What is a Settlement Statement in Real Estate?

Key Takeaways
– A settlement statement itemizes every fee, credit, tax, and loan detail in a home purchase or sale, giving both parties a full financial breakdown.
– Most financed home purchases use the Closing Disclosure, while settlement statements are common for sellers and cash transactions.
– Buyers typically receive the Closing Disclosure three days before closing, and sellers receive their settlement statement shortly before or on the day of closing.

A settlement statement is a detailed, itemized breakdown of every cost, credit, and dollar exchanged during a real estate transaction. It acts as the final financial snapshot for both the buyer and the seller, outlining what the buyer owes at closing and what the seller will receive after all fees are deducted. 

While the term “settlement statement” is still widely used, most mortgage transactions now rely on the Closing Disclosure. Older forms like the HUD-1 are reserved for reverse mortgages and certain cash deals.

Understanding how a settlement statement works helps ensure there are no surprises at the closing table. Whether you’re closing in Orlando, FL, Los Angeles, CA, or Phoenix, AZ, this Redfin guide walks you through what the settlement statement includes and how to understand it.

How a settlement statement works

A settlement statement pulls together every financial component of a home sale in one clear document. It includes the purchase price, loan details, deposits, fees, taxes, prorated expenses, and any credits negotiated between the buyer and seller.

Here’s a settlement statement functions during closing:

1. The closing agent compiles all charges and credits from the lender, buyer, seller, and service providers.
2. The buyer’s section outlines total costs and the exact cash-to-close amount.
3. The seller’s section calculates total credits (such as the sale price) minus costs (such as commissions and taxes) to determine final net proceeds.
4. The lender and closing agent review the document to ensure accuracy.
5. Both parties sign, finalizing the transfer of funds and property ownership.

What’s on a settlement statement

A standard settlement statement is divided into buyer and seller sections, each side listing the financial line items that make up the closing. From the purchase price and loan fees to taxes, prorated costs, and final credits, it captures every charge and payment in one place. 

Purchase price and loan details

This section includes:

• Home purchase price
• Buyer’s loan amount
• Interest rate and loan terms
• Down payment amount already paid

Credits and debits

 Every item on a settlement statement appears as either:

• Debit: money owed
• Credit: money received or paid on your behalf

This includes deposits, prorated rent, seller concessions, and adjustments for taxes or utilities.

Property-related costs

Fees related to evaluating and insuring the property:

• Appraisal fee: A fee paid to a licensed appraiser who determines the home’s market value.
• Home inspection fee: The cost of hiring a professional inspector to evaluate the home’s condition and identify any issues.
• Title search and title insurance:  A title search confirms legal ownership, and title insurance protects against future ownership disputes.
• Survey fees (where required): The cost of having a surveyor confirm property boundaries and check for encroachments or easements.

>> Read: Costs of Owning a Home

Taxes and government fees

These vary by location but may include:

• Transfer taxes: Taxes imposed by state or local governments when a property changes ownership.
• Recording fees: Charges by the local government to officially record the sale and update public property records.
• Prorated property taxes: The buyer’s share of property taxes for the portion of the year they will own the home, split between buyer and seller at closing.
• Municipal fees: Local government fees that may include charges for utilities, certificates, or required inspections, depending on the location.

Broker and escrow fees

This section outlines the professional fees involved in the transaction:

• Real estate agent commissions: Fees paid to the agents representing the buyer and seller, typically based on a percentage of the home’s sale price.
• Escrow or settlement fees: Costs charged by the escrow or closing company for managing the transaction, holding funds, and ensuring all documents are properly completed.
• Attorney fees (where applicable): Charges for hiring a real estate attorney to review documents or represent you during the transaction, required in some states.

Prepaid items

These upfront costs help set up the buyer’s loan:

• Prepaid mortgage interest: Interest paid upfront to cover the period between closing and your first full mortgage payment.
• Homeowners insurance premiums: The upfront cost of insuring the home against damage or loss, typically required before closing.
• Mortgage insurance premiums: Payments required if your down payment is below a certain threshold, protecting the lender in case of default.
• Escrow deposits for taxes and insurance: Funds collected at closing to establish your escrow account, used to pay future property taxes and insurance premiums.

Settlement statement vs. Closing Disclosure

Although the terms “settlement statement: and “Closing Disclosure” are sometimes used interchangeably, they apply to different situations. The closing disclosure is required for most mortgage transactions, whereas a settlement statement appears in certain cash purchases, reverse mortgages, and non-TRID loans.

Document	When used	Required by law?	Notes
Closing Disclosure	Most financed home purchases	Yes (for borrowers)	Must be provided to the buyer at least 3 business days before closing; replaced the HUD-1 for most mortgages.
HUD-1	Reverse mortgages, some cash transactions, certain non-TRID loans	Yes (in specific scenarios)	Older form still used when a closing disclosure is not applicable.
Settlement statement/closing statement	Many cash purchases, commercial deals, and often to sellers in financed transactions	No	Used to outline final buyer/seller costs when a closing disclosure isn’t required or when sellers need a separate breakdown.

>> Read: Settlement Statement vs Closing Disclosure

Who provides the settlement statement?

The party responsible for  preparing the settlement statement varies by state and the type of closing. In most transactions, it’s issued by one of the following:

• The title company
• The escrow company
• A closing attorney
• Your lender (for the closing disclosure)

When you receive the settlement statement

When a settlement statement is provided can vary based on the type of transaction. If you’re using a mortgage, federal disclosure rules determine when closing documents must be delivered. For cash purchases and other non-loan closings, the timing is usually more flexible and depends on your title or escrow company.

• Buyers with a mortgage: Receive the Closing Disclosure at least three business days before closing.
• Sellers: Typically receive the seller’s settlement statement one day before closing or on closing day.
• Cash buyers: Usually receive their settlement statement shortly before signing, since timing is more flexible.

How to access your settlement statement after closing

Your settlement statement is an important legal and financial record you may need for taxes, refinancing, proof of purchase and sale, and more.You can usually retrieve a copy from:

• Your lender (for Closing Disclosures)
• Your closing or escrow company
• Your real estate agent
• Your title company
• Your online closing portal (if used)
  

If you’ve misplaced your copy, any of the parties above can typically provide a replacement.

FAQs: What is a settlement statement in real estate?

1. What is the purpose of the settlement statement?

The settlement statement provides a clear, itemized breakdown of every cost and credit in the transaction. Its purpose is to give both the buyer and the seller a transparent record of where every dollar is going, so each party fully understands the financial side of the closing.

2. Is a settlement statement the same as a Closing Disclosure?

Not always. The closing disclosure is required for most mortgage loans and must be given to buyers at least three business days before closing. A settlement statement is a more general document often used in cash transactions or provided to sellers, and the older HUD-1 form is still used in specific cases such as reverse mortgages.

3. Is settlement the same as closing?

They’re closely related but not exactly the same. Closing refers to the signing of documents and the transfer of ownership. Settlement is the financial portion of the process, where all costs, credits, and payments are reconciled to finalize the transaction.

4. When should a seller receive a settlement statement?

Sellers typically receive their settlement statement shortly before closing or on the day of closing, depending on how the title or escrow company prepares final documents and reconciles the transaction.

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