to view larger version, click the image above
First, a few notes. You may notice that I've opted to black out many of the figures and company names in the above image. In regards to confidentiality I felt it necessary to do so to protect the people involved. Overall, the message stays the same without giving too much information and exposing my clients, the lender, or the other agent and their clients involved in the transaction. I have also highlighted a few key things - Borrower's column, Seller's column, and the "Items Payable in Connection with Loan" section. I will dissect these in my post, but wanted you to notice them now. You may also notice that my hand is very shaky when drawing lines with Gimp (a open-source photo tool similar to Adobe Photoshop).
The HUD-1 Settlement Statement.
The HUD-1 Settlement Statement contains a list of all the money passed around during a real estate transaction. Simply put, it is the official accounting of the sale and purchase of a home. It is required reading at the closing table and your agent should be aware of what's on it to make sure everything looks correct. They are often a bit confusing at first, but after you've seen a few of them or had them explained they suddenly begin to make sense.
The above HUD-1 Settlement Statement is from a recent transaction where I represented the buyer. It is only a small piece of the statement in order to illustrate a point that often confuses many buyers and sellers. As I represented the buyer in the transaction, they had few questions about this section of the statement, because as you will see, all of the charges appear in the seller's column.
The red-highlighted section is for "Items Payable in Connection with Loan" (Section 800) - these are typically the lender's charges for giving you the loan. Since the buyer is taking out the loan, the lender charges them with the various charges such as Loan Origination Fee, Underwriting Fee, pulling a Credit Report and more (the 900 section on the form covers thing requires by the lender to be paid in advance such as taxes, insurance, and interest).
Why is the seller being charged for the buyer's loan costs?
Of course the loan costs should be in the buyer's column (blue-highlighted) and not in the seller's column (green-highlighted). Right? Well, not exactly. In this particular transaction, we had asked the seller to contribute some money to the buyer's closing costs (negotiated in the contract under Paragraph 12. A (1) (b) - Settlement and Other Expenses (see image below)). This is a common negotiation in a real estate transaction in order to help lower the initial cost of getting into a home for a buyer and helping the seller get their home sold. It is very common here in San Antonio for seller's to contribute to the closing costs of the buyer (I'd say 98% of the contracts I have seen involve some amount of seller paid closing costs).
Because the seller in this particular contract had agreed to pay part of the buyer's closing costs, we have to account for this money in the HUD-1 Settlement Statement. Unfortunately, the title company (who prepares the document) are not allowed to enter it as a lump sum. (which would make things very easy to see and understand on the statement) Because of this, they have to find ways to show that the money was distributed by parsing it out through several different charges. Let's say a buyer is receiving $2,000 in closing costs from the seller. The escrow officer must find $2,000 of charges to even things out. Occasionally you will even see small charges being made of just a few cents in order to balance everything out to the last penny. As you can see from Paragraph 12 of the Texas Real Estate Commission's One To Four Family Residential Contract (Resale), the order in which the expense must be paid are laid out (Paragraph 12 A. (1) (b)) as well as what the buyer's expenses are (Paragraph 12 A. (2) (a) and (b)).
To make this parsing of costs a little more difficult, the lender must approve the HUD-1 Settlement Statement. Each lender can determine what is allowable or not-allowable as far as who pays for what. This requires the lender and the escrow officer to communicate clearly what charges they can put in which column. I have seen a lender reject a HUD-1 because they didn't want a charge in one column or another and the escrow officer had to go back and find a new place to deal with the remaining charge.
So while it may look a little strange to see the buyer's loan costs in the seller's column, it is actually all fairly balanced out. When you receive your HUD-1 Settlement Statement, you should speak with your Realtor® immediately to be sure you go through all the charges, check the math, and determine that it all adds up.
This is a post in a series on real estate education to help define some of the finer points of contracts and the process of buying and selling real estate in San Antonio, Texas (it's Texas real estate, so if you live outside of Texas, these articles may not apply to you). You can read the previous posts; "Realtor® Speak 102: What do I need to bring to closing?," "Realtor® Speak 102: Who's paying for the survey?," "Realtor® Speak 102: Does that come with the house?," and "Realtor® Speak 102: What if the house burns down?" or check out my ongoing series Realtor® Speak 101 at RErockstar.com.
photo courtesy of Menage a Moi
I was preparing for a closing yesterday with a client...
My client is a First Time Home Buyer and we've had some interesting moments looking for homes. We've seen good and we've seen bad. As we went through the house on our final walk-through to prepare for the closing the next day, the client had quite a few questions. This particular client really had a desire to understand what was going on as he was purchasing a home and I had a blast with him. I like questions. It gives me a chance to talk about something I know well and to help someone grasp concepts that I once didn't understand either. I was a first time home buyer once too.
His last question to me, as we were getting in our cars, was a simple one. What do I need to bring to closing? He had already received a list of items from the title company, but he wanted to make sure. I answered the question, parroting back what the title company had said; a drivers license (or other form of photo ID) and a cashier's check in the amount given to him by the title company.
