What Is A Settlement Statement In Real Estate? (Solved)

A settlement statement is a document given to borrowers at closing that itemizes services and fees charged to the borrower by the lender or broker.

Contents

What is the purpose of a settlement statement?

A settlement statement is a document that summarizes the terms and conditions of a settlement, most commonly a loan agreement. A loan settlement statement provides full disclosure of a loan’s terms, but most importantly it details all of the fees and charges that a borrower must pay extraneously from a loan’s interest.

What is a seller’s settlement statement?

What is the seller’s closing/settlement statement? The Seller’s Closing Statement, or Settlement Statement, is an itemized list of fees and credits that shows your net profits as the seller, and sums up the finances of the entire transaction. This is one of many closing documents for seller.

Who prepares the settlement statement?

The settlement statement is prepared by an impartial third party to the transaction, usually an officer with the title or escrow company that performs the closing.

What are closing costs on settlement statement?

In California, as a rule of thumb, closing costs amount to approximately 11 percent of the total sales price of a home. They usually include a real estate commission, loan fee, escrow charge, title insurance premium, a pest inspection and the like.

Does seller get check at closing?

Sellers receive their money, or sale proceeds, shortly after a property closing. It usually takes a business day or two for the escrow holder to generate a check or wire the funds.

When should I get a settlement statement?

When you are in the process of closing, you will receive a settlement statement. They arrive three days before closing from your lender. This document is commonly known as the “closing disclosure.” Essentially, this is for buyers to review in advance before closing.

Is a settlement statement the same as a closing statement?

A settlement statement is also known as a HUD-1 form or a closing statement. Until 2015, when the rules changed, this form was provided twice. First, within three business days of applying for a mortgage loan, the borrower receives one in the mail with the person’s estimated closing costs.

When should seller Get settlement statement?

It is usually handed out at least three days before the closing, so that the seller and their agent can review it. The document is usually prepared by a lawyer, escrow firm, or a title company.

How do you get a settlement statement?

In your case, you should start by contacting the settlement agent for the purchase of the home. Depending on how long they retain their records, they should be able to supply you with a copy of your settlement documents.

Can you cancel a house sale after closing?

Unlike buying a home, a buyer who has received bank financing for their purchase has 3 days after the house closes to rescind the financing and reject the mortgage. If they cannot replace their mortgage the home will revert back to the seller and there may be legal ramifications for the buyer.

What should you not do during escrow?

What not to do once your home is in escrow

  • Watch those zero-balance credit cards.
  • Don’t change jobs – or let your lender know if you do.
  • Don’t buy or lease a new car.
  • Don’t buy new furniture on store credit.
  • Don’t run up credit cards with cash advances:

Do sellers receive a settlement statement?

A seller should receive a settlement statement to review before they arrive at the closing table to sign documents. The purpose of this document is to show the purchase price, itemized deductions and funds going to the seller.

Who pays the settlement fee?

Settlement: This fee is paid to the settlement agent or escrow holder. Responsibility for payment of this fee can be negotiated between the seller and the buyer.

How much are closing costs on a 400000 house?

For example, on a $400,000 loan, you can expect closing costs to be anywhere from $8,000 to $20,000.

Settlement Statement

A settlement statement is a document that explains the terms and circumstances of a settlement, which is most typically an agreement between two parties. A loan settlement statement not only offers complete disclosure of a loan’s terms, but it also lists all of the fees and charges that a borrower must pay in addition to the interest on the loan. Different types of loans may have different paperwork requirements for settlement statements. Loan settlement statements, also known as closure statements, are a type of financial statement that is used to document the completion of a loan transaction.

They can be utilized whenever a big settlement has been reached.

Key Takeaways

  • Typically, a settlement statement is a document that explains the terms and circumstances of a settlement, which is typically a loan arrangement. A loan settlement statement offers complete disclosure of all of a loan’s terms and conditions, as well as any additional fees that may be charged. Apart from loan settlements, settlement statements can also be generated whenever a substantial settlement has occurred, such as after a corporate transaction of significant size, or in the legal, insurance, banking, and trade industries, among other instances.

Settlement Statement Explained

In its most frequent form, a settlement statement is included in the loan closing package that a borrower receives from a lending institution, generally via the efforts of a loan officer. A comprehensive settlement statement is required for all mortgage loan products, including home equity loans. It is also commonly required for other sorts of loans, such as credit cards. Borrowers of commercial and personal loans will often interact with a loan officer who will provide them with a closure, settlement statement at the conclusion of the transaction.

In order to properly finish the financing process and obtain their loan, borrowers are often needed to examine and sign a closing, settlement statement.

Closed disclosures and HUD-1 settlement statements are the two primary forms of settlement statements that a borrower may face in the course of a home loan transaction.

An example of a closing statement is the HUD-1 settlement statement, which is used in reverse mortgages.

Mortgage Settlement Statements

The Real Estate Settlement Procedures Act (RESPA) oversees the preparation of closing disclosures and HUD-1 documents for use in the mortgage lending market, among other things. The Real Estate Settlement Procedures Act (RESPA) has been altered and updated several times throughout history to assist in the management of mortgage lending disclosures and to safeguard borrowers. For borrowers who are participating in a reverse mortgage, the HUD-1settlement statement is required under RESPA. The mortgage closing disclosure is required for all other forms of mortgage loans under the terms of the Real Estate Settlement Procedures Act.

In most cases, the HUD-1 is a three-page document that must be presented to a borrower one day before the loan is finalized.

Providing information on all elements of a loan, including conditions as well as personal or entity information about the borrower, the HUD-1 and mortgage closing disclosure are both required documents.

This section contains information on loan conditions such as information on the principal and interest payments, variable interest rates, prepayment penalties, and any specific stipulations related with the loan, such as escrow requirements.

