Massachusetts Real Estate License Practice Test

What is a common component of a buyer closing statement that deals with property taxes?

1. Adjustment for unpaid taxes

2. Interest on loans

3. Monthly mortgage payments

4. Homeowner's insurance fee

The correct answer is: Adjustment for unpaid taxes

The common component of a buyer closing statement that specifically addresses property taxes is the adjustment for unpaid taxes. In a real estate transaction, it's important to account for any property taxes that may be due at the time of closing. This adjustment ensures that the seller pays their fair share of taxes up until the date of the sale, while the buyer takes responsibility for property taxes from that point forward. This is a standard practice to make certain that both parties are fairly compensated for their respective durations of ownership during the tax year. By including this adjustment, the closing statement accurately reflects the financial responsibilities each party has regarding property taxes, thus preventing any disputes or liabilities after the transfer of ownership has occurred. The other options—interest on loans, monthly mortgage payments, and homeowner's insurance fee—are not directly related to property taxes in the same way. They pertain more to financing and insurance aspects of real estate transactions rather than taxation adjustments occurring at closing.