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36 Cards in this Set
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- Back
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An FHA loan for $80,000 at 10.5% requires discount points paid at closing in the amount of 3%. Find the cash value of the discount points. 2520 2400 3000 3150 |
A: 2400 80,000 x 3 % = 2,400 Definition of 'Discount Points' Discount Points are a form of prepaid interest. A borrower buys a point and in return gets a lower interest rate on the loan. Each discount point generally costs 1% of the total loan amount and depending on the borrower, each point lowers your interest rate by one-eighth to one one-quarter of your interest rate. As the IRS considers discount points to be prepaid interest they are tax deductible in the year in which they were paid.For example, on a $300,000 loan, each point would cost $3,000. Assuming the interest rate on the mortgage is 5% and each point lowers the interest rate by 0.25%. Buying 2 points will cost $6,000 and will result in an interest rate of 4.50%.Both lenders and borrowers gain benefits from discount points. Borrowers gain the benefit of lowered interest payments down the road, but the benefit applies only if the borrower plans on holding onto the mortgage long enough to save money from the decreased interest payments. Lenders benefit by receiving cash upfront instead of waiting for money in the form of interest payments over time, which enhances the lenders liquidity situation.On a practical basis; discount points are most often purchased by sellers as an incentive to prospective buyers. For most sellers, discount points are a cost of selling and thus tax-deductible. Buyers usually do not see enough benefit to purchase discount points. In the earlier example; spending $6,000 to reduce the interest rate to 4.5%, would have reduced the monthly payment by about $90. It would have taken a buyer 67 months to cover the cost of the points. |
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Title insurance endorsements appear on a closing statement as a: Credit to the seller Debit to the seller Debit to the broker Credit to the broker |
A: Credit to the broker The Title Company or broker, whoever is doing the closing, collects money for title insurance endorsements most typically from the buyer (Debit Buyer) and then places the corresponding amount into the Credit Broker column to ensure a check gets written to the title company for providing the endorsement. Endorsements are generally requirements by the lender for additional coverage to be added to the title insurance policy. More info: This answer to this question refers to the 6 column worksheet which pre-personal computer days was used to calculate the numbers for a closing. The broker engages the title company to act as scrivener and conduct the closing which includes deposits and withdraws into and out of the closing escrow account. Although the escrow account used for closings is managed by the title company closer, legally the listing broker is still responsible for it. Therefore, on the 6 column settlement worksheet the columns pertaining to the closing escrow account are labeled "Broker Credit" and "Broker Debit." Deposits into the closing escrow account are placed into the Broker Debit Column and withdrawals are listed in the Broker Credit column.Wait a minute! How can a deposit be a debit? Unfortunately that is how it works. The 6 column settlement worksheet twists slightly the traditional rules of accounting so that the person responsible for the closing escrow account knows what checks to write and deposits to make. S/he does this by dedicating the "Broker Debit" column to deposits and the "Broker Credit" column to withdrawals. This way, for example, if the seller owes the County Treasurer for back taxes, the closer can take the money from the Seller by indicating Debit Seller and have a reminder to write a check to the County Treasurer by placing the corresponding credit into the Broker Credit column. When all is said and done accounting gods are happy as all debits and credits are in balance. |
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Loan discount points appear on a closing statement as a: Debit to the buyer or seller Credit to the buyer Debit to the broker Credit to the seller |
