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Don’t Be Fearful of the Settlement Statement

The settlement statement is an often-overlooked component of the short sale package. Whether you are inputting settlement statement information into Bank of America’s Equator system or whether your escrow or title officer is preparing a settlement statement for you, the settlement statement is one of the most vital components of the short sale transaction.

As part of my series on the Top Eleven Ways to Get Your Short Sale Approved in 2011, I am going to address the settlement statement. In that post, I stated that one of the most important ways to get that short sale approved in 2011 is to “assure that the settlement statement that you submit to the bank has the correct figures for your closing date.”

By the way, this statement should not intimidate you or scare you in any way. It is only second grade math. Your real estate licensing examination required much more difficult math than what you would see on a common HUD-1 or estimated settlement statement.

Take a look at these math problems:

49 + 51 = ?

100 = ? + ?

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In the first problem, you are expected to find the answer. In the second problem, you know the answer and you must find out which numbers equal one hundred.

A short sale settlement statement is like the second math problem in that you already know the answer. The answer is your purchase price.

Let’s say that you have a purchase contract for a short sale with an offer of $250,000. The $250,000 is your answer.

Now, once you have your answer, you need to figure out all of the different numbers that will total $250,000 (or your purchase price). For example, how much are property taxes? How much are the homeowner’s association dues, docs, and transfer fees? What is the cost of the title insurance policy? How much is the pest control estimate? What is the real estate commission?

Once you have considered all of the possible fees associated with your transaction, you add those together. You will get a number MUCH lower then your purchase price (or the $250,000 in the example).  You will then subtract that number from the $250,000 (or your purchase price). The amount that remains is what the lien holder(s) will net when the short sale closes.

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$250,000 minus commission minus other fees = net amount to lender

All a settlement statement requires is a little bit of addition and subtraction. It may be the most important addition and subtraction problem that you ever had to complete. If you do it wrong, you may have to give up some of your commission to close the transaction. I’m thinking that’s not something that you want to do. So, bone up those math skills or, better yet, buy some batteries for your calculator.

Photo: flickr creative commons by cogdogblog

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Written By

Melissa Zavala is the Broker/Owner of Broadpoint Properties and Head Honcho of Short Sale Expeditor®, and Chief Executive Officer of Transaction 911. Before landing in real estate, she had careers in education and publishing. Most recently, she has been able to use her teaching and organizational skills while traveling the world over—dispelling myths about the distressed property market, engaging and motivating real estate agents, and sharing her passion for real estate. When she isn’t speaking or writing, Melissa enjoys practicing yoga, walking the dog, and vacationing at beach resorts.



  1. Missy Caulk

    January 25, 2011 at 9:09 pm

    Excellent explanation Melissa. I am amazed at how many agents don’t know how to read them. I review before passing on to my buyers or sellers. On the short sale listings I have the Title company prepare them, they have the software that when you change a number it automatically changes the totals.

    Since I hate math, I would never put myself in the position of messing up. Like you said it is too critical to getting that short sales closed.

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