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Florida Real Estate Principles, Practices & Law 38th Edition Linda L. Crawford Copyright © 2015 Kaplan, Inc. All rights reserved.
Chapter 14 Computations and Title Closing
©2015 Kaplan, Inc. Computations Parts of a fraction –Numerator and Denominator Changing fractions to decimals Changing decimals to fractions Changing percentages to decimals Decimal place values
Sale Commissions Commission often is shared by –Listing broker –Listing sales associate –Selling broker –Selling sales associate ©2015 Kaplan, Inc.
Sharing Commission Example Sales associate Bill who works for Proven Realty, secured a listing for $173,000 at 6 percent commission. Terry, who works for Reliance Realty, sold the property at the listed price. The listing broker and selling broker share the commission equally. The broker of Reliance Realty keeps 45 percent of what his company received. How much was Terry compensated? ©2015 Kaplan, Inc.
Solution $173,000 sale price × 6 percent commission = $10,380 total commission $10,380 ÷ 2 = $5,190 commission to selling office 100% - 45% = 55% to selling sales associate $5,190 selling office × 55 percent = $2,854.50 selling sales associate’s commission ©2015 Kaplan, Inc.
Graduated Commission A broker lists a hotel for $2,500,000, and the seller agrees to a graduated commission. The seller will pay a 5% commission on the first $1,000,000 of the actual sale price; 6% commission on the next $1,000,000 of the sale price; and 7% commission on any of the sale price above $2 million. What will be the total commission if the property sells for $2,250,000? ©2015 Kaplan, Inc.
Solution 1.$1,000,000 x 5% = $50,000 2.$1,000,000 x 6% = $60,000 3.$250,000 x 7% = $17,500 4.$50,000 + $60,000 + $17,500 = $127,500 total commission ©2015 Kaplan, Inc.
Percentage Applied to Selling Price, Cost, and Profit Profit –How much you make over and above your cost Loss –How much you sell below your cost Profit Formula –Amount made on sale ÷ Total cost = Percent Profit Loss Formula –Amount lost on sale ÷ Total cost = Percent Loss ©2015 Kaplan, Inc.
Example A lot cost $28,000 and sold for $35,000. –What is the percentage of profit? ©2015 Kaplan, Inc.
Solution $35,000 price - $28,000 cost = $7,000 profit $7,000 made on sale ÷ $28,000 cost =.25 25% profit made on sale ©2015 Kaplan, Inc.
Another Example A house cost the owner $125,000. The owner sold the house for $100,000. What was the percent of loss? ©2015 Kaplan, Inc.
Solution $100,000 price - $125,000 cost = -$25,000 $25,000 loss ÷ $125,000 cost =.20 20% loss on the sale ©2015 Kaplan, Inc.
One More Example A lot sold for $35,000, making a 25 percent profit. What was the cost of the lot? ©2015 Kaplan, Inc.
Solution 100% cost + 25% profit = $35,000 selling price 125% = $35,000 selling price $35,000 ÷ 1.25 (125%) = $28,000 cost of lot ©2015 Kaplan, Inc.
Pre-Closing Steps Mortgage application Survey Appraisal Title Insurance Closing documents Property inspections Pre-closing inspection ©2015 Kaplan, Inc.
Prorated Expenses To prorate means to divide various charges and credits between buyer and seller Contract should specify a date and time for prorating items –Midnight before the day of closing is customary Credit = one party gets reimbursed $ Debit = the other party is charged $ ©2015 Kaplan, Inc.
Items to Prorate Property taxes for the current year Rental income for the closing month Interest (assumed mortgage) for the closing month Proration methods –30-day-month (statutory month) method –365-day method (actual number of days) ©2015 Kaplan, Inc.
30-day Month Method Tax Proration The annual property taxes are $3,840. The day of closing is June 15 and is charged to the buyer. Calculate the proration using the statutory month method Who will receive a credit and who will have a debit ©2015 Kaplan, Inc.
