Anytime you buy or sell a piece of real estate, you receive, at or before closing, a summary of all fees associated with the purchase or sale. Confusion regarding the HUD1 is common, so let me simplify.
Closing costs are itemized for both buyer and seller on a document called a HUD1 Settlement Statement. This form is filled out by the closing attorney or title company and will be shown to both buyer and seller at closing. The HUD1 shows all fees each pay to purchase, transfer and record the transfer of property.
As a buyer or a seller, always ask that a copy of the HUD1 be provided to you 24 hours before your scheduled closing. This should happen automatically, but often does not unless there is a specific request from the attorney or closing agent.
Receiving the HUD1 prior to closing allows time for the buyer to confirm all fees to be paid or funds needed, if any, to bring to closing. It allows the seller an opportunity to confirm the amount they will receive or, possibly, need to bring to closing.
When you receive the HUD1, examine it closely to find errors or omissions. Never assume it was prepared correctly. We regularly find mistakes on the HUD. If you find errors, have them corrected. And, if there are items you don’t understand, ask questions until you do.
The HUD1 is broken down into easily understood sections. The top area is self-explanatory with sections for buyer, seller, lender, and property information. The sections below are broken into two columns – the left includes a summary of the buyer’s/borrower’s transaction, the right column is for the seller’s.
Read your column and you will find it broken into transactional groups including: gross amount due, commission to be paid, loan charges, insurance, taxes, attorney fees, recording fees, etc.
Any items associated with the purchase or sale, but paid either before or after closing, should also show up on the HUD. These items will be marked with the letters “POC,” meaning Paid Outside of Closing. They are included on the HUD1 because this form is intended to be a record of all costs associated with the property transfer.
As with any legal document, when looked at as a whole, it can seem overwhelming. When you sit down and read it in sections, however, it is actually quite easy to understand.
Again, if you find something you don’t understand, ask questions until you do. The closing attorney, title company or agent, are all there on your behalf and expect to answer questions for buyers and sellers everyday.
Please leave your questions or comments about the HUD1 below.