|
ADJUSTMENTS TO CLOSING COSTS |
At settlement it is
usually necessary to make an adjustment between buyer and seller for
property taxes and other expenses. The adjustments between buyer and seller
are shown in Sections J and K of the HUD-1 Settlement Statement.
If the
taxes, which are payable annually, had not yet been paid when the settlement
occurs on July 1, the borrower will have to pay a whole year's taxes on the
following December 1. However, the seller lived in the house for the first
six months of the year. Thus, one half of the year's taxes are to be paid by
the seller. The borrower is given credit for this amount at the settlement and the
seller will pay this amount or count it as a deduction from sums payable to
the seller.
Similar adjustments are made for homeowner association dues, special
assessments, and fuel and other utilities, although the billing periods for
these may not always be on an annual basis. Be sure you work out these cost
sharing arrangements or "prorations" with the seller before the
settlement.
You may wish to notify utility companies of the change in ownership and
ask for a special reading on the day of settlement, with the bill for
pre-settlement charges to be mailed to the seller at his or her new address
or to the settlement agent. This will eliminate much confusion that can
result if you are billed for utilities used when the seller owned the
property. |
|
. |
|