How to Read a HUD-1 - Sellers

I realized the other day as I was reviewing a HUD-1 or Settlement Statement with a client of mine, that while I take the ability to scan one of these for inaccuracies, errant charges, or omissions, that many intelligent people don’t know how to read one.  I have set out to go through it line by line in simple English so people know what they are looking at. 

This article will cover the seller’s side of the transaction and I will follow up with another article for the buyer’s side.  Okay, let gets to it.

I think it makes more sense to start on the second page and then go to the first.  The entire second page is where they are detailing the fees you will be incurring for the sale of your house.

Page 2

Section 700

• Line 700: This is obviously the real estate commission. 
• Line 701,702: Usually the commission is split 50/50 between your agent and the selling agent.
• Line 703: This is where the actual debit for the commission takes place on the HUD.

Section 800, 900, and 1000:
Unless you are paying some of the buyer’s closing costs, you will not need to worry about this section at all.  There should be no charges to the seller in these sections.

Section 1100:
These are going to be the fees that the title company charges you to close the house and insure the title.

• Line 1101: This fee is for the manpower, paper, rent, etc., to close the loan.  This usually should be in the ballpark of around $300 and tends to be split between the buyer and the seller.
• Line 1102 – 1106: These belong to the buyer.
• Line 1108 – 1110: Let’s start with 1109 and 1110 first.  This is a breakdown of the insurance that the title company is issuing.  The lender’s coverage covers the bank’s interest and is usually paid by the buyer.  The owner’s coverage protects the new owner and basically insures that they have clear title to the property.  Typically the seller pays for this because you are guaranteeing that the home’s title is clean.  Costs for this can vary wildly, so check with you local title company.  Line 1108 just puts the amounts for the lender’s and owner’s policy as debits to the buyer and/or seller on the HUD.
• Line 1111 – 1113: This is where you will usually find various and sundry “junk fees” that a title company will charge.  You might see items like courier fee, email fee, or wire fee in here.  Usually these are pretty small ranging from $25 - $100.

Section 1200:
Uncle Sam wants a piece of the pie.

• Line 1201: There are usually two items that need to be recorded at your local government office; the deed showing a transfer of property and the mortgage where the bank stakes its claim.  The seller typically pays to record the deed.  These shouldn’t be too much and are normally based on a per page basis. 
• Line 1202: “Doc stamps”…again there are doc stamps on the deed and doc stamps on the mortgage.  Some cities don’t have them, some are very expensive.  Typically the buyer is going to pay for the mortgage stamps and the seller is going to pay for the deed. 
• Line 1203:   See the explanation for 1202…exactly the same just on a state level.
• Line 1204 – 1205: Various things that may be required by local or state government in association with the sale of real property.

Section 1300:
This where they put everything else that doesn’t fit into one of the above categories.

Line 1301: Survey’s are not required by all lenders, but they are always good to have done.  A normal survey should run from $175 - $350.  Normally a buyer’s cost.

• Line 1302: Pest inspection aka WDO (Wood Destroying Organisms) or a termite inspection.  Normally about $75 - $125.  Again not all lenders require it, but highly recommended.  Normally a buyer’s cost.
• 1303 – 1307: Here you might find things like a home warranty, transfer fees to the HOA, HOA dues, etc.

Section 1400:
  This is the total of all the above costs and what it is costing you to sell your house.  They will bring this number over to the first page which is why I think it makes more sense to start from page 2.

Page 1

Section 400:
 Just like it says, this is a financial summary of the transaction.

• Line 401: Pretty easy, that is hopefully the price you accepted for your house.
• Line 402: I have never used it; banks don’t like to see any personal property as part of the real estate transaction.  If they bought some furniture from you, odds are it took place as a separate transaction.
• Line 406 – 412: If you live in a state that does not pay taxes in arrears, the buyers will owe you money for taxes that you pre-paid.  You will see the same amount appear as a debit to the buyer on lines 106 – 112.  You also might find HOA fees that you pre-paid here as well.
• Line 420: This is the amount due to you before any fees are paid and mortgages are paid off.

Section 500:
 This is where they subtract all the fees and payoff all debts you have on the house.

• Line 501: I have never seen this one used, as most sellers don’t hold the earnest money.  If you did, it would be deducted here.
• Line 502: This is where they bring over the amount from the second page.
• Line 503 – 509: These pay off any and all mortgages that you owe on the property.
• Line 510 – 512:  If you pay property taxes in arrears, you owe money to the buyer for the property taxes for the period of time that you occupied the home.  The buyer will actually pay the entire bill when it comes due, so you are giving them this credit to “pay your portion”.  Note: This can be negotiated at time of contract, but I am assuming that the seller agreed to pay for the taxes for the time they occupied the property.
• Line 520: This is total amount of fees and payoffs you owe on the house.

Section 600:
A little subtraction takes place.

• Line 601:  Gross amount due to you from line 420.
• Line 602: Minus total fees and payoffs from line 520.
• Line 603: The moment you have been waiting for...this is amount of the check you will be recieving at the the closing.