Settlement Statement
A settlement statement is a statement of the financial settlement between buyer and seller. It contains expenses paid and income received by both buyer and seller that affect the cut-off date. It must therefore be calculated who, between buyer and seller, owes money to the other. The settlement statement is typically calculated up to 30 days after the takeover date.
When the settlement statement is to be prepared, it is important that everything is calculated correctly and all relevant items are included. However, there is no requirement as to who does the work, but it can be advantageous to have a professional handle it. Often this is the buyer's advisor.
What is a settlement statement and why is it important?
A settlement statement is the financial settlement between buyer and seller. It ensures that ongoing expenses and income are distributed fairly between the parties based on the cut-off date.
It is important that the settlement statement is prepared correctly, as errors can lead to financial disagreements between buyer and seller after the transaction is completed.
Preparation
A settlement statement includes a range of information. You should find all those that are relevant to the transaction (that you possess). The settlement statement can only be prepared when both buyer and seller have found all relevant items. The list below contains the most common items in a settlement statement, but is not exhaustive.
Approaches
Below we list the three most popular choices for preparing the settlement statement.
Option 1: Buyer's advisor
It is normally the buyer's advisor who handles the completion of the transaction, including the settlement statement. When the settlement statement is approved by you and the buyer, the advisor ensures that the money is either paid directly or offset against the purchase price. The advantage of having a professional advisor handle it is that if something goes wrong, the advisor's liability insurance covers it.
What do you need to do?
Agree in the purchase agreement that the buyer's advisor prepares the settlement statement
Provide the necessary documents and information to the buyer's advisor
Review the settlement statement thoroughly when it is complete
Approve the statement and await payment
Option 2: Seller's advisor
If you have an advisor, they can prepare the settlement statement for you. Make sure to clarify in advance with the buyer and possibly write in the purchase agreement who pays for these expenses. When the settlement statement is approved by you and the buyer, the advisor ensures that the money is either paid directly or offset against the purchase price. The advantage of having a professional advisor handle it is that if something goes wrong, the advisor's liability insurance covers it. We have included a link to a website that lists most lawyers in the country.
What do you need to do?
Agree in the purchase agreement that the seller's advisor prepares the settlement statement
Provide the necessary documents and information to the seller's advisor
Review the settlement statement thoroughly when it is complete
Both parties approve the statement
Option 3: Buyer/seller
There is no requirement as to who should prepare the settlement statement, so if neither the buyer nor you have an advisor to represent you in the transaction, you can choose which of you prepares it. It is usually written in the purchase agreement who is responsible for preparing the settlement statement and it is typically the same person who handles the entire completion of the transaction. You are free to create your own document or find a template online. Various templates can be found online, some free and others for a small fee. We have included a link to a website that appears to have a thorough settlement statement.
What do you need to do?
Gather all relevant documents and information
Use a template or create your own document with all relevant items
Review the statement together with the buyer
Both parties approve the statement
Good advice
Get help from an advisor
Have an advisor, at minimum, review the settlement statement to ensure it is correct and no items are forgotten.
Prepare items in advance
Avoid an overwhelming amount of work by finding relevant documents for the items continuously during the transaction.
Read the settlement statement
Take the time to read the settlement statement thoroughly to ensure the calculations are correct.
Ensure documentation on house inspection scheme
If the buyer wants to use e.g. the house inspection scheme, get documentation that the buyer has paid their share.
Include self-paid items too
If an amount is paid directly by a party and should not be included in the settlement statement, it should still be documented.
Pay attention to the cut-off date
Make sure all items are calculated correctly based on the cut-off date.
What can we offer?
At Bolig Selvsalg we plan to offer the option to enter ongoing expenses and income related to the property, that either buyer or seller has paid or received. Based on the takeover date as the cut-off date, the parties are presented with an overview of expenses and income, as well as which amount should be paid in whose favor (buyer pays seller or vice versa).