Statement of adjustments
Whether you’re buying, selling or refinancing your home, you’ll need a real estate lawyer or notary to help you complete your paperwork and facilitate the financial transaction. On closing day, you’ll sit down with your lawyer to make sure everything is done, and you’ll walk out with a statement that shows you exactly how your money was moved around in the process. Let’s take a look at what goes into both the statement of adjustments and trust ledger statements prepared for buyers, sellers and refinancers.
Buyer’s statement of adjustments and trust ledger statement
If you’re buying a home, two statements will be prepared for you: a statement of adjustments and a trust ledger statement.
A statement of adjustments isn’t as complicated as it might seem; it’s actually similar to your monthly bank statement, as it has a list of various debits and credits with a balance at the end. In the buyer’s statement of adjustments, the debits represent amounts already paid, such as the deposit, while the credits include the purchase price of the home and any fees or utilities the seller has prepaid. The total amount in the credits column (purchase price + prepaid items) minus what’s in the debit column (the deposit) is what you owe to the seller on closing day.
Once the full amount you owe to the seller is determined, it is moved over to the buyer’s trust ledger statement. A trust ledger statement is essentially a record of all of the money moved around on closing day, and its setup looks similar to the statement of adjustments, with a debits column and a credits column. The credits column includes the mortgage loan amount being advanced by your lender, as well as the rest of your down payment. The debits column lists where all of that money is going on closing day, including how much the seller must be paid, as well as the land transfer tax, title insurance, legal fees and disbursements, plus any other fees that might be payable (for instance, you might need to pay GST or HST and a warranty).
Seller’s statement of adjustments and trust ledger statement
If you’re selling a home, two statements will be prepared for you: a statement of adjustments and a trust ledger statement.
The seller’s statement of adjustments looks just like a buyer’s, with two columns for debits and credits. Debits include anything that needs to be paid for by the seller (many sellers use the buyer’s deposit to pay the real estate agents’ commission), plus any unpaid taxes or utilities. Credits include the sale price of the house, and any portion of the prepaid taxes or utilities that the buyer needs to repay to the seller. Subtract the debits from the credits, and the leftover amount is what the buyer needs to pay you.
The seller’s trust ledger statement essentially lists the amount you stand to make from the sale of the house minus any amounts that need to be paid on closing day. Under the credits column, you’ll find the total amount paid to you by the buyer (which you determined in the statement of adjustments). The debits column includes anything you still need to pay for, such as your outstanding mortgage on that house, legal fees and any outstanding realtor fees. Subtract your expenses from the amount paid to you by the buyer, and what’s left over is yours to keep (or use towards your next home purchase).
Refinancer’s trust ledger statement
Finally, if you’re refinancing a home, your real estate lawyer will only prepare a trust ledger statement for you.
Much like the seller’s trust ledger statement, a refinancer’s trust ledger statement essentially lists what changes you’re making to your mortgage, including how much equity you may be accessing, and any payments you need to make during the transaction. For example, if you’re refinancing to access equity and pay off debt, your debits column will include the equity you’re pulling out and the credits column will list all the payments you need to make with that equity (including your debt, title insurance, legal fees, etc.). Subtract your credits from your debits, and you’re free to keep what’s leftover.