Software Catches Errors on the HUD 1 Settlement Sheet
The HUD 1 is confusing and many professionals -- agents, lenders and attorneys -- skim over the numbers without really paying attention. Errors can slow down the sale or even blow the deal, and the perverse laws of the universe guarantees the errors will always be against you rather than in your favor. Although nothing takes the place of a pair of human eyes, HUD settlement statement software catches many errors that delay closing.
Manual Checks Are a Good First Step
You can't review a HUD closing statement too many times. This is especially true if the property has been subject to fast and furious negotiation. With so many numbers going back and forth between buyer and seller, you need to be sure the final figures are the ones that end up on the HUD form. Here are a few key entries to verify:
- Price - Although price is arguably the most important box on the HUD form, it is also often wrong. A common mistake is to enter the initial offer rather than the final negotiated price.
- Down Payment - This is another figure that may be negotiated so is subject to change. Just because the lender initially offered a loan with 20% down doesn't mean those were the final terms.
- Buyer/Seller Address - Although the real estate business is moving towards electronic documents and email, closing documents are still typically mailed. If someone's address is entered incorrectly then that someone isn't going to get the right documents.
- Proration - Figures such as taxes, interest charges and HOA fees are prorated between buyer and seller. Double check your dates to be sure you are prorating correctly.
- Cash From/To - With experience you get a feel for how much cash should be here. If this number looks wrong, then there is an error somewhere else on the form.
HUD Programs Find Errors
One advantage of using software to complete HUD forms is that computers are good with numbers. You can be sure that the confusing math on the form has been done correctly. The right boxes have been totaled in the right places, and the addition and subtraction is correct.
HUD software that includes tax tables makes this complex calculation simple. You can be confident you are using the right tax table for the property's jurisdiction, an important feature if you are in an area with multiple tax structures. You can also know that the tax proration will be done accurately.
Software makes it easy to update a form. Deals often change at the last minute requiring a new closing statement. A few seconds in the software allows you to generate a modified form and all changes will propagate through the calculations automatically.
Reducing errors is just one of the many ways that real estate law practice management software speeds closing. If you are still doing HUD forms the old fashioned way then it is time to update your practice to better serve your clients.
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