Seller Side Closing Documents
This Seller Side Closing Documents Guide, will go over the documents a Seller will need to sign at closing. Since a good closing attorney will walk you through the signing process, we’ll concentrate on a mail away package. This guide covers the Seller side of the transaction. If you are purchasing a home, check out our Buyer Side Closing Documents Guide.
First, and foremost, you MUST sign the documents in the presence of a notary public. This is easy enough to arrange, if there isn’t one in your office, you can drop into a UPS store and they will notarize the document for you. Second, you MUST sign in blue ink. Some institutions will refuse to accept signatures in anything other than blue ink. Now that we’ve got the minutia out of the way, let’s take a look at the documents involved.
Most attorneys will split the documents into two section. The first section does not require a notary public. The second section does. The first section usually includes the following documents:
- Settlement Statement
- Addenda to Settlement Statment
- Acknowledgement and Receipt of Settlement Statement
- Representation Acknowledgement
- Affidavit of Exemption from 1099-S Rules
- 1099-S Tax Reporting Act Information
The second section will usually include the following documents:
The Settlement Statement, also known as the HUD-1, is the document that lays out all of the closing costs, states who pays for each item, and shows the net amount due to or from each party. As the Seller, you are primarily going to be concerned with the right side of the page. On page 1, you’ll find the price being paid, payoff amounts for any existing loans, total closing costs paid by you, and the total amount due to or from you
Depending on the attorney, and the details of your transaction, you may have several Addenda, or none at all. A common addendum to the HUD-1 clarifies some of the acronyms on the HUD-1 (For example, …Items marked “(P.O.C)” were paid outside of closing…). You just have to read and sign these.
Acknowledgement and Receipt of Settlement Statement
This document has several purposes, I will highlight a few here. It confirms that all parties have received and reviewed the Settlement Statement. It lays out what should happen should an error be found. It explains how to handle the difference between estimated taxes and the actual tax bill. It states for whom the closing attorney is working. Finally it gives the closing attorney a limited Power of Attorney on your behalf to correct clerical issues with the notes, deeds, or other closing documents. There’s a lot packed into this one page document, so read it carefully, then all you have to do is sign.
Acknowledgement that the Attorney Represents the Lender
In Georgia, unless the purchase is made with cash, the closing attorney represents the Lender in the vast majority of transactions. They do not represent either the buyer or the seller. It’s counter intuitive, and thus the closing attorney is required to disclose this fact to all parties. Each attorney will have their own version of this letter. This page only requires a signature.
Affidavit of Exemption from 1099-S Rules
In Georgia, if a Seller meets the following four criteria, they are not required to file a form 1099-S for the sale of their property. In order to qualify for this exemption, you must meet ALL of the following criteria:
- The seller used the residence as the principal address for at least two of the five years before the sale.
- The sales price is less than $250,000 if the seller is single, or $500,000 if the seller is married.
- There is no federally subsidized mortgage financing assistance with respect to the mortgage on the residence
- There is no reason to believe the gain on the sale of the property will be included in the seller’s gross income
If you meet all of these criteria, all you have to do is sign the form.
1099-S Tax Reporting Act Information
This document gives the attorney all the information they need in order to file the 1099-S. Most of the time it will come mostly filled in. You will most likely be responsible for filling in your phone, and, if the proceeds of the sale are being split between the sellers, what percentage each person receives.
This is the document that actually transfers title to Buyer. You just need to sign this one.
The Seller’s Affidavit will vary by attorney, but the main purpose of the form is to assure the buyer that there aren’t any nasty surprises waiting for them. Common statements you might find on this form assure the buyer that there are no outstanding tax appeals, disputes over boundaries, pending suits, or other parties residing in or with claim to the property. You just need to make sure that all of these statements are true, and then sign the document.
Affidavit of Seller’s Residence
In Georgia, if you are a Georgia resident, you are not required to withhold taxes on the sale of your home. If you’re a Georgia resident, all you have to do is check the box marked “Seller is a resident of Georgia” and then sign the form. You may still qualify for the exemption, even if you are technically a resident of another state. You may qualify if you meet the criteria of the section shown below. If so, check the corresponding box, and sign the form at the bottom. If you are not a Georgia resident, and do not qualify under one of the other exemptions, you will have to fill out the section titled Affidavit of Seller’s Gain. Take a look at the image below. In the box marked LESS COST BASIS, you will enter the amount you paid for the house, plus the cost of any upgrades you made. You will have to present documentation supporting the number you put here, so only include expenses that you can prove you paid for. In the LESS SELLING EXPENSES field, you will put the amount it cost you to sell the home. This includes Real Estate Broker commissions, closing costs, staging fees, ect. Again, you must have documentation to support the costs you are claiming. Finally, subtract the COST BASIS and the SELLING EXPENSES from the SALE PRICE to get your NET TAXABLE GAIN.
Each attorney will have a slightly different set of documents. If you are in doubt about anything on the form, give the attorney a call. If the documents are incorrect when they get to the attorney, you may have to re-do the entire process.