Question

Assume you negotiated the sale as a real estate broker and are entitled to a six percent commission. The offer and acceptance contract calls for a sales price of $230,000. The buyer has tendered $2,000 for earnest money. The buyer has received loan approval on an 80% loan to value ratio loan. The property is presently encumbered with an existing mortgage with a balance of $150,691.73. The interest on the loan has been paid through April 30, 2019. The interest rate on the mortgage is 5%. Closing date is to be May 20, 2019. All prorations are based on a 360 day year and 30 day month. The 2018 taxes have not been paid and the 2019 taxes are to be prorated based on the 2018 taxes which were 51.5 mills on an assessed valuation of $50,000. A homeowner’s insurance policy costing $1,400 for a one-year period will be purchased by the buyer and paid at closing. The owner’s title insurance costing $1,000, a deed preparation fee of $75.00, and a termite policy costing $600 are to be paid by the seller. Title insurance costing $900, a credit report costing $60, and an appraisal fee of $450 will be paid by the buyer. The buyer’s loan fees include a 1 point origination fee and $700 of additional costs. In addition, the following documents will be recorded: 1 page deed, 15 page mortgage, and a 1 page release deed. The broker’s fee is payable at closing and revenue stamps at the usual rate must be paid by the seller and buyer. The closing fee of $600 will be split 50/50 between the buyer and seller.

1. How much is the loan amount?

2. How much would the payoff be for the existing loan?

3. How much are the 2018 property taxes?

4. How much would the 2019 tax proration be?

5. Regarding the 2019 tax proration, which party (Buyer or Seller) will receive a credit for the taxes on the closing statement?

6. How much are the buyer’s total loan fees?

7. How much will be the buyer’s charge to record the documents they customarily pay to record?

8. How much would be the total cost to purchase revenue stamps on this transaction from the state of Arkansas?

9. How much would be the seller’s share of the revenue stamps?

10. How much is the total real estate commission paid by the seller?

Answer 1

Solution-1	The loan amount
		Amount in $
	a) Sale price	230000
	b) Loan to value ratio (LTV Ratio)	80%
	Mortgage loan (a*b)	184000
Solution-2	Payoff for the existing loan
	Interest on mortgage	5%
	Interest payment date	April 30, 2019
	Loan closing date	May 20, 2019
	Interest outstanding for	20 days
		Amount in $
	Interest (150591.73*(5/100)*(20/360)	418.31
	Existing mortgage loan balance	150691.73
	Payoff for the existing loan	151110.04
Solution-3	2018 property taxes
	Property Assessed valuation	50000
	Tax rate (per $ 1000)	51.5 Mills
	Tax (51.5*50000/1000)	2575
Solution-4	2019 tax proration
	Fair value of property	230000
	Value already assessed	-50000
	Unassessed value of property	180000
	Tax rate (per $ 1000)	51.5 Mills
	Tax (51.5*180000/1000)	9270.00
	Note- It is assumed that the fair value of the property is selling price of the property and on $ 50000 assessed till 2019
Solution-5	Party who (Buyer or Seller) will receive a credit for the taxes on the closing statement
	A property owner can claim a tax deduction on some or all of the taxes paid on that property, provided it is for personal use and the owner itemizes deductions on their federal tax return.
Solution-6	buyer’s total loan fees
	Mortgage loan (a*b)	184000
	Origination fee (.01%*184000)*	18.4
	Additional fee	700
	buyer’s total loan fees	718.4
	*1 Point = 1 Basis Point
Solution-7	Buyer’s charge to record the documents they customarily pay to record.
	Note: Following recording fee is assumed which are applicable in Arkansas, in case of no information provided in the question
	$15.00 for the first page (1) side only and $5.00 for each additional page.
	Therefore,
	1-page deed record fee	15
	15 page mortgage {15+(5*14)}	85
	1-page release deed	15
	Total record fee	115
Solution-8	Total cost to purchase revenue stamps on this transaction from the state of Arkansas
	Note :
	Tax rate - $ 3.30 per $ 1000 of actual consideration on the transaction that exceeds $ 100
	Therefore,
	Total cost to purchase revenue stamps on this transaction from the state of Arkansas (230000*3.3/100)	7590
Solution-9	Seller’s share of the revenue stamps
	Revenue stamp	7590
	Share of seller	50%
	Seller’s share of the revenue stamps	7590.50
Solution-10	total real estate commission paid by the seller
	Sales price	230000
	Commission rate	6%
	total real estate commission paid by the seller	13800.00
	Note - commission paid on full amount of consideration