Sellers may encounter two forms of expense as a result of settlement.

First, there are costs that arise from the sale directly, such as the payment of brokerage fees. Second, some sellers - as a matter of negotiation - may have agreed to pay certain settlement costs as a sales inducement to the buyer. In such arrangements, the seller may pay the first $500 or $1,000 in settlement expenses or a specific item such as points.

Sellers should obtain the standard HUD settlement sheet or appropriate form from the settlement arranger.The front of the HUD form will have a numbered series of items to fill in, including adjustments between the buyer, seller, and lender as well as final costs of the sale. The numbered items to fill in on the back include the costs of marketing, taxes and the settlement process itself and loan expenses. Before considering the front-page totals, sellers should review their expenses, if any, on the back.

Looking at specific settlement costs first, at the top of the HUD sheet are the items with 700-series numbers that relate to brokerage commissions. If money is due to a broker it will be shown here. If two brokers are dividing a commission, the portion paid to each will be shown.

The 800-series items list specific costs associated with obtaining a loan. Included here are sucn potential costs as an appraisal fee, credit report, assumption fee, loan orgination fee (typically 1 percent of the loan, an item usually paid by the buyer), application fees for FHA and VA loans, and other items. Of particular interest to sellers is item number 802, the "loan discount" or points.

A lender may require certain monies to be paid in advance. The 900 items can include advance payments for mortgage insurance or interest. Item 903, hazard insurance, is typically a cost to the buyer and requires a purchaser to bring the policy to settlement. This item is usually marked "POC" on the settlement sheet which means "paid outside the closing."

A lender may also establish escrow accounts to hold the buyer's money for specific purposes. The 1000-series items will include reserves such as several months' advance property taxes. Although these deposits are a matter of negotiation, few buyers try to reduce the escrow funds sought by the lender.

The settlement arrangers must be paid for their work and these charges are found in the 1100-series items. These costs can include a title search (which is routinely done by someone other than an attorney evenin cases where an attorney handles settlement), a title examination (a review of the title search), the sale of title insurance (for which the settlement provider often receives a substantial commission, up to 40 percent) a title insurance binder (a commitment by a title insurer to provide coverage), and fees for document preparation and other legal work.

One group of costs which are wholly non-negotiable are governmental taxes, the "1200" items. These costs can include tax stamps, recording fees for deeds and mortgages, and tax certificates.

There may be additional settlement costs, such as a property survey or a pest control inspection paid at closing.

These miscellaneous expenses are found in the "1300" items.

Item "1400 will show the total costs from the charges above to the buyer and seller. These totals are then transferred to the front of the settlement sheet as part of the overall adjustments of the sale.