What is Closing Statement (Settlement Statement)?
The Short Answer
Closing Statement (Settlement Statement) explained simply
The Closing Statement, often called a Settlement Statement, is a detailed record of all financial transactions that occur when a business or property sale is finalized. It lists every cost and credit for both the buyer and the seller. This includes the purchase price, deposits, prorated expenses like rent or utilities, commissions, taxes, and any other fees. Both parties review and sign this document to confirm they agree with the financial breakdown before the deal is officially closed.
Real-World Example
The Coffee Shop Sale
Imagine you are selling your coffee shop for $200,000. The buyer put down a $20,000 deposit. Your broker’s commission is $10,000. There are also prorated utility bills of $500 that you owe, and $200 in prepaid rent that the buyer owes you. The Closing Statement will clearly show the $200,000 sale price, the $20,000 deposit credited to you, the $10,000 commission deducted from your proceeds, the $500 utility deduction, and the $200 rent credit. This document ensures everyone knows exactly where the money is going.
Why this matters
The Closing Statement is important because it provides a clear and final accounting of all money exchanged in a sale. It protects both the buyer and the seller by ensuring all financial obligations are met and accurately recorded. This document helps prevent disputes and confirms that the deal is fair and transparent for everyone involved.
Always review your Closing Statement carefully with your legal counsel before signing. Make sure every item is correct and that you understand all the charges and credits. It’s your last chance to catch any errors.
Always review your Closing Statement carefully with your legal counsel before signing. Make sure every item is correct and that you understand all the charges and credits. It’s your last chance to catch any errors.
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