Closing Statements and Settlement Math
Brokers are expected to understand and review settlement figures. This chapter covers closing-statement preparation, prorations, and the broker's review responsibility.
The Closing Statement
A closing (settlement) statement itemizes the credits and debits to the buyer and seller, including the purchase price, deposits, loan amounts, prorated taxes and other charges, and closing costs. Utah brokers should understand how the statement is built so they can explain it to clients and catch errors. The broker exam includes settlement math because the broker is responsible for the transaction's accuracy at a higher level than a sales agent.
Prorations
Prorations divide ongoing costs such as property taxes, HOA dues, and prepaid items fairly between buyer and seller as of the closing date. Amounts the seller has prepaid may be credited to the seller, while amounts the seller owes but has not paid may be credited to the buyer. Being able to compute a proration and check that it appears correctly on the settlement statement is a practical broker skill.
Broker Review of Figures
A broker's supervisory role includes reviewing that the settlement figures match the contract terms and that client funds, including any deposit held in the broker's trust account, are correctly reflected. Catching a mistake before closing protects the parties and the firm. Understanding the numbers also supports the broker's duty to deal honestly and to avoid misrepresenting the costs of a transaction.