Who Should Review the Settlement Statement Before Closing?

The settlement statement is a foundational financial document in real estate transactions, detailing all costs and credits for both the buyer and the seller. Its primary purpose is to provide a comprehensive financial summary, ensuring transparency and accountability for all funds exchanged. A thorough review of this statement before closing is important to confirm accuracy, prevent potential financial discrepancies, and ensure the transaction proceeds smoothly and reflects the agreed-upon terms.

Understanding the Settlement Statement

A settlement statement is a comprehensive document outlining all financial aspects of a real estate closing. For most residential transactions in the United States since the implementation of the TILA-RESPA Integrated Disclosure (TRID) rule, this document is known as the Closing Disclosure. Older transactions or certain commercial real estate dealings might still utilize the HUD-1 Settlement Statement. Both forms itemize all charges and credits related to the transaction.

The document includes the agreed-upon purchase price, detailed loan information such as the principal amount and interest rate, and an exhaustive list of closing costs. These costs can encompass various fees, including loan origination fees, appraisal fees, title insurance premiums, recording fees paid to local government entities, and escrow charges. Additionally, the statement details prorated expenses like property taxes and homeowners association dues, which are adjusted based on the closing date to fairly divide costs between the buyer and seller.

Key Parties and Their Review Focus

Multiple parties review the settlement statement, each with a specific focus aligned to their interests. The buyer scrutinizes the statement to confirm all costs and credits align with their initial Loan Estimate and the terms outlined in the purchase agreement. Their review focuses on the accuracy of loan terms, the required down payment, and the itemization of various closing costs.

The seller reviews the settlement statement to verify the accuracy of the sale price, any credits extended to the buyer, and all deductions from their expected proceeds. This ensures the final amount they receive matches the sales agreement and accounts for any agreed-upon concessions or expenses. Real estate agents, representing both the buyer and seller, examine the statement to confirm their commissions are correctly calculated and that the terms of the purchase agreement, such as repair credits or specific allowances, are accurately reflected.

The lender, when applicable, reviews the settlement statement to ensure compliance with lending regulations and to verify the accuracy of loan terms and associated fees. This includes confirming the correct principal amount, interest rate, and any points or charges related to the loan. The closing agent or attorney, serving as a neutral third party, is responsible for the legal accuracy of the document, ensuring proper allocation of all funds, and confirming that all required fees and documents are accounted for according to local regulations and the transaction’s specifics.

Verifying Key Information

A thorough review of the settlement statement involves scrutinizing several specific data points. A primary step is to compare the figures on the settlement statement, particularly loan terms, interest rates, and lender fees, with the previously issued Loan Estimate or Good Faith Estimate. Any significant discrepancies from these initial disclosures warrant immediate clarification and explanation.

Confirming the accuracy of the foundational numbers, such as the agreed-upon purchase price and the final loan amount, is also essential. Detailed attention should be paid to the breakdown of all closing costs, including origination fees, appraisal fees, title insurance premiums, escrow charges, and recording fees. Each itemized charge should be expected and correctly attributed to the appropriate party based on the purchase agreement.

Verifying prorations is another important step, ensuring that property taxes, homeowners association fees, and other shared expenses are correctly calculated and divided between the buyer and seller based on the closing date. All agreed-upon credits, such as seller concessions for repairs or closing cost assistance, and debits must be accurately reflected in the final figures. It is also important to identify any fees or charges that were not previously disclosed or agreed upon, prompting an immediate inquiry. Finally, confirming the accuracy of all personal information, including names, addresses, and property details, helps prevent administrative errors.