Quick Answer
A settlement statement is a document showing the financial details of a real estate transaction including charges, credits, payoffs, deposits, commissions, taxes, and amounts due or payable to each party. The specific form and format vary by state and transaction type.
The settlement statement is one of the most important documents in any real estate closing. It tells you exactly where every dollar is going. Understanding it helps you verify that the transaction numbers are correct before you sign.
What Might Appear on a Settlement Statement?
A settlement statement typically includes a wide range of financial items. Depending on the transaction type, you may see:
- Purchase price and earnest money deposit
- Loan amounts and financing details for the buyer
- Prorated property taxes allocated between buyer and seller
- Prorated HOA dues and other ongoing assessments
- Title insurance premiums for owner's and lender's policies
- Escrow or settlement fees
- Recording fees and transfer taxes
- Real estate commissions paid to agents
- Lender fees such as origination fees, discount points, and processing fees
- Payoff amounts for existing mortgages and liens
- Seller proceeds net of deductions
- Cash to close for the buyer
Why Should Buyers Review the Settlement Statement?
Buyers should review the settlement statement carefully to confirm that the loan terms match what was disclosed, the fees are as expected, the credits and debits are accurate, and the cash to close amount is correct. Any discrepancy between the Closing Disclosure and the final settlement should be discussed with the title company and lender before signing.
Why Should Sellers Review the Settlement Statement?
Sellers should review the settlement statement to verify that the purchase price is correct, deductions such as commission and payoff amounts match expectations, prorations are calculated correctly, and the net proceeds amount is accurate before signing.
Can the Numbers Change?
Yes, the numbers can change up until closing. Payoff amounts may be updated, prorations may be adjusted, and last-minute changes can occur. The final settlement statement should reflect the most current numbers. Always review the version you are signing and ask about any changes you do not understand.
Is It the Same as the Closing Disclosure?
Not always. The Closing Disclosure is a federally regulated form used in most consumer mortgage transactions. The settlement statement may be a different form in cash transactions, commercial deals, or transactions in certain states. See Settlement Statement vs. Closing Disclosure for a complete comparison.
Key Takeaway
The settlement statement summarizes all financial aspects of a real estate transaction. Both buyers and sellers should review it carefully before signing, and ask about anything that does not match expectations.
FAQs
When do I receive the settlement statement?
In financed transactions, you receive the Closing Disclosure at least three business days before closing. In cash transactions, the settlement statement is typically provided a day or two before closing. Ask your title company when to expect it.
What should I do if I find an error on the settlement statement?
Notify your title or escrow officer immediately. Most errors can be corrected before closing, but last-minute corrections may affect the timing. The earlier you review the statement, the more time there is to fix any issues.