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Short Sales: Not paying attention to details could cost you

The Importance of the Settlement Statement

As agents, many of us haven’t spent too much time scrutinizing the estimated settlement statements. We usually leave that work to escrow officers, lenders, or attorneys. Some folks even take a quick cat nap when it comes to that aspect of the transaction. Unfortunately, when it comes to short sale transactions, you better drink a few cups of coffee, wake up, and pay careful attention to the settlement statement.

Why? Well . . . the banks request these settlement statements (also know as HUD-1s) as part of the short sale package. The short sale lien holders want to see their bottom line. How much money are they going to net? How many cents on the dollar will they be forgiving?

Preparing the HUD-1 for the seller’s first and second lien holders is truly an art form. This is primarily because mathematical calculations need to be done in order to assure that there is no shortage on the close date. And . . . since it is difficult to determine how long the bank is going to take to approve the short sale, under-calculating the fees or forgetting to put all of the fees on the HUD-1 could potentially blow the deal or, at the very minimum, cut into the agent’s commission.

Once a short sale is approved, the lien holder will generate an approval letter that has a minimum net amount. So, if something has been calculated incorrectly and the minimum net cannot be met, additional money may be needed in order to close the transaction.

There is no question that short sale deals are tricky and time consuming.

Clearly nobody wants the deal to go south at the eleventh hour and nobody wants to give away any commission. In order to protect yourself, it is absolutely necessary to prepare the HUD-1 with a closing date that is realistic. This way taxes and any penalties will be calculated to a realistic date, and not a date only a few weeks out. Also, consider this: Did you allocate money for pest control, HOA fees, and other possible liens?

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While it was probably never your intention to get into this component of the deal, imagine how much more knowledgeable we will all be . . . and imagine how much more appreciative we will be of our fellow escrow officers, lenders, and attorneys once this current wave of short sales is over!

Written By

Melissa Zavala is the Broker/Owner of Broadpoint Properties and Head Honcho of Short Sale Expeditor®, and Chief Executive Officer of Transaction 911. Before landing in real estate, she had careers in education and publishing. Most recently, she has been able to use her teaching and organizational skills while traveling the world over—dispelling myths about the distressed property market, engaging and motivating real estate agents, and sharing her passion for real estate. When she isn’t speaking or writing, Melissa enjoys practicing yoga, walking the dog, and vacationing at beach resorts.



  1. HAFA disaster

    April 22, 2010 at 4:58 pm

    Even worse is when you’ve mastered all these details, the government throws you a curve ball. HAFA, which was meant to help us in the short sale process, has become a nightmare. 52 new pages of details to comb through now.

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