Updated April 2026

Mastering the Settlement Statement Walkthrough for the Arkansas Real Estate Exam

Last updated: April 2026

For many real estate students, the math and terminology surrounding the closing process can feel like a foreign language. However, understanding how to read, calculate, and explain a settlement statement is a critical competency required by the Arkansas Real Estate Commission (AREC). Whether you are analyzing a Closing Disclosure (CD) or an ALTA Settlement Statement, you must know how funds are distributed between the buyer and the seller.

This mini-article serves as your comprehensive settlement statement walkthrough. It covers state-specific tax calculations, proration rules, and broker responsibilities. For a broader overview of all test topics, be sure to bookmark our Complete Arkansas Exam Guide.

Understanding the Settlement Statement Landscape

In residential real estate, the settlement statement is the ultimate accounting of the transaction. It itemizes every cost, fee, and payout. Historically, the industry used the HUD-1 statement. Today, under the TILA-RESPA Integrated Disclosure (TRID) rules, residential transactions involving a mortgage utilize the Closing Disclosure (CD). Additionally, title companies in Arkansas frequently use the ALTA Settlement Statement to provide a clear, side-by-side view of the buyer's and seller's debits and credits.

To pass the Arkansas real estate exam, you must understand the fundamental difference between a debit and a credit:

  • Debit: A charge or an expense. It is money that a party owes at closing.
  • Credit: Money received or already paid. It reduces the amount a party must bring to closing.

Arkansas-Specific Closing Costs and Rules

The national portion of your exam will test general closing concepts, but the state-specific portion will drill down into Arkansas laws. There are two major Arkansas-specific calculations you must master: the Real Property Transfer Tax and property tax prorations.

The Arkansas Real Property Transfer Tax (Revenue Stamps)

Whenever real estate is transferred in Arkansas, a state documentary stamp tax (transfer tax) is levied. The current rate in Arkansas is $3.30 per $1,000 of the purchase price.

By default, standard Arkansas real estate contracts stipulate that this cost is split equally (50/50) between the buyer and the seller. Here is the formula you should memorize:

  • Formula: (Sales Price ÷ 1,000) × $3.30 = Total Transfer Tax
  • Example: A home sells for $200,000. ($200,000 ÷ 1,000) = 200. Multiply 200 by $3.30 to get a total tax of $660. The buyer pays $330 (debit) and the seller pays $330 (debit).

Property Tax Proration in Arkansas (Paid in Arrears)

Property tax proration is a heavy favorite on the AREC exam. You must remember this golden rule: Arkansas property taxes are paid one year in arrears. This means that taxes for the year 2025 are not due and payable until 2026 (specifically, they are due by October 15th of the following year).

Because the seller lived in the home while these unpaid taxes were accruing, the seller must give the buyer a credit at closing for the time they owned the home. On the settlement statement, this appears as a Debit to the Seller and a Credit to the Buyer.

Average Settlement Costs in Arkansas ($)

Debits and Credits: The Balancing Act

When reviewing a settlement statement scenario on your exam, you will need to identify how common line items are allocated. Here is a quick cheat sheet for typical Arkansas closings:

  • Purchase Price: Credit to the Seller, Debit to the Buyer.
  • Earnest Money: Credit to the Buyer (they already paid this). For more details on how these funds are handled prior to closing, review our guide on Arkansas earnest money and escrow.
  • Agent Commissions: Debit to the Seller (usually, unless a buyer's agency agreement dictates otherwise).
  • Loan Payoff: Debit to the Seller.
  • New Loan Amount: Credit to the Buyer.

The Principal Broker's Responsibility

In Arkansas, closings are predominantly handled by title companies rather than attorneys. However, do not let this fool you into thinking the real estate agent is off the hook. According to AREC Rule 10.10(c), the Principal Broker is ultimately responsible for ensuring that the closing statement is accurate and that copies are delivered to both the buyer and the seller.

Even if a title agent prepares the ALTA statement, the broker must review the debits, credits, and prorations for accuracy. To understand more about the hierarchy of liability in a brokerage, check out our article on Arkansas broker vs. agent responsibilities.

Step-by-Step Settlement Walkthrough Scenario

Let’s put it all together with an exam-style scenario. Imagine you are representing a buyer purchasing a home in Little Rock for $300,000. The closing date is June 30th. The annual property taxes are $2,400 (paid in arrears). The buyer put down $5,000 in earnest money.

1. Transfer Tax Calculation:
($300,000 ÷ 1,000) × $3.30 = $990 total.
Settlement Entry: $495 Debit to Buyer / $495 Debit to Seller.

2. Earnest Money:
The buyer has already deposited these funds into the broker's or title company's trust account.
Settlement Entry: $5,000 Credit to Buyer.

3. Property Tax Proration:
Taxes are $2,400 per year, which is $200 per month. The seller owned the home for exactly 6 months (January 1 through June 30). The seller owes for these 6 months because taxes are paid in arrears.
6 months × $200 = $1,200.
Settlement Entry: $1,200 Debit to Seller / $1,200 Credit to Buyer.

By mastering these calculations, you will be well-prepared to tackle the settlement and closing questions on the Arkansas state exam.

Frequently Asked Questions (FAQs)

How is the Arkansas real estate transfer tax calculated?

The Arkansas transfer tax (documentary stamps) is calculated at a rate of $3.30 per $1,000 of the purchase price. Unless negotiated otherwise, standard Arkansas contracts split this cost 50/50 between the buyer and the seller.

Are property taxes prorated in advance or in arrears in Arkansas?

Property taxes in Arkansas are paid one year in arrears. For example, 2024 property taxes are due by October 15, 2025. Therefore, at closing, the seller must provide the buyer with a credit for the portion of the year the seller owned the property.

Who is ultimately responsible for the accuracy of the settlement statement under AREC rules?

Under Arkansas Real Estate Commission (AREC) rules, the Principal Broker is ultimately responsible for the accuracy of the closing statements and ensuring that both the buyer and seller receive copies, even if a title company prepares the documents.

How does earnest money appear on the settlement statement?

Earnest money appears as a Credit to the Buyer. Because the buyer has already paid this money into an escrow account out-of-pocket, it reduces the total amount of cash they need to bring to the closing table.

What is the difference between a Closing Disclosure (CD) and an ALTA statement?

The Closing Disclosure (CD) is a federally mandated form under TRID used specifically for the buyer's loan terms and closing costs. The ALTA Settlement Statement is a comprehensive, industry-standard form created by the American Land Title Association that clearly breaks down the itemized debits and credits for both the buyer and the seller side-by-side.