Real Estate Term of the Day: Debit & Credit
DEBIT – in a closing statement, an item that is charged to a party in contrast with a credit (Barron’s Dictionary of Real Estate Terms)
Typical debits for a buyer include:
- Purchase price
- Tax escrow
- Insurance escrow
- Title closing fee
- Deed recording fees
- Appraisal fee
- Tax report
- HOA working capital (if applicable)
- Prepaid HOA fees (if applicable)
- Fee for surveys
- Documentary fee
- Mortgage insurance premiums (if purchasing with a loan)
- Credit report fee (if purchasing with a loan)
- Lender title insurance premium (if purchasing with a loan)
- Lender fees including discount points & origination fees (if purchasing with a loan)
- Hazard insurance premiums & escrow reserves (if purchasing with a loan)
- Loan closing fee (if purchasing with a loan)
- Flood certification (if purchasing with a loan)
- Loan interest (if purchasing with a loan)
Typical debits for a seller include:
- Real estate commissions
- Loan payoff
- Accrued Interest
- Title insurance premium
- Assessments/Liens including a mortgage
- HOA transfer fee
- Water & sewer escrow
- Title closing fee
CREDIT – the column on the closing statement that shows what is due and payable (Barron’s Dictionary of Real Estate Terms)
Credits for a buyer typically include:
- Earnest money deposit
- Loan amount financed
- Tax credit from sellers based on closing date
- Lender credit (if applicable)
- Seller paid closing costs if applicable
Credits for a seller typically include:
- Purchase Price
- Any other prepaid items (such as HOA fees and HOA working capital)
Title companies in Colorado will always prepare separate Buyer Settlement Statements and Seller Settlement Statements for each party. However, if financing is involved with the purchase, a HUD-1 will also be provided to both parties which shows all of the debits/credits for both buyer & seller on the same form.
LESLIE MONACO REAL ESTATE 