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Why does the amount you bring with you on closing day sometimes appear different from the purchase price you agreed on? It’s a question that gets asked a lot in Edmonton real estate transactions.
The answer usually lies with closing adjustments. These calculations are done before closing to ensure that the buyer and the seller each pay their fair share of property-related costs.
If you have looked over a statement of adjustments and wondered about the figures, you are not alone. This is exactly when an experienced real estate lawyer in Edmonton can help.
In this blog, we will understand how closing adjustments work in Edmonton real estate transactions and why a lawyer is necessary in this process.
What Are Closing Adjustments in Edmonton Real Estate Transactions?
Closing adjustments in the Edmonton real estate market are prorated amounts used to balance costs between the buyer and the seller as of the date of possession.
They are not surprise costs. Rather, they are used to ensure that everything is fair. For example, if the seller has prepaid property taxes for the year, the buyer pays back the amount for the period after the date of possession. If the taxes are not paid, this is also reflected.
As part of the closing process, your real estate lawyer in Edmonton will prepare and review a Statement of Adjustments, which is a financial summary that breaks down the purchase price, deposits, credits, and all prorated amounts so that you can see how the final amount due at closing is determined.
What Are The Closing Adjustments Buyers and Sellers Should Expect
As a first-time homebuyer in Edmonton, closing adjustments can be a surprise, especially if you see the final amount a little different from the purchase price. Sellers can also be relieved if they know they are being credited correctly for prepaid expenses.
Knowing what usually shows up on a Statement of Adjustments can give both sides a little more confidence on closing day. Here are the usual adjustments that both buyers and sellers can expect:
1. Property Tax Adjustments
Municipal property taxes are typically the largest adjustment. Because property taxes are an annual charge, they are prorated according to the date of possession. Regardless of whether it’s prepaid or due, your lawyer will determine the exact amount through official tax certificates.
2. Condo Fees (If Applicable)
If it’s a condominium, condo fees are prorated based on the possession date between the two parties. Your lawyer will also examine the estoppel documents to ensure there are no outstanding fees or special assessments that might impact the final amount.
3. Utility Adjustments
Utilities may be prepaid or paid through condo fees. These amounts are reconciled to ensure that neither party overpays.
4. Rent or Security Deposits (Investment Properties)
If it’s an investment property, the tenant’s security deposit and prepaid rent must be accurately transferred. In Alberta, there is a specific requirement for handling these amounts to ensure that the rights of both the landlord and the tenant are protected.
How a Real Estate Lawyer Protects You on Closing Day
This is where the importance of legal review comes into play.
A real estate lawyer in Edmonton will:
- Examine the statement of adjustments, figure by figure
- Check the municipal tax certificates
- Review the condo documents and financial statements
- Check the mortgage payout statements (if applicable)
- Verify the trust account transactions
- Prepare and register the transfer and mortgage documents with Alberta Land Titles
Even a tiny mistake in the calculations can amount to hundreds, or even thousands, of dollars. A seasoned residential real estate lawyer will make sure that the figures are in line with the agreement and save you from the costs of errors.
In Conclusion
Closing adjustments are not intended to complicate your transaction; instead, they ensure it is fair for both the buyer and the seller. However, closing adjustments must be calculated and analyzed carefully.
That’s where we, Peter B Mason Real Estate Lawyers, make sure that all statements of adjustment are carefully analyzed, that all tax and title information is checked, and that your funds are handled properly. We will ensure to keep the entire transaction process smooth and simple.
Contact us today and get the best advice to close your transaction with clarity and confidence.
FAQ
What is a statement of adjustments in the Edmonton real estate market?
A statement of adjustments is a document that lists the prorated expenses from the buyer to the seller, or vice versa, of property taxes, condo fees, and other prepaid expenses, completed before closing.
Who pays the property taxes at closing in Edmonton?
Property taxes are prorated based on the date of possession. The seller pays until possession, and the buyer pays back any prepaid amount for the period of ownership.
Can closing adjustments be altered before the date of possession?
Yes. Adjustments can be altered based on new information about property taxes, condo fees, or payout statements. Your lawyer will update the figures before final disbursements are made.