As a Massachusetts title attorney with more than 40 years experience, I have handled more than 20,000 real estate closings. While there have been many changes in the industry over the course of my career, there are still some basic concepts that have remained constant. There follows a primer on the most standard adjustments which are involved in each and every real estate closing:

     1. Real Estate Taxes: In Massachusetts, most taxing authorities render bills on a quarterly basis. This means that taxes are due on the first of February, May, August and November of each year. The February bill covers the period which commences on January 1 and ends on March 31. The May bill covers April 1 through June 30 and so on. The trick here is to explain to the Buyer and Seller that when you close within a taxing period, there are roughly 90 days of taxes to deal with. That means that if a closing takes place on January 20, the Seller is responsible for 20 days in the quarter and the Buyer for the remainder. A January 20 closing will almost always produce a credit for the Buyer and a debit for the Seller since the February 1 taxes will not have been paid. The Buyer will be required to pay the taxes due on February 1 if the closing take splace on January 20. What makes thing more complicated is the fact that Massachusetts uses a June 30 fiscal year. This means that any taxes collected after July 1 of each year and before December 31 of each year are only “estimates” and there may be post closing adjustments based on whether the actual taxes are higher or lower than the estimate.

     2. Condominium Common Area Fees. These are generally monthly fees. The Seller brings a Certificate from the Consominium Trustees which indicates that the monthly fees have been paid through the end of the month. The partiesd then adjust what is owed based on the actual time during the month that the Seller occupied the Unit. Sometimes, the Seller is behind in his Common Area Fees. The Trustees issue a “wet” ceritifcate that can only be delivered if the total amount of arrearages is collected by the closing agent. This is workable, but tricky.

     3. Balance of Seller’s Mortgages. Most Sellers underestimate the amount of their mortgage payoff. They forget that their mortgage has interest accruing in arreas, so that if they close on the 25th of the month, they owe the principal balance of the mortage plus accried interest. The writer has had “heated discussions” with Sellers over the amount due. This is compounded by the usual custom of taking a few extra “per diem” interest charges to take into acocunt delay in getting themortgage payoff to the Seller’s mortgage lender.

There are other adjustment that come up from time to time, but the ones set forth in this post are the most common. Take some time to understand adjustments in your  state. Knowledge is power, and the more effectively you can explain these comments to your client, the easier and smoother your real estate closing will be. It  aldohelps if you have an erxperienced conveyancer steering you through the process!!