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

© 2009 by South-Western, Cengage Learning

SAMSAMIRLANDERIRLANDER

Chapter 14Chapter 14

Florida Real Estate:Florida Real Estate: Principles, Practices and Principles, Practices and

License LawLicense Law

Chapter 14Chapter 14

Title Closing and Title Closing and ComputationsComputations



Key TermsKey Terms

Arrears

Credit

Debit

Prorating


Title ClosingTitle Closing

Consummation of transaction

Seller delivers title

Buyer delivers payment


Closing StatementsClosing Statements

Seller pays existing loan

Prorate tax bill

Prorate rent / security deposit

Down payment

Loan costs



Closing statements / Settlement statements

All items paid and received by buyer and seller























State documentary stamps (deed)

Usually paid by seller

$0.70 per $100 (or any fraction) of purchase price



State documentary stamps (notes)

Usually paid by buyer

$0.35 per $100 (or any fraction) of new and assumed mortgages



State documentary stamps (recorded mortgages)

Usually paid by buyer on new money

$0.002 X new mortgage



Converting mills to decimals

101000

1100

=









Parties with financial interest:

Buyer

Seller

Real estate brokers

Seller’s lender

Buyer’s lender

Escrow company

Title insurance company





Debit: Debit: payment

Credit: Credit: money received

Note: assume buyer is paying full sales price







Seller pays:

Loan balance

Broker’s commission

Escrow fees

Title insurance

Transfer taxes

Entered as debits







Paid by seller to buyer:

Deposit

Seller debit

Buyer credit





Prepaid rent:

Seller received rent in advance

Seller debit

Buyer credit





Buyer pays:Loan origination fee

Structural pest control report

Escrow fees

Recording fees

Other

Entered as debits







The loan balance in a loan assumption:

Seller debit

Buyer credit





Seller will receive a check for $27,100Seller will receive a check for $27,100







Buyer must pay $98,150


ProratingProrating

Prorating: Prorating: determining the costs to be paid by the buyer and seller

Each responsible for the period of time they owned the property


ProratingProrating

Jan 1 ClosingDate

Dec 31

Seller ownsproperty

Buyer ownsproperty


ProratingProrating

Buyer owns on the day of closing

Beginning date: first date in effect

Ending date: last date in effect


ProratingProrating

Seller’s ownership: beginning date through the day before closing

Buyer’s ownership: from day of closing to ending date


ProratingProrating

Prorated at closing:

Property taxesCalendar year

Homeowners insuranceEffective period

Mortgage interestMonth of closing


ProratingProrating

Jan 1

Sept 10Sept 10Closing DateClosing Date

Dec 31

Mar 1 Feb 28

Sep 1 Sep 30Sep 30

TaxesTaxes

InsuranceInsurance

Mortgage InterestMortgage Interest


ProratingProrating

Jan 1


Dec 31

Mar 1 Feb 28

Sep 1 Sep 30Sep 30

TaxesTaxes

InsuranceInsurance



ProratingProrating

Jan 1


Dec 31

Mar 1 Feb 28

Sep 1 Sep 30Sep 30

TaxesTaxes

InsuranceInsurance



ProratingProrating

Jan 1


Dec 31

Mar 1 Feb 28

Sep 1 Sep 30Sep 30

TaxesTaxes

InsuranceInsurance



ProratingProrating

Jan 1 ClosingDate

Dec 31

Seller ownsproperty

Buyer ownsproperty


ProratingProrating

Jan 1


Dec 31

Mar 1 Feb 28

Sep 1 Sep 30Sep 30

TaxesTaxes

InsuranceInsurance



ProratingProrating

12-month tax yearJan 1 – Dec 31

Florida taxes paid in arrearsarrears

Paid at the end

Seller owes if taxes have not been paid


ProratingProrating

Jan 1 ClosingDate

Dec 31

Seller owestaxes for this

period at closing


ProratingProrating

1. 1. # of days seller owns the property

2. 2. Calculate daily rate

3. 3. Multiply # of days

X rate


ProratingProrating

Tax bill: $877

Closing: March 13

# of days seller owns property prior to closing month

January

February

31 days

28 days

59 daysTotal

Step 1Step 1


ProratingProrating

ADD # of days seller owns property in closing month

From step 1

March 13 closing date

+ 12 days

71 days

59 days

Total # of daysseller owes tax

Step 2Step 2


ProratingProrating

Determine daily tax rate:

