The Washington Post

Real Estate Matters | Making sense of figures on a HUD-1 form


(Michael S. Williamson/The Washington Post)

I paid $160,000 for a condominium recently. On the HUD-1 statement, the sales price was listed as $160,000 but there was also a cost of $30,000 that I had to pay.

This was a short sale. I would like to know if any of that $30,000 is deductible on my income tax return forms. Can you please direct me to somebody who can give me a breakdown of these costs and tell me if any is deductible?

We’re surprised that you seem not to know why you had to spend an extra $30,000. If you agreed to purchase the condominium for $160,000, we would assume that you’d know what you were paying for, especially when it came to a sum as large as this one.

But let’s start at the top. A HUD-1 is the statement used by closing/settlement agents and title companies for residential real estate transactions. The form was created some 40 years ago by the Department of Housing and Urban Development for residential transactions. As an aside, starting in August 2015, a new form will replace the HUD-1.

To answer your question, you will need to review the HUD-1 statement further to see if there is any additional information provided about the $30,000. You may also need to review your purchase and sale agreement to see what you agreed to pay for. In some situations, short sale lenders may refuse to pay certain charges billed to the owner/seller of the home.

While $30,000 is a very large sum, especially as a percentage of the purchase price, the condominium association may have been owed years of back assessments along with attorneys’ fees and costs associated with your seller’s failure to pay monthly assessments. If your contract made you responsible to bring those assessments current and the seller failed to make payments to the association for many years, you would expect to see a sky-high bill.

If the HUD-1 does not give you enough information to determine what the sum was for, you may want to contact the settlement agent and request that they tell you who was paid with those funds.

The disbursement statement from the settlement agent should disclose to you who was paid and for what from your closing. You shouldn’t need to see the disbursement check to figure out what you were supposed to pay for.

Many of the payments you made at the closing would not be deductible on your federal income tax return. Generally, the only deductible sum from the HUD-1 is prepaid interest on the loan. That might have been a couple of hundred dollars, or maybe as much as a thousand dollars.

Most other charges listed on the HUD-1 might affect your cost basis for the condominium but would not be deductible on your federal income tax return. In certain situations, mortgage insurance payments are deductible along with points paid to obtain the loan (a point is 1 percent of the loan amount).

However, when it comes to payments made to the seller or the title company or most third parties for fees and expenses relating to your closing, those costs would not be tax deductible. As we approach tax-filing dates, you should consult with a tax adviser or tax preparer to go over all of your expenses from the closing.

Finally, you should never close on a property unless you understand all of the charges listed on the HUD-1. It would have been entirely appropriate for you to stop the closing until the title agent or attorney provided a solid explanation of all costs and payments. It’s confusing to us why you or anyone would simply write a check for an extra 20 percent without knowing why.

Ilyce R. Glink’s latest book is “Buy, Close, Move In!” If you have questions, you can call her radio show toll-free (800-972-8255) any Sunday, from 11 a.m. to 1 p.m. EST. Contact Ilyce through her Web site,



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Michele Lerner · March 17, 2014

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