Statement of Adjustment for Sellers

What You Need to know About Income Statement Normalization Adjustments

Statements of adjustments are created to clearly show all credits to the buyer and seller in the transaction, including the final amount due to the seller on closing day. There are two statements created—one by the buyer’s lawyer, one by the seller’s lawyer. They then meet and combine their work to be sure the amounts are correct, and develop one final statement.

What amounts are shown on the statement of adjustments?

Any adjustments against the sale price are listed on the statement of adjustments, including the purchase price, your deposit, and other expenses and fees, like utility or oil adjustments. There are also taxes payable, as well as property tax adjustments.

This example assumes the seller has prepaid one year property taxes, which the buyer will need to pay back to the seller.

How is a statement of adjustments laid out?

Luckily, statements of adjustments are fairly straightforward, and resemble a bank statement.

There are two columns: credit purchaser and credit vendor. The first column lists dollar amounts the buyers have made to their lawyer—primarily deposits. The second column lists payments you can expect to receive as the seller, including the sale price, tax adjustments, and common expenses.

The amount to be paid and the amount to be received are the same, balancing the statement. The prepaid adjustments and purchase price in the credit vendor column are what you can expect to receive on closing day.

How do trust ledger statements differ from statements of adjustments?

Your lawyer will issue you a trust ledger statement to the total that you owe, including legal fees and other minor expenses, as well as the amount you can expect to receive.

The buyers also receive their own trust ledger. While the statement of adjustments is shared between the two parties and details the overview of the transaction between the buyer and seller, the trust ledger outlines the transaction between you and your lawyer.

Trust ledgers are shown in the same manner as statements of adjustments, with one debits column and one credits column. Debits include paying off your existing mortgage, the real estate agent commissions, legal fees and disbursements, and the amount paid to you, the seller. The credits column shows the total received from the buyer—carried over from the statement of adjustments—and the deposit. Both the credits and debits columns will balance.

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