Where Does All the Money Go?

Lots and lots of money gets exchanged when a St. Paul house is sold, but most of the time, the buyers and sellers never see it!   It's all accounted for on the settlement statement or "HUD".  The settlement statement is one of the documents most frequently causing confusion for home buyers and sellers.  The "deer in the headlights" look is a sure sign that the figures on that legal size paper have not registered.

The buying/selling process is only done a few times in a person's life so it's often intimidating to understand.  When presented with the settlement statement,  some clients will nod their heads as if they understand and after the closing ask me about the figures.  Some nod their heads and just trust that all is right with the world.  Others question every single line until it is clear.

One of the common questions relates to how the seller's mortgage gets paid.  The seller doesn't get the money from the buyer and pay it him/herself, so what happens to that money?   

In St. Paul, the buyer's closer combines the funds from the buyers' new mortgage with any cash the buyer or seller bring to the closing. The closer then writes checks using those funds to pay off the sellers' mortgage, any old liens against the property, any judgments that have to be cleared, any unpaid  taxes, the real estate company's commission, and the fees associated with the closing.  All of those bills must be paid off before the title will be clear to transfer to the buyer.  Since the buyer's closer acts as agent for the title company who guarantees clear title, it is important that their representative be the one to pay the bills.  That way, if they make a mistake, they have to make it right.

For the same reason, the buyers' closer has to get written pay-off figures from the respective lien holders as well.  The seller cannot provide a pay-off amount for their mortgage.  That figure has to be requested by the closer from the lender.  Again, the closer has to guarantee that the figures are right, and therefore, has to obtain the figures directly. 

Because the closer has to account for how all the funds are used, the settlement statement is detailed and sometimes overwhelming for the buyers and sellers.   It's okay to ask questions.  Afterall, there's a lot of money (at least that's what the paper says!) exchanging hands and it's not a bad idea to understand where it's all going!

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