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closing statement real estate example

Closing Statement: Real Estate Example

Introduction

This response will provide a comprehensive explanation of a closing statement in a real estate transaction in Kenya, drawing upon relevant legal provisions and case law. The closing statement is a crucial document that summarizes all financial aspects of the transaction, ensuring transparency and accountability for all parties involved.

Table of Contents

1. Legal Framework

2. Components of a Closing Statement

3. Example of a Closing Statement

4. Conclusion

1. Legal Framework

The legal framework governing real estate transactions in Kenya is primarily found in the Land Registration Act, 2012 and the Transfer of Property Act, 1882. These acts outline the procedures for transferring ownership of land, including the requirements for a valid closing statement.

2. Components of a Closing Statement

A closing statement in a real estate transaction typically includes the following components:

2.1. Purchase Price

This is the agreed-upon price for the property, as stated in the sale agreement.

2.2. Earnest Money Deposit

The earnest money deposit is a sum paid by the buyer to the seller as a sign of good faith and commitment to the purchase. This amount is typically credited towards the purchase price at closing.

2.3. Financing

If the buyer is obtaining a mortgage, the closing statement will reflect the loan amount, interest rate, and any associated fees.

2.4. Closing Costs

Closing costs are expenses incurred by both the buyer and seller during the transaction. These costs can include:

• Title Insurance: This protects the buyer and lender against claims on the property's title.

• Property Taxes: The buyer may be responsible for prorated property taxes for the period of ownership.

• Recording Fees: These are fees charged by the government for recording the transfer of ownership.

• Attorney Fees: Legal fees for representing the buyer or seller.

• Survey Fees: Fees for a survey of the property to verify boundaries.

• Home Inspection Fees: Fees for a professional inspection of the property.

2.5. Adjustments

Adjustments are made to account for any prepaid expenses or liabilities related to the property. These can include:

• Property Taxes: Prorated taxes for the period of ownership.

• Homeowners Insurance: Prorated premiums for the period of ownership.

• Utilities: Prorated bills for utilities such as water, electricity, and gas.

2.6. Net Proceeds to Seller

This represents the amount of money the seller receives after all expenses and adjustments are accounted for.

2.7. Net Costs to Buyer

This represents the total amount of money the buyer pays at closing, including the purchase price, closing costs, and any adjustments.

3. Example of a Closing Statement

Buyer: John Doe

Seller: Jane Smith

Property: 123 Main Street, Nairobi

Purchase Price: Ksh 10,000,000

Earnest Money Deposit: Ksh 1,000,000

Financing: Ksh 8,000,000 mortgage

Closing Costs:

• Buyer: Ksh 500,000

• Seller: Ksh 200,000

Adjustments:

• Property Taxes: Ksh 50,000 (prorated)

• Homeowners Insurance: Ksh 20,000 (prorated)

Net Proceeds to Seller: Ksh 9,030,000

Net Costs to Buyer: Ksh 2,570,000

4. Conclusion

The closing statement is a critical document in a real estate transaction in Kenya. It provides a clear and comprehensive summary of all financial aspects of the transaction, ensuring transparency and accountability for all parties involved. The legal framework governing real estate transactions in Kenya, including the Land Registration Act, 2012 and the Transfer of Property Act, 1882, outlines the requirements for a valid closing statement. By understanding the components of a closing statement and the legal framework governing real estate transactions, buyers and sellers can ensure a smooth and successful closing process.