may think that the most valuable piece of paper you get when closing
is your check for the proceeds of sale. From an accounting standpoint,
however, the most precious piece of paper is the final closing statement.
If you think of the closing as a checking account, the final closing
statement is your checkbook. It records all the money related to
your transaction either as credits or debits.
money that you receive during closing is shown as a credit to your
account. You won't have many credits; the biggie is always your
credit for the amount of the sale price. You may get a credit from
the buyers for the unused portion of property taxes you prepaid.
You get a check from your insurance company for any unused portion
of your homeowners insurance premium. By the same token, if your
lender collects extra money from you each month that goes into an
impound account used to pay your property taxes and homeowners insurance
premiums, any excess funds in the impound account are paid directly
to you by the lender after the sale closes.
are funds paid out during closing on your behalf. Your biggest debit
is usually the mortgage payoff. Other major closing costs listed
as debits are the real estate commission, local transfer taxes,
any corrective work credits you give the buyers, and, depending
on the date the sale closes, a credit to the buyer for your share
of unpaid property taxes. The list also includes an assortment of
small charges for notary fees, recording fees, document preparation
fees, messenger fees, and so on.
final closing statement is extremely important. Be sure to keep
a copy for your files; you'll want to refer to it when you prepare
your income tax return. Some expenses of sale (such as the real
estate commission, mortgage prepayment penalties, and property tax
payments) are tax deductible. Furthermore, you may owe capital gains
tax on any profit you made from selling the property.
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