1. © 2009 by South-Western, Cengage Learning SAMIRLANDER Chapter 14

2. Florida Real Estate: Principles, Practices and License Law Chapter 14 Title Closing and Computations © 2009 by South-Western, Cengage Learning

3. Key Terms Arrears Credit Debit Prorating

4. © 2009 by South-Western, Cengage Learning Title Closing Consummation of transaction Seller delivers title Buyer delivers payment

5. © 2009 by South-Western, Cengage Learning Closing Statements Seller pays existing loan Prorate tax bill Prorate rent / security deposit Down payment Loan costs

6. © 2009 by South-Western, Cengage Learning Closing Statements Closing statements / Settlement statements All items paid and received by buyer and seller

7. © 2009 by South-Western, Cengage Learning Closing Statements

8. © 2009 by South-Western, Cengage Learning Closing Statements

9. © 2009 by South-Western, Cengage Learning Closing Statements

10. © 2009 by South-Western, Cengage Learning Closing Statements

11. © 2009 by South-Western, Cengage Learning Closing Statements

12. © 2009 by South-Western, Cengage Learning Closing Statements

13. © 2009 by South-Western, Cengage Learning Closing Statements

14. © 2009 by South-Western, Cengage Learning Closing Statements

15. © 2009 by South-Western, Cengage Learning Closing Statements

16. © 2009 by South-Western, Cengage Learning Closing Statements

17. © 2009 by South-Western, Cengage Learning Closing Statements State documentary stamps (deed) Usually paid by seller $0.70 per $100 (or any fraction) of purchase price

18. © 2009 by South-Western, Cengage Learning Closing Statements State documentary stamps (notes) Usually paid by buyer $0.35 per $100 (or any fraction) of new and assumed mortgages

19. © 2009 by South-Western, Cengage Learning Closing Statements State documentary stamps (recorded mortgages) Usually paid by buyer on new money $0.002 X new mortgage

20. © 2009 by South-Western, Cengage Learning Closing Statements Converting mills to decimals 10 1000 1 100 =

21. © 2009 by South-Western, Cengage Learning Closing Statements

22. © 2009 by South-Western, Cengage Learning Closing Statements

23. © 2009 by South-Western, Cengage Learning Closing Statements

24. © 2009 by South-Western, Cengage Learning Closing Statements Parties with financial interest: Buyer Seller Real estate brokers Seller’s lender Buyer’s lender Escrow company Title insurance company

25. © 2009 by South-Western, Cengage Learning Closing Statements

26. © 2009 by South-Western, Cengage Learning Closing Statements Debit: Debit: payment Credit: Credit: money received Note: assume buyer is paying full sales price

27. © 2009 by South-Western, Cengage Learning Closing Statements

28. © 2009 by South-Western, Cengage Learning Closing Statements

29. © 2009 by South-Western, Cengage Learning Closing Statements Seller pays: Loan balance Broker’s commission Escrow fees Title insurance Transfer taxes Entered as debits

30. © 2009 by South-Western, Cengage Learning Closing Statements

31. © 2009 by South-Western, Cengage Learning Closing Statements

32. © 2009 by South-Western, Cengage Learning Closing Statements Paid by seller to buyer: Deposit Seller debit Buyer credit

33. © 2009 by South-Western, Cengage Learning Closing Statements

34. © 2009 by South-Western, Cengage Learning Closing Statements Prepaid rent: Seller received rent in advance Seller debit Buyer credit

35. © 2009 by South-Western, Cengage Learning Closing Statements

36. © 2009 by South-Western, Cengage Learning Closing Statements Buyer pays: Loan origination fee Structural pest control report Escrow fees Recording fees Other Entered as debits

37. © 2009 by South-Western, Cengage Learning Closing Statements

38. © 2009 by South-Western, Cengage Learning Closing Statements

39. © 2009 by South-Western, Cengage Learning Closing Statements The loan balance in a loan assumption: Seller debit Buyer credit

40. © 2009 by South-Western, Cengage Learning Closing Statements

41. © 2009 by South-Western, Cengage Learning Closing Statements Seller will receive a check for $27,100