Pretty simple list really. Of course, I added, "A well-rested hand." Closings are one signature after another and it can actually become a bit tiresome after awhile. We laughed, got in our cars and drove off.
On my way home, I thought of something else I should have told him - especially based on what I knew about him. Bring your questions and concerns. Closing time is the point where most people shut off and sign the papers. You're so close at this point, I've seen people glaze over and just sign whatever was put in front of them.
Not this client...
This client wanted to understand the process. Wanted to know what he was signing. He listened to every word and occasionally paused to ask a question or ask if he was correct the way he understood something in front of him. I loved watching it and the closer (Sherri Reidel of Independence Title) was great at explaining everything. We were also joined by the client's lender, Scott Cummins of Cornerstone Mortgage, who is a great guy to work with. What made this so interesting to me, was the interaction that happened at the table. Instead of just signing everything in front of him, the client asked questions, we all shared stories from our experiences, and we all bantered back and forth about real estate and real estate theory. It actually became a discussion and not just a closing.
My client commented on how great it was to have both of us there and I definitely think he learned more about the real estate process than most people do when closing. To me, that's an amazing thing. Education. A smarter consumer. A better relationship. Next time you go to closing - go with an open mind and a desire to learn. You'll walk away better prepared for the day you sell the home and buy a new one.
Special thanks to Sherri and Scott for being a great team to work with and to my client for helping me remember my first time buying a home and how overwhelming it was. I learned a lot today too. Tomorrow, I am better prepared to take on new clients than I was the day before.
This is a post in a series on real estate education to help define some of the finer points of contracts and the process of buying and selling real estate in San Antonio, Texas (it's Texas real estate, so if you live outside of Texas, these articles may not apply to you). You can read the previous posts; "Realtor® Speak 102: What are all these charges on my HUD-1 Settlement Statement?," "Realtor® Speak 102: Who's paying for the survey?," "Realtor® Speak 102: Does that come with the house?," and "Realtor® Speak 102: What if the house burns down?" or check out my ongoing series Realtor® Speak 101 at RErockstar.com.
photo courtesy of blmurch
What is a survey?
First let's get the concept of "survey" out of the way. Merriam-Webster defines survey as "2 : to determine and delineate the form, extent, and position of (as a tract of land) by taking linear and angular measurements and by applying the principles of geometry and trigonometry." Think of it as a map of your property marking property lines, easements, buildings, and setbacks. It shows the truest picture of what the layout of your land is and defines what you actually own when it comes to a piece of land.
Alright, so who's paying for it?
Like most things in a Texas contract to purchase a one to four family residence, the cost of a survey is determined during the offer and negotiations on a new home. There are several checkboxes that determine who pays for the survey. On more than one occasion I have seen an experienced agent check a box incorrectly which later cost their client money.
Paragraph 6. C (2) and (3).
Let's cover (2) and (3) first as they are very simple. The blank spot in both is for a number - the number of days after the effective date of the contract with which a buyer or seller must obtain a new survey. Pretty straightforward. (2) is for the buyer paying for the new survey and (3) is for the seller paying for the new survey (told you it was simple).
Paragraph 6. C (1).
This is where I see mistakes most often. This section lays out the rules and is typically used when a survey already exists on the home and both parties would prefer to use the older survey for some cost savings. Your agent and you (the buyer) should be looking at the existing survey though, if any major changes have been made (new pool, deck, shed, fence lines, etc.) you'll want a new survey. This will help you when you sell the house someday and also make sure that you know the official layout of your land and home.
If both parties are going to try to use the older survey, caution should be taken by the agents (as I said I see a lot of mistakes made here). The first section of (1) is for the number of days for the seller to present the survey to the the buyer and the title company. The set of checkboxes who (buyer or seller) will pay for the survey if it is deemed not acceptable by the title company or the buyer's lender. It clearly spells out that they (buyer or seller) must obtain it no later than three day prior to the closing date.
Here's where the mistake is made. The section in bold (in the contract, bold below indicates my emphasis) that reads:
If Seller fails to furnish the existing survey or Affidavit within the time prescribed, Buyer shall obtain a new survey at Seller's expense no later than 3 days prior to the Closing Date.
I have seen several times where we thought there was a survey and checked off C (1) and asked for the seller to pay for the survey. During negotiations, the seller's agent suggested the buyer pay for the survey and we agreed. However, when we received the signed contract back, they had merely crossed off the seller's checkbox and checked the buyer's checkbox. This is fine, if the seller does indeed have a survey, but if they do not or forget to supply one in the prescribed time, the last sentence becomes the most important one in C (1). Because the seller failed to provide a survey (whether they didn't have one or didn't perform their duties in a timely manner), the buyer now has the right to order one and have it conducted - and the seller has to pay for it.
Your agent should be aware of this, but as I've said previously, I have seen it happen more than once (when I was on the buyer's side of the transaction - it didn't make the seller very happy with their agent, but my buyer loved me for it). Knowing your contracts can really pay off for your clients and really should be a no-brainer for an agent.
