At Horan & Aronowitz, LLP, we pride ourselves on giving hands on legal experience to all of our clients engaged in buying or selling residential and commercial real estate.  One of the most confusing aspects of buying or selling a home is the information contained on the Settlement Statement also known as the HUD-1 form.  For purposes of assisting our clients in understanding the terms and categories included in the HUD-1, we provide our clients with a full explanation of closing costs.  The following is the breakdown of Title and Closing Charges contained in section 1100 of the HUD-1.

Title and Closing Charges (Section 1100)

These fees cover the administrative costs of a title search, title examination, issuance of the title commitment/binder and final title insurance policy(ies.) Also included would be charges for conducting the closing/settlement/escrow. You are free to select the company to conduct your closing/settlement/escrow, and to shop for the best pricing.

Settlement/Closing Fee -A fee must be paid to a settlement agent who has prepared documents, calculated figures, and oversees proper execution of closing documents. This fee is often split between buyer and seller but can be negotiated as part of the sales contract.

Abstract of Title, Search, Title Examination, Title Insurance Commitment or Binder – In order to ensure that there are no pre-existing problems with your property, a title insurance professional must perform a title search and produce documentation on the home’s title. In some places, one or more of these charges will appear separately on the HUD-1 and in other places they may be included within the title insurance premium. When a mortgage loan is involved, there may also be added charges for special endorsements that will accompany the lender’s title policy.

Document Preparation – Some settlement agents charge for the cost of preparing legal papers such as the mortgage, deed of trust, note or deed and/or other loan and title documentation. If a lender charges a document preparation fee, it will typically appear in the Loan Fees/Direct Loan Costs section of the HUD-1.

Notary Fee – Because there are legal documents involved, a licensed notary is required to acknowledge the fact that the proper people signed these official documents in their presence. Notaries often charge a fee for their services.

Attorney fees – Both the homebuyer and the seller might have their own legal representation to prepare and record legal documents. Frequently, however, where an attorney is acting as a settlement agent, there may only be one involved in the closing. Who pays for those services is a matter of contract negotiation but is often handled like fees paid to any other settlement agent/title agent.

Title Insurance – There are two kinds of title insurance policies: Loan and Owner’s policies. The cost for the Loan Policy is based on the loan amount and the cost for the Owner’s Policy is based on the sales price of the home. Who pays these one-time fees at closing varies from state to state. Ask your settlement agent how it is handled in your area. In some circumstances, discounts may be available (such as a “reissue rate” or “reissue credit”) when the property has recently been insured by a title insurer. Be sure to ask if you are entitled to any discounts.

For a full breakdown of the sections contained within a HUD-1 form and to discuss any other issues related to the buying or selling of a home, contact Horan & Aronowitz, LLP for a free consultation.