42. © 2009 by South-Western, Cengage Learning Closing Statements

43. © 2009 by South-Western, Cengage Learning Closing Statements

44. © 2009 by South-Western, Cengage Learning Closing Statements Buyer must pay $98,150

45. © 2009 by South-Western, Cengage Learning Prorating Prorating: Prorating: determining the costs to be paid by the buyer and seller Each responsible for the period of time they owned the property

46. © 2009 by South-Western, Cengage Learning Prorating Jan 1 Closing Date Dec 31 Seller owns property Buyer owns property

47. © 2009 by South-Western, Cengage Learning Prorating Buyer owns on the day of closing Beginning date: first date in effect Ending date: last date in effect

48. © 2009 by South-Western, Cengage Learning Prorating Seller’s ownership: beginning date through the day before closing Buyer’s ownership: from day of closing to ending date

49. © 2009 by South-Western, Cengage Learning Prorating Prorated at closing: Property taxes Calendar year Homeowners insurance Effective period Mortgage interest Month of closing

50. © 2009 by South-Western, Cengage Learning Prorating Jan 1 Sept 10 Closing Date Dec 31 Mar 1Feb 28 Sep 1 Sep 30 Taxes Insurance Mortgage Interest

51. © 2009 by South-Western, Cengage Learning Prorating Jan 1 Sept 10 Closing Date Dec 31 Mar 1Feb 28 Sep 1 Sep 30 Taxes Insurance Mortgage Interest

52. © 2009 by South-Western, Cengage Learning Prorating Jan 1 Sept 10 Closing Date Dec 31 Mar 1Feb 28 Sep 1 Sep 30 Taxes Insurance Mortgage Interest

53. © 2009 by South-Western, Cengage Learning Prorating Jan 1 Sept 10 Closing Date Dec 31 Mar 1Feb 28 Sep 1 Sep 30 Taxes Insurance Mortgage Interest

54. © 2009 by South-Western, Cengage Learning Prorating Jan 1 Closing Date Dec 31 Seller owns property Buyer owns property

55. © 2009 by South-Western, Cengage Learning Prorating Jan 1 Sept 10 Closing Date Dec 31 Mar 1Feb 28 Sep 1 Sep 30 Taxes Insurance Mortgage Interest

56. © 2009 by South-Western, Cengage Learning Prorating 12-month tax year Jan 1 – Dec 31 arrears Florida taxes paid in arrears Paid at the end Seller owes if taxes have not been paid

57. © 2009 by South-Western, Cengage Learning Prorating Jan 1 Closing Date Dec 31 Seller owes taxes for this period at closing

58. © 2009 by South-Western, Cengage Learning Prorating 1. 1. # of days seller owns the property 2. 2. Calculate daily rate 3. 3. Multiply # of days X rate

59. © 2009 by South-Western, Cengage Learning Prorating Tax bill: $877 Closing: March 13 # of days seller owns property prior to closing month January February 31 days 28 days 59 daysTotal Step 1

60. © 2009 by South-Western, Cengage Learning Prorating ADD # of days seller owns property in closing month From step 1 March 13 closing date + 12 days 71 days 59 days Total # of days seller owes tax Step 2

61. © 2009 by South-Western, Cengage Learning Prorating Determine daily tax rate: Annual tax bill divided by # of days $877 365 Annual tax Days $2.4027 per day Step 3 =

62. © 2009 by South-Western, Cengage Learning Prorating Multiply the # of days by the daily rate $170.59 71 Tax owed Days X $2.4027 Step 4 per day

63. © 2009 by South-Western, Cengage Learning Prorating Tax bill: $877 Closing: March 13 Step 1 # of months seller owns the property prior to closing Jan & Feb = 2 months 30-Day-Month Method

64. © 2009 by South-Western, Cengage Learning Prorating Step 2 Calculate monthly rate 30-Day-Month Method $877 Annual tax 12 months = $73.0833 per month

