It appears we have a good deal of misunderstanding, especially with the newly-licensed among us, about the requirements for estimated closing statements in single family residential transactions. The requirements are set out in Alabama Real Estate Commission Rule 790-X-3-.04. The term "net sheets" is commonly used in the business to refer to estimated closing statements.

If you are working with a buyer, it is your responsibility to provide a net sheet form to the buyer at the time the buyer signs an offer. This form must be prepared by you and it must be signed by the buyer. It must contain your best estimates of all cost items the buyer is expected to have at closing, and the approximate amount each item will cost. Do not forget, too, your responsibility to furnish a detailed closing statement at the time the sale is closed.

If you are working with a seller, it is your responsibility to provide a net sheet form to the seller at the time an offer is presented to the seller. This form must be prepared by you and it must be signed by the seller. It must contain your best estimates of all cost items the seller is expected to have at closing, and the approximate amount each item will cost. Do not forget, too, your responsibility to furnish a detailed closing statement at the time the sale is closed. Here are some key points: You will be OK if you make your best reasonable guess about the items and the amounts that appear on the sheets. This requires that you make reasonable efforts to inform yourself about the list of possible cost items, and the estimated cost of those items. If you find later that some correction needs to be made, you should make those corrections. Then have the seller or buyer sign off on a new or corrected sheet. It is not permissible to rely on any estimate of costs provided by a mortgage lender. It is your responsibility to prepare one yourself. If an attorney or title company closes the transaction, you can rely on the actual closing statement provided by them. It is not necessary that you "redo" one yourself for the buyer or seller. The rule requiring you to do an actual closing statement is for those very rare cases where the closing is conducted by you or your company broker. Let me add a note here. I do not recommend that you or your broker handle a closing, no matter how simple it might appear. It is necessary for you to do a new net sheet, or at least correct the one already prepared, when preparing and presenting counter offers or subsequent written offers. The rule does not require that you prepare a net sheet for the seller at the time you get a listing. Many brokers require this, but the rule does not. If your broker does require this, you still must prepare another one when you present an offer to the seller, unless the offer is on the same, exact terms upon which you based the first one. I do not think that happens very often. You are to leave a signed copy with the buyer or seller, and retain one for the company's files. The company file copy should be retained for three years the same as all other records. It is not necessary for the listing agency and the selling agency to trade net sheets for record retention purposes. If it is an in-house sale, then the file should contain both seller's and buyer's sheets.

This is not just a technical paperwork requirement. It is designed to inform and protect consumers. It also is a good sales tool for you. Getting a transaction closed is just as important as getting a contract. Closings are often difficult under the best circumstances. If the parties know what to expect, the odds are you will have a smooth closing. If a party is unhappy due to not being informed, then the closing is in trouble. It is hard to negotiate, and get a closing done on the spot under these circumstances. If those efforts fail, remember this: No commissions are disbursed at failed closings. You will be left to walk to the parking lot with empty pockets and some very unhappy folks. It gets worse after they drive away.

Personally, I learned this stuff the hard way when I closed transactions while in private practice. Complying with the rule is good for everyone, especially you.

Again, it should be noted that the information presented in the preceding article relates ONLY to people buying & selling houses in the state of ALABAMA and their agents.