Sunday, December 9, 2007

¿ A document frequently referred to as a "closing statement" or "settlement sheet."

¿ A form that itemizes all the amounts paid by the buyer and the seller of a residential property, including commissions, loan fees, points, transfer taxes and escrow charges for property taxes and insurance. It may also list certain expenses paid outside of closing, such as for a termite inspection or appraisal.

¿ A document that is filled out by the closing agent and must be signed by both buyers and sellers. "Oftentimes buyers don't even see the document until they are supposed to sign it," said Jon Boyd, president of the National Association of Exclusive Buyer Agents.

¿ A standardized form created by the Department of Housing and Urban Development.

¿ A statement that is required for federally regulated mortgages under the Real Estate Settlement Procedures Act. In practice, the form is often used for cash transactions as well.

¿ A form that the buyer should be allowed to review at least one business day before closing. The buyer may need to specifically request it from the settlement agent, though. "Unfortunately, this document has information from a bunch of different sources," Boyd said, and the form is rarely ready early.

¿ A form that buyers should read closely, checking against the good-faith estimate they received from their lender when they applied for their mortgage. In particular, they should double-check the interest rate and fees for their lender and the title company charges. They should also make sure seller concessions are appropriately credited. Most mistakes on the form are innocent, Boyd said, but they are rarely in the buyer's favor. "Out of hundreds of transactions, I've never seen a situation where the interest rate was lower" on the HUD-1 than it should have been, he said.

¿ A form that sellers should also read carefully, verifying the amounts being charged for commissions, transfer taxes and their split of the property taxes.

¿ A potential source of problems that neither buyers nor sellers should ignore. If they spot a mistake, they must speak up quickly. Signing the form signals approval of the charges. Protesting them after the fact can be difficult. Buyers and sellers may even want to postpone closing until the issue is resolved. If it's a $5 question, they may not care anymore, Boyd said, but if it's a $500 question, they should.

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