MM related: settlement charges at closing

[LoveTrains]

I just received a preliminary settlement sheet for closing. I am so confused. I have a message in to the lender to explain it, but maybe you all can help.

So first of all it has an adjustment of "items unpaid by seller" that is approximately $500 of property taxes for the month of october. This is then added to our cash paid on behalf of borrower line. So it isn't something that I owe, but why would it be on my side? It appears on both sides, actually.

Then on my summary of settlement costs, I am somehow getting an aggregate adjustment (where does this number come from) that is like $600 subtracted from the money I need to deposit into escrow for my taxes. Again, I am so confused about this.

It seems like somehow I am getting credits for things I haven't actually paid for, and I am wondering if its because its a short sale? Out of the money we are paying for the house, he has debits on the proceeds he is receiving because of unpaid taxes, unpaid water bills, etc.

[susieq]

This happened to us recently with a HUD house that we purchased. The taxes had not been paid for the year. They credited us the amount of taxes they should have paid (so it was an added cost to them and a reduction in cost to us) and then we had to pay the entire tax bill when it came due later in the year.

I dont know about the aggregate adjustment.

[LoveTrains]

OH, that is a good point that maybe I am getting a credit and then I need to pay the city....I will ask about that.

[sometimesrunner]

In my state, property taxes for 2012 are paid in 2013. So you're getting a credit for the amount of time the seller owned the house in 2012 that you'll need to pay tax on in the following year.

[sjh722]

I think pp is probably right about the taxes - ours are always paid in arrears so the seller credits the buyer for time lived there that taxes have not yet been paid.

The aggregate adjustment is just an accounting adjustment. I think it's been on every HUD I've ever seen that has an escrow. Scroll down to line 1008 on this page, it explains it more concisely than I could. :-)
portal.hud.gov/hudportal/HUD?src=/program_offices/housing/ramh/res/sc3secta

[bunch]

Yes, it is a credit to you and a debit from the seller.

I've always heard the aggregate adjustment described as you have to pay in for your property insurance and tax escrow but they can only hold so much so they have to credit some back, but I honestly don't know why. It's one of those things closing attorneys quickly gloss over in their HUD spiel.

[LoveTrains]

Yeah this whole thing is making my head explode. I honestly feel like somehow I am not paying enough (I know, silly problem to have, right?) in regards to the taxes. Something feels wonky to me.

I guess my other concern was that if this guy wasn't making his quarterly payments to his tax bill (since its a short sale), they actually charge you interest for the ENTIRE year up front. So hopefully that is being paid off and I don't know how to check. I guess I need the settlement attorney to explain.