A: Debit to the buyer or seller Either the buyer or seller pays the loan discount points (it is negotiated in the contract.) Definition of 'Discount Points' Discount Points are a form of prepaid interest. A borrower buys a point and in return gets a lower interest rate on the loan. Each discount point generally costs 1% of the total loan amount and depending on the borrower, each point lowers your interest rate by one-eighth to one one-quarter of your interest rate. As the IRS considers discount points to be prepaid interest they are tax deductible in the year in which they were paid.For example, on a $300,000 loan, each point would cost $3,000. Assuming the interest rate on the mortgage is 5% and each point lowers the interest rate by 0.25%. Buying 2 points will cost $6,000 and will result in an interest rate of 4.50%.Both lenders and borrowers gain benefits from discount points. Borrowers gain the benefit of lowered interest payments down the road, but the benefit applies only if the borrower plans on holding onto the mortgage long enough to save money from the decreased interest payments. Lenders benefit by receiving cash upfront instead of waiting for money in the form of interest payments over time, which enhances the lenders liquidity situation.On a practical basis; discount points are most often purchased by sellers as an incentive to prospective buyers. For most sellers, discount points are a cost of selling and thus tax-deductible. Buyers usually do not see enough benefit to purchase discount points. In the earlier example; spending $6,000 to reduce the interest rate to 4.5%, would have reduced the monthly payment by about $90. It would have taken a buyer 67 months to cover the cost of the points. |
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The water bill has been paid in advance by the seller for the month of August. The bill was $35.82. The closing is August 25. The correct entry on the settlement statement would be: Credit Seller $35.82, Debit Buyer $35.82 Credit Buyer $9.50, Debit Seller $9.50 Credit Seller $8.09, Debit Buyer $8.09 Credit Seller $8.09, Debit Buyer $27.73, Credit Broker $27.73 |
A: Credit Seller $8.09, Debit Buyer $8.09 Seller overpaid, so buyer owes seller - Credit Seller/Debit Buyer To calculate the amount owed:$35.82 / 31 (days in August) x 7 (Buyer owned days in month, including day of closing)= $8.09 Credit Seller $8.09, Debit Buyer $8.09 |
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Recording fees may appear on a closing statement as a: Debit to the buyer Debit to the seller Credit to the broker All of the above |
A: All of the above Recording fees are charged to the buyer and seller respectively, for recording documents that benefit them. The broker credit column is credited for the amounts charged to the buyer and seller so that a check for the recording fees are sent to the County Recorder. More info: This answer to this question refers to the 6 column worksheet which pre-personal computer days was used to calculate the numbers for a closing. The broker engages the title company to act as scrivener and conduct the closing which includes deposits and withdraws into and out of the closing escrow account. Although the escrow account used for closings is managed by the title company closer, legally the listing broker is still responsible for it. Therefore, on the 6 column settlement worksheet the columns pertaining to the closing escrow account are labeled "Broker Credit" and "Broker Debit." Deposits into the closing escrow account are placed into the Broker Debit Column and withdrawals are listed in the Broker Credit column.Wait a minute! How can a deposit be a debit? Unfortunately that is how it works. The 6 column settlement worksheet twists slightly the traditional rules of accounting so that the person responsible for the closing escrow account knows what checks to write and deposits to make. S/he does this by dedicating the "Broker Debit" column to deposits and the "Broker Credit" column to withdrawals. This way, for example, if the seller owes the County Treasurer for back taxes, the closer can take the money from the Seller by indicating Debit Seller and have a reminder to write a check to the County Treasurer by placing the corresponding credit into the Broker Credit column. When all is said and done accounting gods are happy as all debits and credits are in balance. |
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The seller agrees to pay $1500 of the buyer’s closing costs, this is shown on the settlement sheet as: debit to the seller, credit to the broker debit to the seller, credit to the buyer debit to the seller single entry debit to the broker, credit to the buyer |
A: debit to the seller, credit to the buyer Debit Seller/Credit Buyer. The term Closing Costs covers a variety of charges such as Recording Fees, Survey, Documentary Fee, Appraisal and others. The Seller contribution may not cover all of them. To keep it simple and make it work. The concession itself is a Seller Debit and Buyer Credit. This gets the dollars into the Buyer's side. The Buyers is then debited for his/her share of the Closing Costs. The Buyer's individual closing cost charges will each be a debit to the Buyer and a credit to the Broker (this deposits the money into the Trust Account for the Broker/Closing Agent to actually pay the vendor who is owed the Closing Costs). |
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The sales price of a property appears on a closing statement as a: Credit to the buyer Credit to the seller Credit to the broker Debit to the broker |
A: Credit to the seller The seller gets a credit for the purchase price of the property. |
