Closing
HUD-1 and ALTA Settlement Statements in a Short Sale
In a short sale the settlement statement is not paperwork that appears at the end — it is a negotiating document the lender reviews before it approves anything. The seller receives no proceeds, so every dollar on the page is a dollar the lienholder is being asked to give up.
Last reviewed August 2026
HUD-1 versus the ALTA statement
The HUD-1 was the standard settlement form for decades. For most consumer mortgage transactions it was replaced by the Closing Disclosure, and settlement agents adopted the ALTA Settlement Statement to give all parties an itemized accounting. In short sale practice, servicers still ask for a "preliminary HUD" and generally accept an ALTA-format statement — the label matters less than whether the numbers reconcile.
What the lender is actually reading
Loss mitigation looks at one figure first: net proceeds to the lienholder. Everything else on the statement is evaluated as a deduction from that number — commission, title and escrow charges, transfer taxes, HOA arrears, judgment payoffs, and any negotiated contribution to a junior lien.
The seller nets nothing
A short sale seller cannot walk away with cash from the closing table. Any credit that looks like proceeds to the seller will be struck and can put the entire approval at risk. Relocation assistance, when a program offers it, is a separate lender-authorized line, not seller proceeds.
Fee allocation and the buyer column
Because seller-side deductions reduce the lender's net, buyer-paid closing-cost amendments are common: title insurance, the title search, and settlement or escrow fees are frequently shifted into the buyer debit column, subject to state custom and the buyer's own loan program rules. Whatever is agreed has to be reflected consistently in the contract amendment and the settlement statement — a mismatch between the two is an automatic resubmission.
Commission caps
Servicers and investors publish maximum total commission percentages. If the statement exceeds the approved figure, the lender will counter rather than reject, but the counter costs weeks. Confirm the cap before the statement is drafted, and never assume the listing agreement's number governs.
State-specific conventions
Who customarily pays transfer taxes, who selects the settlement agent, whether an attorney must conduct closing, and whether owner's title insurance is a seller or buyer charge all vary by state and sometimes by county. Getting these wrong produces a statement that looks wrong to the servicer's reviewer even when the total is correct.
Changes trigger re-approval
After the approval letter issues, most servicers require any material change to the settlement statement to be re-approved: a repair credit, a revised payoff, a commission change, or a new lien discovered on final title. Send the final statement to loss mitigation days before closing, not the morning of.
Practical drafting sequence
Build the preliminary statement as soon as the contract is executed so it can travel with the package. Update it after the valuation, again after any lender counter, and once more when title returns final payoffs. Keep every version — the servicer will ask which figures changed and when.
Run your short sales in one place
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