Chapter 14 - Computations and Title Closing

Question 1

What is profit?

Answer 1

How much you make over and above your cost; may be expressed as an amount or as a percent of your cost

Question 2

What is another name for a fixed-rate amortized mortgage and what is the definition?

Answer 2

Level-payment plan
Mortgages used to purchase residential property that call for regular, equal payments that include both interest payments and payments on the principal

Question 3

What does it mean to prorate?

Answer 3

To divide various charges and credits between buyer and seller

Question 4

What is arrears?

Answer 4

Payments made at the end of the period for which the payment is due

Question 5

What is the difference between credit and debit?

Answer 5

Credit is reimbursed

Debit is charged

Question 6

How do you find what to credit and debit on the 365- day method?

Answer 6

First divide 365 into the annual cost of the item to find the exact daily rate, then multiply the number of days involved by the daily rate

Question 7

How do you find how much to credit and debit on prepaid rent?

Answer 7

Total rent amount should be divided by the number of days involved in the rental period and allocated on a daily basis

Question 8

How do you find the mortgage interest on assumed mortgages?

Answer 8

Mortgage balance x annual interest rate / 12 months = month’s interest
Month’s interest / days in month = daily rate
Daily rate x days interest is owed = prorated interest

Question 9

What is the state documentary stamp tax on deeds?

Answer 9

$.70 for each $100 of the full purchase price (or any fraction of $100)

Question 10

What is the state documentary stamp tax on notes?

Answer 10

$.35 per $100, or fraction thereof, on the face value of the promissory note

Question 11

What is the state intangible tax on new mortgages?

Answer 11

$.002 or two tenths of once cent per dollar of debt

Question 12

You bought a house for $120,000. You gave a deposit of $10,000 assumed a recorded mortgage of $90,000, and signed a new second mortgage and note for $20,000. What are the total state taxes due as a result of this transfer of property?

Answer 12

$1,265.00

Question 13

To get a mortgage loan of $31,000, a buyer has agreed to pay all state tax costs incurred by creation of the new mortgage. What is the total cost?

Answer 13

$170.50

31,000 / 100 = 310
310 x .35 = 108.50
31,000 x .002 = 62.00
108.50 + 62 = 170.50

Question 14

You have a VA mortgage of $48,000 at 9% with a 30-year term. The monthly principal and interest payment is $386.21. What portion of the second month’s payment will apply to amortization of the mortgage?

Answer 14

$26.41 
48,000 / .09 = 4,320
4,320 / 12 months = 360
386.21 - 360 = 26.21
48,000 - 26.21 = 47,973.79
47,973.79 x .09 = 4,317.64
4,317.64 / 12 months = 359.80
386.21 - 359.80 = 26.41

Question 15

Mr. and Mrs. Greer are purchasing the Hogue’s apartment building. Each of the five apartments rents for $315 per month. The closing is scheduled for September 16, and the rents were collected on September 1. What is the rent proration for this transaction and to whom will the amount be credited? (Day of closing belongs to the buyer)

Answer 15

$787.50, credit buyer

Question 16

A 28.5-acre parcel of land in Orange County sells for $4,100 per acre. What is the documentary stamp tax on the deed?

Answer 16

$818.30

Question 17

How is the buyer’s binder deposit entered on the closing statement?

Answer 17

Credit to the buyer only

Question 18

How is the purchase price entered on the closing statement?

Answer 18

Credit to seller and debit to buyer

Question 19

How are unpaid property taxes entered on the closing statement?

Answer 19

Credit to the buyer and debit to seller

Question 20

How is the T structure set up for real estate math problems?

Answer 20

Part
____________________
Whole | Rate

Question 21

What questions can the T structure be used to solve?

Answer 21

Commission
Interest
Discounts or loan origination points
Profit and % of gain or loss
Seller's net

Question 22

The sellers told their real estate agent they wanted to net $50,000 after paying a 6% commission. How much did the property have to sell for?

Answer 22

$53,191.49
Use the T formation
Put the $50,000 on the top of the T
The sale price is unknown
Subtract the % of commission away from 100%
The way the formula now reads is that $50,000 is 94% of what whole number?

Question 23

What is a conditional loan approval?

Answer 23

The lender has agreed to lend the money, but certain conditions still remain to be completed

Question 24

Deed - Seller - _____ per $100, or fraction thereof

Answer 24

.70

Question 25

Note - Buyer - Both assumed and new - ____ per $100, or fraction thereof

Answer 25

.35

Question 26

Intangible - Buyer - New mortgages only - _____ per $1

Answer 26

.002

Question 27

What are charges commonly credited to the seller in closing?

Answer 27

Sale price

Prorations such as rent or water

Question 28

What are charges commonly credited to the buyer in closing?

Answer 28

Earnest money
New loan
Prorated taxes, advance rents
Security deposits

Question 29

What are charges commonly debited to the seller in closing?

Answer 29

Loan(s) to be paid
Interest on loan
Commission
Prorated taxes
Security deposits or prepaid rents
Title insurance for the owner
Preparation of the deed
State transfer tax on the deed
Attorney's fees

Question 30

What are charges commonly debited to the buyer in closing?

Answer 30

Sale price
Title insurance - lender (mortgagees)
Preparation of mortgages and deed
Recording of deed
Recording of mortgage
Documentary tax on note
Intangible tax on mortgage
Attorney fees
Interest adjustment

Question 31

A house sold for $165,000, and the total commission received by the broker was $13,200. What was the rate of commission?

Answer 31

8%

13,200 / 165,000 = .08

Question 32

Taxes are $1,485 for a July 31 closing. Compute the tax proration and show how the proration will appear on the settlement statement. The day of closing belongs to the buyer, and taxes are paid in arrears. Use the 365-day method for prorating.

Answer 32

Debit seller $858.45; credit buyer $858.45

Question 33

Rich and Merle purchase a property for $275,000. They obtain a new 75% loan from the ABC Lending Company. How much was their loan and how would it appear on their settlement statement?

Answer 33

$206,250; credit the buyer
275,000 x .75 = 206,250

The loan is given to them, so they acquire that money and are not charged that money

Question 34

What statement best describes the purpose of a Closing Disclosure?

Answer 34

An official settlement statement used by settlement agencies and title companies to itemize all charges for a borrower and seller

Question 35

A seller listed a property for $96,000. The property sold for $94,000. How would the purchase price appear on a full settlement statement?

Answer 35

Credit the seller $94,000 and debit the buyer $94,000

Question 36

A property sold for $198,000 with a listing commission of 8%. The selling office is to receive 40% of the total commission. How much with the listing salesperson receive if she is paid 60% of the amount retained by the listing broker?

Answer 36

$5,702.40
198,000 x .08 = 15,840
15,840 x .6 = 9504
9504 x .6 = 5702.40

Question 37

In Florida, the deed of the property is taxed based upon the:

Answer 37

Sale price

Question 38

A borrower received an 80% conventional loan and paid two discount points. If the points totaled $1,500, what was the sales price?

Answer 38

$93,750
1,500 / .02 = 75,000
75,000 / .8 = 93,750

Question 39

A seller netted $55,000 at closing. If the seller paid costs of $1,000 and an 8.5% commission, what was the sale price to the nearest dollar?

Answer 39

$61,202
100 - 8.5 = 91.5
55,000 + 1,000 = 56,000
56,000 / .915 = 61,202

Question 40

A 15-acre plot of land sold for $3,000 an acre. What is the cost of the deed stamp tax on this property?

Answer 40

$315
15 x 3,000 = 45,000
45,000 / 100 = 450
450 x .7 = 315