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Real Estate Notes Chapter 14
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Terms in this set (32)
What is the formula for calculating sale price, commision percentage, and percentage?
commision/(sale price*commission percentage)
What are the two sides when calculating a commission?
When calculating commission - remember that there are normally two sides - a listing side (where the broker works for the seller) and a sale side (where the broker works with a buyer. Sometimes the sale side will be referred to as a "buyer" side. The sale side term has been used over the years as a term for representing the buyer so, be aware of both terms!
A broker listed a home for $195,000 and sold it for 90% of the list price. If the home was listed at a 7.5% commission and the split was 55% to the listing broker and 45% to the selling broker, how much did the selling broker receive?
$14,625.00
$13,162.50
$5,923.13
$7,239.38
C
What's the formula for calculating loan amount, loan interest, and loan interest rate?
Interest/(loan amount*loan interest rate)
The buyer wants to get a new loan of $60,000 at 6% interest. His lender wants 2 points to do the loan. What is the dollar amount of discount points the buyer must pay?
$60,000 * 2 points @ 1% = (2%)
The answer is $60,000 x 2% = $1,200
What is an origination point?
The origination point is the loan fee that a broker or lender charges to originate a loan. It does NOT involve bringing the interest down on the loan. When taking out a loan a borrower may pay 1-2 points to originate that loan. Mortgage origination points are negotiable between a borrower and lender.
What is the calculation for profit and percent of gain?
Subtract the original price from the sale price
2. Gain/(orginal purchase price* % of Gain or loss)
How do you calculate the Seller's Net?
Seller's Net/sale price* (100% - agent commission )
The sellers told their real estate agent they wanted to net $50,000.00 after paying a 6% commission. How much did the property have to sell for to net the seller $50,000.00?
$50,000.00
$51,500.00
$53,000.00
$53,191.49
Step 1: Use the T formation
Step 2: Put the $50,000 on atop the horizontal line. This is what the seller wants to net.
Step 3: The sale price is unknown -it is what you are solving for.
Step 4: Subtract the % of commission from 100%. The way the formula now reads is that $50,000 is 94% of what whole number?
By dividing $50,000 ÷ by 94%= answer is $53,191.49
The seller told his real estate agent to list his house for $75,000.00 and that he wanted to net $69,750.00. If the property sold for that price, and there were no additional expenses, to what did the seller agree?
A net listing, which is discouraged by the regulatory authorities in Florida
A 7% commission
A bad deal
Can't tell without more information
7%
The seller wanted to net $150,000 after paying an 8% commission and closing expenses of $1500. How much does the property have to sell for to net the seller $150,000?
$138,000.68
$163,043.48
$164,673.91
$170,000.00
If the seller has some expenses, add the expenses to the net before dividing by 100%-commission %.
$150,000 + $1,500 = $151,500/100% - 8% = 92%
Who does the day of closing belong to?
In Florida, the day of closing belongs to the buyer. This means that as of midnight the day before the closing, the seller must be off the property and the property must be swept clean for the buyer to move in on the day of closing.
What is the TRID?
The TRID (TILA RESPA) Integrated Disclosure is required for all government loans. The TRID's purpose is to notify the buyer of the true costs of their loan from their original loan estimate from the bank to the closing date.
What does zeroing out the amounts mean?
Zeroing out the amounts is called proration. Proration is the process of proportionate or fair share distribution of fees and charges which are anticipated or which must be reimbursed to arrive at a "zero" balance between the seller and the buyer.
What is the statutory month method?
The statutory month method is most often used for calculating interest and the calendar year for all other closing calculations. In all other calculations for prorations, the calendar method is used. This method assumes all months have 30 days in a year.
How are arrears calculated?
Arrears (taxes, interest) - Use seller days and calculate up to the day of closing. Debit the seller/Credit the buyer
How do you calculate advance payments?
Advance (insurance, CDD Fees, HOA/condo fees) - Use buyer days and calculate as of the day of closing to the end of the payment period. Debit buyer(if they are reimbursing the seller)/credit the seller
What is the closing disclosure?
The Closing Disclosure is the official settlement statement used by settlement agents and title companies to itemize all charges for a borrower and seller.
