Thank you so much for all the feedback we received on our recent post regarding HUD adding NHD reports to the list of official settlement services. I received many good comments and wanted to clarify some points that were raised.
- We know that a majority of escrow officers handle the accounting of the NHD reports on the HUD-1 correctly. The problem, according to the NHD companies I have interviewed, is not the 80% of escrow officers who account for these services the right way, but the 20% who do not. You would be surprised at the number of residential real estate transactions that actually close without an NHD report, resulting in panicked real estate agents calling NHD companies to get reports after the fact to ensure their files are complete. You can imagine the legal problems that could arise from that practice. With the NHD reports required to be on the HUD-1 these types of unfortunate mistakes and many others will be greatly reduced.
- It is true that in your average residential real estate transaction the seller pays for the NHD report. It is also the case that the buyer typically receives just their side of the HUD-1 showing what they paid for in the transaction. However the complete HUD-1 is the official record of how all monies, both credits and debits, were handled in the transaction. While there are ways to handle miscellaneous expenditures in a transaction, settlement services by law, should only be accounted for on the HUD-1. This is the reason why NHD reports are required to be on the HUD-1 regardless of the buyer’s interest.
Again, I want to thank all of you for your comments and keep them coming! I would love to hear from all my readers. And please continue to follow along with me as I explore different issues facing buyers and sellers in the real estate industry at www.re-insider.com.