Share article
Share article
Summary: A statement of adjustments is the financial ledger for a real estate closing. It sets out the purchase price, the deposit already paid, prorated adjustments for things like property taxes and condo fees, and the final balance due on closing. In Ontario, the lawyers on both sides prepare and reconcile it so the numbers are accurate before money changes hands.
The final steps of a real estate transaction come with documents that can be hard to decode, and the statement of adjustments is one of them. It is also one of the most important, because it dictates exactly how much money changes hands on closing day. Here is what it is, what it contains, and who puts it together.
What is a statement of adjustments?
A statement of adjustments is the financial ledger between a buyer and seller in a real estate transaction. It details the final numbers: the purchase price, deposits made, adjustments (more on these below), and the balance due at closing. Think of it as the final bill of sale, accounting for every dollar changing hands.
Both sides need to understand it. For buyers, it clarifies exactly what you are paying and why. For sellers, it confirms what you are receiving, including reimbursement for any expenses you prepaid. Because it dictates the final amount owed on closing, both parties should review it carefully for accuracy.
What's included in a statement of adjustments?
The document brings together a few core line items: the purchase price, deposits already paid, prorated adjustments, and the resulting balance the buyer owes on closing.
Purchase price. The agreed-upon sale price of the property.
Deposits. Any amounts the buyer has already paid.
Adjustments. Prepaid items such as property taxes, utilities, or condo fees, prorated to the closing date.
Balance due. The remaining amount the buyer needs to pay to close.
Here is a simplified illustration of how those pieces fit together (figures are an example only):
Line item | Amount |
Purchase price | $800,000 |
Less: deposit paid | ($40,000) |
Plus: property tax adjustment (seller prepaid) | $1,200 |
Balance due on closing | $761,200 |
What are common adjustments?
Adjustments account for expenses tied to the property that one party has paid for a period the other party will own. Depending on how the seller paid them, the seller is credited or the buyer is debited so each side covers only their share of the time they own the home.
Property taxes. Prorated so each party pays for the part of the tax year they own the property.
Utilities and condo fees. Adjusted if the seller prepaid them for a period beyond the closing date.
Rent and security deposits. On investment properties, rent collected in advance and deposits held are adjusted, with the buyer reimbursing the seller for amounts covering periods after closing.
Who prepares the statement of adjustments?
The real estate lawyers prepare the statement of adjustments and make sure every financial detail is accurate. Having a lawyer review it is what catches discrepancies or errors that would otherwise slip through.
In Ontario, and most of Canada, a real estate lawyer is required on both sides of the transaction. The buyer's and seller's lawyers work together to confirm the statement is complete and correct, reconciling it against the Agreement of Purchase and Sale and the other closing costs before closing day.
Frequently asked questions
What is a statement of adjustments?
It is the financial ledger for a real estate closing, showing the purchase price, deposits paid, prorated adjustments for items like property taxes and condo fees, and the final balance the buyer owes on closing day.
Who prepares the statement of adjustments?
The real estate lawyers prepare it. In Ontario, a lawyer is required on both sides, and the buyer's and seller's lawyers reconcile the statement together to confirm the numbers are accurate before closing.
What adjustments are commonly included?
Prorated property taxes, prepaid utilities and condo fees, and, on investment properties, advance rent and security deposits. Each is split so the buyer and seller each cover only the time they own the property.
Why does the statement of adjustments matter?
Because it dictates the exact amount of money changing hands on closing. Reviewing it carefully, with your lawyer, ensures you are paying or receiving the correct amount and catches any errors before funds move.
What is the balance due on a statement of adjustments?
It is the amount the buyer still owes to close after the deposit and any adjustments are applied to the purchase price. It is the figure the buyer's funds and mortgage advance need to cover on closing day.
About the author
Joel Fox is a co-founder and COO at Ownright. He helps run the firm's day-to-day work on Ontario residential closings, refinances, and sales, and writes regularly to demystify the parts of a transaction that most homeowners only encounter once or twice in their lives.
At Ownright, we focus on Ontario real estate law and make the closing process simple, with a digital app that keeps you informed and a support team available whenever questions come up, adjustments included. You can start your closing online or get in touch with any questions.
Important note: This article is not legal advice. No one should act, or refrain from acting, based solely on the information in this post or any linked materials without first seeking appropriate legal or professional advice.
