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Closing Adjustments
At closing, there are always leftover financial matters that need to be settled. You and your buyer will tie up these loose ends through closing adjustments.
How do adjustments work?
Any expenses (property taxes, school taxes, condo fees, insurance, utilities, etc.) you prepaid before closing day are pro-rated, with the buyer reimbursing you for the period during which you no longer own the property.
For example: You pay your property taxes in advance each month. Your closing takes place on April 20. At closing, your buyer will reimburse you for 10 days' cost of insurance coverage you've already paid for, but won't use.
Some other possible closing adjustments:
- If your buyer assumes your mortgage, the outstanding principal, plus accrued interest and any funds held in your tax account, are also adjusted.
- You may give the buyer a credit at closing in consideration for any defects revealed by the home inspection.
- If you are selling a rental premises, income such as first and last month's rents are adjusted.
Note that fees and adjustments can make closing costs add up substantially. Remember to factor them into both the buyer's affordability calculation and your expected net proceeds. Ask your mortgage specialist, account manager or real estate agent for assistance.
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