Lesson 11: Closing the Transaction

Question 1

settlement statement

Answer 1

Each party’s closing costs, along with the other financial details of the sale, are listed in a settlement statement.

The settlement statement is part of the closing disclosure form that federal law requires in residential transactions.

The settlement statement shows how much the buyer will pay at closing and how much cash the seller will receive at closing.

Question 2

documentary transfer tax

Answer 2

In California, the seller pays a documentary transfer tax (or excise tax) on the sale of real property. The tax is based on the property’s selling price.

Currently, the tax rate is 55 cents per $500 of selling price, or fraction thereof. (The rate is higher in some cities.) Here’s how to calculate the tax on a purchase price of $285,000: $285,000 divided by $500 = 570. 570 times $0.55 = $313.50. The documentary transfer tax is $313.50.