A statement of adjustments is a bill that shows who owes what on closing day. It splits the costs of the home between the buyer and the seller, so each side pays only for the time they own the property. It also shows the final amount the buyer must bring to closing, or the final amount the seller receives.
Why it exists
Think about how bills work when you own a home. The city sends a property tax bill. The condo corporation charges monthly fees. The water company bills you. Often, the seller already paid some of these bills for a period that continues after closing day.
That creates a problem. If the seller paid the property tax for the whole year in advance, and you take over the house in June, you should pay the seller back for the months you will own it. If the seller owes money for a period before closing, the seller should cover it.
The statement of adjustments fixes this. It makes sure nobody pays for time they didn't own the home.
What shows up on a statement of adjustments
Every deal looks a little different, but these items appear most often:
The purchase price. This is the starting point.
Your deposit. You already paid it, so it counts as a credit in your favour.
Property taxes. If the seller prepaid taxes past the closing date, you reimburse that portion. If the seller owes taxes, the seller covers them.
Condo fees. Condo corporations bill monthly, so the statement splits the month of closing between you and the seller.
Utilities. Water or other municipal charges can show up, depending on how the city bills.
Rent. If a tenant lives in the property, the statement divides the rent for the month of closing.
Fuel. If the home has a tank of heating oil, the buyer sometimes pays the seller for what's left in it.
A simple example
Say the seller paid the full year of property tax, $4,800, in January. You close on June 30, so about half the year remains.
The statement of adjustments gives the seller a credit of about $2,400. You pay that amount on top of the purchase price, because you get the benefit of the tax the seller already covered.
Now say the condo fee is $500 a month, and the seller paid the full month on the 1st. You close on the 15th. The statement gives the seller a credit of roughly $250 for the half of the month you own the unit.
Each of these amounts looks small on its own. Together, they can add up to a few thousand dollars on closing day, which is why buyers should plan for them.
Who prepares it, and when do you see it?
Your lawyer prepares the statement. Your lawyer gets the tax, condo, and utility information, runs the numbers, and talks to the other side's lawyer until both sides agree.
You usually see it a few days before closing, when you come in to sign your documents. Your lawyer walks you through it line by line, so you know what each number means before you sign.
What to check
You don't need to be an accountant. A quick read can catch most problems. Look for these things:
The closing date. The adjustments depend on it, so make sure it matches your agreement.
Your deposit. Confirm the full amount appears as a credit.
Any item you don't recognize. Ask your lawyer to explain it. A good lawyer will happily do that.
The bottom line. Check the total you need to bring, and make sure it matches what your lawyer estimated earlier.
If something looks wrong, tell your lawyer right away. Fixing a number before closing is simple. Fixing it afterward takes much more effort.
Does the statement include everything I pay at closing?
Not always. The statement of adjustments covers the money that moves between you and the seller. You also pay certain costs to other parties, such as land transfer tax, title insurance, registration fees, and your legal fees. Your lawyer usually shows these in a separate summary of your funds, so ask for the full picture, not just the adjustments.
The bottom line
A statement of adjustments is a fairness tool. It makes sure you pay for the time you own the home, and the seller pays for the time they owned it. Once you understand the main items, the document stops looking scary.
Have a closing coming up and want to know what to expect? Contact us, and we'll explain every number before you sign.