Loan Fees

In addition to the loan settlement statement, a borrower will get a bundle of disclosures that will assist them in completely comprehending all of the terms and circumstances of their loan. One of the most significant functions of a settlement statement, in addition to giving complete information, is the disclosure of all of a borrower’s miscellaneous fees and charges. All loans are subject to interest, but some loans may include a range of additional fees and levies. Some of these additional charges may include the following:

  • Origination expenses, appraisal fees, title administration fees, home inspection fees, background checks fees, underwriting fees, closing fees, loan insurance fees are all included.

When a loan is settled, a settlement statement gives a detailed breakdown of all of the costs associated with the loan.

Other Special Considerations

When it comes to loan closings, the word “settlement statement” is most commonly linked with the process. But there are other sorts of settlements that might take place that require a different type a settlement statement than the one described above. Debt settlement: After a debt settlement has been completed, a debt settlement statement can be used to offer a summary of the debts that have been wiped off, decreased, or otherwise adjusted. Lawyers and debt settlement organizations operate on behalf of debtors who are drowning in debt, attempting to decrease their liabilities to a manageable level or completely eliminate them.

  • Legal settlement statements may contain a description of payments that must be made to a plaintiff or a list of ongoing criteria that must be met as part of a child custody settlement agreement.
  • Banking: Settlement statements are generated on a regular basis in the banking sector for the purpose of conducting internal banking activities.
  • Individuals can also be given with settlement statements after funds have settled in an account and are ready for withdrawal.
  • Most stock transfers have a T+2settlement date, which means that ownership is established two days after the transaction is completed.
  • A closing or settlement statement is frequently required for large corporate transactions, such as mergers and acquisitions, in order for the transaction to be completed.

How to Read a Settlement Statement: Real Estate Closing Help

In our minds, a world in which every real estate transaction is straightforward, certain, and rewarding is what we are working toward. As a result, we strive to maintain high standards of journalistic integrity in all of our postings. Disclaimer: The information contained in this blog post is intended solely for educational purposes and should not be relied upon as a substitute for professional legal advice. If you have a question regarding your settlement statement, HomeLight always recommends that you contact your own financial advisor for assistance.

Gather your strength and look at it with a new pair of eyes.

In addition, the lengthy paper will disclose an intriguing calculation: how much money you will receive from this transaction at the end of the day, after deducting fees, taxes, and other expenses.

When it comes to commissions and closing charges, sellers should expect to spend between 6 percent and 10 percent of the final sale price, so it’s helpful to know precisely where their money is going. (Photo courtesy of Free-Photos/Pixabay)

What is a settlement statement?

A settlement statement is a detailed list of fees and credits that summarizes the financial aspects of a real estate transaction from beginning to end. It acts as a record of how all of the money has changed hands, line by line, during the course of the transaction. It outlines the cash payable to real estate agents who received commissions from the transaction, as well as the monies owed to local governments for taxes and recording fees, as well as the final costs to the lender. As a seller, you’ll see your net revenues shown in the seller credit column at the bottom of your statement, along with any amounts owed by the buyer.

Does the seller get a closing statement?

Most of the documentation is signed by buyers at closing, leading some sellers to question if they would even receive a settlement statement. This is one document, however, that is relevant to all parties involved in the transaction as a whole. At the time of closing, both the seller and the buyer will get a copy of the settlement statement to examine.

Who prepares the settlement statement?

This will be done by whoever is assisting the closing, whether it is a title business, an escrow agency, or an attorney representing the buyer or seller in the transaction.

What is the settlement statement called now?

Despite its name, the settlement statement is simply called that: a settlement statement. Different versions of these papers are used in different parts of the country. For real estate transactions, however, a settlement form established by the trade association ALTA (American Land Title Association) is commonly used throughout the country. In order to avoid any misunderstanding, the settlement statement you will receive is not a HUD-1. Closing Disclosures have been in force since October 3, 2015, and have replaced the HUD-1 Settlement Statement and the Truth-in-Lending Statement, thereby consolidating them into an one document.

Is a settlement statement the same as a closing statement?

Yes, a settlement statement and a closing statement are the same thing, albeit the term “settlement” is the more formal phrase that is most commonly used in the real estate market. (Image courtesy of Kelly Sikkema / Unsplash)

What’s the difference between a Closing Disclosure and settlement statement?

In terms of content, the Closing Disclosure is nearly identical to the settlement statement, but it is tailored specifically to the borrower and their expenses. Designed to be compared to the Loan Estimate, which is the initial estimate of fees that a buyer receives when borrowing money, the Closing Disclosure is supplied by the buyer’s lender and is intended to be compared with the Loan Estimate. On the basis of a copy of the expected settlement statement given by the closing agent, most lenders will produce the Closing Disclosure for their clients.

Sellers are often not provided with a copy of the Closing Disclosure document.

The Closing Disclosure is not required in a cash transaction because there is no borrowing of funds; nonetheless, the buyer and seller would still get a settlement statement outlining their expenses and any payments, as well as any other documentation.

What is an ‘excess deposit’ at closing?

The “Excess Deposit” line item on the seller’s settlement statement is one that frequently generates misunderstanding. What is an excess deposit, and who will get the amounts stated on that line if there is an excess deposit made? For the sake of simplicity, the excess deposit line reflects any monies remaining after accounting for real estate agent commission costs from the buyer’s earnest money deposit. Consider the following scenario: a buyer makes a $7,000 earnest money deposit on a $100,000 house.

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After that, the seller will get $1,000 in “extra deposit,” which will be refunded to the buyer.

What does the seller’s closing statement look like?

