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HUD-1 as a Marketing Tool – for Realtors

How can HUD-1 help you create a business?

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HUD-1 is a standard model that you use often. The form is used not only as a settlement closing statement, but also as evidence of the payment of various tax deductions. Understanding the form and tax-deductible items and communicating them to your customers will help your customers reduce their taxes and help you build trust and get more business.

What is HUD-1

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HUD-1 is a form used by a settlement agent (closing agent) to detail all money received and all fees paid and owed by a borrower and seller for a real estate transaction.
When is the HUD-1 released?

The Real Estate Settlement Procedure Act (RESPA) requires the form to be issued in all real estate transactions in the United States that involve union-related mortgage loans. RESPA states that you must obtain a copy of your HUD-1 at least one day prior to settlement.

When do customers need HUD-1 for taxes?

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Customers use the information on the form when filing their annual taxes. The application deadline is usually April 15 of each year for the following year. To allow the customer enough time to file taxes using the HUD-1 information, it is recommended that a copy of the HUD-1 be sent to the customer in January.

Because the real estate transaction takes place during the year, usually long before the tax return is filed, the HUD-1 given to a client at closing time may be lost or misplaced. Sending a copy of the HUD-1 to the client along with a cover letter will be very helpful and save time for the client.

HUD-1 Customer Message Sample

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Here is a sample letter that you can use to send your customers:

[Date]

It’s tax time

Dear [Client’s Name]:

Tax time is already close, and the first thing you’ll need is a copy of the closing statement on your property. Moving can be a very busy time, and you may have lost this very important document.

I would like to make sure that you take advantage of all possible tax benefits from our transaction. If your accountant has any questions, please ask them to contact me (if you need a referral to an accountant you can trust, I’ll be happy to provide you with one).

I look forward to continuing as a realtor and providing you with the highest level of service possible.

welcome,

[your name]

Oh, by the way… If any of your friends or relatives are thinking of buying or selling a house, I’d love to be at their service. So, when you think of these people, just call me by their name and number. I would be happy to follow up and take care of their real estate needs.

What is HUD-1 Important Information for Your Customer’s Taxes?

The information in HUD-1 relates to the following tax statements and schedules:

HUD-1 line tax form

Schedule A (Detailed Deductions), Line 10 – Annual Mortgage Interest Discount, Line 901

Table A (Detailed Discounts), Line 10 – Points Discount Line 802

Schedule A (Detailed Deductions), Line 6 – Property Tax Deduction Line 1003, 1004

Table E (rental income), Line 20 – Depreciation (Property cost required) Line 101, 102

Schedule E (Rental Income), Line 12A – Mortgage Interest Discount Line 901, 802

Schedule E (rent income), line 9 – Insurance 903, 1001, 1002

Schedule E (rent income), line 16a – State taxes 1003, 1004

Schedule E (rent income), line 18 – other deductions 703, 801-811, 1005, 1101-1110, 1201-3, 1301-1302

Table D (Capital Gains) Part One, Two, Column D – Sales Price 401, 402

Schedule D (Capital Gains) – Part One, Two, Electronic Column – Cost or Other Basis 101, 102

Form 6252 (Installment Sale), Line 8 – Sale Price 401, 402

Form 6252 (Install Sale), Line 8 – Cost or Other Basis 101, 102

Form 4797 (Sale of Business Property), Part 1, Column D – Cost or Other Basis 401, 402

Form 4797 (Sale of Business Property), Part One, Column and 101, 102

Two Section HUD-1

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Section J, Borrower Transaction Summary

This section contains 6 sections, and basically summarizes the entries made in Section L (settlement fee, see below).

o Section 100, the total amount due from the borrower

o Section 200, Amounts Paid by or on behalf of the Borrower

o Section 300, Cash on settlement from/to the Borrower

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