Solution 1/1June 1512/31 SellerBuyer 5 months + 14 days in June $3,840 ÷ 12 = $320 per month x 5 months = $1,600.00 $320 ÷ 30 days = $10.6667 per day x 14 days = $149.33 $1,600.00 + $149.33 = $1,749.33 Credit Buyer $1,749.33 and Debit Seller $1,749.33 ©2015 Kaplan, Inc.
365-day Method Tax Proration The annual property taxes are $3,840. The day of closing is June 15 and is charged to the buyer. Calculate the proration using the 365-day method Who will receive a credit and who will have a debit ©2015 Kaplan, Inc.
Solution 1/1June 1512/31 SellerBuyer 165 days $3,840 ÷ 365 = $10.5205 per day x 165 days = $1,735.89 Credit Buyer $1,735.89 & Debit Seller $1,735.89 ©2015 Kaplan, Inc.
Rental Proration A rental property will close on June 15 and the closing day belongs to the buyer. The seller has collected the rent of $1,000 at the beginning of the month. Calculate the proration How will it be distributed on the closing statement ©2015 Kaplan, Inc.
Solution June 6/1 156/30 SellerBuyer 16 days $1,000 ÷ 30 = $33.33333 per day x 16 days = $533.33 Credit Buyer $533.33 & Debit Seller $533.33 ©2015 Kaplan, Inc.
State Transfer Taxes State documentary stamp tax on deeds –$.70 per $100 increment of sale price State documentary stamp tax on notes –$.35 per $100 increment on note amount for all new and assumed mortgage notes State intangible tax on mortgages –$.002 per $1 on the amount of new mortgage loan ©2015 Kaplan, Inc.
Doc Stamps on Deed Example A home sells for $150,025 in Duval County. Solution: $150,025 ÷ $100 = 1500.25 stamps, round up to 1501 stamps x $.70 each stamp = $1,050.70 documentary stamp taxes on the deed ©2015 Kaplan, Inc.
Doc Stamps on Notes Example A buyer purchases a property by assuming an existing loan of $62,350 and signing a new mortgage and note for $110,000. Solution: $62,350 ÷ $100 = 623.5 stamps, round up to 624 x $.35 per stamp = $218.40 $110,000 ÷ $100 = 1100 stamps x $.35 per stamp = $385.00 Total documentary stamp taxes on the notes = $603.40 ©2015 Kaplan, Inc.
Intangible Tax Example A buyer purchases a property by assuming an existing loan of $62,350 and signing a new mortgage and note for $110,000. Solution: $110,000 x $.002 = $220.00 intangible tax ©2015 Kaplan, Inc.
Key Concepts Regarding Closing Statements Double entry items Exceptions –Buyer’s deposit –Existing mortgage being paid off –New mortgage obtained from a financial institution –Expenses Buyer days –Prorated item is paid in advance of closing Seller days –Prorated item is paid after closing ©2015 Kaplan, Inc.
Seller’s Closing Statement Items credited to seller –Total purchase price –Other prepaid items ©2015 Kaplan, Inc.
Seller’s Closing Statement Items charged (debits) to seller –Mortgages assumed, paid off, or newly created –Prorated taxes, interest, advance rent –Security deposits –State documentary stamps on the deed –Broker’s commission –Title insurance (owner’s policy) –Preparation of deed –Seller’s attorney fees ©2015 Kaplan, Inc.
Buyer’s Closing Statement Items credited to buyer –Earnest money deposit –Mortgages assumed or newly created –Prorated property taxes, unpaid interest and advance rents –Security deposits ©2015 Kaplan, Inc.
Buyer’s Closing Statement Items charged (debits) to buyer –Purchase price –Title insurance (mortgagee’s policy) –State documentary stamps on the note –State intangible tax on the new mortgage –Recording of the deed –Recording of the mortgage –Buyer’s attorney fees –Preparation of mortgage and note ©2015 Kaplan, Inc.
Paid at Closing On the buyer’s closing statement Total debits – Total credits = Amount the buyer must pay at closing ©2015 Kaplan, Inc.
Renting vs. Buying Housing. Rental Terminology Landlord Owner of property –Expects rent to be paid on time and for tenant to keep the property in reasonable.
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