Closing Adjustments Explained: What First-Time Buyers Need to Know
If you’re buying your first home, your closing statement might look confusing at first glance. There are numbers, credits, and extra charges that weren’t part of your offer price.
Take a breath. No one is trying to get one over on you.
These extra amounts are called closing adjustments, and they’re simply a fair way to divide ongoing costs between you and the seller.
space
What Are Closing Adjustments?
Think of it like splitting a bill at a restaurant.
On closing day, ownership of the home transfers from the seller to you. But some household expenses — like property taxes and utilities — are paid ahead of time or billed in cycles.
That means you and the seller need to settle up and make sure each person only pays for the time they actually owned the home.
Your real estate lawyer will show you a document called the Statement of Adjustments. This outlines exactly what has been credited or charged and why.
space
The Most Common Closing Adjustments
1. Property Taxes (Usually the Biggest One)
This is the adjustment most buyers will see.
Let’s say:
- Annual property taxes are $3,600
- The seller already paid the full year in January
- You close on the home at the end of July
From August to December (5 months), you’ll be living in the home — but the seller already paid those taxes. You have to reimburse him for the period of time after you take ownership of the property.
Here’s how it’s calculated:
$3,600 ÷ 12 months = $300 per month
$300 × 5 months = $1,500
That $1,500 gets added to your closing costs to reimburse the seller.
It’s not an extra fee — it’s simply your share of the year’s taxes.
space
2. Utilities (Sometimes)
Depending on the property and where you live, you may also see adjustments for:
- Prepaid propane or heating oil (very common in rural areas)
- Water or sewage bills (in some towns)
- Occasionally natural gas deposits
Example:
You buy a rural home and the propane tank is ¾ full on closing day. The seller already paid to fill it.
If that propane is worth about $600, you would reimburse the seller for that amount — since you’ll be using it.
space
The Bottom Line
Closing adjustments aren’t surprise charges. They’re simply a fair way to divide ongoing home expenses. The key is knowing they’re coming so you can budget properly and avoid feeling overwhelmed when you see your final numbers.
If something doesn’t make sense to you, ask. Your lawyer and your realtor are there to walk you through every line of your closing costs. Buying a home is one of the biggest financial decisions you’ll ever make. You deserve to understand it clearly and confidently.
space
If you have questions about closing costs, adjustments, or you’re getting ready to buy or sell a home, Forest Hill – Grey County is always happy to help. Feel free to reach out to Mark and Laura at anytime. Whether buying or selling, we’re here to make the process clear, straightforward, and stress-free.
Closing Adjustments Explained: What First-Time Buyers Need to Know
Important note: This article is provided for general information only and is not legal advice. You should not make decisions — or avoid making them — based solely on the information shared here. Always speak with a qualified lawyer or appropriate professional about your specific situation before taking action.
