Mar 17, 2023
Buying or selling a home comes with paperwork, including the important statement of adjustment. The statement of adjustment outlines all financial adjustments to the purchase or sale price. These adjustments include any credits or debits including deposits, property taxes, and condo fees. Understanding what these costs are and who pays them is essential to ensure you have a smooth closing.
A statement of adjustments typically includes the following information:
In the following example, the seller will receive credit for items included under the column “Credit Seller”. The buyer will receive credit for the items under the column “Credit Buyer”.
Starting at the top, you will see that the seller will receive a credit for the Purchase Price of $316,000. This is the purchase price agreed to by the parties in the Purchase Contract. Accordingly, the seller receives full credit for the purchase price.
Further, on the next line, the Buyer will receive a credit for the Deposit of $10,000. The deposit was paid by the Buyer upon signing the contract. The Buyer receives full credit for the Deposit they have paid.
Thirdly, in this scenario, the Buyer will pay the full 2023 property taxes. This is because the deal closes on March 1st and property taxes are typically paid to the municipality at the end of June. However, the tax year runs from January 1st to December 31st. Therefore, the Buyer receives credit for the Seller’s portion of the 2023 property taxes. The Seller’s portion of the property taxes is calculated by pro-rating the annual taxes by the number of days the Seller owned the property in 2023.
Finally, the seller has paid the March condo fees in full. Therefore, the seller will receive a credit of $505.07 for the buyer’s portion of the March condo fees. The Buyer’s portion of the condo is calculated by pro-rating the monthly condo fees by the number of days the Buyer will own the property during the month of March.
Cash to Close is the final amount owed by the Buyer to Seller on Closing. It is calculated by adding up all the credits to the seller in the “Credit Seller” column and deducting the credits to the Buyer in the “Credit Buyer” Column.
The statement of adjustment is an important document when purchasing or selling real estate as it outlines all financial costs related to the deal and who pays them. Understanding this document ahead of time can help avoid any surprises on closing day and help ensure both parties get what they agreed upon in their contract. Being familiar with this document and all its components can make for an easier transition when buying or selling your home!
Hi! I’m Erin Crocker. I’m a real estate lawyer with over 10 years of experience in Alberta and British Columbia real estate law. I love technology and efficiency. I’m on a mission to create a modern, digital closing experience for buyers and sellers through technology, transparency and sharing knowledge.
