Settlement statement

The settlement statement is the master accounting document for a real estate closing. It shows every credit and debit on both the buyer's and seller's side, with the bottom line being the cash to close (for the buyer) and net proceeds (for the seller). The form is sometimes called the ALTA Settlement Statement; before 2015 it was the HUD-1.

How it works: for the buyer, the statement shows the purchase price, the loan amount, deposits already paid, closing costs, prepaids, and the resulting cash needed at closing. For the seller, it shows the sale price, the mortgage payoff, commissions, transfer taxes, attorney fees, prorations (property tax, HOA), seller concessions, and the resulting net wired to the seller. The two sides reconcile against each other, the buyer's debit for prorated property tax matches the seller's credit, for example.

Why it matters: the settlement statement is the binding accounting of the transaction. Sellers and buyers should review it line by line before signing, confirming the sale price matches the contract, the mortgage payoff matches the lender's payoff statement, the commissions match the listing agreement, and the prorations are calculated correctly through the closing date. Errors are usually addressable on the spot, but only if caught before signing.

Common gotcha: the settlement statement shows the seller's net proceeds, but it doesn't show capital gains tax, that's a tax-return calculation due the year after the sale. Sellers reading their settlement statement and seeing what looks like "the take" should remember that capital gains, particularly above the § 121 exclusion, can produce a meaningful additional bill at tax time. The seller-net-proceeds calculator at /tools/seller-net-proceeds models the after-tax view.