Real Estate Proration for the closing

On July 18th, 2014 Jane from ABC Realty meets her first time home buyer clients Jane and Fred Smith at the attorney\’s office for the closing of 25 Maple St. Jane remembers that she was able to negotiate a great sales price for her clients. The property was listed for $150,000. and it was on the market for over 150 days. After comparing the other sold properties in the area. Jane realized the property was over priced. She helped her client negotiate a sales price of $140,000. When filling out the offer the Buyers place a $10,000 earnest money deposit and their financing is 90% of the purchase price with 4 points. Your clients tell you that they locked in an interest rate of 9.5%. During the closing the attorney goes over the closing statement with your clients. The Sellers have not yet paid the real estate taxes of $1700 and the additional property assessment of $1540. The Sellers also have a mortgage that need to pay at the time of closing, $83,760 with an interest rate of 7%.

At the time of closing the items that will appear on the closing settlement statement are:

  1. Proration of real estate taxes: (The Seller has not paid the real estate taxes.)
    1. Taxes per day:
    2. $$$1700 \, unpaid \, taxes \div 360 \, days = $4.72$$

    1. How many days the Seller lived in the property
    2. $$6 \, months * 30 \, days = 180 \, days$$
      $$180 \, days + 18 \, days \, in \, July = 198 \, days$$

    1. The Seller’s Debit and the Buyer’s Credit
    2. $$$198 \, days * $4.72 \, per \, day = $934.56$$

    1. Prorate the addition property assessment:
      1. Additional property assessment per day
      2. $$$1540 \, unpaid \, property \, assessment \div 360 \, days = $4.28 \, per \, day$$

      3. How many days the Seller lived in the property
      4. $$6 \, months * 30 \, days = 180 \, days$$
        $$180 \, days + 18 \, days \, in \, July = 198 \, days$$

      5. The Seller\’s Debit and the Buyer\’s Credit
      6. $$198 \, days * $4.28 \,per \, day = $847$$

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