Who Creates The HUD?

I'm representing the buyer of a short sale in California; Seller's agent is in my brokerage, and has "hired" a 3d party negotiator. BofA has countered my client's offer. I know the counter price but not terms. 3d party negotiator will not provide Equator worksheet or the HUD as it has "created problems in the past." I think the 3d party negotiator created the HUD as escrow/title named on the purchase agreement says they have not. 1. Am I entitled to see the Equator worksheet and/or the HUD? 2. Is the 3d party negotiator even allowed to create the HUD if they're not the escrow/title co?

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Permalink Reply by Marcy Moyer on January 15, 2012 at 5:56am

I send HUd1 to buyers agent after it has been approved to make sure buyer approves of all items they will need to pay. Before it is approved it can be changed so what's the point?

Permalink Reply by Michael Schneider on January 15, 2012 at 6:05am

The listing agent and the negotiator represent the seller, so their obligation is to the seller.  It seems prudent to me to share information with the buying side on a "need to know" basis, as needed to complete the transaction.  Eg, The buyers' lender often asks for the demand letter.  Beyond that "need to know" basis, I leave such sharing of information to the seller.

Let me ask Katherine.  Would you demand that the buyers share with the sellers the information they provide to their lender for securing funding, beyond "need to know"?  Probably not, right?

Much as I might like full information from the "other side", I think each side has a reasonable "right of confidentiality", when such information isn't really "needed" to complete the transaction.

If I were the Sellers' agent/negotiator, I would ask: What is the "need"?

Permalink Reply by Katherine Muhs on January 15, 2012 at 7:58am

Sorry, this is not a loan, this is a short sale where everything needs to be exactly correct; changes are problematic once the approval letter has been issued. I've had short sales nearly fall apart because a buyer name on the HUD was misspelled (with an a not an o) and because the HUD was not correct to begin with, and the short sale was approved on those incorrect terms.

Permalink Reply by Thom Colby CA Brkr 888-391-5245 on January 15, 2012 at 6:32am

Katherine -

 

The HUD is created by the Escrow Officer from the RPA and any addenda.  When there is a counter offer from the lender that requires a change to the HUD, and once it has been agreed to by Buyer and Seller, the escrow officer makes the changes and (in this case) it would be uploaded to Equator.

 

I do a lot of short sales for other Agents and Brokers as a 3rd party negotiator.  In CA, we are required to have a Disclosure and Acknowledgement between ALL parties, Seller, Seller's agent and Broker, Buyer, Buyer's Agent and Broker and the negotiator that outlines who represents whom and that the BROKERS have agreed to the negotiator.  In that document it has to be clearly spelled out what the fee is and who pays for the negotiator.  Additionally, as a negotiator, we need to have an Agency Disclosure between the negotiator and the Seller.

 

To answer the question about the HUD and the Worksheet, I do not provide it to the Buyer's side until it is 100% approved and an Approval Letter has been issued.  Too many foolish quiestions arise which just take too much time to address. I NEVER speak with the Buyer's Agent or Broker as I do not work for them.  I work for the Listing Agent, Listing Broker and Seller which is clearly defined in the Agreement.

 

If you have questions about your transaction, you should direct those to the Listing Agent in an e-mail so they are documented and the Listing Agent can easily pass it along to the negotiator.

 

I know you are both in the same brokerage but keep it as formal as you can......

 

Best of luck,

 

Thom Colby

Broker

Palm Desert and Newport Beach CA

 

Permalink Reply by Katherine Muhs on January 15, 2012 at 7:16am

Great comments everyone! The only reason I am requesting to see the HUD and/or Equator worksheet is because the buyer is deciding whether or not to sign a 4th time extension and they are concerned about the lack of information flowing from the seller's agent and 3d party negotiator. They just want to know what's in front of the investor for final approval so they can make an informed decision. The fact that the negotiator is not willing to share info, and that when asked, she only replies by quoting agency law that's not germane to our situation concerns me. Also, statements she has made makes me wonder if she even read the contract (e.g. referring to the lender on our cash deal). She also created the HUD, not escrow, and that's also a concern because the 3d party negotiator does not have access to HOA information and other items that could cause us to be short of funds at c.o.e. Wouldn't you want to know?

