Seller paid closing costs into escrow

[Eric Anopolsky]

On Mon, 2008-04-28 at 09:26 -0700, Jason Ahrens wrote:
> So, this is more of an accounting question than a usability question. 
> I'm hoping someone with experience can help :)
> 
> I just bought a house. Most of the Concepts Guide works great for the 
> basic case, but in the specific case (at least in this state) a number 
> of things go through Escrow on an on-going basis, including a large 
> initial deposit from the closing costs. To this end, I created an "Asset 
> :Escrow" account that deposits go into, and payments go out of 
> (insurance and taxes). That part works fine.
> 
> The sticking issue is that in this case, the seller has paid a good 
> chunk of my closing costs. And of of those "closing costs" is going into 
> the Escrow Account.
> 
> My initial thought was to draw this money from an "Income:Other" account 
> into the "Asset:Escrow" for the house. Would this be correct?

Let me ask you this: why are you using the word "my" to describe the
closing costs in question?

Normally, the purchase agreement will list all of the expenses
associated with the sale (fees, inspections/surveys, pro-rated property
taxes) and the buyer and seller will come to an agreement about who will
pay what. Even if the row is titled "buyer's closing costs", the check
mark in the "seller will pay" column rather than the "buyer will pay"
column means that the seller is responsible for paying those expenses;
they're not your expenses.

If I understand you correctly, I would create a liability account called
"Seller's Closing Costs" and record a transfer from that to the escrow
account. As money leaks out of the escrow account to pay for the things
the seller agreed to pay, record transfers from the escrow account back
to the new liability account. Eventually the liability will be paid down
to 0, indicating that all of the seller's money has been spent.

If you provide more info on exactly what that money will be used for, I
will try to give you more specific information.

Also, the quickbooks web forum in an invaluable resource for accounting
questions that don't relate to the quickbooks software package.

Cheers,
Eric

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