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Sellers' Legal Basics

Deposits & Closing Adjustments


Your Agreement of Purchase and Sale (“APS”) will detail any deposits that have been paid by the purchasers. The deposits are your security in case something happens that prevents the purchasers from closing the deal. The deposits are usually paid in trust to your broker, or if you are selling privately, they are commonly paid to your lawyer in trust. Although there are no set rules regarding the amount of the deposit, you can ask your real estate agent what the norm is. In most cases, it is wise to get a deposit that is at least as much as your agent’s real estate commission, including GST. Any deposits will be accounted for on the Statement of Adjustments.

Statement of Adjustments

The standard APS requires the usual adjustments to be made to the balance due on closing. These adjustments are shown on the Statement of Adjustments, which is prepared by your lawyer and reviewed with you prior to closing. Adjustments relate to costs that are payable before or after the closing date. These costs are pro-rated to the closing date, and a credit is given to the appropriate party to adjust the balance due on closing. Adjustments are typically made for property taxes, prepaid condominium common expenses (if you are selling a condo), prepaid security monitoring services, prepaid flat rate water accounts, and fuel oil (if the home is heated by an oil furnace). Total adjustments can usually range from a few hundred dollars in the buyers’ favour to a few hundred dollars in your favour.

General Rule

Total adjustments will usually be in the buyers’ favour near the beginning of a calendar year because installments for things like property taxes may not have been payable yet. Total adjustments will usually be in the seller’s favour near the end of a calendar year because things like property taxes have usually been paid in full before year’s end.

Adjustments Example

The most common adjustment is for property taxes. Assume the following facts for the home you are selling:

Property taxes for the current year


Closing date of the sale

November 30th

Property taxes already paid by you


Remaining tax installments due


Assuming the current year is not a leap year, you are responsible for costs of the property taxes for the first 333 days of the 365-day year (up to the date before closing). So you are responsible for (333 days / 365 days) x $2,500.00 of the current year’s property taxes, or about $2,280.82 of this year’s property taxes. Because you already paid the municipality $2,500.00 on account of this year’s taxes in our example, you would receive a credit of $219.18 on the Statement of Adjustments.

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