How to Read Your Claremont Settlement Statement Line by Line

A few days before closing, escrow sends an estimated settlement statement. Most people scan the bottom number and put it down.

That is a mistake, and a cheap one to fix. The estimated statement is a DRAFT circulated so the parties can find errors while there is still time to correct them. Everything on it came from somewhere - a contract term, an invoice, a payoff demand, a proration calculation - and every one of those inputs can be wrong.

Reviewing it is a task, and it takes about twenty minutes if you know what to look at. This is how to do that work.

Note the scope: this article is about auditing the document. Which party customarily bears which charge is a separate subject, worked through in the closing-cost guide.

How the document is built

Every settlement statement uses the same logic: DEBITS are amounts charged to you, CREDITS are amounts in your favor, and the difference is what you bring or receive.

A buyer's statement debits the purchase price and the buyer's charges, credits the deposit already in escrow, the loan amount, and any seller credits. The remainder is cash to close.

A seller's statement credits the sales price, debits the loan payoffs, commissions, the seller's charges, and any credits given. The remainder is proceeds.

On a financed purchase the buyer also receives a closing disclosure from the lender, and escrow's statement and that document should tell a consistent story. Where they differ, ask - the difference is either an explainable formatting matter or a real discrepancy, and you want to know which.

The audit, in order

1. The contract numbers

Purchase price, deposit, and loan amount. Compare each to the executed contract, and check the deposit against what was actually delivered and receipted. A deposit that reached escrow in two installments and appears once is a real error.

If terms changed during escrow, every change should be reflected. Amendments that were signed but never made it onto the statement are one of the most common findings, which is why the amendment guide insists that changes be documented in writing. Verbal agreements do not appear here.

2. Negotiated credits

A repair credit, a closing cost credit, a holdback. Each should appear at the exact agreed amount, on the correct side. Sellers should confirm nothing appears that was never agreed; buyers should confirm nothing agreed is missing. Where a holdback exists, check that the disbursement terms match what was signed - the framework in the holdback guide.

3. The prorations

Property taxes, association dues, and, where relevant, rent. These are computed to the closing date, and the two things to verify are the DATE used and the FIGURE being divided.

If the closing date moved, the proration should have moved with it. If the tax figure looks unfamiliar, ask which bill it came from. The method is explained in the proration guide, and the arithmetic is easy to check by hand.

4. Payoffs

Sellers: does each loan payoff match the demand, and is every loan on the statement? A closed-but-unreleased equity line that was supposed to be cleared should appear. Payoff figures include interest to a specific date and sometimes fees, so they will not match a statement balance, and that is expected.

5. Third-party charges

Title, escrow, recording, county fees, association transfer charges, home warranty, natural hazard report, inspections paid through escrow. Each should correspond to an actual service that actually happened. A line for a service you did not order is a question, not a formality.

6. Commissions

Compare to the listing agreement and any written agreement with the buyer's agent. The figures should match the documents exactly.

7. The bottom line

Only after all of the above. If the final number is not what you expected, the reason is in one of the sections above and it is findable.

What to do when something is wrong

Send it to the escrow officer in writing, identify the line, and say what you believe it should be and why. Escrow corrects errors as a matter of course; that is what circulating a draft is for. What escrow cannot do is invent a term the parties never agreed - if a credit is missing because it was never documented, the fix is an amendment signed by both sides, not an adjustment.

Raise it as soon as you see it. A correction two days out is administrative; the same correction on signing day risks the recording date, the delay pattern the stall guide describes.

Two numbers to note before you close the file

Buyers: the exact cash to close, and the form and deadline escrow requires for it. Sellers: how proceeds will be delivered - wire or check - and where.

And for both: any instruction about moving money gets verified by telephone using a number obtained independently, never a number printed in an email. A settlement statement circulating by email, with a large figure on it and a deadline attached, is precisely the moment wire fraud tries to insert itself. Call the escrow company on its published number, read the details back, and confirm arrival by phone afterward.

Keep it

The final version of this document is the one your CPA will ask for years from now, and it is the primary evidence of what you paid and what it cost. File it permanently.

Line-item questions go to the escrow officer. Loan figures go to the lender. Tax treatment of any item goes to a CPA.

The escrow guide covers the sequence that produced these numbers. This is general information, not legal or tax advice.

Anthony Grynchal has been licensed in California since November 2009.