Annual tax bill divided by # of days

$877

365

Annual tax

Days$2.4027per day

Step 3Step 3

=


ProratingProrating

Multiply the # of days by the daily rate

$170.59

71

Tax owed

DaysX $2.4027

Step 4Step 4

per day


ProratingProrating

Tax bill: $877

Closing: March 13

Step 1Step 1

# of months seller owns the property prior to closing

Jan & Feb = 2 months

30-Day-Month Method


ProratingProrating

Step 2Step 2

Calculate monthly rate

30-Day-Month Method

$877 Annual tax

12 months =$73.0833per month


ProratingProrating

Step 3Step 3

Multiply tax per month by # of months prior to closing

30-Day-Month Method

$146.1666

X 2 months$73.0833 per month


ProratingProrating

Step 4Step 4

# of days seller owns in the month of closing

30-Day-Month Method

Seller owns for 12 days

Closing date March 13


ProratingProrating

Step 5Step 5

Amount of tax per day

30-Day-Month Method

30 days

$73.0833 per mon. $2.4361per day=


ProratingProrating

Step 6Step 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


ProratingProrating

Step 7Step 7

Add step 3 and step 6

30-Day-Month Method

$29.2332

$146.1666

$175.3998

$175.40 Seller’s tax proration


ProratingProrating

365 day method

30 day month method

Figure 14.1


ProratingProrating

PartiesSeller

Buyer

Escrow/closing cost

SectionsTransactional

Proration

Expenses/closing costs


ProratingProrating

ExpensesLegal fees

Title insurance

Broker commission

Miscellaneous items

Recording fees

Documentary stamps


ProratingProrating

Transactions informationSales price

Deposit

New mortgage

Assumed mortgage

Second mortgage


ProratingProrating

ProrationsUnpaid property taxes

Paid property taxes

Sales price

First mortgage interestAssumed

New loan

Second mortgage interest

Rent

Insurance


Sales Contract to ClosingSales Contract to Closing

Periods between contract signing and closing

After contract is signed

Loan application

Closing preparation



Copies of contractSeller

Buyer

Your broker

Cooperating broker

Contingency Financing



Other contingenciesLoan assumptions

Inspection

Repairs

Appraisal

Surveys

Termite inspections

Sale of buyer home



May require buyer qualification

Notify lender

Spouse

Home inspectionASAP



Completed in a timely manner

Completed in a timely manner

Cooperate with appraiser



Lender’s or buyer’s request

Inspection, clearance letter or termite bond

Different forms and procedures



Seller’s agent: info on the market where buyer’s home in located

Buyer’s agent: assist in sale



Selection of a lender

Loan application

Homeowner’s insurance



Broker may not select

Seller may stipulate in contract

Buyer choice if not stipulated



Keep seller informed

Progress on applicationtime periods

Good faith effort of buyer

Appraisal

Renegotiate if buyer does not qualify



Lender to be named as payee



Information to closing agent

Coordinating date and time

Preparing buyer and seller



Sales contract

Buyer’s hazard insurance

Termite clearance letter



Set after loan approval

Inform parties of:Date, time, and place

What to expect



RESPA requires that the settlement statement:

Be available on request

Be available one business day prior to closing

Include an itemized list of charges


Sold SignsSold Signs

Licensee may choose to place either:

““Sold”Sold”

““Sale pending”Sale pending”

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

Documents

new money

fraction of new

new mortgage

fraction of purchase

loan ori

money receivednote

sales price

florida real estate