Definition:
A settlement statement is a detailed document that outlines all the costs, fees, and credits involved in a real estate transaction. It shows who pays what between the buyer and seller at closing.
Example:
When Kevin buys his first home, his real estate agent gives him a settlement statement at closing. It lists his loan amount, down payment, appraisal fee, title insurance, and other expenses. It also shows how much the seller is getting after fees. This document helps Kevin understand where every dollar is going.
Explanation:
The settlement statement—also called a closing statement—breaks down the final financial details of a property sale. It includes all charges paid by the buyer and seller, such as:
- Loan amount
- Down payment
- Title and escrow fees
- Recording fees
- Property taxes
- Real estate agent commissions
- Prepaid insurance
- Seller credits or buyer concessions
For most residential transactions, buyers will receive a Closing Disclosure (required by federal law) at least three days before closing. In other cases, especially for cash deals or commercial properties, a HUD-1 Settlement Statement or a custom form might be used.
The statement is prepared by the escrow officer, title company, or closing attorney. Both the buyer and seller review and sign it during settlement.
Why is Settlement Statement Important in Real Estate Transactions?
The settlement statement ensures complete transparency. It helps both buyers and sellers understand the full breakdown of costs, avoid surprises, and confirm that everything is correct before the transaction is finalized. For buyers, it’s a chance to verify their loan terms and the total amount due. For sellers, it clarifies what they’ll walk away with after fees. It’s a key document for accountability and peace of mind at closing.