"Padding The HUD"...Games People Play.

It all boils down to reactive shenanigans. 

Makes you wonder why people look for creative ways to screw the banks. 

Some might call it tit for tat, an eye for an eye.............

Bryant, I agree with some aspects of your post; however, the content in your post sounds like it is intended for real estate investors, not the typical agent.  I agree that some investors are greedy scoundrels!  But not all of them are; and certainly the mainstream typical real estate agent is not excessively padding.

In a "typical agent" transaction, the escrow officer (here in CA we use escrow companies) will prepare the HUD-1 based on the purchase contract.  The escrow officers are licensed by the state, bonded, and regulated.  They do not over "pad".  However, they are required to estimate the costs for all parties, and because they do not know WHAT day it will close, it's impossible to estimate the exact closing costs.  If they estimate too low, we all lose, and often the inexperienced real estate agent is forced to pay the "shortage" out of her pocket.  Another big problem is that HOA liens and other expected surprises often pop up after you are well into the transaction, and if if the bank has already issued an approval letter, they will rarely IF EVER change their approval.  So it means that, again, the agent has to find some creative way to pay the difference (usually by sacrificing part of her hard-earned paycheck) OR the transaction falls apart.  Therefore, estimating expenses conservatively for the seller is a necessity.

HERE HERE _ unfortunately the people who are padding thier HUD's are probably NOT reading this, don't have a Broker who educates, and has not been doing Short Sales for very long.   Just irritates me beyond believe.

We have not seen any lenders not willing to pay the HOA estoppel fee. The problem with buyers paying the fees is if they are first time homebuyers getting an FHA loan. They oft times are asking for 3% and from Fannie and Freddie owned loans there is no issue with 3% concessions to the buyer from the seller. 

There is a difference between padding a HUD and making sure the HUD has projected fees out to a realistic closing date. The problem we see most often is the HUD is being prepared for a closing date in 30 days from the date of execution of contract and that is rare to close and get financing in 30 days from date of contract. The HUD should be prepared to be accurate on the projected closing date and I don't consider that to be padding the HUD.

There are also legitimate 'pads' that the lenders even tell the closing agent to do. For instance, Bank of America does not allow attorneys fees to be paid. We have an attorney who refers short sales to us because she won't negotiate them but she does the title work and the closing fee. For her, as an attorney, her closing fee is an 'attorneys' fee'. She used to put that under attorneys fees. Bank of America refused to pay those. So she and I asked BofA what are we supposed to do then, how is she supposed to get paid for doing the closing and they told us to put her attorneys fee into a different line item, ( lost which one just this moment, sorry) and that they allow up to $800 for that line item. That would appear to be 'padding' but it was totally legit. 

Transparency is the best way to have a chance at making it work in short sales.  I agree with your info about short sales!  Kristine

Broker Bryant,

"I've had buyers pay $10,000 cash contributions to the sellers lender before. everything is negotiable in a transaction."

That's the truth!  I've been a buyer who got the deal when others were only negotiating for themselves, and I really wanted the property.  I asked myself "What's going to clinch this for me?" and often found the answer in doing something for the seller that no one else would think of doing.

Mike in Tucson

Bryant:  That's a new concept to me... buyer incentives paid to a seller.  Hmmm. 

Also... the idea of "padding the HUD" is also a new one for me.  Perhaps I am naive... and live in a "little girl" world.  Over thirty years as a Realtor, and still things that I have never heard of bounce up every other once in awhile.  I am also wondering if this is just something that is more "market centered" rather than universal throughout the country in many other markets.

I am also wondering if these things that are used to "pad" the HUD are just phony, made-up stuff that would not appear on other HUDs... that they might be considered fraud.  Don't know... just wondering out loud.

I am just so glad that I see so few Short Sales in the greater Fort Worth market area.  But, then again, I don't go looking for them.  But I also rarely see them mentioned in the MLS information when I am showing homes, either.

Bryant - seems to me that due diligence by the listing agent will save a lot of time for all involved.  Thanks for the post.

Bryant - seems to me that due diligence by the listing agent will save a lot of time for all involved.  Thanks for the post.

Good Morning:  I think this is some good Info for all,keep up the good work and good luck in 2012,  E

Bryant...

I agree that the HUD-1 submitted should accurately represent the true offer as closely as possible, but there is a always a fear that something will pop up and there is a tendency to "head it off at the pass."

But as you correctly stated, that could be a deal breaker so it is NOT worth the risk.

Good post.

I have on occasion had the buyer pay the deficit in commission on a SSale for both the buyers agent and listing agents commission.

I consider that the "cost of acquision" for the buyer.

Well, I pad the HUD and I'm proud of it, LOL. But I don't do it in the way you mentioned. Not bogus crap. We have other fees in northern California that are separate from title and escrow. For example, we might have a mobile notary fee because the seller lives out of area, or courier, doc prep. There are recording fees that banks routinely refuse to authorize. And I've yet to meet a negotiator who completely understands prorations. We pad a little bit for the closing date and to make sure we have enough to meet the required net. You know what? It works for me.

Bryant,  Padding the HUD is just wrong.  Only charge the client for the service that they used.  I can personally say there are extra charges that I as a loan officer just eat out of my profit.  Also too, I have had many closing that I review the HUD all looks good on my end then at the last minute I tell the title closer, please give the client a credit on my behalf of $$$.  Yes, it might only be a few hundred that I make less but these clients that I do the credit for are the ones that worked hard and got me the documents on time and worked with me when I needed something. 

Hi Bryant, "padding the hud" does not sound like it goes along with honesty, integrity and transparency. Instead it sounds like a lot of the same shady stuff that got us here to begin with.

Elizabeth in #41:  To me, that does not sound like "padding the HUD," but simply like you know what you are doing, and know how to anticipate real, honest fees that may arise, and then to provide for them.

Bryant, you bring up a good point.  The short sale lenders do NOT negotiate.  They tell us what to do and we do it.  Plain and simple.  They are in complete control of the transaction and they call the shots.  In fact, they are in control of our economy too.  Therefore, you don't need to hire a short sale negotiator... simply hire a short sale processor to send in the paperwork, jump through the bank's hoops, and (hopefully) receive the approval letter on the seller's behalf.

Bryant - interesting blog!   About 70% of my business is short sales, and I work with a professional negotiator.  The Buyer paid Seller incentive is a new concept to me, and one that could have saved me fees and commissions in the past!  Will be looking at short sale transactions now with a new "tool" in my belt!