Chapter 14 Flashcards
What is the binder deposit?
The money paid up front by the buyer to start the contract
It is credited to the buyer at closing because they already paid it to the escrow.
Prorating rent
Used when a buyer purchases a home with a tenant in it that has already paid rent for the month.
You calculate how much of the rent for the remainder of the month should be credited to the buyer
This is a double entry because it has to be debited to the seller and credited to the buyer
Who gets a credit when the seller has prepaid interest on the loan?
The money was paid by the seller, so it is a credit to the seller and a debit to the buyer
This is a double entry
Who gets credit for property taxes?
Property taxes are paid in arrear (at the end of the year)
The buyer will be paying them but the seller lived in the property for part of the year. This will be a debit to the seller and a credit to the buyer
This is a double entry
In the exam, what should we do with expenses?
These are single entry
Debit the seller
There are no credits in the expenses section
How much is the document stamp tax on the deed (Sales price)?
$0.70 for every $100 or a fraction thereof
Calculate it by dividing purchase price by 100 (round up) and multiplying by 0.7
How much is the document stamp tax on the promissory note?
$0.35 for every $100 or a fraction thereof
This is the taxes to be paid on all the loans the buyer will be paying
Calculate it by dividing all the loans being taken by 100 (round up) and multiplying by 0.35
How much is the state intangible tax on a mortgage?
0.002 (2 mills) of new loans
Calculate it by multiplying the NEW loan amount by 0.002
Is title insurance split equitably?
No, it cannot be prorated. One of the parties must pay for it and it is shown as a debit to that party.
The buyer is purchasing the seller’s house, he will be assuming the payment on the seller’s first mortgage. The seller had prepaid interest on this mortgage. How will the entries appear on the closing statement?
It will show as a credit to the seller and a debit to the buyer
