Where Can Net Proceeds Be Found in a Seller’s Package?
Locate your net proceeds in seller's package documents. Understand how this final amount from your sale is calculated.
Understanding the final amount a seller receives from a property sale is crucial. This amount, known as net proceeds, is distinct from the gross sale price and is determined after various expenses and adjustments are applied. Identifying this figure requires navigating specific documents typically provided at the culmination of a sale.
What is a Seller’s Package?
A seller’s package is a collection of documents provided to the seller during a property transaction. This package contains important legal and financial paperwork that outlines the terms of the sale and the distribution of funds. While the exact contents can vary, the package primarily serves to formalize the transfer of ownership and detail all financial aspects.
Common documents include the Purchase Agreement, which outlines the agreed-upon sale price and terms, and the Deed, which is the legal document transferring property ownership to the buyer. Other documents may include title insurance policies, which protect against claims to the property, and various disclosures outlining known property conditions. The most financially significant documents for a seller are typically the Settlement Statement or the Closing Disclosure, as these detail the financial outcome of the sale.
Locating Net Proceeds in Key Documents
Net proceeds from a property sale are detailed in financial documents provided at closing. For residential real estate transactions, particularly those with mortgages applied for on or after October 3, 2015, the Closing Disclosure (CD) is the primary document. Older transactions, or certain commercial real estate deals, typically use the HUD-1 Settlement Statement.
On a Closing Disclosure, Page 3, in the “Calculating Cash to Close” section, locate the column for the “Seller’s Transaction” under “Summaries of Transactions.” The line item labeled “Cash to Seller” represents the final amount the seller will receive. This figure reflects the sale price after all credits and debits have been applied.
For a HUD-1 Settlement Statement, the net proceeds are found in Section K, titled “Summary of Seller’s Transaction.” Line 603, labeled “Cash to Seller,” indicates the total amount due to the seller at closing. This line summarizes the overall financial transaction from the seller’s perspective, reflecting the final funds disbursed.
Understanding Net Proceeds Calculation
Net proceeds represent the actual cash a seller receives from a sale after all associated costs and adjustments are accounted for. This figure starts with the gross sales price, which is the initial agreed-upon price of the property. From this gross amount, various expenses are deducted.
Common deductions include real estate agent commissions, which typically range from 5% to 6% of the sale price and are often the largest single expense. Other deductions include closing costs, such as title insurance fees, escrow fees, and attorney fees, which can collectively add another 2% to 3% of the sale price. Outstanding mortgage payoffs are also subtracted, ensuring the property’s lien is cleared. Prorated property taxes, which cover the seller’s share of taxes up to the closing date, and any agreed-upon seller credits to the buyer are deducted from the gross proceeds. The final net proceeds amount is what remains after these and any other applicable expenses are paid.