- The seller paid a $1,200 annual homeowner's insurance premium on July 1. The property closes on October 15. Using the 365-day method, what is the insurance proration?
Answer: $569.86 credit to seller and debit to buyer
Daily rate = $1,200 ÷ 365 = $3.29. From October 16 to June 30 = 258 days remaining. Unused premium = $3.29 × 258 = $569.86. Seller gets credit for unused premium, buyer gets debit for coverage they'll receive.
- Recording fees are $35 for the deed and $45 for the mortgage. Title insurance costs $1,850. Attorney fees are $750. What are the total title and recording costs?
Answer: $2,680 in title and recording expenses
Total costs = Recording fees ($35 + $45) + Title insurance ($1,850) + Attorney fees ($750) = $80 + $1,850 + $750 = $2,680. These are typical closing costs related to title and recording services.
- Property taxes of $4,800 are due December 31 for the tax year. The property closes September 10. Using the 360-day method, what is the tax proration?
Answer: $3,440 credit to buyer and debit to seller
Daily tax rate = $4,800 ÷ 360 = $13.33. Seller owes taxes for 258 days (Jan 1 - Sep 10). Seller's portion = $13.33 × 258 = $3,440. Since taxes aren't paid yet, seller owes buyer this amount, creating a credit to buyer and debit to seller.
- A home inspection costs $485 and an appraisal costs $650. Survey costs are $850. These are all buyer expenses. What is the total for these professional services?
Answer: $1,985 in total professional service costs
Total professional services = Home inspection ($485) + Appraisal ($650) + Survey ($850) = $1,985. These are typical buyer expenses for professional services required during the purchase process.
- Hazard insurance escrow requires 2 months reserve. The annual premium is $1,440. What amount will be collected at closing for the escrow account?
Answer: $240 for insurance escrow reserves
Monthly insurance cost = $1,440 ÷ 12 = $120. Reserve requirement = 2 months × $120 = $240. This amount is collected at closing to establish the escrow account for future insurance premium payments.
- A buyer is purchasing a property for $485,000 with a 20% down payment. The lender requires a loan origination fee of 1.5% of the loan amount. What is the total loan origination fee?
Answer: $5,820 paid by the buyer at closing
Loan amount = $485,000 × 80% = $388,000. Loan origination fee = $388,000 × 1.5% = $5,820. This is typically a buyer cost at closing, not seller cost.
- Transfer tax is charged at $0.75 per $500 of sales price. What is the transfer tax on a $368,000 sale?
Answer: $552.00 paid at closing typically by seller
Number of $500 increments = $368,000 ÷ $500 = 736 increments. Transfer tax = 736 × $0.75 = $552.00. Transfer taxes are typically paid by the seller at closing as a cost of transferring ownership.
- County taxes of $3,960 and city taxes of $1,440 are paid in arrears annually. The property closes on July 10. Using the 365-day method, what is the total tax proration?
Answer: $2,842.19 credit to buyer and debit to seller
Total annual taxes = $3,960 + $1,440 = $5,400. Daily rate = $5,400 ÷ 365 = $14.79. Seller owes for 191 days (Jan 1 - July 10). Seller's portion = $14.79 × 191 = $2,842.19. Since taxes are paid in arrears, seller owes buyer this amount.
- A seller's net proceeds after all closing costs and commissions total $387,500. If the total closing costs were $8,200 and the commission was $24,300, what was the sales price?
Answer: $420,000 total sales price
Sales price = Net proceeds + Closing costs + Commission = $387,500 + $8,200 + $24,300 = $420,000. The net proceeds represent what the seller receives after all deductions from the sales price.
- The seller's mortgage payoff is $198,750, and they owe $2,340 in property taxes. Real estate commission is $18,600. If the sales price is $310,000, what is the seller's net proceeds?
Answer: $90,310 net proceeds to seller after expenses
Net proceeds = Sales price - Mortgage payoff - Taxes - Commission = $310,000 - $198,750 - $2,340 - $18,600 = $90,310. This represents what the seller receives after all major expenses are deducted.
