Hud-1 Buyer's Closing Statment

4 Replies

Ok I have a question recording buyer's closing statement. Once I finish entering everything in, I have a negative amount in my property tax account. Is this correct? If so when will it zero out?

I wrote a check for $23,666

Property : 185,000

Property: 1005  Title services

Earnest Money: -1000

Property Taxes: -3449.09 01/01/2016 to 06/20/2016

Mortgage: -148,000

Prorated Rent: -1304.91

Loan Costs: 2,085

Security Deposit: -3670

Owner Equity: -7000

Thanks for the help.

It's hard for me to tell without looking at the entire hud.  The buyer will receive tax credit for the time they didn't own the property if the purchase date is before property taxes are due. 

It is likely you received a credit for property taxes on your HUD statement. In that case you have a liability. When you pay your real estate tax bill later in the year, you would reverse the liability by debiting it, credit to cash, and debit to the excess and an expense.

Hello @Jason Vandermark

Yes, It is absolutely correct. 

Property Taxes: -3449.09 01/01/2016 to 06/20/2016

This is prorated tax credit for the buyer. 

In many states, current taxes are collected almost towards the end of the assessment period e.g Texas i.e 

-For 1 Jan 16 to 31 Dec 16. Taxes are due in Dec 16.

Say the seller is sold the property on 20 June 2016. But, Buyer will receive the tax bill in December. In this case, Buyer is not liable to pay taxes prior to 6/20/16 as that should be paid by the seller who occupied the property until then (can vary only if purchase contract says otherwise)  

So In such cases, seller has to credit taxes for the period 1 January 2016 to 20 June 2016 to the buyer at closing - which is what you are seeing on the settlement statement. 

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