On June 15, Jane and Jerry Jones (“Sellers”) listed their Flagstaff home for $39
ID: 2654668 • Letter: O
Question
On June 15, Jane and Jerry Jones (“Sellers”) listed their Flagstaff home for $399,500 with Re/Max Peak Properties and agreed to pay a 6% commission on the sale price. They have a mortgage for $361,000 remaining on the home.
Sam and Sue Smith (“Buyers”) offered 3% less than the listed price. The offer was accepted by Jane and Jerry. At that time, the Buyers put down $1,000 of earnest money.
The Buyers will put 20% down and finance the rest through EverBank. The sale will close on July 1st at which time the Buyers will take possession. EverBank requires a loan origination fee of 1% of the value of the loan along with a property appraisal which will cost $400 and a credit report at a cost of $25.
Taxes for the current year were $1,500 and were paid in full by the Sellers.
The Buyers’ title insurance policy will cost $800, and the Sellers’ title insurance policy will be $1,690.
Homeowner’s insurance will cost the Buyers $350.
Recording the deed will cost $50 (equally split between the Buyers and Sellers).
Endorsements of $150 would be paid by the Buyers.
Courier fees will be $25 for the Buyers and $25 for the Sellers.
All pro-rations are based on a 30-day month.
Calculate the costs to the Buyer and the Seller as a percentage of the purchase/sales price.
Explanation / Answer
Listed Price = $399,500
Actual Sale Price of the Home = 97% of Listed Price = 97% * $399,500 = $387,515
Costs to the Seller:
i. 6% commission on the sale price = 6% * $387,515 = $23,250.90
ii. Taxes paid by the seller (prorated for July 1 to December 31) = $1500/2 = $750
iii. Sellers’ title insurance policy = $1,690
iv. Seller's share for the cost of recording the deed = $50/2 = $25
v. Courier Fees = $25
Total Costs to the Seller = $23,250.90 + $750 + $1,690 + $25 + $25 = $25,740.9
Total Costs to the Seller as a percentage of sales price = (Total Cost / Actual Sales Price) * 100
Total Costs to the Seller as a percentage of sales price = ( $25,740.9 / $387,515 ) * 100
Total Costs to the Seller as a percentage of sales price = 6.64%
Costs to the Buyer:
i. Loan origination fee = 1% * Value of Loan = 1% * ( 80% * Actual Sales Price) = 1% * ( 80% * $387,515 ) = $3100.12
ii. Property Appraisal Cost = $400
iii. Credit report cost = $25
iv. Buyers’ title insurance policy = $800
iii. Homeowner’s insurance = $350
iv. Buyer's share for the cost of recording the deed = $50/2 = $25
v. Endorsements cost = $150
v. Courier Fees = $25
Total Costs to the Buyer = $3100.12 + $400 + $25 + $800 + $350 + $25 + $150 + $25 = $4,875.12
Total Costs to the Buyer as a percentage of sales price = (Total Cost / Actual Sales Price) * 100
Total Costs to the Seller as a percentage of sales price = ( $4,875.12 / $387,515 ) * 100
Total Costs to the Seller as a percentage of sales price = 1.26%
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