Regardless of others perceptions of my talent for such, I have done a ton of real estate settlements over the past six months.
These can be relatively painless affairs, for once you see me, arguments over the property, negotiation over price and discussions over your interest rate should be completed. Once Im at the table, I really cant alter the terms of the deal or change any numbers on the settlement statement, although I have worked for outfits that will do that, consequences be damned.
Anyhow, the settlements Ive conducted over the past few weeks have been painful. A great deal of this discomfort has to do with the new government-mandated settlement sheet. Before the days of the new settlement statement (also known as the HUD), each and every cost and credit to the buyer and the seller were clearly spelled out. You purchased this; that is how much this cost. You receive a credit for this, this is how much will be added to, or subtracted to, your bottom line. Simple. Easy.
However, the new HUD ignores said streamlined explanations. Rather, it totals everything up in a given category and then provides the total for the services in said sections.
So, if you were charged $100 for a settlement fee, $105 for a title search, $95 for a title binder, and $700 for title insurance, the total for that section will be $4,682.50, of which you have to connect the dots, play some games with your calculator, and attempt to force figures to make sense better than an accountant for Enron.
Additionally, banks can charge origination fees and points in traditional transactions. Origination fees were basically a fee that the banks could levy if you were a high-risk borrower, and points were sums of money you could apply to your interest rate to buy it down. Now, almost all of the banks fees are totaled up and presented to the borrower as the loans origination fees. This is a red button phrase, and it makes buyers very defensive when they actually see it.
The new HUD also shows how much the title insurance producer makes on any given transaction, for it splits up the title insurance into two additional categories. One, the amount that will be paid to the underwriter and, two, the amount that will be paid to the agent. This drives people crazy, and it makes them more than a little angry that theyre paying the agent a pretty decent amount of money. This figure is nowhere close to what the borrower pays the banks, or as much as the buyer pays to the state through taxes. It really burns buyers up to see the title company make a couple of bucks off of their transaction.
Its almost like going into a convenience store and purchasing a soda. In place of the original price tag, theres the total price, with how much the actual product cost, and then the amount that the store will realize as a result of the sale. Imagine going into one of those places and saying youll pay $0.10 for the soda, but there is no way you will be paying the store its mark-up. If you get out of there alive, I would be quite surprised.
The aforementioned issue aside, the new HUD is a disaster. Ive compared it to a platypus a mammal that lives in the water, with a bill that lays eggs. That type of animal had to have been made by a committee, and said committee must have been dissolved soon thereafter, because there are no other animals like it.
See, the new HUD was designed by people who likely never sat through a real estate closing in their entire lives. Further, I dont believe said people ever knew anyone who sat through a real estate settlement in their lives. The nameless, faceless people who designed this atrocity did so in a vacuum, not particularly caring what the end result would be. They simply caved into cries from the legislature and various citizen groups that wanted change, and, by golly, they gave those people a change. Not a very good one, mind you, but change can be both good and bad, cant it?
In the future, I invite the people who drafted the new settlement statement to sit in on a settlement. They can then see the complete and utter confusion their progeny has spawned upon the world of real estate. Then, and only then, may we get some positive change.