1. Florida Real Estate Principles, Practices & Law 39th Edition
Unit 14: Real Estate–Related Computations and Closing of Transactions

2. Computations Parts of a fraction Changing fractions to decimals
Numerator and Denominator
Changing fractions to decimals
Changing decimals to percentages
Changing percentages to decimals
Decimal place values

3. Sale Commissions Commission often is shared by Listing broker
Listing sales associate
Selling broker
Selling sales associate

4. Percentage Applied to Selling Price, Cost, and 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

5. Example #1 A lot cost $28,000 and sold for $35,000.
What is the percentage of profit?

6. Solution #1 $35,000 price – $28,000 cost = $7,000 profit
$7,000 made on sale ÷ $28,000 cost = .25
25% profit made on sale

7. Example #2
A house cost the owner $125,000. The owner sold the house for $100,000.
What was the percent of loss?

8. Solution #2 $100,000 price – $125,000 cost = -$25,000
$25,000 loss ÷ $125,000 cost = .20
20% loss on the sale

9. Example #3 A lot sold for $35,000, making a 25 percent profit.
What was the cost of the lot?

10. Solution #3 100% cost + 25% profit = $35,000 selling price
$35,000 ÷ 1.25 (125%) = $28,000 cost of lot

11. Preliminary Steps to Closing
Earnest money deposit
Loan application
Contingencies
Appraisal
Loan approval
Title Insurance
Inspections
Required repairs
Survey

12. Preliminary Steps to Closing
Hazard insurance
Preclosing inspection (walk-through)
Review closing documents
Buyer given amount needed to close
Earnest money transferred to closing agent

13. 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 $

14. Items to Prorate Property taxes for the current year
Rental income for the closing month
Interest (assumed mortgage) for the closing month
Proration methods
365-day method (actual number of days)
360-day method (30-day month)

15. Property 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

16. Solution January 1 to June 15 = 165 days
$3,840 ÷ 365 = $ per day × 165 days = $1,735.89
Credit Buyer $1, & Debit Seller $1,735.89

17. 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

18. Solution June 15 to June 30 = 16 days
$1,000 ÷ 30 = $ per day × 16 days = $533.33
Credit Buyer $ & Debit Seller $533.33

19. Proration for Interest on Assumed Loan
A buyer is purchasing a property by assuming an existing loan with a balance of $110,350.
The closing is scheduled for April 10 with the next mortgage payment due May 1.
The interest rate is 4%.
Calculate the proration amount and indicate which party will be charged a debit and which will receive a credit.

20. Interest Proration Solution
April 1 to April 10 = 9 days
$110,350 × 4% = $4,414 ÷ 365 days = per day
$12,09315 × 9 days = $108.84
Credit buyer $ and debit seller $108.84

21. State Transfer Taxes State documentary stamp tax on deeds
$.70 per $100 increment of sale price
State documentary stamp tax on promissory 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

22. Doc Stamps on Deed Example
A home sells for $150,025 in Duval County.
Solution:
$150,025 ÷ $100 = stamps, round up to 1501 stamps × $.70 each stamp = $1, documentary stamp taxes on the deed

23. 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 = stamps, round up to 624 × $.35 per stamp = $218.40
$110,000 ÷ $100 = 1100 stamps × $.35 per stamp = $385.00
Total documentary stamp taxes on the notes = $603.40

24. 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 × $.002 = $ intangible tax

25. Key Concepts Regarding Closing Statements
Double entry items
Exceptions (only appear for one party)
Buyer’s deposit
Existing mortgage being paid off
New mortgage obtained from a financial institution
Expenses
Document preparation
Recording fees
Broker’s commission
Title insurance

26. Rules of Thumb Items credited to seller Total purchase price
Prepaid items

27. Rules of Thumb Items debited 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

28. Rules of Thumb Items credited to buyer Earnest money deposit
Mortgages assumed or newly created
Prorated property taxes, unpaid interest and advance rents
Security deposits

29. Rules of Thumb Items debited to buyer Purchase price
Title insurance (mortgagee’s policy)
State intangible tax on new mortgages
State documentary stamps on new and assumed notes
Recording of the deed
Recording of the mortgage
Buyer’s attorney’s fees
Preparation of mortgage and note