A Guide To The Settlement Statement

A Guide To The Settlement Statement

You see the checkered flag just around the next corner. You are positive you are nearing the end of the long, slow home selling process. You know that you only have a few more steps to complete before you hand over the house keys. During the home closing, you and your buyer will be dealing with the settlement statement, also known as the closing statement. This document lists the fees and charges that the seller and the buyer must pay.

Either the buyer has his lender prepare the settlement statement, or it is done by an escrow agent. Federal guidelines are carefully followed, no matter who prepares the documents. The Real Estate Settlement Procedures Act (RESPA) of 1974 stressed that consumers receive total disclosure throughout the transaction of home sales. RESPA also outlaws any kickbacks that may increase the cost of settlement services. It is designed to help home buyers be more knowledgeable shoppers when they buy a new home.

When you sell a home directly, be sure you pay close attention to the settlement statement. It will list all the costs you and the buyer are responsible for. Usually, you have already gone over all these costs with the home buyer, but you must review the settlement statement anyway to make sure all costs are assigned to the right party. Settlement statements are two page documents. The first page lists all payments to be made in the whole transaction. Home price, tax adjustments, first mortgage payoff amount, settlement charges that both the seller and the buyer must pay, and the total amount the buyer has to pay to the seller, are all listed on the first page.

The second page is where your previous negotiations will appear. There is also a list of various fees that must be paid: loan origination fee, appraisal fee, lender’s inspection fee, assumption fee, and underwriting fees. This page will list who pays each of these fees that are directly related to processing the mortgage. Some interest and insurance premiums must be paid in advance by the buyer. These fees will also be listed on this second page.

The buyer is assigned to set up an escrow account that contains monies from other mortgage related costs. One set of fees included in any settlement statement are related to the legitimacy of the title, the title search, title insurance, document preparation, notary fees and attorney fees. Your sales contract will have all the agreements you and the buyer made that relate to these fees.

There are also government related fees to be paid: recording fees, tax and stamps, which are all negotiated in the sales contract. There may also be miscellaneous charges that were not included in other sections of the settlement statement. A pest inspection requested by the buyer would be one example of a miscellaneous charge. All the settlement charges are added together and appear on the first page in the summary information section. Understand your settlement statement is key in reaching that finish line and collecting that checkered flag. A home sale that flows smoothly to the end is the best kind of race to win.

 

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