If you're buying or selling a property, you're likely to come across a document called a Statement of Adjustments. A statement of adjustments is a document that outlines the financial transactions that are involved in a real estate sale. It typically includes information about the purchase price of the property, any outstanding mortgages or liens, and any other expenses or credits that need to be accounted for in the sale.The statement of adjustments is an important document that is prepared by the seller's lawyer or closing agent. It is typically provided to the buyer and their lawyer shortly before the closing date, and it is used to finalize the financial details of the sale. The statement of adjustments must be reviewed and accepted by both the buyer and the seller before the closing can take place.
To read a statement of adjustments, you will need to understand the following key components:
- Purchase price: This is the amount that the buyer has agreed to pay for the property.
- Outstanding mortgage: If the seller has a mortgage on the property, this amount will be listed on the statement of adjustments. The buyer will typically be responsible for paying off any outstanding balance on the mortgage at closing.
- Closing costs: These are the expenses associated with the sale of the property, such as legal fees, land transfer taxes, and title insurance. The buyer and seller will typically split these costs according to the terms of the purchase agreement.
- Credits: This section will list any credits that the seller is entitled to receive, such as property tax credits or utility credits. These credits will be subtracted from the purchase price to determine the net amount that the seller will receive at closing.
- Net amount: This is the final amount that the seller will receive at closing, after all adjustments have been made. This amount will be paid to the seller by the buyer or their lender, typically through a lawyer or a closing agent.
It's important to carefully review the statement of adjustments before closing on a property to ensure that all of the financial transactions are accurate and fair. If you have any questions or concerns, it's a good idea to discuss them with your lawyer or real estate agent. In some cases, the statement of adjustments may include additional items that need to be accounted for in the sale. For example, the statement may include prorated property taxes, utility bills, or association fees.
These items will be divided between the buyer and the seller based on the number of days that each party owned the property during the applicable billing period. Additionally, the statement of adjustments may include provisions for adjustments to the purchase price. For example, the purchase agreement may include a clause that allows for an adjustment to the purchase price based on the results of a home inspection. If the inspection reveals any defects or issues with the property, the buyer may be entitled to a credit or a reduction in the purchase price.