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The Certificate of Taxes Due is used to calculate: the proration of taxes for the final tax agreement the amount of taxes due pursuant to the Real Property Transfer Declaration the amount of the transfer tax to be collected at closing whether or not the sale will be subject to Colorado income tax withholding |
A: the proration of taxes for the final tax agreement The tax certificate is a breakdown of the current property tax liability for the property. |
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If the closing is March 15, and last years taxes of $1127 were not paid; how is this shown on the settlement sheet? $1127 debit to the seller, credit to the broker $1127 debit to the seller, credit to the buyer $225 debit to the seller, credit to the broker $225 debit to the seller, credit to the buyer |
A: $1127 debit to the seller, credit to the broker It will be shown on the settlement sheet as a debit to the seller and a credit to the broker. Remember, the broker represents the escrow account. The credit goes to the escrow account as the person in charge of it, represented by the broker, needs to write a check to the County to pay the seller's delinquent tax bill. |
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A purchaser is required to fill out a W-9 form at closing so that: the federal government will always know your current address the borrower's lender can report interest payments to the IRS the KGB taught the CIA that it is the "intelligent" thing to do your income tax forms will automatically be mailed to your new address |
A: the borrower's lender can report interest payments to the IRS A W-9 is prepared at closing so the borrowers lender can report interest payment to the IRS, and the borrower can claim the interest as a tax deduction. |
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Mortgage insurance in conjunction with a loan appears on a closing statement as a: Debit to the buyer Debit to the seller Credit to the buyer Credit to the seller |
A: Debit to the buyer The buyer pays a mortgage insurance premium for a policy that insures the lender against the buyer's default. This is not credit life insurance that insures against the death of the borrower. |
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What is the debit/credit entry when a buyer assumes a loan from the seller? debit broker, credit buyer debit seller, credit buyer debit buyer, credit seller debit seller, credit broker |
A: debit seller, credit buyer The seller still owes the amount that is assumed (debit seller). On an assumption, that the buyer will be making payments against the loan does not relieve the seller of the obligation that it be paid in full. The buyer will not be required to bring this amount to the closing (credit buyer) |
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In Colorado "good funds" include a A personal check from the buyer that will clear the bank A title insurance company check A check drawn on the broker's escrow account A teller's check from a savings and loan |
A: A teller's check from a savings and loan From the Contract to Buy and Sell (Purchase Contract)Good Funds. All amounts payable by the parties at Closing, including any loan proceeds, Cash at Closing and closing costs, shall be in funds that comply with all applicable Colorado laws, including electronic transfer funds, certified check, savings and loan teller’s check and cashier’s check (Good Funds).This is also covered in Real Estate Commission Rule E-36:E-36. Good funds at closingPursuant to 38-35-125, a real estate licensee who provides closing services shall not disburse funds or instruct an agent to disburse funds until those funds have been received and are either:(1) available for immediate withdrawal as a matter of right from the financial institution in which the funds have been deposited or(2) available for immediate withdrawal as a consequence of an agreement of a financial institution in which the funds are to be deposited or a financial institution upon which the funds are to be drawn. Such agreement with a financial institution must be for the benefit of the licensee providing the closing service. If the agreement contains contingencies or reservations no disbursements can be made until these are satisfied. |
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The Seller holds security deposits in the amount of $1,000 from each of six tenants. On the settlement sheet: Credit Seller & Debit Broker $6,000 Debit Seller & Credit Buyer $6,000 Credit Seller & Debit Buyer $6,000. Prorate the deposits between the Buyer and Seller based on the closing date |
A: Debit Seller & Credit Buyer $6,000 Security deposits are a security against damage to a property. It belongs to the tenants and not the owner. When the property is sold - they must be transferred in whole to the new owner. Debit Seller Credit Buyer. |
