For most of us, a little-understood aspect of real estate transactions is the closing statement. Still, it’s an important part of the process, document-wise, that you’ll have to get past before you can close. So for your own protection, whether you’re a buyer or a seller, you need some understanding of closing statements and how they function. Let’s see, then, if we can help you understand your closing statement when buying or selling a house in Kauai.
What Is a Closing Statement?
Basically, a closing statement is just “a document that records the details of a financial transaction. A homebuyer who finances the purchase will receive a closing statement from the bank, while the home seller will receive one from the real estate agent who handled the sale.” But, really, there’s a lot more to it than simply being an itemized list of all buyer and seller costs.
Typically, a closing agent prepares the closing statement, also known as a settlement sheet. “It’s a comprehensive list of every expense that the buyer and seller must pay to complete the real estate transaction. Fees listed on this sheet include commissions, mortgage insurance, and property tax deposits. It includes costs such as loan origination fees, appraisal fees, inspection costs, and mortgage broker fees. It might also itemize fees to pull the borrower’s credit report, escrow funds, title search fees, and fees for services provided by lawyers, notaries, and closing agents.”
And here’s how it usually works . . .
Buyer and seller come together “with a professional such as a lawyer, real estate agent, or closing agent to review the statement and ensure everything is correct. Even after the statement is prepared, it might include last-minute changes that both parties need to review for accuracy. The statement lists the fees in two columns, one on the left side of the sheet for the buyer’s expenses and one on the right for the seller’s expenses. The amount of cash the buyer must give the seller has its own entry at the bottom of the document.’
Buyer’s Closing Statement
For a buyer, the closing statement is tied to the loan estimate, which the buyer/borrower should receive from the lender within three days of a mortgage application. Before closing, the buyer will receive the final closing disclosure, and reviewing this is “one of the last steps that a borrower must take before signing on the dotted line and accepting the money for a mortgage or refinancing.” The loan estimate “estimates the various fees and additional charges the borrower will face at closing, and the closing statement/disclosure should parallel it.
A buyer/borrower should receive the closing statement/disclosure at least three business days prior to closing. “It contains a detailed list of every fee and charge that the borrower will be required to pay, and to whom it will be paid. The gross amount due will be adjusted to reflect any costs already paid by the borrower. The final disclosure will even present all of those figures side by side with the initial loan estimate for easy comparison. It also will include the details of the loan, including the interest rate, the amount of the monthly payments, and the payment schedule.”
Buyers should carefully review the mortgage closing statement to make sure everything is correct and that there are no discrepancies. This can get more than a little complicated, so if you have questions, be sure to consult a Kauai agent at 808-634-4518.
Seller’s Closing Statement
A seller typically receives the closing statement/disclosure (as required by the Consumer Financial Protection Bureau) from “a settlement agent working with the title company selected to close the transaction.” This document “will list all of the commissions and fees to be paid, as well as any credits that will be offset against them. The bottom-line figure is how much the seller will receive once the transaction is finalized.”
What you don’t want to happen as a seller when you receive the closing statement is a huge surprise with respect to your net proceeds. An experienced agent should be able to help you estimate your net proceeds fairly accurately. To discover more, just call 808-634-4518.
Elements of a Closing Statement
As we’ve shown, a closing statement “includes information related to the cost of buying or selling a home. The form can also include details of the property itself.” And, of course, what exactly is included in closing statements depends on whether they are for buyers or sellers. Below are the common elements in most closing statements:
- Basic information about the property, such as address, date of construction, type of structure, and so on
- Important financial information like purchase price and deposits paid
- Prorated amounts paid toward, for example, property taxes and/or HOA fees
- All loan costs, such as underwriting fees, application fees, and origination fees
- Miscellaneous loan costs, including appraisal fees, credit report fees, research fees, survey fees, and inspection fees
- Escrow fees and fees for recording
- Commissions, that is, “ what was paid in real estate commissions to the buyer’s agent and the seller’s agent”
Why You Need a Kauai Agent
Understanding and reviewing the closing statement is a critical part of the transaction for both buyers and sellers. It’s important, then, that you get the professional assistance you need. And your experienced Kauai can provide that assistance. When it comes to the closing statement in buying or selling a house in Kauai, don’t hesitate to contact us at 808-634-4518.