How to Make a Closing Statement

by David Ingram Google
    A closing statement is a type of real estate contract.

    A closing statement is a type of real estate contract.

    A closing statement, also referred to as a settlement sheet, sets forth all costs that must be covered before a title transfer in a real estate transaction can take place. The purpose of a settlement sheet is to ensure that all administrative costs of the sale are incurred by the appropriate party to the transaction—whether the seller or the buyer. Closing statements include costs imposed by real estate brokers, mortgage lenders, title companies and tax authorities, as well as provisions for instating an insurance policy on the part of the purchaser.


    Write out the real estate broker's commission and fees. The seller is generally liable for brokers' fees, which are based on a percentage of the sale price.


    List all administrative loan costs. Include all costs imposed by the bank extending the mortgage loan, if applicable. Common loan administration fees include credit report fees, inspection fees, mortgage broker fees and origination costs.


    List administrative title costs. Include all costs imposed by the title company performing the legal transfer of title to the property. Common title charges include a settlement fee, documentation costs and attorney's fees.


    List all insurance policies the buyer must purchase before taking the title for the property, and set forth the amounts of the initial premiums. Include costs for mortgage insurance and hazard/flood insurance, at minimum.


    Note all taxes that must be paid before the transaction takes place. Include property taxes owed to the county or city as well as any applicable state taxes.


    Research all other extraneous costs related to the sale. These could be costs absorbed by the seller that the buyer has agreed to pay, including expenses for things like last-minute repairs, pest control or safety inspections.


    Summarize all required costs at the end of the closing statement, and collect signatures from the buyer, seller and any co-signers. Preface your signature lines with a statement that the signers have read and understood the provisions of the closing statement, and agree with all costs and amounts set forth in the document. Include a statement that all parties agree to fulfill their financial obligations before the title transfer.

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