Closing statement

Key Takeaways

• Washington rule WAC 308-124D-205 requires the real estate licensee to furnish, or cause to be furnished, a complete detailed closing statement to each buyer and to each seller at the time the transaction is closed.
• A closing statement must show the date of closing, the total purchase price, and an itemization of every adjustment or amount received or paid, naming who is credited and who is debited for each item.
• The buyer and the seller receive different statements from the same closing, because a charge that is a debit to one party is often a credit to the other.
• A closing statement is the settlement accounting for the whole transaction, while the federal Closing Disclosure is a loan form delivered to the borrower.

What It Means

A closing statement is the final accounting of a real estate sale. It starts with the purchase price and then lists every dollar that moves because of the sale: the loan payoff, the earnest money already on deposit, the broker compensation, the escrow fee, the title premium, recording charges, and any taxes or utilities split between the parties. Each item lands on one side of a ledger as a credit or a debit, and the columns settle into a single bottom line.

Two people get their own version of that ledger. The buyer's statement ends with the cash the buyer must bring to closing. The seller's statement ends with the net proceeds the seller will receive. The same transaction produces two different bottom lines, because a charge that is a debit to one party is frequently a credit to the other. A Seller Concession toward the buyer's costs, for example, is a debit on the seller's side and a credit on the buyer's.

The statement is prepared by whoever handles settlement, usually an Escrow Officer at a title or escrow company, and the broker reviews it before the parties sign. Every term the parties agreed to in writing should be traceable somewhere on it.

How It Works in Washington

Washington puts the closing statement duty on the licensee, not only on escrow. WAC 308-124D-205 provides that the real estate licensee shall furnish or cause to be furnished to each buyer and to each seller, in every transaction where the licensee provides brokerage services, at the time the transaction is closed, a complete detailed closing statement as it applies to that party. The same rule sets the minimum content: the date of closing, the total purchase price of the property, and an itemization of all adjustments, money, or things of value received or paid, showing to whom each item is credited and to whom each item is debited.

The phrase to watch is cause to be furnished. In a typical Washington sale the escrow company prepares and delivers both statements, and the broker meets the rule by confirming that it happened rather than assuming it did. The signed statement then belongs in the transaction file. RCW 18.85.361(17) makes it grounds for discipline when a firm and its designated broker fail to preserve records relating to a real estate transaction for three years following the submission of the records to the firm, and the closing statement is one of those records.

Example

Rosa Delgado sells her Spokane house to Ben Whitfield for $455,000, closing June 15. Ben's statement debits him the $455,000 price and $3,200 in lender and escrow charges, and credits him $10,000 in earnest money, his new $364,000 loan, and $1,100 for the unpaid property taxes covering the days Rosa owned the home. His debits total $458,200 against $375,100 in credits, so he wires $83,100 to close. Rosa's statement credits her the same $455,000 and debits her $198,000 to pay off her loan, $22,750 in broker compensation, $700 for her half of the escrow fee, $895 for the title policy, $6,143 in real estate excise tax (the 1.1 percent state rate under RCW 82.45.060 plus a quarter percent local rate under RCW 82.46.010), and the same $1,100 tax Proration. Her debits come to $229,588, leaving net proceeds of $225,412. The $1,100 appears on both statements, as a credit to Ben and a debit to Rosa, which is how a proration is supposed to read.

Common Mistakes and Exam Traps

• The Closing Disclosure and the closing statement are not the same document. The Closing Disclosure is a federal loan form given to the borrower, while the closing statement is the settlement accounting given to both the buyer and the seller.
• A cash sale with no lender still needs a closing statement. The Washington rule keys off the licensee providing brokerage services, not off whether a loan is involved.
• Credits and debits are read from each party's own side. The same prorated amount is a debit on one statement and a credit on the other, so an answer that shows it as a debit to both parties is wrong.
• The seller's bottom line is net proceeds, not the sale price. A question asking what the seller receives is asking for the price minus the payoff, the compensation, and the prorated charges.