Read the following scenario and answer the questions:

The house at 314 Baker Street sells on January 28 for $435,000. The offer that the seller accepts is accompanied by a $10,000 good faith deposit.The purchase agreement calls for the buyer to make a 10% down payment and obtain an 80%, 30-year conventional loan with an annual interest rate not to exceed 6%. The seller agrees to accept a five-year straight note secured by a deed of trust for the balance of the purchase price; the interest rate on this seller second will be 8%.The seller will also pay up to $4,000 toward any discount points charged by the buyer's lender. The closing is to take place on March 14.

The buyer obtains the necessary loan commitment from Clearwater Bank. The appraised value of the property is $436,500. The terms of the commitment include an 80% loan for 30 years at 6% annual interest, a 1% origination fee, and two discount points. (Remember that the seller has agreed to pay for a portion of the discount points.) The appraisal fee is $400, the credit report costs $45, and the bank is charging a $200 document preparation fee. Prepaid interest on the buyer's loan will also have to be paid at closing, to cover interest accruing from the closing date through the end of the month.

At closing, Clearwater Bank will require a reserve account deposit of $742.20, which is enough to cover three months' worth of property taxes and homeowner's insurance. The first payment on the Clearwater loan will be due on May 1.The buyer is purchasing a three-year homeowner's insurance policy for $990, with the first year's premium ($330) to be prepaid at closing; that will be handled through escrow. This year's property taxes are $2,640 and the seller has not yet paid them. The buyer will be responsible for property taxes on the day of closing.

Liens against the property that the seller will pay off at closing include a first deed of trust that will have a balance of $300,423.62 after the March 1 payment is made, and a home equity loan that will have a balance of $12,553.27 after the March 1 payment is made. The first lienholder instructs the escrow officer to collect prorated interest, if any, equal to $48.21 per day. The home equity lender advises the escrow officer that $3.14 in interest per day will be due on the home improvement loan. Interest on both loans will be charged up to and including the day of closing. The balance in the seller's reserve account for the first loan, $251.50, will be refunded at closing.

The 6% brokerage commission is to be shared 50/50 between the listing broker and the selling broker, and the transfer tax is 55 cents per $500 of value. The premium for the owner's title insurance policy (which the seller is paying) is $1,080; the premium for the lender's title policy (which the buyer is paying) is $365. The pest inspection fee is $230, and the buyer has agreed to pay that; and the escrow fee, to be divided evenly between the parties, is $600. The buyer's recording costs will be $35; the seller's recording costs will be $19.

Highlight or Circle the correct answer.

1 The buyer's loan amount is:

a. $435,000

b. $348,000

c. $436,500

2. The origination fee is 1% of the loan.What is the fee amount?

a. $435

b. $3,480

c. $4,365

3. Calculating the interest for the buyer's loan is based on the following:

a. 17 days (March 14 - 30)

b. 3 months (January - March)

c. Neither

4. Property Taxes - Seller's Share is based on the following calculation:

a. $2,640 taxes/52 weeks = $50.77 per week x 3 months

b. $2,640 taxes/360 days = $7.33 per diem x 73 days = $535.09

c. $2,640 x 360 days = $950,400

5. Sales commission is calculated as follows:

a. $348,000 x .06 = $20,880/2 = $10,440 for each broker

b. $435,000 x .06 = 26,100/2 = $13,050 for each broker

c. $436,500 x .06 = $26,190 for each broker

6. Escrow fee will be paid as follows:

a. Buyer and Seller pay their fair share - $600.00 each

b. Buyer and Seller split the fee equally - $300 each

c. Buyer pays all the fee - $600

d. Seller pays all the fee - $600

7. The appraisal fee is to be paid by:

a. The Seller

b. The Buyer

c. The Closing Agent

d. The Lender

8. The Owner's title insurance is paid as follows:

a. The Buyer pays $1,080 because they are purchasing the home.

b. The Buyer and Seller split the cost of $1,080.

c. The Seller pays the Owner's Title Insurance fee of $1,080.

d. None of the above.

9. The pest inspection fee benefits the ____________ and is paid by the ______________.

a. Buyer; Buyer

b. Seller; Buyer

c. Buyer; Seller

10. The buyer's recording costs will be $_______; the seller's recording costs will be $________.

a. $35.00; $0

b. $35.00; $35.00

c. $35.00; $19.00