Who Is Responsible for the Accuracy of a Closing Statement?

The settlement document of a real estate transaction, or HUD-1 statement, is the product of participation from many parties. As a result, no single rule places one party at fault for an inaccurate settlement statement. The accuracy of the settlement statement greatly depends on the information provided to the escrow agent, while responsibility for the accuracy of the settlement statement often depends on the party that provided the bad information.

As the provider of closing instructions and funds, the lender plays a large role in ensuring that the settlement statement is accurate. Before the escrow agent can close the loan or disburse funds to the appropriate parties, the lender requires the escrow agent to submit a preliminary HUD-1 statement that is subject to the lender's approval. In this way, the lender largely shifts the burden for the settlement statement's accuracy onto itself.

When the escrow agent prepares the settlement statement, it does so using information provided by many sources. The purchase and sale agreement, title abstract, and associated documents all contain information that must be properly transcribed onto the settlement statement. Failure to retrieve or properly transcribe necessary information could result in unpaid liens or other fees. The escrow agent must ensure that the settlement statement is free of clerical errors or figures that differ from those found in any associated contracts, liens, or invoices.

Real estate agents and professionals often do not get paid until the loan closes. In some cases, parties to the transaction reduce their fees or commission to ensure that the transaction closes. It is the duty of the agents and professionals to ensure that the settlement statement accurately reflects the amount that each professional should receive. In some cases the responsibility to adjust a fee down is self-enforcing and, therefore, the responsibility of the appropriate professional.

The purchaser and seller are ultimately responsible for the accuracy of the settlement statement. The purchaser and seller are the only two parties intimately involved in every part of the transaction. The seller is aware of liens attached to the property and the amount of any taxes or assessments owed. The purchaser should be familiar with all loan related costs and any other fees associated with the purchase of a new piece of property. Together, the buyer and seller are collectively able to verify the figures on the settlement statement and will probably sign a document to that effect.