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Closing March 15, next payment due April 1. How many months of escrow can lender take for taxes? 1 2 3 4 |
A: 3 The private lender will collect its loan in monthly installments, along with one month’s taxes to be held in reserve so that sufficient funds are on hand to pay the yearly taxes when due. This reserve is based lender’s own loan requirement and state law, C.R.S. 39-1-119. This law provides that any amount held on May 20 in excess of 3/12 of the taxes paid that year must be refunded to the borrower on or before May 30. Payments to a reserve escrow account must be adjusted annually upon reasonable belief of substantial improvements to the property or upon official notification of an increase in the actual amount of taxes levied. Failure to make a refund is subject to interest and penalty. |
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A house is closed on April 15. The property taxes are $960 for the year. They have not been paid. How much does the buyer receive from the seller at closing? 360 274 280 680 |
A: 274 $960 / 365 days = $2.6301 per day the seller owned the property and owes the Buyer for 104 days. $2.6301 x 104 = $273.53 |
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The fee to notarize a Warranty Deed is charged on the settlement statement to: the buyer the listing broker the seller the buyer and seller |
A: the seller The seller(s) signs the warranty deed, not the buyer. The charge is debit seller. On the settlement sheet do not confuse "recording" the deed with "notarizing" the deed. Recording the deed is "debit buyer" as it is considered in the buyers best interest to have the deed recorded into the public record. For more info: THE WARRANTY DEED - Although title may be transferred by a number of types of deed such as a quit claim deed, the most common type of deed used in a closing to transfer title is the warranty deed. The seller signs the warranty deed, not the buyer. In addition, a notary public must notarize the deed and an unofficial witness who is not a party to the transaction must sign as well so the deed can be recorded. The notary and the witness are usually employees of the closing attorney, although sometimes the attorney may ask the licensee to be a witness. Once the seller, the notary, and the unofficial witness have signed the deed, and the seller or attorney hands (delivers) it to the buyer and the seller has officially transferred title. It is standard practice for the attorney to keep the original warranty deed at closing for recording at the courthouse. The original deed is then mailed to the buyer after the recording. |
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Interest in arrears is charged to the: Buyer Seller Broker Lender |
A: Seller The seller pays interest from the first day of the month until the day of closing (sellers loan balance times the interest rate divided by 365 to get the daily rate) on the loan the seller’s paying off. |
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Real estate closing fees customarily appear on a settlement statement as a: Charge that is shared equally by the buyer and seller in the case of a conventional loan Charge to the seller in the case of a VA loan Charge that may be shared equally by the buyer and seller in the case of an FHA loan All of the foregoing is true |
A: All of the foregoing is true By custom in Colorado buyers and sellers share the cost of closing a transaction where the buyer is getting a conventional loan. VA requires the seller to pay the cost of closing. FHA allows the buyer to pay 1/2 of the closing fee. This is shown as a debit to whomever is paying it and a credit to the broker so that a check is written to the title company for providing the service. More info: This debit and credit explained above refers to the 6 column worksheet which pre-personal computer days was used to calculate the numbers for a closing. The broker engages the title company to act as scrivener and conduct the closing which includes deposits and withdraws into and out of the closing escrow account. Although the escrow account used for closings is managed by the title company closer, legally the listing broker is still responsible for it. Therefore, on the 6 column settlement worksheet the columns pertaining to the closing escrow account are labeled "Broker Credit" and "Broker Debit." Deposits into the closing escrow account are placed into the Broker Debit Column and withdrawals are listed in the Broker Credit column.Wait a minute! How can a deposit be a debit? Unfortunately that is how it works. The 6 column settlement worksheet twists slightly the traditional rules of accounting so that the person responsible for the closing escrow account knows what checks to write and deposits to make. S/he does this by dedicating the "Broker Debit" column to deposits and the "Broker Credit" column to withdrawals. This way, for example, if the seller owes the County Treasurer for back taxes, the closer can take the money from the Seller by indicating Debit Seller and have a reminder to write a check to the County Treasurer by placing the corresponding credit into the Broker Credit column. When all is said and done accounting gods are happy as all debits and credits are in balance. |
