Everything You Need to Know About a Statement of Adjustments

Navigating the final steps of a real estate transaction can feel like decoding a complex puzzle, especially when you encounter documents like the Statement of Adjustments. Whether you're buying your dream home or selling a property, understanding this document is crucial to ensure a smooth and transparent financial transaction. So, let's dive into everything you need to know about a Statement of Adjustments, from its purpose to who prepares it.

What is a Statement of Adjustments

A Statement of Adjustments is a critical document in the real estate world, acting as a financial ledger between buyers and sellers. It details the final financial transaction, showing the purchase price, deposits made, adjustments (more on these soon), and the balance due at closing. Think of it as the final bill of sale, outlining every nickel and dime changing hands.

Key Components of the Statement of Adjustments

The document typically includes several key components:

• Purchase Price: The agreed-upon sale price of the property.

• Deposits: Any amounts already paid by the buyer.

• Adjustments: These could be for prepaid property taxes, utilities, or condo fees, prorated to the closing date.

• Balance Due: The remaining amount the buyer needs to pay.

Both buyers and sellers must thoroughly understand the Statement of Adjustments. For buyers, it clarifies what you're paying and why. For sellers, it confirms what you're receiving, including reimbursements for any prepaid expenses. Both sides should thoroughly review the document to ensure that everything looks accurate as it is ultimately what will dictate the final amount of money that will change hands on closing day.

Common Adjustments Explained

Adjustments are included in the Statement of Adjustments to account for expenses that are paid by the homeowner throughout the year. Depending on how the seller has paid these expenses historically, they will be credited or debited for the expense to account for the amount of time they were the owners of the property. 

Property Taxes and More

Adjustments can include prorated property taxes, ensuring both parties pay their fair share for the time they own the property within the tax year. Similarly, utilities and condo fees might be adjusted if the seller has prepaid these for a period beyond the sale date.

Handling Rent and Deposits

In investment property transactions, rent collected in advance and security deposits must also be adjusted. Essentially, the buyer reimburses the seller for amounts that cover periods beyond the closing date.

The Role of Legal Professionals

Real estate lawyers are typically responsible for preparing the Statement of Adjustments. They ensure that all financial details are accurately reflected. It’s also why having a legal professional review the document is paramount; they can spot discrepancies or errors that might otherwise be missed. In Ontario, and most parts of Canada, a real estate lawyer is required on both sides of the transaction. The buyers and sellers lawyers will work together to ensure that the Statement of Adjustments is accurate and complete. 

Wrapping Up

The Statement of Adjustments plays a vital role in closing the financial loop of a real estate transaction. By understanding its components, ensuring accuracy, and working with your lawyer, you can navigate this final step with confidence. Whether you're stepping into your new home or handing over the keys to new owners, knowing the ins and outs of the Statement of Adjustments means you're informed, prepared, and protected.

Buying or selling a home and need a lawyer? Feel free to reach out. At Doormat, we make the closing process simple with a digital app that keeps you informed and a support team that is available whenever you have questions. We're here to help you through every step of your real estate journey, adjustments included.