Closing and Real Estate Math
Closing is where title transfers and money moves. The closing statement lists buyer and seller debits and credits: debits are charges, credits are amounts received on a party's behalf.
Prorations
Taxes, rents, and interest are prorated to the closing date. Florida practice uses a 365-day year, and the seller is charged for the day of closing unless the contract says otherwise.
Florida transfer costs
- Documentary stamp tax on the deed: $0.70 per $100 of consideration (Miami-Dade differs, with a lower base rate plus a surtax).
- Intangible tax on the note: $0.35 per $100 of new mortgage debt.
- Owner's and lender's title insurance at promulgated rates, plus survey, recording, and closing agent or attorney fees.
Federal law requires the Closing Disclosure at least three business days before consummation. FIRPTA requires 15 percent withholding on sales by foreign persons; a 1031 exchange defers tax when a qualified intermediary holds the proceeds.
Traps
- Deed stamps are based on price, not loan amount.
- Points and prepaid interest are buyer charges tied to the loan.
- Proration direction is the classic error: the seller pays for the days the seller owned the property.
Worked example
Sale price $350,000 with a $280,000 new mortgage: deed tax = $350,000 divided by 100 times $0.70 = $2,450; intangible tax = $280,000 divided by 100 times $0.35 = $980. Commission at 6 percent = $21,000; split 60/40 between brokerages = $12,600 and $8,400.