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You answered this question correctly Title passes from the grantor to the grantee: at the time of recording of the deed at time of the buyer's initial possession of the property at time the closing begins when the seller signs the warranty deed and gives it to the buyer |
A: when the seller signs the warranty deed and gives it to the buyer Title passes when the signed deed is delivered to and accepted by the buyer during closing. |
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Real estate commissions appear on a closing statement as a: Debit to the buyer Credit to the buyer Credit to the seller Debit to the seller |
A: Debit to the seller Sellers typically pay the real estate commission. |
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A $175 water bill is paid on June 1 for three months, the home is sold and the closing is August 25. How is this shown on the settlement statement? $161.69 credit to the seller, debit to the buyer $13.31 credit to the buyer, debit to the seller $161.69 credit to the buyer, debit to the seller $13.31 credit to the seller, debit to the buyer |
A: $13.31 credit to the seller, debit to the buyer $175 / 92 = $1.9022 X 7 = $13.31 credit seller debit buyer |
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When reconciling a 6 column worksheet for a closing - after totaling up the debits and credits, the closing agent needed to add a $30,000 Debit to the Seller Debit column to make it equal to the Seller Credit column. What does this Seller Debit represent? A $30,000 check the Seller must bring to the closing A $30,000 check the Seller will receive from this closing |
A: A $30,000 check the Seller will receive from this closing This DEBIT represents the Seller's proceeds from the sale (what they are getting). More info: This is a common spot of confusion, so do not let it break your head. The situation occurs at the bottom of the 6 column worksheet when you are reconciling the columns. Let’s assume for a moment you are looking at a Buyer’s columns. You have applied all the debits and credits and all you have to do is reconcile the columns which have $100,000 in the Credit column (money the buyer has proven they have) and $125,000 in the Debit column (what the Buyer owes). Looks like this Buyer is a little short, but by how much? To determine this amount, you have to make both columns equal. This enables the Closing Agent to determine how much the Buyer is short; which is also how much of a check the Buyer needs to bring and be deposited into the escrow account. So you add $25,000 to the Buyer’s Credit column to make both columns equal. Therefore this $25,000 CREDIT represents how much the Buyer is short, meaning this CREDIT does not represent how much they have, it represents how much they still OWE. This is how a CREDIT becomes something you OWE. We are not done reconciling yet. We have a $25,000 Credit, to balance it out we need a $25,000 Debit. That debit goes to the Broker account which represents the Escrow Account. Back to practical language – the Buyers needs to bring a $25,000 check to the closing so that they can make their Credit column (what they got) equal to the Debit column (what they owe) and the Broker (Closing Agent) needs to deposit it into the Escrow Account ($25,000 Debit). For extra points – the reverse is most common with the Seller. When a Sellers Debit column (what they owe) is lower than their Credit column (what they sold their property for), the amount added to the DEBIT column to make both columns equal represents money the Seller is receiving. The balancing CREDIT in the Broker column, reminds the Closing Agent to cut a check to the Seller out of the escrow account. |
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Loan discount points are a percentage of the: Purchase price Loan amount Loan origination fee Amount due from the buyer |
A: Loan amount One discount point equals one percent of the loan amount. Definition of 'Discount Points' Discount Points are a form of prepaid interest. A borrower buys a point and in return gets a lower interest rate on the loan. Each discount point generally costs 1% of the total loan amount and depending on the borrower, each point lowers your interest rate by one-eighth to one one-quarter of your interest rate. As the IRS considers discount points to be prepaid interest they are tax deductible in the year in which they were paid.For example, on a $300,000 loan, each point would cost $3,000. Assuming the interest rate on the mortgage is 5% and each point lowers the interest rate by 0.25%. Buying 2 points will cost $6,000 and will result in an interest rate of 4.50%.Both lenders and borrowers gain benefits from discount points. Borrowers gain the benefit of lowered