When you’re buying a property—especially your first home—one part of the closing costs that often takes buyers by surprise are closing adjustments. These aren’t fees you hear about all the time, but they can have a real impact on your final payment due on closing day.
Let’s break it down so you know exactly what to expect.
What Are Closing Adjustments in Real Estate?
Closing adjustments are final financial calculations made between the homebuyer and the seller during the closing process. Their purpose? To make sure both parties fairly split costs related to the property based on the time each one owns it.
If the seller has already prepaid certain expenses (like property taxes or condo fees), the buyer is responsible for reimbursing the seller for the portion of those costs that extend beyond the closing date.
These adjustments will be outlined in a document called the Statement of Adjustments, which your real estate lawyer will go over with you before closing.
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What are some of the other costs associated with buying a home? Watch these videos next to find out:
Common Closing Adjustments for Home Buyers in Toronto
Wondering what expenses are typically adjusted at closing? Here are the most common ones to look out for:
1. Property Taxes
If the seller has prepaid property taxes for the year—or even just for the month—the buyer will need to reimburse the seller for the time after closing. For example, if your closing date is September 15 and the seller already paid the full month’s taxes, you’ll pay them back for September 15–30.
2. Utility Bills (Rental Items)
Most utility bills are settled directly between the service provider and the homeowner. But some homes have rental items like hot water tanks or HVAC systems. If that’s the case, you’ll see an adjustment for any rental costs that overlap with your ownership.
3. Condo Fees (Common Expenses)
In condo buildings, monthly maintenance fees are often paid in advance. If the seller has paid the full month and your closing happens mid-month, you’ll reimburse them for the days following the sale.
4. Rent and Security Deposits (If Tenants Are in Place)
If you’re buying a tenanted property, this one’s key. Any prepaid rent or security deposits must be transferred to you as the new landlord. Unlike other adjustments, this is money coming to you, not from you.
How Do I Know How Much I’ll Owe In Closing Adjustments?
Before closing, your lawyer will provide you with a Statement of Adjustments. This document clearly outlines:
- What you owe the seller
- What the seller owes you (if anything)
- A final total of funds you’ll need to bring on closing day
It’s super important to review this document with your lawyer carefully. This is where unexpected costs can sneak up if you’re not prepared.
Pro Tip: Budget for Closing Adjustments in Advance
One of the most common buyer questions I get is:
“How much should I budget for closing costs?”
While closing adjustments vary based on your specific property and the timing of your closing, it’s smart to set aside extra funds beyond your down payment and standard legal fees. This ensures you’re not caught off guard when your lawyer requests additional money to cover adjustments.
Need help budgeting? Try some of our helpful buyer calculators here:
Final Thoughts
Understanding closing adjustments is a crucial part of being a well-informed buyer. They aren’t there to trick you—they just ensure that the costs of ownership are divided fairly between the buyer and seller.
Buying a home in Toronto? I’m here to guide you every step of the way, from offer to closing—and everything in between. Give me a call at 416-909-9235, email me at info@yaelandco.com, or fill out the form on this page.
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