Chapter 15 study guide: Real estate computations and closing
Closing math is easier when you first identify whose money you are calculating. Buyer cash to close, seller net proceeds, loan amount and taxable gain are different figures. Chapter 15 connects transaction costs with debits, credits and the allocation of expenses between buyer and seller.
Before using a calculator, mark the party, the amount being measured and the time period. Many wrong answers come from choosing the wrong starting figure rather than making an arithmetic mistake.
Commission calculations start with the agreement
For a percentage-based commission exercise, multiply the stated sale price by the agreed rate. An illustrative $400,000 sale at an agreed 4% produces $16,000. This is a hypothetical calculation, not a standard or recommended commission. Compensation and who pays it depend on the applicable agreements.
If the problem then gives a broker or associate split, apply it to the amount being split, not automatically to the home price. A 60% share of $8,000 is $4,800. Underline the wording when a question contains several percentages: a commission rate and an associate's share describe different steps.
Net proceeds are not the same as profit
A simplified seller calculation starts with sale proceeds and subtracts the mortgage payoff, agreed selling costs and other seller charges. Suppose the price is $400,000, the payoff is $250,000 and the stated selling costs total $24,000. Estimated cash to the seller is $126,000, before any additional adjustments.
That is not automatically the seller's taxable gain. A loan payoff reduces cash received but does not simply become the property's tax basis. Capital improvements, acquisition history and applicable tax rules raise a separate calculation. Keep a question about closing cash separate from one about tax treatment.
Read debits and credits from one side at a time
| Item | Buyer side | Seller side |
|---|---|---|
| Purchase price | Amount charged to buyer. | Sale proceeds credited to seller. |
| Buyer deposit already paid | Credit toward the buyer's amount due. | Handled through the transaction's settlement accounting. |
| Existing seller mortgage payoff | Not the buyer's new loan. | Charge reducing seller proceeds. |
| Seller credit for unpaid accrued taxes | Credit because buyer will pay the bill. | Charge for the seller's allocated share. |
Deposits are not added twice. If a buyer has already paid $5,000 toward a purchase, the settlement calculation credits that amount; it is not another $5,000 still required simply because it appears on the form.
Proration means allocating a period
First decide whether the item is income or an expense, and whether it has already been paid. Next identify the period, day-count method and which party is responsible for the closing day. Those assumptions come from the question or contract, not a rule that should be imposed on every transaction.
Prepaid-rent example: assume a 30-day month, rent of $1,800 collected by the seller and a contract allocating days 1 through 10 to the seller. Daily rent is $60. The remaining 20 days belong to the buyer, so $1,200 is allocated from seller to buyer: a seller debit and buyer credit.
Unpaid-tax example: assume an annual bill of $3,650, a 365-day method and exactly 100 days allocated to the seller. The seller's share is $10 x 100 = $1,000. If the buyer will pay the full bill later, that share is credited to the buyer and charged to the seller.
These are intentionally simple assumptions. Actual Florida tax prorations may use estimates and contractual readjustments. A 360-day method and a calendar-day method can produce different answers; never switch methods halfway through a problem.
Deed taxes and loan taxes use different bases
Florida documentary stamp tax on a deed generally uses consideration for the transfer, not merely the new mortgage amount. Outside Miami-Dade County, the stated rate is $0.70 per $100 or fraction of $100. Miami-Dade has a different rate and a surtax with an important single-family-dwelling exception. Check the Department of Revenue's current explanation.
For an ordinary taxable transfer outside Miami-Dade with $250,050 of consideration, round up to 2,501 taxable $100 units, then multiply by $0.70: $1,750.70. Rounding the consideration down would understate this example. Notes, mortgages and intangible tax involve separate rules; do not apply the deed calculation to every closing charge.
Use the Closing Disclosure to check the story
For covered mortgage transactions, compare the final loan terms and closing charges with the earlier Loan Estimate and the purchase agreement. The CFPB's Closing Disclosure explainer separates loan costs, prepaids, escrow deposits and cash to close. A total can be mathematically correct and still contain an incorrect allocation or an unexpected charge.
Check your understanding
Question: A buyer will pay the entire annual tax bill after closing. Which way does the seller's unpaid share move?
Answer: seller debit, buyer credit. The seller bears the allocated expense; the buyer receives credit because the buyer will pay that portion with the full bill.
Try Chapter 15 practice questions. Write the assumption and unit beside each calculation before selecting an answer.
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Based on Chapter 15 lessons reviewed October 8, 2026. Illustrative calculations are not a settlement statement, tax opinion or estimate for a particular purchase.