Part Two – What Is A HUD-1?

HUD SealWelcome to “What Is A HUD-1?”, a four-part series breaking down the settlement statement that’s used in a real estate transaction. The settlement statement, also known as the HUD-1, is your receipt – it’s an itemization of every penny associated with the sale or purchase, so if it’s money-related then it’ll be shown on the HUD-1. Each party (buyer and seller) or signatory will sign multiple copies of the HUD-1.

A quick note – HUD, which is short for the US Department of Housing and Urban Development, is a department in the federal government that oversees, among other things, housing, and includes departments like Freddie Mac, Fannie Mae, and the Federal Housing Administration.

In Part One, we looked at a Summary of the Borrower’s Transaction. Part Two will cover a Summary of the Seller’s Transaction, on the right side of page 1 of the HUD-1. These are credits to the seller.

  • Line 401, Contract Sales Price – again, easy. This is the full sales price for the purchase.
  • Lines 404-412, Adjustments for Items Paid by Seller in Advance – here the buyer is making a reimbursement to the seller for things, like taxes and HOA fees, that the seller has already paid for.

Sellers Summary HUD-1Reductions in Amount Due to Seller (these are costs to the seller):

  • Line 502, Settlement Charges to the Seller – these are the charges to the seller, brought over from line 1400 on page 2 of the HUD-1.
  • Line 503, Existing Loan(s) Taken Subject to – if the buyer is assuming (taking on) the seller’s existing loan, the balance of that loan will be shown here.
  • Lines 504-505, Payoff of First and Second Mortgages – the balance, on the day of closing, of any outstanding mortgage(s) on the property will be shown here.
  • Line 506, Deposit or Earnest Money – when the buyer made the offer, they submitted the offer along with a good faith deposit (GFD), showing their good faith to purchase the property. The amount of this GFD is deducted from their total purchase price.
  • Lines 510-519, Adjustments for Items Unpaid by Seller – if the buyer will be receiving a bill for items that were unpaid during the period they did NOT own the property, the seller will credit the buyer for those items here. THis often includes things like taxes and HOA fees.

Coming up, we’ll go through all of the settlement charges for both buyer an

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