When you finally get to the closing on the sale of your property, your lawyer will present you with the federally-required HUD-1 Settlement Statement (the “HUD-1”). The buyer’s lawyer typically prepares the HUD-1 and I usually get a draft of the document the day before the closing. I first review the HUD-1 to make sure that all the normal seller’s closing costs are there, that all the calculations are correct, and that all changes to the contract that involve money (i.e., changes in the purchase price because of a low appraisal, changes to the real estate agents fees, or credits for repairs) are on the HUD-1. I then send a copy to you, my client, to explain each item on the HUD-1.
The computations are itemized on page 2 and so that’s where I start my explanations. On the seller side of the HUD-1, there will be the real estate agents commissions, the seller’s lawyer’s fee, the New Jersey seller's transfer fee, and the cost of releasing any existing mortgages on the property.
The total of those itemized costs are then brought forward to page 1 of the HUD-1. Page 1 adds up the purchase price and the amount the buyer may be reimbursing you for prepaid real estate taxes (that you paid for the entire quarter) from the date of closing to the end of the quarter, the price for any items of furnishings that the buyer is buying from you, and any prepaid maintenance fees (if you live in a condominium) or prepaid homeowner’s fees (if you have a homeowner’s association). Then, deductions are made for the mortgages that need to paid off from the sales funds, the costs that were itemized on page 2, any credits for repair items, any real estate taxes that the seller did not yet pay but are due, and all of the deposits that the buyer has given and are being held by me. The buyer’s lawyer actually makes the payments to the real estate agents, to the banks holding your mortgages, and to me, paying my fee on your behalf.
The difference between the total of the purchase price and the additions and the deductions is the amount that the buyer’s lawyer will give you in a check at the closing. I will give you a separate check for the deposits that I am holding. Those two checks are the total amount that you made from the sale of your property.