Question on HUD1 and Subject 2 - Posted by Candice

Posted by Jack on April 30, 2003 at 18:20:14:

If they deed the house into a trust, and assign you the beneficial interest of the trust, you now own the trust that owns the house.

The house was owned by them, but is now owned by you. In most states that would mean that they are the sellers and you are the buyer.

Question on HUD1 and Subject 2 - Posted by Candice

Posted by Candice on April 29, 2003 at 10:02:37:

I know this is a stupid question but on the HUD1 closing statement who is the buyer and who is the seller?

I mean who is buying subject to and who is selling subject to?

There seems to be three people in the transaction. 1) Investor. 2) Original seller. 3) End buyer

Please help me understand this so that I can know what I’m talking about when explaining to people and attorneys.

Thanks for a wonderful site.

Candice

Re: Question on HUD1 and Subject 2 - Posted by Brent_IL

Posted by Brent_IL on April 29, 2003 at 10:57:58:

There are only two actual parties to a RE sale. The one who is buying is one of them and the one who is selling is the other. Banks, investors, lien holders, et, al. have an interest in the property. The terms of the sale are subject to their recorded interest.

If you assign the contract, there are only two. If you do a double close, you are still only doing two at a time.

I can’t imagine explaining a HUD-1 to any seller to make a purchase. That’s what the closing agent’s do.

Never explain anything to a lawyer. You have to gently guide them by asking leading questions and what-if’s. If you have to explain things to your attorney, you need a new RE attorney.

I think you’re offering too much information to sellers that have little interest in hearing about it. Give them only enough to explain your position. If they want more, they will ask. Most do not.

Subject-to example:

"Mrs. Seller,

Your asking price is $xxx,xxx. You owe the bank $xx,xxx, so that leaves $xx,xxx in equity. I’ll take over the monthly mortgage payments so that you don’t have to worry about this loan. As you can appreciate, neither one of us is a real estate lawyer. We can have the lawyers put the property in a trust to protect you until the loan is refinanced. Now, let’s talk about the money I owe you for your equity in the property."

“But if I stay on the mortgage, will I be able to get a new loan for my new house”?

“Well, Mrs. Seller, the attorneys will document that you are free of the payments because I’m making them, so unless you have a bank that is unusual, it shouldn?t be a problem. Now, about all the money that I?m going to pay you, …”

Re: Question on HUD1 and Subject 2 - Posted by Dave T

Posted by Dave T on April 29, 2003 at 10:47:01:

When you (the investor) acquire the property from the seller (original seller), you are the buyer.

When you sell the property to your end buyer, you are the seller.

There are two different transactions involved here. In the first when you acquire the property, you are the buyer. In the second, you are the seller.

Re: Question on HUD1 and Subject 2 - Posted by Candice

Posted by Candice on April 29, 2003 at 17:33:41:

Thank you Brent,

Thank you for the help.

You stated,

“Well, Mrs. Seller, the attorneys will document that you are free of the payments because I’m making them, so unless you have a bank that is unusual, it shouldn?t be a problem.”

Does this mean that two HUD1 will be prepared by the attorney. One between me and the seller. A second between me and the end buyer?

So for every subject to transaction there will be two HUD1s to be filled out and one to be given to the original seller for future financing?

Again thank you.

Re: Question on HUD1 and Subject 2 - Posted by Candice

Posted by Candice on April 29, 2003 at 17:36:01:

Thank you Dave,

I was just wondering if two HUD1s will be needed for every subto transaction and one given to the seller for future financing.

Thanks again.

Sorry, Dave. I didn’t see your post. NTXT - Posted by Brent_IL

Posted by Brent_IL on April 29, 2003 at 10:59:41:

.

Re: Question on HUD1 and Subject 2 - Posted by Brent_IL

Posted by Brent_IL on April 30, 2003 at 24:48:28:

The HUD-1 is accurate only on the settlement day. The next day the prorations change; another day’s interest, taxes, and so on.