Permalink Reply by Thom Colby CA Brkr 888-391-5245 on January 15, 2012 at 7:45am

Katherine -

From what you've said, I would be concerned as well.  The negotiator needs to understand the only items on the HUD can be what has been agreed to on the RPA and any Addenda.  If your client is trying to make a decision as to wheher to continue or not, I suggest you send an Addendum specifying the Seller and Seller's agent provide "a copy of the HUD and Equator Worksheet as currently being considered by the lender".  Also, since both you and the Listing Agent work for the same broker, I suggest you both meet with the Broker and explain your concern with the lack of information flow.  Your Broker's responsibility is to ensure all parties are being treated equally and he/she is actually representing both sides of this transaction!

One last question, is the negotiator actively licensed by the DRE and either a Broker or affiliated with a Broker?  If not, they are operating illegally - just a thought.

 

Best,


Thom Colby

Permalink Reply by Smitty on January 15, 2012 at 8:25am

How do you know she does not have access to HOA information?  I'm a 3rd party negotiator and I can easily contact a HOA and ask for outstanding fees/dues and add them onto the HUD.  I've also changed the HUD numerous times before the approval if for some reason we find something out after submission that affects the bottom line.  Just because you have to extend your contract, doesn't mean the HUD is out of wack.  I would outline what your buyer is willing and is not willing to pay for, including HOA fees and anything else.  The negotiator can certainly match those items with the contract and align it to the HUD fees.

 

It sounds to me that there are other issues here at play rather than HUD issues.  It's sounds as if there is a communication issue that is affecting the sale, not necessarily HUD issues.  I would have a talk with the selling agent and tell them you're not satisfied with the information thats coming from the 3rd party negotiator.  Also, keep in mind the communication may not be forthcoming when there is nothing to communicate.  I'm in the middle of a Suntrust deal in which we are in limbo.  The file sat from 12/15 to 1/11 with very little info coming from Suntrust, so there was little for me to communicate with a buyer's agent.  If a buyer isn't prepared to wait a minimum of 60-90 days, sometimes up to 120 or 180 a short sale isn't for them.

Permalink Reply by Donna McClelland on January 16, 2012 at 6:26am

Wow, I am a 3rd party negotiator in Calif (and AZ) and I have never heard of one doing their own HUD!  I don't even know if that is "legal."  The title/escrow company is supposed to do the HUD.  YES, you are most definitely allowed to, and are entitled to see the HUD and the reason for that is, legally, your buyer needs to know what their costs are, and those are reflected on the HUD.  By looking at the HUD the negotiator submitted to the bank, you can see what he/she offered to the bank on your buyer's and the seller's behalf.  The negotiator isn't required to send you the counter offer worksheet, but when she submits YOUR counter offer back to the lender, she will also have to submit a revised HUD, which should be created by title/escrow which they are required to give you a copy of.  Hope this helps, and good luck! 

Permalink Reply by Jeff Payne on January 16, 2012 at 7:01am

Donna, the HUD is just a prelim HUD.  Wells has you do them online.  There is nothing that says the title/escrow has to do the prelim HUD to send to the lender.  I do my own HUD's with a HUD generating program.  I think you are getting final HUD that needs to be done by title/escrow with the prelim HUD that can be done by anyone

Permalink Reply by Michael Schneider on January 16, 2012 at 7:40am

Yes, agreed, Jeff.  This comes up a lot.  I think people often confuse the use of the HUD1 settlement sheet, as required under RESPA with the use of the HUD1 settlement sheet as a means of communicate a proposed offer.

The first is regulated, whereas the second is not IMHO.

I don't think the form itself is reserved for exclusive use for RE settlement.  So, I'm pretty sure that if I want to make an offer to Jeff for a property, and we use the HUD1 settlement sheet, as this is the format we know and understand, then the use of the form does not make this a regulated or restricted act.

On a practice level, with all due respect to title agents, attorneys, and para-legals, having done 100's of short-sale HUDs, I  think I am probably better at generating these "offer sheets".  BTW, mine are generated from VBA, running inside Access, from a master repository of all data elements for the file, that auto-populates Excel, so I can foot the HUD1 to any field, and then auto-populates and generates the HUD1 as a pdf.  Does the job nicely.

The final HUD1 must, of course, be fully under the control of the Settlement Agent, as they have the legal responsibility under RESPA.

Permalink Reply by Thom Colby CA Brkr 888-391-5245 on January 16, 2012 at 9:09am

Yes, I agree also BUT, I have the escrow officer (settlement company) do the proposed / preliminary HUD.  They can prorate the taxes, HOA if there is any.  They can research the HOA transfer and doc fees, etc.  If anyone is going to make the mistake on pro-rations let it be someone other than me!  It's their job and why they get paid their settlement fee which of course varies from company to company.

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