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CALCULATING YOUR NET AT CLOSING

When you accept an offer your attorney or title company can provide a statement showing what your approximate costs will be at closing. A final settlement costs statement will be provided to you prior to actual closing.

Seller’s Closing Costs are deducted from the sale price of the home at closing. Your lawyer, title or mortgage company will prepare a closing statement at the time your lending documents are prepared. You will not have an exact number until your closing date has been established.

Mortgage payoff:				$
Prorated mortgage interest:			$
Prorated real estate taxes:			$	
Lender closing fees:			$
Attorney’s fees:				$
Title insurance fees:			$
Real estate transfer tax:			$
Real estate brokerage commission:		$
Any liens or debts to be paid from proceeds	$			
					 _______________
Deduct from Sale Price of Property		$

A sample of state transfer fees is provided here for informational purposes. Your state may have no transfer fees or, a different method of computing them. Consult with your attorney or title company to find out what to expect.

EXPLANATION OF NEW JERSEY REAL ESTATE TRANSFER FEES

The Real Estate Transfer Fee is a tax paid to the State of New Jersey and is calculated based on the purchase price of the home. The tax is calculated as follows: $2.00 for each $500.00 up to $150,000.00 or ($4 per $1,000) $3.35 for each $500.00 up to $200,000.00 or $6.70 per thousand on $50,000) $3.90 for each $500.00 over $200,000.00 or ($7.80 per thousand on anything over $200,000

There is an additional GPF – general purpose fee – on the sale price as follows:

$1.80 for each $1,000.00 up to $550,000.00
$2.80 for each $1,000.00 on amount from $550,001.00 to $850,000.00
$3.80 for each $1,000.00 on amount from $850,001.00 to $1,000,000.00
$4.30 for each $1,000.00 over $1,000,000.00

Example: If you sell you home for $500,000.00 you will pay $4,175.00

To make it easy:

$4 x $150	 	=	  $600  (covers $150,000)
$6.70 x $50 	=	  $335  (covers $ 50,000)
$7.80 x $300	=	$2,340  (covers $300,000)
				      _________
		 	                $500,000  Total Sale Price	
Plus:
$1.80 x $500	=	  $900 (covers $500,000 GPF)
			=======
			$4,175

The above information is supplied only as a general guideline to help you estimate this portion of your closing costs. Your attorney, lender or title company will supply you with exact figures as required by your state.

SETTLEMENT COSTS

This sample HUD-1 or RESPA statement will give you an idea of most of the settlement costs incurred by Buyers and Sellers of real property. Some statements may show other charges such as Credit Report Fees, Messenger Fees, Appraisal Fees, however, this will give you a very good idea of what you can expect to see on your closing statement.

Closing Statements (also known as Settlement Statements) are similar to balance sheets and are itemized summaries of all the details of the transaction. At closing it becomes necessary to make adjustments and to prorate the amount of money owed or to be received by the Seller and Buyer. This final accounting shows the buyer and seller the cash required, pro-ration, expenses, charges and proceeds.

Closing statements are usually prepared by the purchaser’s attorney. However, your real estate sales person should be familiar with the methods of computation and be able to explain the statement to you.

