A debit is what a party owes; a credit is what a party has paid or is owed. Cash to close is the buyer's debits minus credits; the seller's net is credits minus debits.
| Price | Buyer debit, seller credit |
|---|---|
| Earnest money and new loan | Buyer credits |
| Commission and payoff | Seller debits |
| Prorations | Appear on both sides, in opposite columns |
A buyer is paying $350,000. She has a $10,000 earnest money deposit held in escrow and a new loan of $280,000. Her closing costs are $6,850, and she receives a $1,275.50 credit for the seller's unpaid taxes. How much cash must she bring to closing?
A home sells for $420,000 with a 6% commission. The seller's loan payoff is $238,400, her other closing costs are $3,150, and she is debited $2,045.80 for unpaid taxes. What are her net proceeds?
A seller wants to walk away with $250,000 after paying $12,000 of closing costs and a 6% commission on the sale price. To the nearest dollar, what must the home sell for?
A credit to the buyer: it has already been paid toward the price. It is not on the seller's side, because the seller gets the full price as a credit.
No. The buyer's new loan is a buyer credit only. The seller's own loan payoff is a seller debit.
It moves money between buyer and seller, so it is a debit to one and a credit to the other.