How the Selling Price of a Property Is Listed on the Closing Statement

A closing statement in real estate transactions provides a comprehensive financial summary of the sale. This document details all the costs and credits associated with transferring property ownership from a seller to a buyer. It serves a fundamental purpose for both parties, ensuring transparency and accountability for every financial aspect of the transaction.

Understanding the Closing Disclosure

For most residential real estate transactions that involve a mortgage or other loan, the Closing Disclosure (CD) is the standardized form used. Its general purpose is to provide a clear, itemized list of all costs and credits associated with the transaction, ensuring consumers understand their mortgage terms and closing costs.

The Closing Disclosure is typically a multi-page document, often five pages long, designed to present information in an understandable format. Page 1 usually summarizes transaction details and loan terms, while Page 2 details loan costs and other closing costs. Page 3 provides a summary of the transaction for both the borrower and the seller, outlining amounts due and amounts paid. Page 4 includes disclosures about loan assumption, late payments, and escrow details, along with other required information. The final page, Page 5, contains the contact information for all parties involved in the transaction, such as the lender, mortgage broker, real estate brokers, and the settlement agent. This structured approach helps ensure all financial aspects are clearly presented and understood by the parties involved.

The Selling Price on the Closing Disclosure

The selling price of a property is a prominent figure on the Closing Disclosure, typically found on Page 1. It is often labeled clearly as “Sale Price” or “Contract Sales Price” within a section dedicated to transaction information. This specific number represents the gross, agreed-upon price of the property as stipulated in the purchase agreement between the buyer and seller, before any adjustments or closing costs are factored into the final calculations.

This figure serves as the foundational amount for all subsequent financial adjustments throughout the closing process. On the Closing Disclosure, this initial selling price is presented differently for the buyer and the seller. For the buyer, the sale price is listed as a debit, representing the total amount they are obligated to pay for the property before any financing or credits are applied. Conversely, for the seller, the sale price is listed as a credit. This credit represents the total amount the seller is receiving for the property from the buyer, prior to any deductions for their specific closing costs or loan payoffs.

Impact of the Selling Price on Financial Calculations

The initial selling price, as presented on Page 1 of the Closing Disclosure, serves as the baseline from which all other financial components of the real estate transaction are calculated. It is the core figure that is adjusted by various credits and debits to determine the final funds exchanged at closing.

For the buyer, the agreed-upon selling price is reduced by credits such as the earnest money deposit. The principal amount of their new loan, which funds a significant portion of the purchase, is also credited against the selling price. Other credits for the buyer might include seller credits for repairs or closing costs, which directly reduce the cash they need to bring to closing. Debits for the buyer, subtracted from the selling price and loan amount, encompass various closing costs. These include loan origination fees, appraisal fees, title insurance premiums, and recording fees, which can collectively range from 2% to 5% of the loan amount.

For the seller, the selling price is the starting point for calculating their net proceeds. Debits subtracted from the selling price include the payoff amount of any existing mortgage or lien on the property, ensuring a clear title for the buyer. Real estate commissions, typically shared between the buyer’s and seller’s agents and ranging from 5% to 6% of the sale price, are also significant deductions. Prorated property taxes and homeowners’ association (HOA) fees are also debited from the seller’s proceeds, covering their share of these expenses up to the closing date.

After all these credits and debits are applied to the initial selling price, the document clearly shows the “Cash to Close” for the buyer, indicating the exact amount of funds they must provide. Similarly, it shows the “Cash to Seller,” which represents the net proceeds the seller receives from the sale after all obligations are met.