What are the best practices for preparing and delivering a settlement statement to the parties involved?

1 Review the contract and disclosures

Before you create the settlement statement, you should review the contract and disclosures to make sure you have all the relevant information and terms. You should also verify the identity and contact details of the buyers, sellers, lenders, agents, attorneys, and other service providers. Check for any contingencies, deadlines, escrow instructions, and special clauses that may affect the settlement.

2 Use a standard format and software

To avoid errors and confusion, you should use a standard format and software to generate the settlement statement. The most common format is the Closing Disclosure, which is required by the Consumer Financial Protection Bureau (CFPB) for most residential transactions. The Closing Disclosure is a five-page form that shows the loan terms, projected monthly payments, closing costs, and cash to close. You can use software programs, such as Easysoft, SnapClose, or Qualia, to create and customize the Closing Disclosure and other settlement documents.

3 Calculate and itemize the charges and credits

The settlement statement should clearly show the charges and credits for both the buyer and the seller. You should calculate and itemize the amounts for each category, such as the purchase price, earnest money deposit, loan fees, title fees, recording fees, transfer taxes, commissions, prorations, and adjustments. You should also indicate who is paying for each charge and how the funds are distributed. You should use the same terminology and order as the contract and the lender's estimate.

4 Double-check the accuracy and completeness

Before you deliver the settlement statement, you should double-check the accuracy and completeness of the data and calculations. You should compare the settlement statement with the contract, the lender's estimate, the title report, the escrow instructions, and any other relevant documents. You should also check for any typos, omissions, or discrepancies. If you find any errors or changes, you should correct them and update the settlement statement as soon as possible.

5 Deliver the settlement statement in advance

You should deliver the settlement statement to the parties involved in advance of the closing date. This will give them enough time to review the document and ask any questions or raise any concerns. You should also comply with the CFPB's rule that requires the lender to provide the Closing Disclosure to the buyer at least three business days before closing. You can deliver the settlement statement electronically, by mail, or in person, depending on the preference and availability of the parties.

6 Explain the settlement statement at closing

At closing, you should explain the settlement statement to the parties and answer any questions they may have. You should go over each line item and make sure they understand what they are paying or receiving. You should also confirm that the settlement statement matches the final loan documents and the escrow instructions. You should ask the parties to sign and date the settlement statement and provide them with a copy for their records.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?