so what is a settlement statement you've probably heard of the term a hud-1
settlement statement or a closing disclosure if you're getting a mortgage
for your purchase but they all roughly do the same thing the
point of a settlement statement is to provide a
clear picture of the flow of funds on closing day
it would typically have columns for both the buyer and the seller
illustrating what they get what they're owed and what
kind of or how much cash they need to bring to
close so let's go over a hypothetical example
all of these names here and addresses are
are made up just for illustrative purposes but let's say this is an
example of a condo purchase in miami
and let's say that it was done in the middle of the month so we can see how
proration works you see here it was hypothetically done
in mid april 2021 and let's just go over this so because
first of all because this is a all cash purchase
you don't technically need a closing disclosure so
that is the what is required these days if you're getting financing
your bank will be required to provide you with a
closing disclosure three days before closing
it's a it's five pages and it has a few additional pages
then what you see here to talk about the loan and such
but if in this example of an all cash transaction it's more flexible so in
this example you are seeing a more traditional
or the older hud statement the settlement statement so let's just go
over it they all roughly have the same parts
or the same idea at least in just explaining to the buyer and seller
what's owed and how the funds work so
in this example the sale price or the contract sale
price is 1.38 mill and then you'll see here obviously that you know you
start off with it with the contract price being owed
by the buyer you add in settlement charges so this is
equivalent to the closing costs which will be detailed
more so later and then you see here
that these are
this specific condo example has a special assessment
that's being levied currently by the hoa and then as well as two separate
hoa fees so one from
the building itself and then one from the
hotel lodge association so you'll see this sometimes in places like south
florida where you know perhaps there's a hotel attached
and then the you know a separate building has
access to the hotel amenities so they pay a fee to the hotel as well so
sometimes that happens which is why you see a few different versions of a couple
different versions of common charges here as well as a special assessment and
because the closing happens in the middle of the month the seller
you know has paid for these
common charges and assessments usually from the first of the month so
because they pay at the first of the month they've technically paid for
the whole month and in which case they're closing here mid-month the
seller would need to be reimbursed by the buyer for half the month which is
why you see this here and then you add these figures up here
and then you get the 1.389 mil which is line 120
and then in line 201 you'll see that the buyer
has already put 10 percent down so 138 000
so this is already paid by the buyer and then here quite interestingly you'll see
that
4796.68 in county taxes from the beginning of the year to the
closing date this is actually owed by the seller and the reason
this is so is because in some counties for example like
miami-dade county and south florida property taxes are
released in november of every year and are paid in arrears so
2021's taxes are paid in arrears which means
you know the seller will be benefiting because by closing in mid
april they haven't technically paid property taxes for the first four and a
half months the buyer will be paying for the 21 2021 taxes for the whole year
in november or later so the seller needs to compensate the buyer in this case
for these pro-rated property taxes so as a result this is added to this 4796 is
added to the contract deposit as already paid by the buyer and then
you see in line 301 again the the gross amount to do from the buyer less
the stuff amount paid for by the buyer and then
you get this one 1 246 502 that's
due at settlement from the buyer
now before we go on to the seller side let's just analyze
the the settlement charges or ie the closing costs for the buyer so you see
here
each the buyer is responsible for 295 for a
transaction fee so is the seller in addition to the
broker commission which again is traditionally paid by the seller
this this you will see in some transactions
sometimes you won't see it it's kind of like a processing fee that
often isn't even mentioned by brokers in south florida and they'll just add it on
it's usually a few hundred bucks if it's really a big deal you can
typically dispute it or or complain to your
realtor and they may be able to take this off
this is the settlement or closing fee this is paid to the closing attorney for
their work in helping guide the the process to closing for the
services of closing day for putting this together for example
it's usually in the you know six seven eight hundred dollar 900 range
and this is title insurance
so you can check out hauseit's title insurance calculator to see
you know how much title insurance are is in florida there is a statutory rate
meaning the law states a minimum amount that
must be charged for title insurance but because of competition pretty much all
title companies essentially charge that statutory rate
so you can you can play around with that yourself to double check this on
our website on our title insurance calculator
