When the transaction of a real estate property takes place, a document is sent to both the seller and buyer of the property. This document includes the overall expenses of the transaction along with the tax deductions. This document is also known as settlement statement and it is sent to both the parties 1-2 days prior to the final deal and transaction of papers of the property.
What goes in a Settlement Statement?
- Seller’s Deductions:
This part of the settlement statement is for the seller of the real estate property. Usually there is only one form that is used for this purpose but it has number of parts on it. Each part is for a particular person i.e. seller, buyer etc. In a standard HUD-1 form, the first part is for the seller of the real estate property. For example if a person is selling his house, he will receive his settlement statement one day prior to the final procedure of the transaction of the property and with this document, he can see how many and what type of expenses he will need to make in order to sell his house. Usually tax deductions are also included in the settlement statement form.
- Buyer’s Deduction:
Other than the seller of a real estate property, there is the buyer who is the most important person in the transaction. Along with the seller, the buyer also receives a HUD-1 form which is settlement statement and it includes all the expenses that he is required to make in order to finalize the transfer of the property. It includes the amount of the property, fee for transferring of the property through legal department, commission of the broker and tax deductions for federal purposes. With the settlement statement, the buyer can actually see how much the purchasing of the property will cost him along with the tax that he is required to pay to the federal and local government.
- Commission of the Broker:
Most of the time, the commission of the broker or the middle man in the transaction of the property is included in between the other figures on the settlement statements that are sent to both the buyer and the seller but sometimes, in order to make the process simpler and easier, brokers add their commissions and tax deductions separately on the settlement statement forms so that both the parties understand how much each of them will pay to the broker in form of the commission and for providing his services as the middle man.
- Tax Deduction:
Usually the tax deductions for both the seller and buyer are included with each type of expense but sometimes the gross tax deduction is added separately in the settlement statement form. This is a step to make it easy for the seller and the buyer to understand the expenses and costs of the procedure and to make sure that they know how much tax they need to pay to the federal and local government after this transaction. The seller will pay the tax on the amount he receives in exchange of the property and the buyer will pay the tax on the property that he has just acquired.
Free Settlement Statement Templates
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