Issues impacting the mortgage industry have recently brought about some rather suspect charges on the settlement sheet (also called a HUD-1).
These charges are appearing in the 800 section of the HUD-1, entitled
Items Payable in Connection of the Loan, which are normally charges to the buyer.
These charges are questionable when they appear on the seller side of the HUD-1, and that has been happening quite often lately.
Here’s what happens. Let’s say that according to the contract of sale, the buyer and seller agree that the seller will contribute $8,000 toward the buyer’s closing costs. One would assume that at closing, the settlement sheet would reflect charges to the seller in connection with the sale of the house consisting of taxes and transfer fees, document preparation, realtor commissions, his loan payoff, and (in this scenario) the $8,000 seller subsidy – and that would be it.
Not so these days! Often times, the lender will state that there are certain charges in connection with the loan that the buyer is not allowed to pay, so in addition to the $8,000, the seller must also pay anywhere from $90 to $900 in additional charges. Since these charges are in connection with the loan, in which the seller had no decision-making powers, it does not seem fair that he should have to pay these fees. Our argument has been that if the seller is subsidizing the buyer’s closing costs, those fees in connection with the loan that the buyer is not allowed to pay should come out of the subsidy since that was the purpose and intent of the subsidy – and we have been successful in every case thus far.
It is important to mention that this situation is not the buyer’s fault; this is directly related to the lender or mortgage broker.
I am beginning to wonder how many times a seller is now paying more money to sell his house than what he originally agreed to because of this situation. How many sellers and realtors truly understand the charges on the settlement sheet and know that they should question these charges? In my experience, not many.
On a lighter note, if you are looking to buy a house and want a bargain, check out our Best Buys page.
Wishing you peace, love, and the home of your dreams,
Jeri
