Unit 14 Flashcards
Profit
Profit is how much you make over and above your cost. It may be expressed as an amount or as a percentage of your cost.
Formula for Profit
Amount made on sale ÷ Total cost = Profi percentage
Formula for Loss
Amount lost on sale ÷ Total cost = Lost percentage.
Preclosing Inspection. (Walk-through)
Before the title closing, the buyer makes a final preclosing inspection (walk through) of the property with the sales associate. The purpose of the preclosing inspection is to verify that repairs have been completed and that the property has been left in good condition.
Prorated Expense.
Prorations
Prorations are entered on the Closing Disclosure as double entries (one party is debited and the other party is credited). A single dollar amount is entered as a debit to one party and a credit to the other party.
PRORATING RENT
Prepaid Rent Formula.
Any rental income collected in advance belongs to the new owner (buyer) as of the date of closing. In other words, the unused portion of advanced rent belongs to the buyer. The total rent amount should be divided by the number of days involved in the rental period and allocated on a daily basis.
Formula For Prepaid Rent:
Rent paid for the closing month ÷ Number of days in closing month = Daily rental rate;
Daily rental rate × number of days buyer owns property in closing month = Proration amount (credit buyer, debit seller)
STATE TRANSFER TAXES
State Documentary Stamp Tax on Deeds.
Florida requires the payment of a tax on deeds and other conveyances. This state documentary tax on deeds is assessed at the rate of $.70 for each $100 of the full purchase price (or any fraction of $100). It makes no difference whether the purchase is all cash, all financed, or some combination of cash and financing because this tax is based on purchase price. This is a one-time tax and is not paid annually.
Formula:
Documentary Stamp Taxes on Deeds
Purchase price ÷ $100 = Taxable units (if the result is a decimal number, round up to the next whole number).
Number of taxable units times $.70 = cost of Documentary Stamp Tax on Deeds.
STATE TRANSFER TAXES.
State Documentary Stamp Tax on Promissory Notes
Florida requires the payment of a documentary stamp tax on all new and assumed promissory notes. The tax rate is $.35 per $100., or fraction there of, on the face value of the promissory notes. The tax rate is an expense usually charged to the buyer. The tax is entered as a debit to the buyer on the Closing Disclosure.
Formula: Documentary Stamp Tax on Promissory Notes.
Promissory notes ÷ $100 = Taxable units ( if result is a decimal number, round up to the next whole number) ;
Number of taxable units × $.35 = Cost of Documentary Stamp Tax on Promissory Notes.
STATE TRANSFER TAXES:
State Intangible Tax on New Mortgages.
Florida requires the payment of an Intangible Tax on New Mortgages. (An assumed mortgage recorded previously is not to be taxed again; likewise, intangible tax is not charged on purchase subject to an existing mortgage.) The tax rate for the state intangible tax on new mortgage is two mills ($.002 or two-tenth of one percent) per dollar of debt.
Formula: Intangible Tax on New Mortgages.
New loan amount × $.002 = Cost of intangible tax.
Items Credited to Seller.
1) Total purchase price.
2) Prepaid items.
