HUD-1 Form and Reserves

Started by LindaM7 • 1 replies • 1264 views

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LindaM7 (Colorado)
Posts: 1

Posted:

My settlement form (HUD-1) shows a $500 charge for "reserves" - our developer-run board is trying to say that money is for expenses and they want to use it now, meaning no money in our reserve fund. Is that legal? Is this something to take up with HUD or the title company that prepared the HUD-1? Thanks for any help.

JosephW (Michigan)
Posts: 882

Posted:

Many new associations collect a fee from first-time purchasers in order to fund the association and pay some of the costs. For example, the association's insurance policies would have been paid in advance for the year and a part of this fee may go toward a pro-rated portion of those premiums. There may be other costs that that have been pre-paid or would exceed the monthly income from the number of owners that have closed, which would present a need for a "start-up" fee.

The explanation for this fee should be in the CC&R's or in some other paperwork provided by the seller. The title company should be able to show you its basis. HUD won't know anything about it, they're just using their forms.

Joe

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