This is a post in a series on real estate education to help define some of the finer points of contracts and the process of buying and selling real estate in San Antonio, Texas (it's Texas real estate, so if you live outside of Texas, these articles may not apply to you). You can read the previous posts; "Realtor® Speak 102: What are all these charges on my HUD-1 Settlement Statement?," "Realtor® Speak 102: What do I need to bring to closing?," "Realtor® Speak 102: Does that come with the house?," and "Realtor® Speak 102: What if the house burns down?" or check out my ongoing series Realtor® Speak 101 at RErockstar.com.
photo courtest of dvs
The roof, the roof, the roof is on fire. *
You and your agent have your offer accepted, you've done your inspections and the title company and lender are doing their work to get your home closed in a few short days. You're about as excited as you can be and can't wait. By this time next week you'll be putting the keys into the front door of your new home at 123 Fake Street. Life is good. In anticipation of your new address, you decide to swing by the house and take a look at the front yard to plan out your new flower beds under the windows. As you pull up at the curb, your jaw drops in horror.
Your new home is engulfed in flames.
Your dream of home ownership is now a nightmare. As the firetrucks scream to the home a million things go through your head, but one thing is louder than everything else and helps drown out the noise of the fire engines. What do I do now?
Welcome to Realtor® Speak 102.
This scenario is horrifying and wouldn't be a lot of fun to live through, but it does happen. I've never had it happen to any of my clients and I hope to keep it that way, but in case it ever does, I'm prepared to deal with the consequences. Thanks to the Texas Real Estate Commission's One To Four Family Residential Contract (Resale), we have a plan of action and a way to deal with this scenario when buying or selling a home. It's called Casualty Loss and it's in Paragraph 14.
With this one simple paragraph, your problems are solved. Casualty Loss gives you a few remedies in a situation where your new home is damaged, destroyed, or decimated before you close. Here's a basic look at your options:
No one wants this to happen to them, but it's nice to know the "what if" of the situation and that there are remedies for you and your family if this does ever occur. I hope to never have to invoke this paragraph in one of my transactions, but I know that if I'm your San Antonio real estate agent, I've got you covered thanks to our promulgated forms.
* Hope those of you out there that just read that line and started singing along enjoyed the reference.
This is a post in a series on real estate education to help define some of the finer points of contracts and the process of buying and selling real estate in San Antonio, Texas (it's Texas real estate, so if you live outside of Texas, these articles may not apply to you). You can read the previous posts; "Realtor® Speak 102: What are all these charges on my HUD-1 Settlement Statement?," "Realtor® Speak 102: What do I need to bring to closing?," "Realtor® Speak 102: Who's paying for the survey?," and "Realtor® Speak 102: Does that come with the house?" or check out my ongoing series Realtor® Speak 101 at RErockstar.com.
photo courtesy of me and the iPhone
Coffee is the fuel of any good Realtor®.
As a real estate agent, I spend a lot of time drinking coffee on my way to appointments and am always looking for a new java fix. I have driven by Java Junction on 3009 in Schertz at least once a day for the past month and finally decided to swing by there and see what it was like. Located in a very unassuming little strip mall on 3009 between I 35 and FM 2252 (map), Java Junction is just a short hop away from my office and with it's location is a prime spot to add to my list of favorite local businesses.
So how did they perform?
Coffee for me is a strange beast. I can drink cheap homemade coffee, fancy espresso drinks, and even the occasional instant coffee. I just like the flavor in general. My drink of choice when getting it to go is either gas station brews (Valero being my local favorite) or lattes. As I entered Java Junction, I noticed one thing rather quickly - it was a little dark in there (it's semi cloudy today). That may seem like an odd observation, but what I noticed was that there were no lights on. This obviously could be for several reasons, but I was hoping it was to conserve a little bit of electricity. It wasn't so dark that it was annoying - just something I noticed.
I ordered up a latte and the two girls behind the counter were fast and friendly. One thing I've noticed in some independent style coffee houses is that the staff sometimes can be a bit too "this is my summer job and I don't really care about it." This wasn't the case with the girls at Java Junction. My order was placed and in my hands in no time at all (I was the only customer when I went in).
I'm sitting in my office right now drinking my latte and it tastes great. Not the best coffee I've ever had (in all fairness I've had some of the world's best coffee in my travels - two of my favorites are at myhotel Bloomsbury in London and Hotel Atlantic Kempinski in Hamburg, Germany), but delicious none the less. If you're looking for something outside of Starbucks for your latte, Java Junction is a great option when heading down 3009 in Schertz. Their menu board also had a wide array of smoothies, sandwiches (including paninis, my all time favorite form of the sandwich), and pastries.
If you're in the Schertz area or find yourself traveling down 3009, check out Java Junction.
Java Junction
17361 Bell North Drive, #115
Schertz, TX 78154
(210) 653-4555
Former PA-based rockstar turned real estate agent in San Antonio, Texas providing an "all access pass" to real estate in San Antonio.
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