Modern Real Estate Practice in Illinois Ninth Edition

Closing Problems

Answer the following questions based on the information provided concerning the closing of a real estate transaction.

Closing Problem 1

Purchase price / $25,000 cash
Earnest money / $1,000
Commission rate / 7%
Revenue stamps / $25 charged to seller
Real estate taxes / $350 paid in full for the current year
Title insurance policy / $153.51 purchased by seller
Recording fee / $2 charged to buyer
Escrow fee / $168
Existing mortgage loan balance / $9,450 including credit for the reserve account
Closing date / July 31
  • Prorate using a 30-day month and a 360-day year.
  • Prorate the taxes as of the close of escrow.
  • Split the escrow fee 50-50 between the parties.

1.What amount is the buyer debited for the real estate taxes?

a.$145.83

b.$146.71

c.$202.19

d.$203.30

2.What amount is the seller debited for the broker’s commission?

a.$750

b.$1,650

c.$1,750

d.$2,500

3.What amount of the escrow fee will the buyer pay?

a.$56

b.$84

c.$160

d.$168

4.What is the total amount the buyer is required to deposit?

a.$24,231.84

b.$24,395.44

c.$24,416.84

d.$25,236.15

5.What are the seller’s proceeds from the sale?

a.$13,493.64

b.$13,683.33

c.$22,830.59

d.$22,889.64

Closing Problem 2

Purchase price / $78,000 cash
Earnest money / $1,000
Commission rate / 7% split 50-50 between the two brokers
Appraisal fee / $125 charged to buyer
Existing mortgage loan balance / $13,576.82
Title insurance policy / $550 purchased by seller
Closing fee / $450
Recording fee / $25 charged to buyer
Termite and wood infestation report / $200 required by buyer’s lender
Real estate taxes / $950 paid in full through December 31
Closing date / August 31
  • Prorate using the actual number of days in the month and the year.
  • Split the escrow fees 50-50 between parties.

1.What is the total real estate commission on this transaction?

a.$2,730

b.$4,650

c.$5,460

d.$6,540

2.What is the balance due from the purchaser at the closing?

a.$76,942.53

b.$77,692.57

c.$79,666.66

d.$80,517.34

3.The seller’s net proceeds from the sale are

a.$57,332.18.

b.$57,555.71.

c.$58,305.75.

d.$60,757.18.

4.The amount of real estate taxes chargeable to the purchaser total is

a.$237.50.

b.$316.67.

c.$632.47.

d.$950.00.

Closing Problem 3

Purchase price / $350,000
Earnest money / $3,500
Commission rate / 6% split 50-50 between the listing and buyer brokers
Real estate taxes / $2,900 paid in full for the current year
Escrow fee / $800
Title insurance policy / $1,150
Fire and extended coverage insurance policy / $758 annual premium
Revenue stamps / $126.30
Recording fee / $30
Closing date / October 15
  • Prorate using the actual number of days in the month and the year.
  • Split the escrow fee 50-50 between the parties.

1.What are the prorated real estate taxes to be charged to the buyer?

a.$288.96

b.$611.78

c.$690.67

d.$728.30

2.What will be the amount of commission paid to the cooperating broker?

a.$8,750

b.$10,500

c.$17,500

d.$21,000

3.What amount will the seller receive at the closing?

a.$325,035.48

b.$339,126.53

c.$342,776.13

d.$351,113.92

4.How much will the purchaser need to complete this transaction?

a.$345,399.78

b.$358,799.77

c.$363,611.52

d.$363,981.43

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