Property transaction is not a simple case of finding a buyer and then negotiating an amount in which you transfer your home for the agreed upon amount. Rather, property transaction is a complicated process full of fees and issues that need to be resolved before the transfer of property can take place.

Many of these extra fees can be described as settlement costs. These costs are resolved at the time of closing and include such items as: real estate broker’s sales commission; loan fees; insurance costs; fees related to starting an escrow account; title charges; government related costs involved in title transfer; and home inspection costs such as surveying fees and pest inspection charges.

Settlement charges are important to consider as the dollar amount attached to these costs can increase the cost of your loan. However, these settlement costs are a necessary component of the home selling process and is used to give both sides of the property transaction deal peace of mind.

The main document involved in the closing stage of the property transaction is the HUD-1 Settlement Statement. A statute of the Real Estate Settlement Procedures Act (RESPA) requires that this form be used by settlement agents in all transactions in the United States that involve federally related mortgage loans. It is an easy to read document that clearly itemizes all settlement cost items. At the end of the document, it clearly states the seller’s net proceeds as well as the buyer’s net payment at the time of closing.

One of the byproducts of using a form that clearly documents the settlement costs involved in the property transaction is that all possible lingering expenses involved in the house must be resolved between the buyer and seller. Expenses such as property taxes, homeowner association dues, utility bills, and special assessments are related specifically to the property. These expenses cover the property for a specific amount of time and since most property transactions do not take place at a time where all of these expenses come up, the buyer and seller must first determine how much of these expenses they are responsible for.

Once these settlement costs are resolved, your home would be sold!

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