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A Guide to the Settlement Statement

By:T J Madigan

Youre about to cross the finish line in your home selling process. There are just a few more steps that you need to complete before you hand over the keys to the home. During the home closing, the primary document you and your buyer will be dealing with is the settlement statement (also called the closing statement). This is a document that lists out the fees and charges that you, as the seller, and the buyer are required to pay in the housing transaction.

The settlement statement is prepared either by the buyers lender or the escrow agent. Regardless of who prepares the statement, that person is required to follow pertinent federal guidelines. The Real Estate Settlement Procedures Act of 1974, the governing law for closing processing in housing transactions.

It is important that you pay close attention to the settlement statement as the for sale by owner seller because it will list out the costs for which you and the buyer are responsible. Most likely, you and the buyer have already negotiated which of you will be paying which closing costs. You must review the settlement statement to ensure these costs have been assigned to the correct party.

Usually, the settlement statement is broken down into two pages. The first page summarizes payments to be made in the housing transaction. Included is the sales price of the home, settlement charges that the borrower must pay, tax adjustments, settlement charges the seller (you) must pay, first mortgage payoff amount, and total amount of cash the borrower (the buyer) must pay to the seller.

The second page of the settlement statement lists the settlement charges that you and the buyer are required to pay. This page is where your previous closing cost negotiations will appear. Your sales contract should also list these charges and to whom the charges were assigned. There will be a group of charges that are related to processing the mortgage, whether it is a new mortgage or an assumed one. Typical fees are the loan origination fee, appraisal fee, lenders inspection fee, assumption fee, and underwriting fees.

The mortgage lender often requires some interest and insurance premiums to be paid in advance. Usually paid by the buyer, these fees are also listed on the second page of the settlement statement. Other mortgage related costs include reserves that are deposited to set up an escrow account. These charges are assigned to the buyer.

Another group of fees included in the settlement statement are related to guaranteeing the legitimacy of the title: title search, title insurance, document preparation, notary fees, and attorney fees. Refer to the sales contract for the agreements made pertaining to these fees.

Government fees include recording fees, tax and stamps and are usually negotiated in the sales contract.

The final group of charges is miscellaneous charges that were not included in previous sections of the settlement statement. For example, a pest inspection requested by the buyer is a miscellaneous charge.

The settlement charges are totaled and entered on the first page in the summary information on the first page of the settlement statement.


Article Source:

T. J. Madigan has been established in online business since 1998 and is director of a number of successful online projects. Take advantage of our Free For Sale By Owner Real Estate Directory at


Taking title to a home can seem like a boilerplate event during escrow, but it is very important. The prime question is how you take title.

Taking Title When You Buy

If you are a first time buyer, you are probably wondering what taking title refers to. It is not the act of accepting a piece of paper from the seller. Taking title refers to who is listed on the title and HOW they are listed. If you are not married and are buying the home alone, you can stop reading now because you simply take the title in your own name. If you are married or buying the property with another person, things get a bit complex.

Most buyers take title in one of three ways – joint tenancy, tenants in common or as community property. Here is a closer look at each.

Joint tenancy is a popular method of taking title. Joint tenancy simply is a co-ownership situation where the purchasing parties are both listed on the title. The advantage of this form of ownership is each person on title has the right of survivorship, meaning that if one of the owners dies, title passes automatically to the surviving owner. Joint tenancy also offers tax benefits in the form of a stepped up basis. It is beyond the scope of this article, but the general idea is that the surviving owner gets to step up the cost of the home, which saves on capital gains taxes.

Tenants in common are essentially partnerships to own a property. They are generally disfavored because of tax issues.

Taking title as community property occurs often, but the buyers often do not realize it. If you are in a community property state, such as California, you pretty much take title as community property unless you hire a lawyer to find a way not to. Community property states have an overriding policy that funds from a married couples estate, not to mention assets, are jointly owned by both regardless of anything in writing. There are, however, some advantages to this approach. Upon the death of one spouse, the other gets a major stepped up basis on the cost of the home. When the property is sold, this results in substantial savings on capital gains.

So, which title should you choose when buying a home? There really is not one correct answer. You simply need to analyze your specific circumstances to make the best choice

Article Source:

Raynor James is with the FSBO site - - homes for sale by owner.

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