so this is what this is
this is just an additional endorsement
that you add on very minor recording fees as you can see
this is the minimus as well and then this is just referring to
you know an account setup fee by the building management company this is a
wire transfer fee the seller also has to pay it as well so it's pretty it's
actually pretty minor all lane in terms of closing costs versus what you would
see in some other cities like new york
and if you are a new yorker coming down here you'll be pleased to see that among
these closing costs in florida there is no such thing as a mansion tax
to worry about
so now let's go on to the seller side to see what makes sense so
obviously the sale price you start with that's due to the seller
and then let's talk about some of these adjustments so like we talked before the
the assessments the special assessment is line 407 and
then the two
condo association fees again the seller has paid for this in advance at the
beginning of the month so they're owed half of the month from the
buyer so then this is added to the 1.3 age
mill you get the 1.381 mil here on line 40 420 rather
and then the settlement charges on line 502 are the closing costs which we'll go
over after this section and then here
you will see in line 511 the county taxes so this is just a reverse the
seller owes this 4796 dollars in property taxes
because again it's paid in arrears towards the end of the year so they
would owe this so you add the property taxes that they owe and the
and the closing costs you get this 84 000 figure in line 520
and in line 601 and 602 you're essentially
deducting the
line 520 from the amount due to the seller and then this is what's due to
the seller in cash what the seller should expect to raise receive at
closing which is around 1.3 million dollars this is in line 603. so now
let's dig deeper into line 502 the settlement charges or in other words
closing costs let's just look to see what they
entail the 79 250 figure
and you can always verify it here 79 000 250 let's see what it's made up of so
obviously the biggest one here is the commission paid to
the realtors so sellers typically pay the entire broker commission
in this case because it was a direct deal
the seller reduced the typical
real estate commission from six percent to five percent because it was a direct
buyer so five percent times the contract sale price 69 000
they also have to pay the transaction fee which no one disputed that we
talked about earlier the 295. you go down
it's customary in miami-dade for the seller to be responsible for the
title search fee 200 bucks and for document preparation fee 495
dollars here and then
you'll see here in terms of
sort of transfer taxes if you will you'll see that
the transfer tax is equivalent to the new york city transfer tax
is is about 8280 and feel free to check out our
miami or florida seller closing cost calculators to learn more about
these various closing costs
you can see from our site that the
florida documentary stamp tax on need is
1.05 percent in this case if it was a single-family home in miami-dade county
would be 0.6
and then in additional settlement charges 1301 1302
you'll see these are traditionally the seller's responsibility
so the municipal lien search in miami-dade county is typically the
seller's responsibility and of course the stop will letter reimbursement
that's the seller's responsibility as well i remember the stop letter is a
letter from the hoa stating that these are the total costs
or or fees or common charges owed by the owed by the the seller um at some
certain time typically the closing date so when it's paid off the hoa can't come
back later and say hey actually more was owed
and then of course the wire transfer fees
by the seller as well so this all adds up to the 79 250 figure which you saw
earlier and that's pretty much it so this is an
example you can check out on our website it's hypothetical but
it gives you a great idea of how these columns all add up and you know the
point of this is just to give a final understanding and clarity on exact
figures for closing day you should obviously get this well before you're
closing so if you're getting a mortgage you would get a version of this called
the closing disclosure as we discussed at least three days in advance of
closing if you're buying all cash you'll get a
settlement statement of some sort perhaps like this
in advance of closing as well so please review it carefully if you have any
questions speak with your attorney the closing attorney or your lender to make
sure they they clarify any questions you might have and if you do have to find a
mistake obviously they need to correct it and if you're
getting financing and you do find an actual mistake
your closing may be pushed back because they need to again issue you a correct
one within before three days before your closing date if the
correction is material so there you have it we hope you found
this explanatory video helpful on what a settlement statement or a hud 1
settlement statement is we'll have another video out
in the near future about a closing disclosure as well which we talked about
in this video again my name is Chris at Hauseit we hope you found this helpful
and if you like what you see please leave a comment below
we get back to you any questions you might have
relatively quickly we'll do our best to do our research and come back to you and
of course this isn't legal advice so please consult your attorney and we wish
you the best of luck on your home search