In Illinois, the majority of properties are in a land trust. The banks want it that way so that they don’t get involved in long judicial foreclosures. The trustee sends a letter to the new lender saying that the payments are being made by whomever and someone else is responsible for taxes, maintenance, et.al.

I don’t assign purchase contracts because I ask the seller for a boatload of concessions that I will not pass on to my buyer. Although they are usually on the same day, I have two separate settlements with two sets of documents.

Re: Question on HUD1 and Subject 2 - Posted by Dave T

Posted by Dave T on April 30, 2003 at 20:57:09:

The HUD-1 documents the accounting involved in the real estate transaction, showing how any money brought to the settlement table was distributed. For each transaction (first when you are the buyer, and again when you are the seller) there will usually be a HUD-1 signed by the parties to the transaction. The buyer and the seller each get a signed copy of the HUD-1 for their transaction.

Re: Question on HUD1 and Subject 2 - Posted by Candice

Posted by Candice on April 30, 2003 at 09:18:17:

>>>>The trustee sends a letter to the new lender saying that the payments are being made by whomever and someone else is responsible for taxes, maintenance, et.al.<<<<

Who do you use for trustee? Yourself or a third party?

Also one last question. You said the HUD-1 is only accurate on the day of the settlement. Does that mean I shouldn’t have a HUD 1 created until I need one? The reason I’m asking this is that an investor could buy and sell subject to today but the original seller might not need a new loan for months or years from now. That’s when the seller’s new lender will require a HUD1.

Thanks for clarifying for me.

Re: Question on HUD1 - Posted by George Hadden

Posted by George Hadden on September 11, 2003 at 17:12:48:

What if a borrower realizes the HUD-1 was not included in the final documents? And got a lot less cash out then they were first shown on the Good Faith due to broker adding extra commissions (points) after the final GFE before docs. They would not have done the loan if they knew because it did not benefit them to pay all those fees to get $5,000 cash out. The broker is now avoiding their calls

Re: Question on HUD1 and Subject 2 - Posted by Brent_IL

Posted by Brent_IL on April 30, 2003 at 13:40:43:

A HUD-1 form tells the parties what is happening to the money, borrowed or otherwise, that they brought to settlement. It?s an itemized list of charges and related fees for that particular real estate transaction. If the title is changing due to your subject-to agreement, you and the property owners get a HUD-1. If the sellers have deeded the house to a trust and retain an interest in the beneficial interest, no sale of the property has occurred yet, so although the information is used to make the deal, they won?t get a HUD-1 until they are cashed out.

I use a RE attorney?s law firm as a third-party trustee.

There is a lot of info on Bill Gatten?s website at www.landtrust.net that may be useful.

Re: Question on HUD1 and Subject 2 - Posted by Jack

Posted by Jack on April 30, 2003 at 14:06:14:

“If the sellers have deeded the house to a trust and retain an interest in the beneficial interest, no sale of the property has occurred yet, so although the information is used to make the deal, they won?t get a HUD-1 until they are cashed out.”

This statement is incorrect. The sellers can receive a HUD-1 from me when they deed the property to trust, and then assign me the beneficial interest. Then they can use the HUD-1 to show to future lenders. There is a line in the HUD-1 that is for “subject-to” transactions.

Their mortgage definately doesn’t have to be paid-off before they get a HUD-1, that’s why the line is there in the HUD-1.

Careful.

Re: Question on HUD1 and Subject 2 - Posted by Brent_IL

Posted by Brent_IL on April 30, 2003 at 23:14:24:

You are right. I shouldn’t post at two in the morning. Thank you.

My kinds of transactions are basically incomplete sales until such time as I am out of the middle. All the docs are escrowed, but the seller is still the perceived owner until the trustee transfers title to the R/B.

Re: Question on HUD1 and Subject 2 - Posted by Candice

Posted by Candice on April 30, 2003 at 15:18:53:

I am confused again now…if the sellers deed the house into a trust who is the buyer as shown on
the HUD-1?