To Fee or Not to Fee, That is the Question

Short sales seem to have become an every day type of transaction for many closing offices. A short sale is when a Seller sells the property for less than they owe. The lender must give approval for this, and will send an official approval letter that we will use at closing to prepare the HUD-1 Settlement Statement. Common allowances are the commissions, closing fees, recording fees, tax prorations, junior lien holder payments, and sometimes a seller incentive.

Realtors will negotiate the terms of the sale with the short sale lender, submit to them the offered contract, hardship information for the seller, and other required documentation. This process can take as little as 3 weeks and as long as 3 months, sometimes a little more.

One item that the Realtor must provide is a draft HUD-1 Settlement Statement for the short sale lender. This will allow them to review fees being charged, compliance with the terms of the contract and to see their bottom line. Among those fees, the seller’s settlement closing office will show their fee. The buyers office will also have fees for the seller, such as a wire fee to send the payoff, or some lenders want the proceeds overnighted to them, a release tracking fee, to ensure the Certificate of Satisfaction is filed properly, and sometimes a recording fee is collected for that Satisfaction, since it isn’t verifiable the short sale lender has collected that in their acceptable proceeds amount.

When selecting a closing agent on the seller side, ask them if they include any fees the buyers closing office may charge within their fee before that initial HUD-1 is submitted to the short sale lender. Not doing so could mean be difference to the seller having to bring money to the closing, or the seller’s closing office having to allocate some of their fee to pay the buyers closing office for required fees to make the payoff to the short sale lender.