Ch 14 - Real estate computations and closing transactions

Question 1

True or false, even though the lenders title insurance is required by the buyers lender it may be paid by the seller at closing.

Answer 1

True

Question 2

True or false, interest on an assumable mortgage is paid ahead, so seller gets a credit from the buyer at closing. I had

Answer 2

False

Interest on an assumable mortgage is paid in arrears, so seller owes the buyer a credit at closing

Question 3

True or false, items paid in arrears is entered as a credit to the seller in a debit to the buyer

Answer 3

False

Items paid in arrears are entered as a credit to the buyer and a debit to the seller. Items paid ahead are entered as a credit to the seller and a debit to the buyer.

Question 4

True or false, intangible tax is paid on every dollar of both new mortgages and assumed mortgages at $.002.

Answer 4

False

Paid on your mortgage is only not assumed mortgages

Question 5

True or false, the broker commission is usually paid by the seller or whoever employed the broker unless otherwise negotiated before hand on the contract

Answer 5

True

Question 6

True or false, a debit means that the person who gets the debit is being charged money

Answer 6

True

Question 7

True or false, the closing disclosure is the financial summary of the deal

Answer 7

True

Question 8

True or false, usually, whichever party is to sign a particular closing document pays the fee for document preparation

Answer 8

True

Question 9

True or false, the statutory method means that you always use 30 days to calculate a monthly proration and 365 days to calculate eight years proration

Answer 9

False

Statutory message means using 30 days for a month and 360 days for a year

Question 10

Security deposits held by seller are entered as a credit to the seller and a debit to the buyer

Answer 10

False

Question 11

You have a listing with a 7% commission. Your sellers have accepted an offer from a buyer that has their own agent. You have agreed to give the buyers agent 3 1/2% of the commission. Your agreement with your broker is that you get 55% of the commission you earn. The sales price was $350,500. How much will you get paid?

Answer 11

$6747.13

$350,500 X .035 = $12,267.50 X .55 = $6747.13

Question 12

A buyer purchased a rental property that is closing on October 20. The seller has already collected rent for the month of October in the amount of $2000. The buyer gets the day of closing. How is this handled on the closing statement?

$1225.81 credit to the buyer and debit to the seller

$1225.81 credit to the seller and debit to the buyer

$774.19 credit to the buyer and debit to the seller

$774.19 credit to the seller and debit to the buyer

Answer 12

$774. 19 credit to the buyer and debit to the seller

$2000/31 = $64.52 X 12 Buyer days (days including closing date left in the month belonging to the buyer) = $774.19

Question 13

Sandra is buying a home in the closing date is set for March 10. The annual property taxes are $2325 and have not yet been paid. How will this be handled on the closing disclosure?

$433.15 as a debit to the buyer and credit to the seller

$433.15 as a credit to the buyer and debit to the seller

$439. 52 as a debit to the buyer and credit to the seller

$439 .52 as a credit to the buyer and debit to the seller

Answer 13

$433 .15 as a credit to the buyer and debit to the seller

Step one: seller will credit buyer from January through midnight the day before closing. Calculate the exact number of days; January 31 plus February 28+ Marj nine equals 68 days that the seller does the buyer. Step two: find the daily rate; property taxes for the year $2325/365 days = $6.37 X 68 = Step 3: multiply the daily rate X number of days = $433 .15

Question 14

Eagle top realty listed a ranch for $1,500,000 the listing calls for 6% commission to be paid on a sale price of up to $1 million and 7% for anything above $1 million. When the property sold for $1,700,000 by eagle top realty, what is the commission paid using the concept of a graduated commission scale?

$49,000
$109,000
$60,000
$119,000

Answer 14

$109,000

Calculate the first $1 million X 6% = $60,000. The other $700,000 X 7% = $49,000; $60,000 + $49,000 = $109,000 in total commission paid

Question 15

David assumed seller Sarah‘s existing mortgage of $50,125 at closing. Plus, David took out a new mortgage of $125,000. How much are the promissory note doc stamps?

$250
$437.50
$613.20
$612.94

Answer 15

$613.20

$50,125+ $125,000 = $175,125/100 = $1751.25 rounded up to $1752 X .35 = $613.20

Question 16

A purchase money mortgage is entered as:

Debit to the seller and credit to the buyer

Credit to the seller and debit to the buyer

Debit to the buyer only

Credit to the buyer only

Answer 16

Debit to the seller and credit to the buyer

Question 17

Rubio purchased property from Covington. Rubio puts $50,000 down and gets a mortgage in the amount of $450,000. How much will Covington be charged for the doc stamp tax on the deed?

$350,000
$3500
$900
$1750

Answer 17

$3500

Doc tax calculation: $450,000 + $50,000 = $500,000/100 = 5000 (taxable $100 units) X $.70 = $3500 tax due.

Question 18

Brandy put $5000 down as earnest money when she made the offer on the house. On the closing statement, this will be shown as a:

Debit to the buyer only

Credit to seller and debit to buyer

Debit to the seller and credit to the buyer

Credit to buyer only

Answer 18

Credit to buyer only

Question 19

The purchase price is shown on the closing statement as:

A credit to the buyer only
A credit to the seller only
A credit to the buyer and a debit to the seller
A credit to the seller and a debit to the buyer

Answer 19

A credit to the seller and a debit to the buyer

Question 20

Randall bought a property for $105,000. He sold it for $150,000. Calculate his percentage of profit:

43%
57%
30%
70%

Answer 20

43%