Know What You’re Signing: The Real Estate Settlement Statement

by Roger Szymonski on February 5, 2012

You’re about to cross the final line in your home selling process. There are only a few more steps you need to complete before you hand over the keys to the home. During the home closing, the key document you and your buyer will probably be dealing with is the settlement statement (also referred to as the closing statement). This is really a document that lists out the fees and charges that you, because seller, and the buyer are required to pay in the housing transaction.

The settlement statement is prepared either by the buyer’s lender or even the escrow agent. Regardless of who prepares the statement, that person is required to follow pertinent federal guidelines. The Real estate property Settlement Procedures Act of 1974, the governing law for closing processing in housing transactions.

It is important that you pay close attention to the settlement statement since the for sale by owner seller as it will list out the costs that you and the buyer are accountable. Most likely, you and the buyer have previously negotiated which of you is going to be paying which unusual closing costs. You must review the settlement statement to ensure these costs are already assigned to the correct party.

Usually, the settlement statement is categorised into two pages. The first page summarizes payments being made in the housing transaction. Included will be the sales price of the home, settlement charges that the borrower must pay, tax adjustments, settlement charges owner (you) must pay, first mortgage payoff amount, and total sum of money the borrower (the customer) must pay to the seller.

The other page of the settlement statement lists the settlement charges that you and the buyer are needed to pay. This page is when your previous closing cost negotiations can look. Your sales contract should also list these charges also to whom the charges were assigned. There would have been a group of charges which are related to processing the mortgage, whether it be a new mortgage or even an assumed one. Typical fees are the loan origination fee, appraisal fee, lender’s inspection fee, assumption fee, and underwriting fees.

The mortgage lender often requires some interest and insurance charges to be paid beforehand. Usually paid by the buyer, these fees can also be listed on the second page of the settlement statement. Other mortgage related costs include reserves that are deposited to set up an escrow account. These charges are assigned to the buyer.

Another band of fees included in the settlement statement are related to guaranteeing the legitimacy from the title: title search, title insurance, document preparation, notary fees, and attorney fees. Refer to the sales contract for the agreements made associated with these fees.

Government fees include recording fees, tax and stamps and are usually negotiated inside the sales contract.

The final group of charges is miscellaneous charges that were not included in previous parts of the settlement statement. For instance, a pest inspection requested from the buyer is a miscellaneous charge.

The settlement charges are totaled and entered around the first page within the summary information on page 1 of the settlement statement.

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