The most important tool in your negotiating arsenal is your HUD-1. Some agents send in a Net Sheet that is ‘estimating’ the numbers and the dollars the bank will get. There are some problems with this in my opinion.If you submit a Net Sheet or a loosely calculated estimate of what the bank will net with your short sale it could become an embarrassing situation when the bank approves this after some long negotiations only to find out the number was wrong and low. If you plan on doing short sales on a regular basis then you need a good relationship with a reliable attorney/closing company to pull your title and get you the most accurate HUD-1 from the start.Here are the keys to a winning HUD-1 for submission to the bank.
- Make certain taxes and fees that may be due are calculated out months down the road to a date you think it will actually close. Often this date is 3 or 4 months out from the creation of the HUD.
- Have the title search run to find any additional liens. Too often a client has told me there were no liens and we find one anyway. Add this to the HUD and estimate the cost to close it 3 or 4 months down the road when the sale might close.
- Include HOA/Condo fees and find out if your client is also behind on these. If they are find out how far behind and again add additional months as needed to match your estimated close date.
- Separate HUD’s for a 1st Lien Holder and the 2nd Lien Holder if two loans with separate banks. The HUD to the first shows a larger payoff to the 2nd, while the HUD to the 2nd shows a low offer to them (the 2nd). Both banks will almost always say push the other way. The 1st will say they don’t want the 2nd to get that much and the 1st will ask for more. Preparing the separate HUDs sets you up for success and meeting in the middle.
- Get your attorney/title company paid. Know from the start that many banks won’t pay recording fees and overnight fees, things of that nature. Suggest from the start that your attorney roll their fees together (where allowed) into their settlement/closing fee on line #1101.
Also you need to know that it is very hard to get the banks pay for home warranties or inspections. So if they need to be paid either the buyer or the seller will need to pay for these so try to keep them off of the seller side of the HUD if you can.I hope this will help you get that much closer to easier negotiations. As always if you have questions or concerns talk with YOUR broker. If you are your broker then, umm . . . ? 🙂