An example of a normal settlement statement is one with a column for the seller’s debits and credits on one side and another with a column for the buyer’s debits and credits on another side, with a description of the charge in the center. We’ll use the ALTA form as an example and break it down line by line in the sections that follow. The following is the source: (American Land and Title Association)

How to read the top of the settlement statement

You’ll see a few input fields at the top of the page (before you get to the section that looks like a spreadsheet) where you may enter information about the transaction’s basic facts, such as the names of the buyer and seller, the address of the property, and the date of the closure. Here’s a breakdown of the text line by line:

  • File No./Escrow No. : (File No./Escrow No. To think of the escrow number as a bank account number, consider the following: it is a string of numbers that is specific to a particular transaction between a buyer and a seller. DateTime:The date and time of the closure, for example, June 15, 2018 at 10 a.m., are specified. Officer/Escrow Officer: This is the name of the officer who will be assisting with the closure. An escrow business or title company office are examples of actual locations where closings take place. Real Estate Address: The address of the property that is being sold. Buyer: The first and last names of the buyer(s)
  • Seller: The first and last names of the seller(s)
  • Lender: The name of the company that is financing the loan for the buyers
  • Lender: The name of the company that is financing the loan for the sellers. Settlement date (also known as closure date): Date of disbursement: When will everyone — including you, the vendor — get compensated for their efforts? Settlement day is normally the next business day, and in most situations, you’ll be able to receive your house sale profit as soon as the ink on the final documents has dried on the paperwork. (Tip: Choose a closure date between Monday and Thursday within local banking hours to get paid as quickly as possible. If you close your business on a Friday, you may have to wait until the following Monday to get money.)
  • Additional dates, as required by the state are as follows: For example, the tax payback date or the recording date (which is used to establish the timer for the property’s ownership)

Debits vs. credits on the closing statement

The settlement statement is arranged in the same way as a traditional budget balancing sheet, with Debits (expenses) and Credits (deposits or increases) to the account as the primary categories. Other formats may include columns labeled “Seller Charge” and “Seller Credit,” which are interchangeable terms that refer to the same item. Let’s have a look at the different spreadsheet components that make up the closing statement.

“Financial”

The first section of the form, called “Financial,” contains information on the price your buyer is paying, followed by a list of things that are deducted from that price.

  • The ultimate sales price of the property, from which everything else will be subtracted
  • Items of personal property include any furniture or other personal property that the customer pays for and that you have agreed to sell
  • Earnest money is included in the deposit. The amount of money that a buyer put down as ” earnest money ” in good faith toward the purchase of your house after you accepted their offer
  • Amount of the loan The amount of money that the lender is lending toward the purchase
  • Existing loan(s) that have been assumed or taken over In accordance with This is only relevant in the event that the buyer is taking over the seller’s existing mortgage
  • Nonetheless, Credit to the Seller Any repair credits or buyer’s closing expenditures that have been agreed upon by the seller
  • Deposit for Exceeding Amount In this case, the buyer’s earnest money deposit will be deducted from the agent commission (any remaining monies will be sent to the settlement agent or straight to the seller)

“Prorations/Adjustments”

You may find out how much you could owe in property taxes (school or county taxes) or homeowner association dues for the period leading up to the moment you give over the keys under theProrations/Adjustmentssection. Consider the following scenario: you close on April 15th, and the tax bill for the period January through the end of May is due on June 1st. As a result, upon closing, the seller would be required to pay their taxes for the period January 15 through April 15. The buyer would be responsible for the property taxes linked with the residence from April 16 to June 1, as well as future property taxes related with the home.

  • Taxes on school supplies from (date) to (date) The amount you get will be determined by your closing date, the local school tax schedule, and whether or not your municipality collects school tax. Taxes collected by the county from (date) to (date) The amount will be determined by your closing date as well as the local county tax schedule. According to your closing date and HOA dues payment schedule, your HOA dues will be collected from (date) to (date). Seller Credit is any money owed to you by the buyer for taxes or payments that you have already made.

“Loan Charges to (lender co.)”

The next subhead, “Loan Charges,” provides specifics on the fees and charges levied by the buyer’s mortgage lender.

You, as the seller, may have agreed to bear part or all of the costs associated with the transaction. Everything is dependent on the terms of the agreement you reached with the buyer during the closing process.

  • Points Mortgage “points” are additional costs that must be paid at the time of closing if the buyer “bought down” their interest rate with a lump sum payment in advance. Purchaser’s Application FeeThis fee is charged to the buyer in order to process his or her loan application. Origination FeeThis fee is charged to the buyer in exchange for drafting and analyzing the loan application. Underwriting feeThis cost is charged to the buyer in order to complete the loan. MIP (Monetary Insurance Premium) When a buyer uses a conventional loan and puts less than 20 percent down on a property, mortgage insurance will be levied to the buyer. Prepaid InterestThe buyer is responsible for the daily interest that has accumulated between the closing date and the date of the buyer’s first monthly mortgage payment
  • This amount is payable at closing.

Other Fees and Charges for the Loan:

  • Expenses incurred by the lender in connection with a house evaluation (which are typically borne by the buyer)
  • Buyer’s Credit Report FeeThis fee is charged for getting the buyer’s credit report (typically reimbursed by the buyer or the lender in some situations)
  • Flood Determination FeeThis fee is charged to the buyer in order to receive a government-issued document indicating if the property is located in a flood zone. Flood Monitoring FeeThis fee is charged to the buyer in exchange for maintaining track of the flood condition of a property. Tax Monitoring FeePaid to the tax service provider in order for the lender to be notified if the new owner falls behind on his or her property taxes. Tax Status Research FeeThis fee is charged to the agency in order for them to check on and report any late tax payments to the lender.

“Impounds”

In order to consolidate the costs of their mortgage principle and interest, property taxes, and mortgage insurance into a single payment, the buyer establishes an impound (or escrow) account at the time of closing. Some payments, such as homeowners insurance premiums or county taxes, may be required to be paid in advance by the buyer at the time of closing.

  • Homeowners insurance for _months at a cost of $_/month The frequency at which homeowners insurance premiums are due, as well as the amount owing
  • Mortgage insurance for _months at a cost of $ _/month The frequency at which mortgage insurance premiums are due, as well as the amount owed
  • The city/town taxes are per month at the rate of $ per month. The regularity at which city/town taxes are due, as well as the amount of money owed
  • County taxes are per month at a rate of $ per month. The regularity at which county taxes are due, as well as the amount of money owed
  • School taxes are _/mo at a cost of $ _/mo. The regularity with which school taxes are due, as well as the amount of money payable
  • Adjustment of the aggregate To prevent the buyer’s lender from collecting more money from the buyer than is permitted by RESPA, a mathematical formula is used (the Real Estate Settlement and Procedures Act). In addition, they are not permitted to retain more than 16% of the new homeowner’s property tax and insurance payments.

“Title Charges and Escrow/Settlement Charges”

“Title Charges Escrow” or “Settlement Charges” are all terms used to refer to costs levied by title or escrow businesses for services such as notarizing signatures or notarizing documents.

  • Obtaining Owner’s Title Insurance ($ amount)Provides insurance coverage to the new buyer in the event that unknown issues with the title arise after the closing
  • Obtaining Owner’s Policy Endorsement(s)Tailors an owner’s policy to the specific transaction
  • Obtaining Owner’s Policy Exemption(s)Provides insurance coverage to the new buyer in the event that unknown issues with the title arise after the closing
  • In the event that unexpected concerns with the title arise after the loan is closed, the lender will be protected by a loan policy of title insurance (in the amount specified). Lender’s Title Insurance Policy Endorsements (if any)Tailors the lender’s title insurance policy to the specific transaction Search for a title The cost of doing a public records search for the property being sold
  • Binder for Insurance A certificate of temporary homeowners insurance, valid until a permanent policy is granted
  • Fees for escrow and settlement Expenses associated with arranging the settlement and distributing monies to the proper parties. a fee paid to a licensed notary public in exchange for witnessing document signatures Notary or document signing fees that are not included in the base price.

“Commission”

Commissions paid to real estate agents often range from 5 percent to 6 percent of the total sale price under the “Commission” part. Typically, commission payments are borne by the seller, however the entire commission cut will be shared between the buyer’s agency and the listing agent in the case of a tie.

  • In addition to the real estate commissions owed to the listing agent (who is representing the seller), there is also the buyer’s agent’s commission owed to them. Any other commissions that may be owing

“Government Recording and Transfer Charges”

Government recording and transfer costs are fees collected by the county, state, or municipality in exchange for documenting the new owner’s deed and mortgages with the appropriate authorities.

  • Deed Recording Fees (Deed)Fees charged for the legal recording of a new deed
  • The cost of lawfully recording a new mortgage or a new deed of trust is referred to as recording fees. if there are any more recording costs owed, they will be added to the total amount. Transfer Tax is a tax levied by municipal and state governments when a property is transferred. Transfer Tax is a tax levied on the transfer of property. It is possible that several transfer taxes are owed, as indicated by the second line

“Payoff(s)”

The likelihood is that when you sell your home, it will not be totally paid off, and you will still owe money on the mortgage loan. You will use the proceeds from the sale of your house to pay down the balance of your current mortgage. The “payoff” part of the seller’s closing statement includes a breakdown of those sums, as well as any fees or charges that may have been incurred. Payoff Lender Co. is the lender.

  • Amount of the debt that remains outstanding after deducting interest and other fees
  • Interest on Loan Repayment ($ amount each day) Any interest that has accrued up to the day you pay off the debt
  • Expenses involved with paying off the loan and being freed from your present mortgage, such as additional payoff costs, conveyance fees, recording fees, and wire transfer fees.

“Miscellaneous”

Finally, “Miscellaneous” refers to any residual transaction fees and charges that may have been incurred.

  • Pest Inspection FeeThe fee for a pest inspection before closing is distinct from the house inspection and examines for indicators of a termite infestation, among other things. Fee for Survey Participation Cost of drawing of the property to be sold, provided by a professional surveyor The cost of homeowner’s insurance Proof of insurance will be required by the lender. Fee for a home inspection Fee paid to the home inspector for completing a visual assessment of the home in order to check for severe problems
  • The cost of a home warranty Covers the repair or replacement of large appliances for a period of time generally up to a year
  • HOA dues are an ongoing expense. Fees owing to the homeowners’ association
  • Fee for transfer to Management Company fees connected with transferring a homeowner’s association membership from one owner to another Disclosure of Particularly Dangerous Situations Obtaining a hazard disclosure document will cost money. Payment for Utilities utility bills that have not been paid
  • Assessments If your homeowners’ association imposes a yearly property assessment, it may be necessary to pay it all at once in a single amount. Taxes levied against schools Usually depending on the value of the property
  • Taxes levied by municipalities whether there are any additional taxes payable to the city, such as county taxes or county property taxes There may be extra taxes due to the county. Expenses for buyer’s counsel In the case of any legal services undertaken on the buyer’s behalf
  • Fees for the seller’s attorney In the event that any legal services are rendered on the seller’s behalf

Subtotals

An overview of the money that you owe (“Due from Seller”) as well as the money that is heading your way (“Due to Seller”) may be seen at the conclusion of the settlement statement (see below).

Totals

“Totals” displays your credit minus your debit column – and, ideally, you’re still in the black at this point! Selling at a loss would be extremely unusual in the present market, given that just 2.6 percent of all mortgage homes had negative equity as of the first quarter of 2021. According to a research we did in 2021, it costs an average of $31,000 to sell a property in that year. If your sale price is high enough, it should cover everything, including your closing expenses and mortgage payoff, and leave you with a handsome money to put in your bank account.

  • Settlement Statements specified by the American Land and Title Association (ALTA) for title insurance and settlement businesses
  • CoreLogic’s Homeowner Equity Insights Report (first quarter of 2021)
  • Questions and Answers on TILA-RESPA Integrated Disclosures from the Consumer Financial Protection Bureau (updated in 2021). In accordance with HomeLight 2021 study, what is the average cost of selling a home?
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Rawpixel/Pixabay is the source of the header image.

Definition of Settlement Statement

It is also known as the HUD-1 settlement statement since it is a standard form that is used to disclose the final expenses of a real estate transaction in which a house is sold. According to the settlement statement, the transaction is completed by an impartial third party, generally an officer with the title or escrow business that handles the closure.

In California, the HUD-1 settlement statement is signed by both the buyer and the seller at the time of closing. Inquire with your local title or escrow business about the prices and common processes for settlement services, as they vary based on where you are located.

Significance

According to the United States Department of Housing and Urban Development, the Real Estate Settlement and Procedures Act, often known as RESPA, requires that the HUD-1 settlement statement be used for all real estate closings in the country. The HUD-1 document contains an itemized list of expenditures incurred by both the buyer and seller. It includes the fees charged by the title firm, as well as mortgage fees, taxes, and any other charges associated with completing the transaction. The final sums at the bottom of the first page reflect the amount owed at closing by the buyer as well as the net revenues received by the seller from the sale.

Format

Two pages make up the settlement statement, with the first page displaying the final sums and the second including a list of all the payments made. It is separated into two columns, one for the buyer and the other for the seller to fill out. In accordance with what they cover and who is charging the cost, fees are grouped together in this section. According to the California Land Title Association, the final figures on the statement must balance; the buyer’s credits and debits must match the entire amount of the seller’s total credit and debit.

Types of Charges

The commissions paid to the real estate businesses, as well as the manner in which the commissions are divided, are listed at the top of the second page in the first part of fees, which is located at the top of the second page. The next three parts cover all fees and charges associated with the buyer’s financing, as well as fees and charges that the buyer has already paid prior to the closing date. Prepaid costs are denoted by the letters POC, which stands for “paid outside of closure,” or “paid before closing.” The following section contains prices for title-related services, which include a title policy, a title search, document preparation, and attorney’s fees.

Time Frame

Prior to closing, the closing agent (also known as an escrow agent) prepares the HUD-1 settlement statement. While the title company is responsible for the majority of the closing expenses listed on the form, the officer must additionally receive the charges from the mortgage lender. Despite the fact that the settlement statement should be available one day before closing, it is common for purchasers and sellers to not get one until just before closing owing to modifications made at the last minute during the transaction.

Warning

Both buyers and sellers, as well as their real estate agents, should thoroughly review the HUD-1 settlement statement for any inaccuracies before signing it off. According to the U.S. Department of Housing and Urban Development, buyers should check the predicted costs on the Good Faith Estimate with the actual expenses on the settlement statement before committing to a purchase decision.

Before closing, buyers and sellers should thoroughly check the HUD-1 settlement statement and amend any inaccuracies that they find. Doing so can help them avoid costly mistakes. References Resources

  • Michelle Blain’s amp
  • Quot
  • Your Real Estate Closing Explained Simplyamp
  • Was published in 2007.

Kelly Hansen is a writer who has been publishing work since 1999. She has over a decade of expertise in the real estate sector and likes writing about anything and everything that has to do with the house. Hansen graduated with honors from the University of Texas at Austin with a Bachelor of Journalism degree.

What is the Seller’s Closing Statement: A Breakdown of Closing Documents For Seller

Hooray! You’ve found a potential buyer for your house. It has been a few weeks since you signed the purchase agreement and received the earnest money deposit. All that’s left is for us to complete the transaction. Additionally, it is at this point — when you can’t bear the notion of holding another piece of paper — that the Seller’s Closing Statement is sent to you. What documents are required for the seller’s closing? As a homeowner, you are well aware that a mortgage transaction entails a large number of calculations.

What appears to be a slew of dollars and debits is actually an exciting calculation – how much money you’ll make once all of the fees and taxes are deducted.

That is why it is critical to carefully analyze the closing paperwork for the seller.

What is the seller’s closing/settlement statement?

The Seller’s Closing Statement, also known as the Settlement Statement, is an itemized summary of fees and credits that reveals your net earnings as the seller and totals the finances of the entire transaction. It is also known as the Settlement Statement in some states. This is one of a number of closing paperwork that the seller will get. This document contains all of the pertinent information, including the purchase price, loan amounts, school taxes, and other pertinent information. Expect to pay a commission and closing charges of between 6-10 percent of the total transaction price, depending on the type of property being sold.

Closing remarks may appear to be difficult to understand at first glance, but they are actually rather straightforward.

In this way, both the buyer and the seller will have a better understanding of how the final expenses were determined and why each of you is responsible for particular fees.

Sellers may save hundreds of dollars in agency commissions by using UpNest!

Other Closing Documents for Seller

There is no standardized “closing statement” form that sellers can use from one state to another in the United States. However, the seller’s settlement form, developed by the American Land Title Association (ALTA), is frequently used in real estate transactions and contains a list of the most important phrases you’ll read on your final settlement statement. In addition to the “Closing Disclosure” form, the settlement statement may also be used in conjunction with the “Closing Disclosure.” This is one of the most usual closing paperwork for a seller to receive.

Other parties who may be in possession of copies of the settlement paperwork include your real estate agent and the financial institution that is holding the loan for the purchase of the property. The seller’s closing documentation can be obtained in this manner.

Closing Disclosure Form

Since the subprime mortgage crisis of the early 2000s, the Consumer Financial Protection Bureau has mandated that buyers receive the Closing Disclosure no later than three days before the closing date of the transaction. It outlines loan expenses, as well as additional fees and information that is relevant to the borrower, among other things. Whenever you, as a seller, volunteer to pay any of the buyer’s expenses associated with getting a loan, you will almost certainly receive a copy of the Closing Disclosure, which explains the lender’s fees and charges.

It should only be seen to the buyer until an agreement to release information is signed by both parties.

This is a critical piece of closing documentation for the seller.

What fees would a seller pay?

