fee, overnight doc fee, water escrow (? we had it transferred day of closing), "abstract" of $285, and "disbursements" of $65.  These errors happened I think in part because we have already left the state, so we have not seen this (although our lawyer did, and signed off on it) until post-closing.

My question is

a) we are closing on the purchase of a house in <1 week, and need the HUD form for the new loan.  I am concerned that any errors that I have uncovered will delay our purchase of this house.  What are the requirements for new loans if the HUD-1 incorrectly gives us slightly more than we were expecting?

b) errors on the HUD-1 form will come back to haunt us when we apply for the 2nd time homebuyers tax credit- would errors cause red flags on the tax form, or cause the IRS to say the form is invalid?

I don't want free money- I don't care if they make an error and need some of that final check back to them (since we were planning on the amount in the pre-estimate which should be correct).  I just don't want it to hurt the closing of my house in <1 week.

Concerned in MD

Hi, Concerned:  

Even when having an attorney or agent represent you at closing you should always insist upon reviewing the HUD-1 yourself prior to closing - just in case.

First, if you have a fully signed/executed HUD-1 in hand, you can use it as evidence that you sold your house, because you DID sell your house. 

Let me take some of these issues individually.

EARNEST MONEY:  Did they give the buyer credit for a deposit?  If so, it doesn't have to show on your side on page one.  It may be deducted from our proceeds somewhere else on the HUD-1.  ASK.  If not and you DID receive money from the buyer up front and someone failed to return that deposit to the buyer, that is an ERROR and you should ask that they work out a correction.

REPAIR CREDIT:  If your buyer was getting a mortgage, their lender likely would not allow a credit for repair.  This is something that should have been discussed with both parties prior to closing, however, if the lender doesn't permit something, then it can't be done.  The buyers simply lose the money.  You cannot give it to them even after closing as that would be mortgage fraud.

COSTS:  It's okay if your attorney overestimated your costs and the actual costs were lower.  That just means the attorney was conservative and wanted to prepare you for a higher number.

I can't tell from your e-mail if you have already received your proceeds.  If for ANY reason the amount you actually received is different than the amount shown on the HUD-1, that is a RED FLAG of mortgage fraud.  For instance, if they did not show the earnest money or repair credit on the HUD-1 but actually deducted it from your proceeds, then they are colluding to defraud the mortgage lender.  In that event, I would correspond with all parties with a letter via certified mail insisting that they either send you the money or amend the HUD-1 to show the real flow of money.  Make sure you include the mortgage lender in the loop.  If you do not get satisfaction, send the evidence to the FBI.

It is this seemingly innocent type of mortgage fraud that was the underpinning of the credit crisis we are recovering from.

In either case, I do not see a problem moving forward using this HUD-1 for evidence of sale. 

Hope that helps and thanks for reading!


No comments: