Question

How are expenses handled that the seller has incurred but have not yet been billed for at the time of closing?

a) Deducted from the buyer's down payment
b) Rolled into the seller's closing costs
c) Paid by the buyer after closing
d) Escrowed for future payment

Answer 1

Expenses that the seller has incurred but not yet been billed for at the time of closing are typically handled through an escrow account, where they are held until due for payment. The correct option is (d).

Step-by-step explanation:

When it comes to the expenses incurred by the seller that have not yet been billed at the time of closing on a home, the correct handling of these expenses typically involves an escrow account.

Neither the buyer's down payment is directly deducted, nor are these expenses directly rolled into the seller's closing costs or paid by the buyer after closing. Instead, an amount is escrowed for future payment of these expenses.

This process ensures that upon completion of the specific event or on a specified date, the neutral third party holding the escrow account will pay out the expenses.

This is part of why escrow is beneficial, as it also can handle recurring expenses such as home insurance and property taxes, making it part of the normal monthly payment of the homeowner.