interest payments down the road, but the benefit applies only if the borrower plans on holding onto the mortgage long enough to save money from the decreased interest payments. Lenders benefit by receiving cash upfront instead of waiting for money in the form of interest payments over time, which enhances the lenders liquidity situation.On a practical basis; discount points are most often purchased by sellers as an incentive to prospective buyers. For most sellers, discount points are a cost of selling and thus tax-deductible. Buyers usually do not see enough benefit to purchase discount points. In the earlier example; spending $6,000 to reduce the interest rate to 4.5%, would have reduced the monthly payment by about $90. It would have taken a buyer 67 months to cover the cost of the points. |
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A Flood Certificate is required for the purposes of: indemnifying the property owner in the event of loss due to flood verifying for the lender that the property does not lay in a flood zone verifying for the lender that the borrower has obtained flood insurance certifying the existence of proper drainage |
A: verifying for the lender that the property does not lay in a flood zone The flood certificate is not insurance; it is a report indicating whether of not the property is in a flood zone. |
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RESPA applies to Construction loans Installment land contracts Loans secured to refinance a current home First loans where the proceeds are used to purchase a primary residence |
A: First loans where the proceeds are used to purchase a primary residence RESPA applies to most new loans where the proceeds are used to purchase land and a dwelling. |
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A house is closed on October 15. The annual insurance payment is $578 for the fiscal year of July 1 to June 30. The buyers will assume the seller’s policy. Since the policy has been paid, how much does the buyer owe the seller at closing? 167.86 410.14 408.56 169.44 |
A: 410.14 $578 / 365 = $1.5836 per day. Seller paid for 259 days; he didn't own the policy (Oct. 15 through June 30) 259 x $1.5836 = $410.14 |
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A house is closed on May 15. HOA dues are $108 per month and are due and payable on the first day of each month. The HOA dues will appear on the closing statement as a: $49 debit to the seller $59 debit to the seller $59 credit to the seller $49 credit to seller |
A: $59 credit to the seller The seller paid the HOA dues on May first for the entire month. With a closing on May 15 ( remember the Buyer is responsible for the day of Closing), this means the Seller paid 17 days (May 15-31) too much. Since the Buyer is receiving the advantage of the overpaid HOA dues, the Buyer owes this money to the Seller. $108 / 31 days = $3.4839 per day. $3.4839 x 17 days = $59.23 to be credited to the seller and debited to the buyer. |
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Lender required addons (called endorsements) to the Title insurance endorsements appear on a closing statement as a: D ebit to the buyer Credit to the buyer Debit to the seller Credit to the seller |
A: Debit to the buyer Buyers pay for the extended policy (sometimes-called mortgagee policy or title insurance endorsements) naming the lender as beneficiary. On the 6 column worksheet this is shown as Debit Buyer and Credit Broker (so that the closer gets a check written to the title company for providing the insurance) More info:For more inquiring minds: This answer to this question refers to the 6 column worksheet which pre-personal computer days was used to calculate the numbers for a closing. The broker engages the title company to act as scrivener and conduct the closing which includes deposits and withdraws into and out of the closing escrow account. Although the escrow account used for closings is managed by the title company closer, legally the listing broker is still responsible for it. Therefore, on the 6 column settlement worksheet the columns pertaining to the closing escrow account are labeled "Broker Credit" and "Broker Debit." Deposits into the closing escrow account are placed into the Broker Debit Column and withdrawals are listed in the Broker Credit column. |
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Charges for a property survey typically appear on a closing statement as a: Debit to the buyer Credit to the buyer Debit to the seller Credit to the seller |
A: Debit to the buyer Buyers typically pay for a survey that is ordered as a requirement of a new loan. Debit Buyer and if the lender has not paid the surveyor (sometimes they pay the surveyor before the closing) you would also need to Credit Broker to get a check written to the surveyor by the closer. |
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A house is closed on July 16. The taxes of $546 for the current year have been paid, what is the prorated portion that the buyer owes the seller 251.31 252.81 293.19 294.69 |
