Accounting for Closing Costs?

[Katie Anderson]

How do you account for closing settlement charges and expenses such as escrow fee, title insurance, wire/notary fees, recording fees, items payable in connection with a loan (on the seller side), appraisal fees, etc... Do you itemize these various items under insurance, legal/professional fees, bank fees on your COA or do you book these as direct costs of goods sold? Is there a reason to keep these off the individual project/investment proforma and put in overhead expenses; or should the opposite argument be made?

Thank you!

[Ashish Acharya]

Originally posted by @Katie Anderson:

How do you account for closing settlement charges and expenses such as escrow fee, title insurance, wire/notary fees, recording fees, items payable in connection with a loan (on the seller side), appraisal fees, etc... Do you itemize these various items under insurance, legal/professional fees, bank fees on your COA or do you book these as direct costs of goods sold? Is there a reason to keep these off the individual project/investment proforma and put in overhead expenses; or should the opposite argument be made?

Thank you!

Loan cost are capitalized and amortized over the term of the loans. So from accounting perspective, an intangible asset is booked. 

Escrowed amount are not deductible or capitalized for taxes and booked against equity. 

Most of the settlement charges are added to the basis of the property and booked as building and land.