The Buyer’s Estimated Settlement Statement lists all of the costs and credits associated with the purchase of a home. In San Francisco, title insurance companies typically act as the escrow agent for a residential real estate purchase/sale, and the escrow officer prepares the statement with input from the buyer’s lender (if applicable).
These documents are usually one or two pages. We explain each section in detail below the picture of the full document.
Let’s take a look at each section of the document in closer detail.
The top of the document will have all of the relevant information about when the transaction is closing (settlement date), the names of the buyers and sellers, the property address, and lender info, if a lender is involved.
The sale price of the property and any deposits made by the buyer (typically the initial deposit, sometimes additional deposits), as well as any loans the buyer is obtaining will be listed in the financial consideration section.
Regardless of the number of days in the month the deal closes, escrow companies prorate costs based on a 30-day month. Property taxes and HOA fees in condos are the two items most likely to be prorated on a buyer’s settlement statement.
Money isn’t cheap! All of the charges associated with the new loan will be summarized in this section. For a buyer with one loan, this is a pretty typical set of charges. If you are paying any points for your loan, that fee will be included in this section. This buyer elected an impound account (the bank will pay their insurance and taxes on their behalf), but most San Francisco buyers choose not to have an impound account and pay property taxes and insurance on their own.
Title and escrow charges are grouped together in SF because it’s a title company usually provides escrow services in addition to title insurance. Your three major costs are your owner’s title insurance policy, the title insurance policy you will buy for your lender(s) (if you have a loan/loans), and the escrow fee. The cost of the title insurance policy is based on the cost of the home, while the lender’s policy is based on the size of the loan, which is why it is a less expensive policy.
The owner’s title insurance policy lasts as long as you own the property. Lender policies last for as long as the loan is in effect on the house; if you refinance, you will buy a new policy for the new lender.
Finally, we’ve got everything else. From estimates to recording fees, charges from building or community homeowner’s associations (HOAs), to miscellaneous charges, insurance policies, home warranties, and anything else that doesn’t fit elsewhere.
Once the buyer’s deposits and loans have been credited to the escrow, and all the debits added up as well, the estimated balance due from the buyer shows the remaining money needed to close the transaction. The balance due is equal to the remainder of your down payment and all of the closing costs as listed on the estimated settlement statement.
Finally, it is important to remember that all of the charges in the closing statement are estimates! Things can adjust based upon the actual closing date (namely, tax prorations and accrued interest). Escrow agents can close a transaction with excess funds, but they cannot close a transaction that does not have enough money in escrow to cover all costs, so escrow agents will generally estimate high and then immediately cut a check to refund any overcharges after the escrow has closed. The buyer will receive an updated final settlement statement once the transaction has closed along with their refund.