Whatever balance you owe on your mortgage is payable at the time of the closing. From the seller’s standpoint, this is the first and most important element to consider. Additionally, buyers and sellers may be responsible for their respective portions of the commissions charged by real estate brokers. This information would be included in the seller’s disclosure statement. You may also be required to pay a prorated amount of your property taxes or homeowners insurance premiums for the time period during which you are still residing in the house.

Seller Concessions

Then there are seller concessions, which are frequently agreed upon throughout the course of a negotiation between the buyer and the seller. Paying for all or a portion of the title insurance, the cost of the appraisal, or prepaid interest points can sometimes assist you in closing the sale more quickly and securing a buyer’s commitment. Buyers will occasionally take advantage of seller concessions in order to reduce the amount of money they must bring to the closing table and to roll their own closing expenses into the loan and amortize them over the life of the loan.

The amount of money a seller can contribute toward these charges may be limited depending on the amount of money a buyer puts down and the type of loan they’re applying for.

Save tens of thousands of dollars.

Inspection Repairs

If any repairs are required on the property, you may be required to pay. Depending on the type of financing a buyer obtains, it may be necessary for the buyer to make repairs before the property may be sold. You and the buyer may have reached a similar arrangement in the purchase agreement for repairs that are discovered during the inspection process. Working with a Realtor who has a sixth instinct about settlement snags will help you avoid problems.

You will be required to sign a settlement statement, which will be written by one of three parties: an attorney, a title business or an escrow firm. The closure will take place at one of these three locations, depending on your state.

Four Types of Settlement Statements

Because settlement statements are intended for use by agents and brokers on both ends of the transaction, four different types of closing paperwork are delivered to the seller. However, it is feasible to have a Buyer’s and Seller’s statement that is mixed.

  • Combined Settlement Statement– The Combined Settlement Statement collects all of the transactions that are relevant to both the buyer and the seller in one place. Settlement Statement Cash — This version is used for real estate transactions involving liquid cash, such as property sales. Purchaser Settlement Statements – This is the version of the settlement statement that is only sent to the buyer, and it contains only information that is relevant to the buyer’s side of the transaction. Seller’s Closing Statement — This document gives a detailed summary of all transactions and fees, as well as how they affect the amount of money the seller will get.

Seller’s Net Sheet

You may receive a document early in the process of selling your property that looks and feels exactly like the closing statement – but what you’re actually looking at is the seller’s net sheet. A net sheet is a document that may be presented to the seller at any point throughout the selling process to provide them an estimate of how much money they can anticipate to make. The net sheet provided by the vendor is not an official document. An organizing worksheet that your realtor completes to estimate how much money you’ll receive from your property sale after expenditures are deducted.

It is possible that the figures will alter depending on the final selling price of your home.

Key To Negotiations and Closing Documents for Seller

These projections are essential in negotiating with prospective purchasers. There is no way to evaluate offers if you don’t know which one would provide you with the most money once the transaction is completed. With great accuracy, an experienced agent should be able to predict your net profits. As the transaction progresses, the estimates will be revised accordingly. In other words, when the Closing Statement arrives, your total net proceeds shouldn’t come as a complete surprise! If the figures are significantly different, you’ll know to double-check them.

  1. When it comes time to close on a home sale, the Seller’s Closing Statement is a valuable tool to have on hand.
  2. If you are seeking for assistance with your real estate transaction, UpNesti is a free service that connects house sellers and buyers with the top real estate agents in their area.
  3. Our agents have been thoroughly verified and frequently provide reasonable commission rates that are lower than the industry average to UpNest clients.
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  5. Closing disclosures detail the conditions of the loan you are consenting to take out, ensuring that you are fully aware of what you are getting into when you sign your mortgage contract.
  6. Do you receive your keys back at the end of the day?

Unfortunately, you will most likely not be given the keys. This, however, is very dependent on the time. Because closure day normally only takes a few hours (and does not take place on a Friday), you will receive your new keys at the end of the day, if everything is completed by 3 p.m.

What Is the HUD-1 Settlement Statement, and When Is It Used?

TheHUD-1 Settlement Statementis a standard federal real estate form that was originally used by settlement agents, often known as “close agents,” to detail all costs imposed on a borrower and a seller during a real estate transaction. It is now no longer in use by settlement agents. It is no longer utilized, with the exception of reverse mortgages, which are still in use. This system was initially designed by the United States Department of Housing and Urban Development (HUD) to provide each party with a comprehensive account of all incoming and exiting monies.

Key Takeaways

  • A standard statement used to detail all expenditures for purchasers and sellers in a real estate transaction was the HUD-1 Settlement Statement, which was in use until 2015. Even today, it is employed in reverse mortgages, which are financial agreements that allow sellers to withdraw equity from their homes. Since October 2015, the Closing Disclosure has taken the place of the HUD-1 in the vast majority of real estate closings
  • Nonetheless,

When Was the HUD-1 Used?

As part of the Real Estate Settlement Procedures Act (RESPA), it was mandated that the HUD-1 form be utilized as the standard real estate settlement form in all transactions involving federal mortgage loans in the United States. It was once utilized for practically all transactions involving a buyer and a seller, including cash closings, and it continues to be so today. If you submitted an application for a mortgage on or before October 3, 2015, you would have gotten a HUD-1 statement. After October 2015, most types of mortgage loans were transferred to a new form known as the Closing Disclosure, which replaced the HUD-1 for the borrower.

When Is a HUD-1 Used in 2020?

In the case of reverse mortgages, the HUD-1 settlement statement is still in use in 2020. These sorts of mortgages are quite popular among sellers over the age of 62 who wish to take advantage of the equity they have built up in their houses. When a short sale occurred before to 2015, lenders may frequently request a copy of an old HUD-1 to establish the date the property closed within the three- to 10-year period following the short sale.

When Is the HUD-1 Distributed?

Prior to October 3, 2015, the Real Estate Settlement Procedures Act (RESPA) required that borrowers should be provided a copy of the HUD-1 at least one day before settlement. However, it is possible that submissions will continue to be received up until a few hours before the contest closes. The majority of buyers and sellers did their own research on the statement, with the aid of their real estate agent and the settlement agent, before signing it. The notion was that the greater the number of individuals who evaluated it, the greater the likelihood that errors would be discovered.

