Adjustments at Closing
This is referred to in the contract of sale as “adjustments at closing”. When the closing date is firmly established, the seller’s attorney will calculate the specific taxes and water/sewer taxes for the current period and divide by the total number of days in the period, and then multiply by the number of days remaining in the period that have already been paid for by the seller. This amount will appear as a debit for the buyer on the closing statement.
The universally agreed upon document to describe and record a credits and debits at closing is called the HUD-1. Prior to closing, this will be reviewed by attorneys representing the buyer, the seller and the bank to make sure that everyone is in agreement regarding costs and proceeds for all parties involved.
The contract date is not set in stone. It is an approximate target date. The contract says that the closing will occur on the target date or “at such other time and place as Seller and Purchaser mutually agree”. We recommend getting the property to close as soon as possible. A Buyer needs to follow through with all requests from the mortgage company in a timely manner to achieve this. A Seller needs to comply with requirements in the contract with respect to establishing clear title as well as any requirements created by local laws.
Possession and Moving
The date the keys are handed over to the new Owner is the closing date unless other agreements have been made. The contract says, “Purchaser shall have possession of all the property and Seller shall be out of the property”. At that time all keys and security codes need to be provided to the Purchaser.
The contract requires the Seller to maintain “all applicable utilities in service until the time of closing”. It is imperative to call the utility companies – electric, gas, water, oil, propane, etc… only after a firm date is received for the closing of the property. The Realtors will help facilitate this transfer so that service continues uninterrupted. The normal date for the transfer is the actual closing date. With the consent of both parties this could be a day or two earlier or later. If you turn the utilities off early and you are the Seller, you will have a problem when the Buyer performs their final inspection of the property. If the Buyer is unable to test the furnace, the lights or the hot water, they will probably not close unless they can hold back sufficient funds to cover the replacement of the mechanical systems that cannot be tested.