Title Tip: Avoid Costly Mistakes And Learn to Read a Seller’s Closing Statement

When it comes to selling a home, there is a lot of paperwork involved. While in the midst of finding a new home, packing and moving, it may be tempting to gloss over the extensive forms and documents. However, it is truly important for sellers to review the financial figures of their transaction prior to closing day.

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. Reviewing it in advance gives the seller the chance to check all fees and charges, ensure there are no errors and see how much they’ll receive from the sale.

The terms ‘settlement statement’ and ‘closing disclosure’ are used universally to refer to the seller’s closing document. There are actually two different forms and both are put out by government entities. In Texas, if the buyer is paying cash, then the HUD Settlement Statement is used. If the buyer is getting a mortgage loan, a Closing Disclosure put out by the Consumer Financial Protection Bureau is used. The escrow agent prepares the appropriate document.

All seller statements show a line-item breakdown of fees, charges and expenses paid by the seller and all credits to the seller. Like a budget balance sheet, it contains debits (expenses or fees) and credits (deposits or increases). It summarizes all of the financial details of the transaction and must be exact to the penny.

Seller’s Closing Disclosure / Settlement Statement

Let’s take a look at the things a seller might pay for and how they appear on their closing statement. This is only the seller’s side of the transaction. We’ll look at the buyer’s side another day.

Below are the two kinds of seller settlement statements. At the top of either document are a few boxes with information on the basic details of the transaction. They include names of the buyer and seller, the property address, and the closing date (also called the settlement date).

Due to Seller

The top of Page 1 shows amounts due to the seller. That includes the sales price, any personal property the buyer is paying for, and any ‘paid in advance’ credits. Those credits are usually HOA dues that have been paid in advance by the seller. The buyer is charged for their portion of the dues for that year and that amount is given to the seller. The seller is essentially paid back for the dues they have paid for the time they will no longer own the home.

Due From Seller/Reductions

The bottom half of Page 1 shows deductions that will be subtracted from the amount due to the seller. At the very bottom is the cash to the seller. That’s the number sellers are always eager to see.

Seller deductions on page 1 may include:

• Payoff of amounts owed on the seller’s current mortgage loan.
• Payoff of any additional liens on the property.
• The seller ‘s share of the current year property taxes for the time they still own the home.
• Any unpaid HOA dues or unpaid property taxes. 
• Any lease back rents or deposits due to the buyer.
• Seller credits for repairs or other credits made in amendments to the contract.
• Total of closing costs itemized on page 2.

Page Two Itemized Closing Costs

The second page of the settlement statement details the seller’s closings costs. These may include:

• Escrow/Settlement Fee. These are the fees charged by the title company for handling the transaction and performing tasks like notarizing signatures.
• Title insurance. Negotiated in the contract and often (but not always) paid by the seller. It protects the buyer from unknown defects with the title.
• Tax certificate. Paid to a tax service company to perform a search confirming prior year taxes are paid and who the taxing authorities are for the property.
• Attorney fees. Typically to prepare legal documents like the deed.
• Recording fees. Collected by the county for recording the deed, mortgages, and other legal documents of the seller and new owner. In Texas, the buyer usually pays the county recording fees for the deed and mortgage. The seller pays for recording other legal documents such as a Power of Attorney, Release of Lien, Affidavits, etc.
• Real estate commissions. Broker/agent commissions are usually paid for by the seller. In Texas, the total commission is typically 6 percent and split between the buyer and seller brokerages.
• HOA fees. Homeowner’s associations often charge a transfer fee. Who pays how much of it is negotiated in the contract.
• Other fees. Expenses incurred by the seller or fees that the seller has agreed to cover for the buyer. They often include a home warranty policy, a survey, or the cost of a mobile notary service.

Like I said, the seller should review all of these figures and let the escrow officer know if they have any questions or concerns PRIOR to closing day. Requests for changes on the day of closing will usually result in delays.

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The opinions expressed are of the individual author for informational purposes only and not for legal advice. Contact an attorney for any particular issue or problem.