27.3 AL – Estimated Closing Statement

A real estate closing comes with costs that can add up fast—commissions, lender fees, title charges, taxes, prorations, and more.
Alabama law requires an estimated closing statement so buyers and sellers can see the likely costs before they’re at the closing table.
This helps prevent surprises and reduces the risk of mortgage fraud.

Closing Statement vs. Estimated Closing Statement

• A closing statement (also called a settlement statement) is the final accounting document used at closing that details
  the final costs and the receipts/disbursements related to the transfer of ownership.
• An estimated closing statement approximates those costs earlier in the transaction so each party is informed and prepared.
• All parties should compare the estimated statement to the final statement to spot and correct potential errors.

When the Estimated Closing Statement Must Be Provided

• Buyer representation (residential): Any licensee who represents a residential buyer and obtains a written purchase offer must prepare and provide
  an estimated closing statement to the buyer at the time the buyer signs the offer.
• The buyer’s statement must include the most accurate and complete estimates of all costs the buyer is responsible for at closing
  and must itemize each cost and the estimated amount.
• Seller representation (residential): Any licensee who represents a residential seller and presents a written purchase offer must prepare and provide
  an estimated closing statement to the seller at the time the offer is presented.
• The seller’s statement must show which costs are the seller’s responsibility and the approximate amount of each.
• By signing the estimated and the actual closing statements, the buyer and seller acknowledge they received them.

How This Relates to TILA/RESPA/TRID (Don’t Mix These Up)

Alabama’s estimated closing statement is a state-law requirement handled by the real estate licensee.
Federal law also requires lender disclosures under TILA and RESPA, which are combined under the TRID rules.

• Estimated closing statement (Alabama law): provided by the licensee to inform buyer/seller of transaction costs;
  provided when an offer or counteroffer is submitted/presented.
• Loan Estimate (TRID / federal): provided by the lender within 3 business days of the borrower’s loan application.
• Closing Disclosure (TRID / federal): provided by the lender 3 days prior to closing on the mortgage loan.

What the Estimate Typically Includes (Debits and Credits)

The estimated closing statement includes debits and credits for both the seller and the buyer. Typically, what is a debit to one party
is a credit to the other.

Disclosure to the Consumer + Consequences for Failing to Provide It

RESPA requires buyers to be informed about closing costs and helps prevent abusive practices that inflate closing costs.
Providing the estimated closing statement is the Alabama method for disclosing expected costs early in the process.