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Mistakes may and do occur, and faults can and can be discovered at the eleventh hour.

Overview of the HUD-1 Form

This line-by-line breakdown of the form covers the most important portions of the document. And, sure, there are a lot of lines in this book.

Section L, Settlement Charges: Lines 700-1400

In Section L, several items are tallied before being moved forward to page 1 or page 2 of the section.

Charges are included in the columns that are paid from either the borrower’s or the seller’s funds, respectively. It’s likely that you won’t have entries in all of these lines in your concluding statement.

Section 700, Agency Commissions

This section is concerned with the commissions that are paid to real estate brokerages. Dividend distribution is depicted in Lines 701 and 702 by the fact that there are two participating agencies. A buyer’s agent who sells a “for sale by owner” house may be compensated by their client rather than by the seller, which is unusual in the real estate industry.

Section 800, Items Payable in Connection with Loan

Buyer money are often used to pay for the entries on these lines, however sellers may agree to pay specific sums to assist the buyer in closing the transaction on rare occasions as well.

  • Lender’s fee for processing or originating the loan is shown on line 801 of the loan document. If the fee is a percentage of the loan amount, the proportion will be reported on Line 802
  • Line 802 records the “points” charged by the lending institution. Each point represents one percent of the loan amount
  • Appraisal fees are recorded on Line 804 of the loan document. It’s possible that you paid these fees when you applied for the loan. If this is the case, the check should be designated POC, which stands for paid outside of closure. The sum would be shown, but it would not be included in the total amount of costs you would be required to bring at settlement. In line 805 of the loan documents, the cost of the credit report is included if it is not included in the origination fee
  • In addition, costs for inspections performed at the request of the lender are recorded. A separate room is designated for the recording of pests and structural inspections. Line 806 is for an application fee that may be required by a private mortgage insurance (PMI) company
  • Line 807 is only used for loan-assumption transactions, in which the buyer assumes the seller’s existing mortgage
  • And Line 808 is for any other fees that may be required by a private mortgage insurance (PMI) company. Miscellaneous things associated with the loan are recorded on lines 808 through 811, such as fees paid to a mortgage broker.

Section 900, Items Required by Lender to be Paid in Advance

In most cases, the buyer is responsible for these fees. Each item is something the lender demands, although it is not always something that is paid to the lender.

  • For the period between closing and the first monthly mortgage payment, line 901 is used to record interest collected at settlement
  • Line 902 is used to record mortgage insurance payments payable at settlement
  • And line 903 is used to record any other charges. Escrow reserves for mortgage insurance are documented later in the accounting process. Note that if your mortgage insurance is a one-time payment that is valid for the entire term of the loan, you should provide that information here. Line 903 is used to record hazard insurance premiums that must be paid at settlement in order for the property to be covered by insurance immediately after closing. It is not used for insurance reserves that will be placed in escrow
  • Instead, lines 904 and 905 are used for miscellaneous things such as flood insurance, mortgage life insurance, credit life insurance, and disability insurance premiums
  • And lines 906 and 907 are used for other miscellaneous goods.

Section 1000, Reserves Deposited with Lender

This part is used to list the escrow monies received by the lender from the borrower for items such as hazard insurance and property taxes, among other things. Even though the number of months charged might vary, there are restrictions to the amount of money that can be collected by the lender. Section 900 contains the current charges for the costs that have been paid by the borrower. The entries on lines 1001 through 1007 are for cash used to establish the borrower’s escrow account, from which the lender will pay the borrower’s insurance payments for the next year.

This line represents an escrow adjustment that was computed by the settlement agency after comparing several escrow formulae.

The figure is either zero or a negative number at all times.

Section 1100, Title Charges

Title costs include expenses that are directly linked to the transfer of title, such as those for the title examination, title search, document preparation, and fees for the title insurance policy, as well as fees for the title insurance policy. Normally, they are passed on to the purchaser. Legal expenses can include fees for both the borrower’s and the seller’s attorneys, as well as fees for an attorney representing the lender on rare occasions. Fees for closing agents and notaries are among the other elements addressed in this subsection.

  • Line 1101 is used to record the charge for the settlement agent
  • Lines 1102 and 1103 are used to record the fees for the abstract or title search and inspection, respectively. If the same person is responsible for both tasks, a lump sum will be recorded on line 1103 of the accounting record. If the person performing the task is a title company or an attorney, the charges are entered subsequently, on lines 1107 or 1108, respectively. Charges for the title insurance binder, also known as a promise to insure, are shown on line 1104 of the invoice. After that, the payment for title insurance plans is input. Charges for deed preparation, as well as labor on mortgages and notes, are recorded on line 1105. The fee charged by a notary public for authenticating the execution of the settlement documents is entered on line 1106
  • The fees charged by attorneys are disclosed on line 1107
  • The cost of title insurance, excluding the cost of the binder, is disclosed on line 1108
  • And the cost of the binder is disclosed on line 1109. 1109 and 1110 are informative lines that show the prices of the different title insurance policies for the borrower and the lender, which are independent from one another. Only line 1108 is carried forward
  • The rest are deleted. Lines 1111 to 1113 are used to input any extra title-related fees that may be applicable depending on the area. Fees to a county tax collector for a tax certificate, as well as fees to a private tax agency, may be included in the entries.

Section 1200, Government Recording and Transfer Charges

This part is used to list expenses such as the costs of registering deeds and mortgages, as well as fees for tax stamps and other similar services.

Sections 1300 and 1400, Additional Settlement Charges and Totals

Section 1300 is used to keep track of survey costs and inspections for things like pests, lead-based paint, and radon, among other things. Examinations of structural components, as well as inspections of heating, plumbing, and electrical equipment, may be performed.