What are the types of disclosures and when are they used?
The American Land Title Association (ALTA) Closing Disclosure is also used for Closing transactions which take place in a title office. Cash transactions closed by an attorney may use a HUD-1 Form to show how the closing costs were calculated.
When should everything be prorated?
In Florida, it is customary to have everything prorated as of midnight the night before closing.
Who is responsible for the day of closing?
The buyer is normally responsible for the day of closing as the buyer would own the property as of 12:01 the day of closing.
How should prorating be done for rental properties?
When a seller owns rental property, rent is prepaid for the month. The seller will owe a partial rental payment to the buyer for the days that the buyer owns the property - from midnight the day before closing until the last of the month. Use the 365-day method and prorate at midnight the day before the closing.
A 20 unit office building was sold and the closing took place on May 20. The seller collected $1250.00 rent from each of the tenants on May 1st. How will the rent be prorated? How would it appear on the closing settlement statement?
Do not round off your answers in this or any other math question until the end of the entire problem.
$9,677.42 debit the seller and credit the buyer
$9,166.67 debit the seller and credit the buyer
$15,322.58debit the seller and credit the buyer
$25,000 debit the seller and credit the buyer
$1,250 X 20 = $25,000 ÷ 31 = $806.4516 per day. The seller has collected the rents so the buyer needs to be reimbursed for the days they own the property (May 20 - 31st).
So, $806.4516 X 12 days = $9,677.42. Debit the seller, Credit the buyer
Who get credited and debited if the buyer assumes the loan?
If the buyer assumes the loan then both the loan balance and the interest would be a debit to the seller and a credit to the buyer.
If assuming a loan, how are loan payments calculated.
Loan payments are calculated in a manner where the principal on a payment is paid in advance for a borrower and the interest is often paid in arrears. With this option in mind, you may be tasked to calculate a buyer's interest to be paid in advance at closing.
What are stamp taxes?
Florida charges taxes for document transfers. These taxes may be referred to as Stamp Taxes or Transfer Taxes. They are paid to the tax collector at closing and are charged to the seller for the deed, the buyer for any note (new or assumed) and also to the buyer for any new notes as an intangible tax.
How should you calculate stamp taxes?
The amounts paid are calculated as follows:
D - is the transfer tax on a Deed - debit the seller. Sales price multiply $.70 per $100
N - is the transfer tax on a Note - debit the buyer. It is based on the loan amount is $.35 per $100
I - is the intangible tax charged for a NEW loan only.- debit the buyer. Use the loan price only. $.002 per $1 of debt.
Memory Mnemonic - DNI To remember the taxes paid at closing.
A buyer assumes an existing loan of $55,000 and executes a new loan of $129,000 for a $230,000 property. What are the documentary stamp taxes to be charged?
Sales price of $230,000 would charge the seller $1,610.00 ($230,000 ÷100 = 2300 X .70 = $1,610)
Existing Loan:$55,000/100 x .35 = $192.50 (on an assumed note)
plus 129,000/100 x .35 = $451.50 (on the new note) for total Tax on the Notes: $644.00 charged to the buyer at closing
What is the formula for finding the loan balance after a down payment if the LTV and the sale price are known or vice versa?
Loan amount/sale price*LTV
The purchase price on a property was $95,000. If the buyer acquired an 80% loan-to-value ratio mortgage, what is the buyer's new first mortgage amount?
$56,000
$71,000
$76,000
$95,000
Multiply the sale price of $95,000 by 80% LTV that calculates to = the loan balance. The earnest money does not make a difference at this point since it is part of the down payment.
A buyer received a loan for $250,000, which was 80% of the sale price. What was the sale price?
$250,000
$275,000
$300,000
$312,500
Divide $250,000 by 80% = Answer d - $312,500
When is principle paid and when is interest paid?
When a buyer obtains a new loan, interest must be paid UP TO the end of the month. For example, closing on the 15th, the buyer would owe interest for 16 days (include the day of closing). This is because any loan charges principal payments in advance and interest in arrears. If a P&I (Principal and Interest) payment is $1545.00 and the payment is due on the first of the month, the principal portion of the payment is paid for the month due and the interest would be paid for the prior month.
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