Calculations and Closing Statements: Commissions, Prorations, Ratios, and Doc Stamps
Real Estate Calculations and Closing Statements tests commission and net-to-seller math, prorations, loan-to-value and qualifying ratios, Florida documentary stamp taxes, and settlement statement preparation.
Commissions and net to seller
Commission is usually a percentage of gross sale price. Net to seller equals sale price minus commission, payoff balances, closing costs, prorated debits, and other agreed charges, plus prorated credits. A net listing sets a seller's minimum and lets the broker keep the excess; it is risky and must be clearly disclosed.
Prorations
Florida taxes are paid in arrears, so the seller usually owes the buyer for the portion of the year before closing. Use a 365-day year unless the contract says otherwise; daily rate equals annual amount divided by 365. The closing day is typically charged to the buyer or seller according to contract custom, so state the assumption.
LTV and qualifying ratios
LTV equals loan amount divided by the lower of sale price or appraised value. Housing ratio equals housing expense divided by gross monthly income; total debt ratio adds recurring debt.
Documentary stamp taxes
Florida charges documentary stamp tax on deeds at $0.70 per $100 of consideration, rounded up to the next $100; Miami-Dade has an additional surtax. Promissory notes and mortgages are generally taxed at $0.35 per $100, with rounding rules. Transfer taxes are usually seller costs; loan-related taxes are buyer costs.
Settlement statements
The Closing Disclosure itemizes buyer and seller debits and credits. Verify prorations, payoffs, commissions, tax stamps, and escrow credits before balancing.
Worked example
Annual property taxes are $3,650. The seller owns January 1 through June 30, a total of 181 days (31+28+31+30+31+30). The daily rate is $3,650 / 365 = $10. The seller's debit is 181 x $10 = $1,810, credited to the buyer. If the closing date were July 1, the seller would not be charged for July 1 under the stated convention.
Traps
Using a 360-day year when the contract calls for actual days; forgetting to round doc stamps up to the next $100; double-counting the commission; and treating the buyer's escrow deposit as a seller credit without matching the contract.