In the event that either party purchases a home warranty, the charge will be noted in this column. Total settlement charges paid from borrower’s and seller’s money are shown on line 1400 of the loan agreement. Also, they’re entered in Sections J and K, lines 103 and 502, respectively.

Section J Summary of Borrower’s Transaction: Lines 100-303

Sections J and K of the HUD-1 form may be found on page 1 of the document. They detail the itemized transactions between the borrower and the vendor.

Section 100, Gross Amount Due from Borrower

  • The gross sales price of the property is indicated on line 101. Items obtained from a seller that include personal property like curtains, a washer and a dryer as well as outdoor furniture and ornamental items are detailed in Section 2 of Schedule 102. Bringing the information forward from Line 1400, Line 103 displays the total settlement charges owed to the borrower. Those on lines 104 and 105 represent sums owing by the borrower or amounts already paid by the seller
  • A balance in the seller’s escrow account may be included in the entries charged to the borrower if the borrower is taking over the loan. In some cases, the borrower may owe a percentage of uncollected rentals to the seller
  • The items on lines 106 through 112 are for goods that the seller has paid in advance. For example, if the seller paid an annual payment for county taxes, the buyer must refund the seller for the prorated share of those taxes that he paid. Each individual is responsible for paying the costs connected with the period they had the property
  • Line 120 shows the total amount due from the borrower in the most recent month. It is the sum of the numbers on lines 101 through 112

Section 200, Amounts Paid by or on Behalf of Borrower

All of these entries are for monies that the borrower will receive at the time of closure.

  • When an offer is accepted, line 201 credits the buyer with the amount of earnest money paid at the time of acceptance
  • Line 202 represents the amount of the new loan, which is paid to the borrower by the lender
  • Line 203 is used when the borrower is assuming a loan or otherwise taking title subject to an existing loan or lien on the property
  • And lines 204 through 209 represent miscellaneous items paid by or on behalf of the buyer. They can contain items such as an allowance the seller may be making for repairs or replacement of products, among other things. It is also used when the seller accepts a note from the borrower for a portion of the purchase price
  • Lines 210 through 219 are for bills that the seller has not yet paid but for which the seller is responsible for the entire amount or a portion of the amount due. Section 200 includes things such as taxes and assessments, but the area may also contain rentals paid in advance by the seller for a term that extends beyond the settlement date
  • Line 220 represents the sum of all items in Section 200. The sum is added to the funds received by the borrower.

Section 300, Cash at Settlement From/To Borrower

This essentially outlines the amount of money that will be sent at the conclusion of the transaction.

  • A summary of the funds that will be transferred upon closure is provided below.

Section K, Summary of Seller’s Transaction: Lines 400-603

This part comes immediately to the right of section J, which contains a summary of the Borrower’s transaction information. It contains a summary of the transactions made by the vendor. It is added to the seller’s funds the sums in Section 400, Gross Amount Due Seller, which are listed in the seller’s funds.

  • The overall sales price of the property is shown on line 401
  • Nonetheless, Entry on line 402 is for personal property that the seller may be selling to the buyer. Other amounts owed by the borrower or previously paid by the seller are listed on the following lines 404 and 405: draperies, washer, dryer, outdoor furniture, decorative items, and other items that the seller may be selling to the buyer are listed on the following lines 404 and 405: Goods on lines 406 through 412 are for items that the seller has paid in advance, such as reimbursements for the balance remaining in the seller’s escrow account when the borrower is taking over the seller’s loan, or the buyer may owe the seller a part of unpaid rentals. For example, if the seller paid a yearly payment but will not be in possession of the property for the whole year, the buyer may be required to refund the seller for a prorated portion of county taxes
  • Line 420 represents the gross amount owed to the seller by the buyer. It is the sum of the numbers on Lines 401 through 412

Section 500, Reductions in Amount Due to Seller

The payments in this section are deducted from the monies available to the seller.

  • It is necessary to utilize Line 501 when the seller’s real estate broker or another entity is in possession of the borrower’s earnest money deposit and will send it straight to the seller
  • Line 502 carries the value from line 1400, which represents the total charges incurred by the seller as calculated in Section L. This line is utilized when the borrower is adopting or taking possession of the property subject to any existing liens that are subtracted from the sales price. First and second debts that will be paid off as part of a settlement, including accumulated interest, are listed on lines 504 and 505 of the settlement document. All of lines 506 through 509 are blank lines in this example. They’re designated for a variety of different submissions. Line 506 is used to record deposits paid by the borrower to the seller or to a third party other than the settlement agency, which is recorded on the settlement statement. In comparison to the entry in 501, this is a minor difference. This occurs when the party holding the funds transfers it to the settlement agent so that it may be dispersed at the time of settlement.

These lines can also be used to specify any extra liens that must be paid at settlement in order for the property to be transferred to the buyer.

  • Lines 510 through 519 are for invoices that the seller has not yet paid but for which he or she is responsible in full or in part. Section 500 includes things such as taxes and assessments, but the area may also contain rent received in advance by the seller for a period of time that extends beyond the settlement date
  • Line 520 represents the sum of all items listed in Section 500. The sum is taken from the revenues received by the vendor.

Section 600, Cash at Settlement to or from the Seller

This section describes the amount of money that the seller will receive or pay at the time of closure.

  • Line 601 contains the gross amount due to the seller, which has been transferred from line 420
  • Line 602 contains the total of reductions in the seller’s proceeds, which has been transferred from line 520
  • Line 603 contains the difference between lines 601 and 602
  • Line 604 contains the difference between lines 601 and 602. It typically refers to a monetary sum paid to the seller, however it is conceivable for the seller to owe money at the time of the transaction. A seller may be responsible for more in first and second mortgage payments than is specified in the contract.

If you obtain a HUD-1 as part of your reverse mortgage transaction, this is one of the closing documents that you should maintain. The same is true for the closing disclosure in every other real estate transaction, whether it is a sale or a buy.

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