- A buyer's total closing costs are itemized as: loan fees $3,200, title insurance $1,450, attorney fees $650, recording fees $125, and inspection $425. What is the total cost to buyer?
Answer: $5,850 in total buyer closing costs
Total closing costs = $3,200 + $1,450 + $650 + $125 + $425 = $5,850. This represents the sum of all itemized closing costs that the buyer is responsible for paying at settlement.
- A buyer obtains an 80% loan on a $525,000 purchase. The lender charges 2.5 discount points. How much will the buyer pay for discount points at closing?
Answer: $10,500 as a one-time financing cost
Loan amount = $525,000 × 80% = $420,000. One point = 1% of loan amount. 2.5 points = $420,000 × 2.5% = $10,500. Discount points are paid by the buyer at closing to reduce the interest rate.
- The seller agrees to pay 3% of the purchase price toward buyer's closing costs. On a $445,000 sale, how much will the seller contribute?
Answer: $13,350 seller contribution toward buyer costs
Seller contribution = $445,000 × 3% = $13,350. This represents a seller concession to help the buyer with closing costs, appearing as a credit to buyer and debit to seller on the settlement statement.
- A tenant's security deposit of $1,800 is being transferred to the buyer. How does this appear on the settlement statement?
Answer: $1,800 credit to seller and debit to buyer
The seller receives credit because they're transferring cash (the security deposit) to the buyer. The buyer receives a debit because they're receiving the cash but also assuming the obligation to return it to the tenant when appropriate.
- A property has an outstanding loan balance of $287,450. The payoff amount includes $1,245 in accrued interest and a $395 prepayment penalty. What is the total loan payoff?
Answer: $289,090 required to satisfy the existing mortgage
Total payoff = Principal balance + Accrued interest + Prepayment penalty = $287,450 + $1,245 + $395 = $289,090. This represents the complete amount needed to satisfy and release the existing mortgage lien.
- The total commission on a $625,000 sale is 6%. The listing broker keeps 55% of the total commission. What amount does the listing broker receive?
Answer: $20,625 from the commission split
Total commission = $625,000 × 6% = $37,500. Listing broker's share = $37,500 × 55% = $20,625. This represents the listing broker's portion of the total commission.
- A rental property generates $2,400 monthly rent. The property closes on the 18th of a 30-day month. If rent for that month was collected by the seller, what proration is needed?
Answer: $1,040 credit to buyer and debit to seller
Daily rent = $2,400 ÷ 30 = $80. Days buyer owns property = 13 days (19th-31st). Proration = $80 × 13 = $1,040. Since seller collected full month's rent but buyer owns property for 13 days, buyer gets credit and seller gets debit.
- A property closes on March 15. The seller has prepaid property taxes of $3,600 for the entire year. Using the 365-day method, what is the proration amount and how is it handled on the settlement statement?
Answer: $2,726.03 credit to seller and debit to buyer
Daily rate = $3,600 ÷ 365 = $9.86. From March 16 to December 31 = 291 days. Proration = $9.86 × 291 = $2,726.03. Since seller prepaid taxes for time they won't own the property, they receive a credit and buyer receives a debit.
- The buyer's earnest money deposit of $15,000 is being credited at closing. Additional cash needed from buyer is $68,750. What is the buyer's total cash investment at closing?
Answer: $83,750 representing total buyer cash at closing
Total cash investment = Earnest money deposit + Additional cash needed = $15,000 + $68,750 = $83,750. The earnest money is credited toward the purchase, but it's still part of the buyer's total cash investment in the property.
- Annual HOA fees of $2,400 were paid by the seller on January 1. The property closes on May 20. Using the 365-day method, what is the HOA fee proration?
Answer: $1,368.49 credit to seller and debit to buyer
Daily HOA fee = $2,400 ÷ 365 = $6.58. Days remaining (May 21-Dec 31) = 225 days. Unused portion = $6.58 × 225 = $1,368.49. Seller gets credit for prepaid fees, buyer gets debit for benefits they'll receive.