Here’s an explanation of how to read the statement:
1. Selling Price: The full amount of the sale price as per the contract is debited to the buyer and credited to the seller.
2. Earnest Money Deposit: The amount of the buyer’s initial deposit is credited to the buyer.
3. Additional Deposit: The balance of the buyer’s deposit (usually 5%-10% of the purchase price is credited to the buyer.
4. Survey: Surveys are usually required by the lender. This is a debit to the buyer.
5. New First Mortgage: Since this amount is applied to the purchase price of the property it is a credit to the buyer.
6. Title Insurance: The title policy is for the protection of the buyer. The insurance premium is a debit to the buyer.
7. Interest Paid in Advance to Lender: Lenders usually require that interest on the mortgage be paid through the end of the month of the closing. This is calculated by taking Mortgage Amount x Interest Rate ÷ 360 x Number of Days until the end of the month. This amount is a debit to the buyer.
8. Recording Documents: Deeds must be recorded by the County Clerk’s office to protect the Buyer. Lenders sometimes require that mortgages be recorded to protect them. Because both of these recordings are to the benefit of the buyer and his mortgagee these charges are debited to the buyer.
9. Pay Off Existing Mortgage: In order to give clear title to the buyer, the seller must pay off any mortgage he has on the property. Since that mortgage is paid from the sellers proceeds the charge is a debit to the seller.
10. Interest on Existing Mortgage Balance: The seller must pay interest on his mortgage from the date of his last payment up to the date of the closing. This is a debit to the seller.
11. Commission to Broker: This is equal to the sale price of the property x the agreed to commission percentage. This amount is a debit to the seller.
12. Taxes, Prorated: Since real estate taxes are usually paid in advance the seller will generally get back a credit for taxes he has already prepaid. The amount which has been prepaid between the date of the closing and the last day covered by the tax payment is credited to the seller and debited to the buyer.
13. Insurance: If the buyer is assuming a homeowner’s insurance policy taken out by the seller the daily premium for the unused prepaid portion will be debited to the buyer and credited to the seller.
14. Title Search: The title search is performed for the benefit of the buyer to be certain he is getting “clear title” to the property, therefore this charge is debited to the buyer.
15. State Realty Transfer Fees: Not all states require transfer fees. In those that do, the charge is levied against the seller’s proceeds and is a debit to the seller.
16. Loan Discount (Points): Some lenders will charge percentage “points” on a mortgage – one point = 1% of the total amount of the loan. This charge is a debit to the buyer.
17. Attorney’s Fees: The buyer’s attorney’s fees are a debit to the buyer.
18. Sub-Total Buyer: The buyer’s debit and credit columns are added up.
19. Balance Due From Buyer: The difference between the debits and credits.
20. Sub-Total Seller: The seller’s debit and credit columns are added up.
21. Net Proceeds Paid to Seller: The difference between the debits and credits is the amount the Seller will receive at closing.
22. Totals: The total debits and credits for the seller should be equal and the total debits and credits for the buyer should be equal.

Some examples of other adjustments you might see on your closing statement are:

Second Mortgage: If the seller has a second mortgage which is being paid off at the time of closing this would be a debit to the seller. If the buyer is taking a second mortgage at the time of purchase this would show as a credit to the buyer.

Purchase Money Mortgage/Second Mortgage: In this case the seller is financing part of the buyer’s purchase. The amount of this mortgage is a debit to the seller and a credit to the buyer.

Assumption of Present Mortgage: If the buyer assumes a mortgage held by the seller, the amount being assumed is a debit to the seller and a credit to the buyer. Interest due from the date of the last payment to the date of the closing is a debit to the seller and a credit to the buyer.

Assumption Fees: In a case where an existing loan is being assumed by a new buyer the lender will usually charge a fee for the new documents required to make the transfer. These fees are generally paid by the buyer. In this case, the fee would be a debit to the buyer.

Pre-Payment Penalty on Existing Mortgage: Some lenders include a pre-payment penalty in the terms of their loans. This means that if the loan is paid off before the 20 or 30 year term of the loan, a penalty must be paid by the borrower. This would be a debit to the seller.

Rental Income: If the property being sold contains one or more rental units, the rent due to the landlord is prorated. That portion of rent due the landlord from the date of closing to the date the next rent payment is due, is credited to the buyer and debited to the seller. This is operating under the assumption that the current months rent has already been paid to the seller.

Security Deposits: If security deposits (including accrued interest) are turned over to the buyer, these deposits should be a credit to the buyer and a debit to the seller.

Escrow: Lenders will often want the buyer to pay a certain portion of real estate taxes and insurance in advance. In this manner they have a reserve for the time when the payments are due. These charges are a debit to the buyer.

Like balance sheets, closing statements are prepared in debits and credits. If an amount of money is owed to the buyer, the buyer is credited. If an amount is owed by the buyer, he is debited. If an amount is owed to the seller, he is credited. If it is owed by the seller, he is debited.

All calculations, unless otherwise stated, are computed as of the closing date. Insurance, rental income, taxes and mortgage interest are calculated using a 360 day year and a 30 day month which represents 1/12 of the yearly charge and each day represents 1/30 of a monthly charge. Prepaid items are all credits to the seller and debits to the buyer. The period of time remaining on the prepaid item is called the ‘unused’ period. The unused period is credited to the seller and debited to the buyer.