Accrued
Definition and meaning of Accrued in real estate.
Accrued is a financial term describing expenses or revenues that have accumulated over time but have not yet been paid, received, or recorded in a transaction. In real estate, this typically applies to unpaid interest, taxes, or rent.
In more detail
Accrued items are common during the closing process of a real estate sale, where expenses must be divided between the buyer and the seller. For example, property taxes are often paid in arrears, meaning they are paid after the period they cover. At closing, the seller will owe the buyer the accrued property taxes for the days the seller owned the home during that tax cycle.
Accrued interest on a mortgage is also calculated to ensure the lender is paid accurately up to the exact day of the loan payoff.
Key facts
| Category | Mortgages & Financing |
|---|---|
| Commonly applies to | Interest, property taxes, rent |
| Accounting method | Accrual basis accounting |
| Timing | Paid or received in arrears |
At a home closing, the seller credits the buyer for the accrued property taxes that have accumulated since the start of the tax year but are not yet due.
Frequently asked questions
What are accrued expenses at closing?
Accrued expenses are costs like property taxes or home owner association fees that the seller has incurred but has not yet paid, which are credited to the buyer.
How does accrued interest affect a mortgage payoff?
When you pay off a mortgage, you must pay the principal balance plus the accrued interest that has built up since your last monthly payment.