An ALTA settlement statement is the definitive financial record of a real estate closing, providing a complete, itemized breakdown of all money changing hands between the buyer and seller. Prepared by the title company or escrow agent, this document ensures transparency by detailing every cost, from the purchase price to prorated taxes. Reviewing your ALTA statement before closing is critical to catch errors and understand your financial obligations.
What is an ALTA Settlement Statement?
The ALTA settlement statement is a standardized form created by the American Land Title Association (ALTA) to document all credits and debits for both parties in a property transaction. Its primary purpose is to provide a clear, unambiguous accounting of the final settlement figures, fostering trust and preventing disputes. Unlike some documents, the ALTA statement is typically used in a wide range of transactions, including cash purchases, commercial deals, and investment property sales.
ALTA Statement vs. Closing Disclosure: What’s the Difference?
A common point of confusion is the difference between the ALTA settlement statement and the Closing Disclosure (CD). It's essential to understand that these forms serve distinct purposes.
- Closing Disclosure (CD): This is a federally mandated document required by the Consumer Financial Protection Bureau (CFPB) under TRID rules. It is provided only to the borrower and focuses on the loan's terms, projected payments, and specific closing costs.
- ALTA Settlement Statement: This form shows the complete financial picture for both the buyer and the seller. It is not federally regulated and is the go-to document for clarifying how proceeds are calculated for the seller and how final costs are allocated for the buyer. In a transaction involving a mortgage, the buyer will often receive both documents.
What’s Included in an ALTA Settlement Statement?
The statement is organized into logical sections for easy review. Key components include:
- Transaction Fundamentals: This section lists the purchase price and credits for deposits like earnest money.
- Loan-Related Charges: For financed purchases, this includes fees for loan origination, underwriting, appraisals, and any discount points.
- Title and Settlement Fees: This outlines the cost of title insurance (a policy protecting against ownership claims), settlement agent fees, and title search costs.
- Prorations and Adjustments: Expenses like property taxes and homeowner's association (HOA) dues are divided between the buyer and seller based on the closing date. This proration ensures each party pays their fair share for the time they own the property.
- Payoffs and Miscellaneous: This covers paying off the seller's existing mortgage, government recording charges, and other items like home warranty plans or inspection fees.
How to Read and Review Your ALTA Statement
A methodical approach helps ensure accuracy. Follow these steps:
- Verify Basic Information: Check the header for the correct property address, names, and closing date.
- Confirm Purchase Price and Credits: Ensure the agreed-upon sales price and any credits from the seller or lender are accurately reflected.
- Scrutinize Loan and Title Charges: Compare these figures against the estimates provided by your lender and title company.
- Check Prorations: Verify that tax and HOA dues are calculated correctly based on your state's calendar.
- Review Payoffs: Confirm the amounts listed to pay off existing liens or mortgages are accurate.
- Examine the Final Totals: The statement will clearly show the final cash-to-close amount for the buyer and the net proceeds for the seller.
Based on our experience assessment, you should carefully look for incorrect prorations, duplicate fees, or misapplied credits. Identifying these issues before signing can prevent delays and financial complications.
When and How to Receive Your Statement
You will typically receive a draft ALTA settlement statement for review one to three business days before the closing date. This allows time to ask questions and address discrepancies. The final version is signed at the closing table.
Key Takeaways for a Smooth Closing
- The ALTA settlement statement is the comprehensive financial record of your real estate transaction.
- Always review the document line-by-line before closing and compare it to your prior estimates.
- Ask your title agent or real estate attorney to explain any unfamiliar charges.
- Address any discrepancies with the title company immediately to ensure a timely and accurate closing.
Understanding this document empowers you to close on your property with confidence, knowing exactly where every dollar is going.
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