A: 252.81 Divide the total taxes $546 by 365 (number of days in the year = $1.4959 per day time the number of days from July 16 through Dec 31 remember that the day of closing goes to the buyer, therefore times 169 = $252.81 |
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Commissions earned by a broker in a real estate sales transaction are determined by agreement of the broker and his or her principal. may be shared with an unlicensed person, provided that such person aided the broker in bringing the buyer and seller together. may be deducted from the earnest money deposit and claimed by the broker as soon as the buyer and seller execute the purchase and sales agreement. are based on a schedule of commission rates set by the real estate commission. |
A: are determined by agreement of the broker and his or her principal. Commissions are determined by agreement of the broker and his or her principal. |
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Interest on the loan assumed is shown as: debit to the buyer credit to the buyer credit to the broker credit to the seller |
A: credit to the buyer Credit to the buyer a debit to the seller. |
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When reconciling a 6 column worksheet for a closing - after totaling up the debits and credits, the closing agent needed to add a $30,000 Debit to the Seller Debit column to make it equal to the Seller Credit column. What does this Seller Debit represent? A $30,000 check the Seller must bring to the closing A $30,000 check the Seller will receive from this closing |
A: A $30,000 check the Seller will receive from this closing This DEBIT represents the Seller's proceeds from the sale (what they are getting). More info: This is a common spot of confusion, so do not let it break your head. The situation occurs at the bottom of the 6 column worksheet when you are reconciling the columns. Let’s assume for a moment you are looking at a Buyer’s columns. You have applied all the debits and credits and all you have to do is reconcile the columns which have $100,000 in the Credit column (money the buyer has proven they have) and $125,000 in the Debit column (what the Buyer owes). Looks like this Buyer is a little short, but by how much? To determine this amount, you have to make both columns equal. This enables the Closing Agent to determine how much the Buyer is short; which is also how much of a check the Buyer needs to bring and be deposited into the escrow account. So you add $25,000 to the Buyer’s Credit column to make both columns equal. Therefore this $25,000 CREDIT represents how much the Buyer is short, meaning this CREDIT does not represent how much they have, it represents how much they still OWE. This is how a CREDIT becomes something you OWE. We are not done reconciling yet. We have a $25,000 Credit, to balance it out we need a $25,000 Debit. That debit goes to the Broker account which represents the Escrow Account. Back to practical language – the Buyers needs to bring a $25,000 check to the closing so that they can make their Credit column (what they got) equal to the Debit column (what they owe) and the Broker (Closing Agent) needs to deposit it into the Escrow Account ($25,000 Debit). For extra points – the reverse is most common with the Seller. When a Sellers Debit column (what they owe) is lower than their Credit column (what they sold their property for), the amount added to the DEBIT column to make both columns equal represents money the Seller is receiving. The balancing CREDIT in the Broker column, reminds the Closing Agent to cut a check to the Seller out of the escrow account. |
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Title insurance protects the buyer against: All liens All liens of record All liens of record that are not listed in the schedule of exceptions Default by the seller on their existing loan |
A: All liens of record that are not listed in the schedule of exceptions Title insurance protects the buyer only against liens or defects of record that are not listed in the schedule of exceptions. |
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Closing is February 10 and taxes for the prior year were not paid for $1,854, this is shown on the settlement sheet as: $1,854 debit to the seller, credit to the $1,854 debit to the seller, credit to the buyer $152.38 debit to the seller, credit to the buyer $152.38 debit to the seller, credit to the broker |
A: $1,854 debit to the seller, credit to the broker Taxes for the prior year would be a debit to the seller and a credit to the broker. The previous years taxes are the seller's problem. Debit the seller for $1854. The broker receives the funds as a Credit. (remember - the "broker" is a proxy for the title company closing agent who controls the escrow account). The broker (closing agent) will then write a check from the escrow account and send it to the governement to pay the past due tax bill. |