65. © 2009 by South-Western, Cengage Learning Prorating Step 3 Multiply tax per month by # of months prior to closing 30-Day-Month Method $146.1666 X 2 months $73.0833 per month

66. © 2009 by South-Western, Cengage Learning Prorating Step 4 # of days seller owns in the month of closing 30-Day-Month Method Seller owns for 12 days Closing date March 13

67. © 2009 by South-Western, Cengage Learning Prorating Step 5 Amount of tax per day 30-Day-Month Method 30 days $73.0833 per mon. $2.4361 per day =

68. © 2009 by South-Western, Cengage Learning Prorating Step 6 Multiply tax per day by # of days in month of closing seller owns 30-Day-Month Method X 12 days $2.4361 tax per day $29.2332 Seller owes for month of closing

69. © 2009 by South-Western, Cengage Learning Prorating Step 7 Add step 3 and step 6 30-Day-Month Method $29.2332 $146.1666 $175.3998 $175.40 Seller’s tax proration

70. © 2009 by South-Western, Cengage Learning Prorating 365 day method 30 day month method Figure 14.1

71. © 2009 by South-Western, Cengage Learning Prorating Parties Seller Buyer Escrow/closing cost Sections Transactional Proration Expenses/closing costs

72. © 2009 by South-Western, Cengage Learning Prorating Expenses Legal fees Title insurance Broker commission Miscellaneous items Recording fees Documentary stamps

73. © 2009 by South-Western, Cengage Learning Prorating Transactions information Sales price Deposit New mortgage Assumed mortgage Second mortgage

74. © 2009 by South-Western, Cengage Learning Prorating Prorations Unpaid property taxes Paid property taxes Sales price First mortgage interest Assumed New loan Second mortgage interest Rent Insurance

75. © 2009 by South-Western, Cengage Learning Sales Contract to Closing Periods between contract signing and closing After contract is signed Loan application Closing preparation

76. © 2009 by South-Western, Cengage Learning Sales Contract to Closing Copies of contract Seller Buyer Your broker Cooperating broker Contingency Financing

77. © 2009 by South-Western, Cengage Learning Sales Contract to Closing Other contingencies Loan assumptions Inspection Repairs Appraisal Surveys Termite inspections Sale of buyer home

78. © 2009 by South-Western, Cengage Learning Sales Contract to Closing May require buyer qualification Notify lender Spouse Home inspection ASAP

79. © 2009 by South-Western, Cengage Learning Sales Contract to Closing Completed in a timely manner Cooperate with appraiser

80. © 2009 by South-Western, Cengage Learning Sales Contract to Closing Lender’s or buyer’s request Inspection, clearance letter or termite bond Different forms and procedures

81. © 2009 by South-Western, Cengage Learning Sales Contract to Closing Seller’s agent: info on the market where buyer’s home in located Buyer’s agent: assist in sale

82. © 2009 by South-Western, Cengage Learning Sales Contract to Closing Selection of a lender Loan application Homeowner’s insurance

83. © 2009 by South-Western, Cengage Learning Sales Contract to Closing Broker may not select Seller may stipulate in contract Buyer choice if not stipulated

84. © 2009 by South-Western, Cengage Learning Sales Contract to Closing Keep seller informed Progress on application time periods Good faith effort of buyer Appraisal Renegotiate if buyer does not qualify

85. © 2009 by South-Western, Cengage Learning Sales Contract to Closing Lender to be named as payee

86. © 2009 by South-Western, Cengage Learning Sales Contract to Closing Information to closing agent Coordinating date and time Preparing buyer and seller

87. © 2009 by South-Western, Cengage Learning Sales Contract to Closing Sales contract Buyer’s hazard insurance Termite clearance letter

88. © 2009 by South-Western, Cengage Learning Sales Contract to Closing Set after loan approval Inform parties of: Date, time, and place What to expect

89. © 2009 by South-Western, Cengage Learning Sales Contract to Closing RESPA requires that the settlement statement: Be available on request Be available one business day prior to closing Include an itemized list of charges

90. © 2009 by South-Western, Cengage Learning Sold Signs Licensee may choose to place either:“Sold” “Sale pending”