real estate closing process Archives

Home sales in 2021 increased by 8.5 percent from 2020.

Each time someone buys a home, they work through many steps before closing on it. A few days before closing on a house purchase, the buyer and seller receive a real estate closing statement.

What is this statement, and what information can you find on it?

Here is a guide to help you know what a real estate closing statement is, how to read it, and the information you’ll find on it.

A Real Estate Closing Statement Is A Summary

The best way to explain a real estate closing statement is to know that it summarizes the financial details of a real estate deal.

In some cases, the firm handling the closing creates one statement that includes the information for the buyer and seller.

In other cases, they create two statements: one for the buyer’s information and the other for the seller’s information.

The closing statement summarizes all the money coming and going for the buyer and seller, and each party can read through it to see the transaction details.

The bottom of the statement shows the final amounts for the buyer and seller. It shows how much money the seller receives at closing and the amount of money the buyer must bring to the closing.

The Information Found On A Closing Statement

A closing statement crams a lot of information into one document, but here are some of the main things you’ll find on it:

The Costs For The Buyer

When reading the buyer’s statement or section, you’ll see information relating to the costs the buyer must pay for the home purchase. Of course, the main cost is the agreed-upon selling price.

Additionally, the buyer has other costs, too. For example, the buyer must pay the closing costs the lender charges. You might see multiple lines for these charges.

The buyer also pays for inspections and the appraisal, and the real estate closing statement lists each one individually. The buyer generally pays for title insurance and title services, too.

The buyer might also have to invest some money into their escrow account when closing, and this amount also appears as a debit on this statement.

The person preparing this document includes every expense the seller pays for in the deal, and they typically list these as debits.

The Credits For The Buyer

In addition to listing all the buyer’s costs for the house, the statement also lists any credits the buyer might receive. Credits reduce the cost of the home purchase, and you’ll find several of these on this statement.

For example, the buyer should receive a credit for prorated property taxes. Property taxes accrue for the year before, and the seller should reimburse the buyer for the time they lived in the home until the closing date.

The earnest money and down payment the buyer offered also appear as credits on the statement, as they reduce the amount the buyer must pay at closing.

The Costs For The Seller

Next, you’ll see a section for the seller’s costs. The seller won’t have as many costs as the buyer, but they’ll still have some expenses associated with the sale.

First, the seller must pay the balance they owe on their mortgage if they have one. This amount reduces the profit they receive from the sale.

The seller also pays the real estate commission, reducing the amount the seller receives at this appointment.

In some cases, sellers pay for some of the closing costs, inspections, and other expenses. The seller also pays the prorated property taxes, and you’ll see all these amounts on the seller’s expense column.

The Credits For The Seller

The seller also receives credits, beginning with the home’s sales price. The sale’s price might be one of the few credits you see on the statement, but there might be others in some situations.

The Bottom Line For Both Parties

At the bottom of the statement, you’ll see the bottom line for both parties.

When it comes to the buyer, they’ll add up all the costs the buyer must pay. Next, they’ll subtract all the credits. The amount they calculate after doing this reflects the amount of money the buyer must bring to closing.

The buyer may need a cashier’s check for the amount, or they might accept other forms of payment.

The bottom line for the seller shows how much the check will be for when they attend the closing appointment. They calculate this by adding up the credits the seller receives and subtracting the seller’s costs.

Therefore, the real estate closing statement shows the buyer how much to bring, and it shows the seller how much they’ll receive.

The Importance Of Reading It Before Attending The Appointment

Whether you’re buying a house or selling one, hiring a real estate attorney is an essential step you shouldn’t forego. Your attorney handles the closing work for you and ensures its accuracy.

You should receive a copy of the closing statement a few days before the scheduled appointment. When you get it, you should read it through line by line.

All the documents you sign at the closing come from the information on this one document. So if you find errors, you shouldn’t close on the deal until they fix them.

If you find mistakes, fixing them before closing is much simpler than fixing them afterward.

For example, suppose the statement doesn’t include the earnest money you paid when you wrote the offer. If this happens, you’ll pay more for the house than you should, as your earnest money reduces the amount you need.

Use A Real Estate Lawyer For Assistance

Learning about a real estate closing statement can help you prepare for buying or selling a home. Then, when you hire a real estate lawyer for help, you’ll have the legal protection and assistance you need for the sale.

If you need a real estate lawyer in Greenville, SC, contact us at De Bruin Law Firm. We can help you with any type of real estate sale!

Real Estate Contract

After a buyer has identified a property for purchase, an offer will usually be made in the form of a contract. Buyers and sellers both need to understand the importance of this offer-acceptance process. Both parties are bound by the terms of the contract once the offer has been formally accepted. While many parties focus entirely on the price, the document will include a multitude of terms and conditions that should be understood and considered.

Contract Changes

If the seller is represented by an agent after receiving an offer, or either party has an realtor after receiving a counter-offer, the agent might suggest changes to terms other than the price to protect a client’s interests. The realtor also can explain the rest of the terms because this contract will govern the entire real estate transaction. After the parties have signed the contract, they are both stuck with the terms and conditions unless they mutually agree to changes in writing. Since the other party knows that the contract is binding, he or she might require additional money to be paid to secure any modifications.

Buyer and Lender Contract

The buyer usually will have to agree to another contractual relationship with a lender. This contractual relationship based on a promissory note and security agreement might include unforeseen costs beyond the down payment and loan payments. These fees, which could include survey fees, loan fees, interest and tax escrows, insurance premiums, and closing attorney fees, can add up, so unwelcome surprising can be a problem. The lender should explain these fees and other terms. However, the advantage of having your attorney review and explain any issues and fees will be apparent if you know anyone who experienced sharp lending practices during the mortgage meltdown.

Settlement Agent and Title Search

If you are the buyer, your attorney also will handle the “title search,” which is critically important to protect the buyer’s interests. This process will be conducted to identify any title defects. At some point during the process, a survey usually will be conducted to confirm that the boundary description in the public records conforms to the property boundaries. The lender typically will require title insurance that normally will be secured by the buyer’s attorney. Title insurance confirms that the lender has a proper mortgage lien that is not impaired by any title defects.

The closing attorney will supervise the formal execution of the relevant documents at the closing. Both parties benefit from having their agent help guide them through the entire process. Potential roadblocks to a residential purchase or sale can derail the transaction at every stage of the process. For example, a party might use the other party’s failure to comply with a term or condition of the contract to get out of the transaction. Even more concerning, unrepresented parties to a residential real estate transaction might complete the sale only to encounter boundary disputes, onerous loan terms, hidden costs, undiscovered property defects, and other issues that impact a party’s desire to complete the transaction or the value of the property. In South Carolina however, a licensed attorney is required to handle and supervise many of the legal aspects involved in transferring property. If the transaction does run into trouble, our Greenville real estate closing attorneys have the experience to assist you in getting out of the deal or to push it forward.

Tag Archive for: real estate closing process

What’s on a Real Estate Closing Statement?