What is a Settlement Statement?

I was taught to break out the Settlement Statement first in a signing. This form is used in purchases, sales, refinance, construction loans, and in both residential and commercial transactions. It’s everywhere and rightly so. This document breaks down all costs associated with the real estate transaction. We present this document first because issues are usually connected with the Settlement Statement, that and the Closing Disclosure. By far, the Settlement Statement is easier to understand because the numbers flow in columns as in an Excel spreadsheet.

At the top right I note if this is a buyer, seller, or refinance package. At top center is the name of the escrow company, the closer, and their office contact information. We’re also given the disbursement date which is the closing date. The buyer, seller, and property address is provided at the top. This top area is key to understanding who the players are, closing date and addresses.

The main body of the form usually has three columns. The first is the description column that provides a description of the line item being charged or credited. You may see the words Property Tax or Homeowners Association. Next to these titles are the proration dates and other values.

The two right side columns are debits and credits. The debits are the costs of the loan that correspond with the description in the first column. The last column to the right is the credit column. The sum of each column is at the bottom. Credits minus debits is the amount owed from signer or returned to them as proceeds. This is the second number from the bottom. If the number appears on the credit column, than the money is owned from the signer. If the amount is in the debit column, the money is owed back to the signer.

The Settlement Statement is typically signed. The buyer and seller Settlement Statements are quite different from each other. The seller typically is paying commissions; that shows up. Also the prorations are unique to the buyer or seller. The seller is probably also paying off a lender and leinable utilities.

The Settlement Statement form is product of American Land Title Association or ALTA. It can run one or two pages.

My script is as follows: “The first doc we’ll sign is the Settlement Statement. This is the title and escrow company’s version of the closing costs, itemized, with the money due back (or required from you) here, the second number up. We sign right here. When you’re ready.”

Note: I am not a lawyer and don’t give legal advise. This is meant to be a general description of the form to help notaries and others get acquainted with this form.