A property sells for $150,000. The existing mortgage balance is $30,000 and the seller's closing costs are $3,500. What should the seller net if the brokerage fee is 5.5%?

Rationale

The seller should get $40,000 after paying the brokerage fee and closing costs.

To determine what the seller receives from the sale, we first calculate the brokerage fee and then subtract the closing costs and the existing mortgage balance from the sale price. The calculations reveal that the seller's net proceeds amount to $40,000.

A ($108,250) CORRECT

This amount does not account for the correct calculations involving the sale price, mortgage balance, and closing costs. It is significantly lower than what the seller would receive after appropriate deductions, indicating a misunderstanding of how to calculate net proceeds from a property sale.

B ($109,900) YOUR ANSWER

Similarly, this figure fails to accurately reflect the deductions from the sale price. It overlooks the necessary calculations for both the brokerage fee and the existing mortgage balance, leading to an incorrect estimation of the seller's net proceeds.

C ($110,090) YOUR ANSWER

This is the correct answer. The total sale price is $150,000. The brokerage fee at 6.5% amounts to $9,750, and when we subtract the mortgage balance of $90,000 and the closing costs of $3,500 from the sale price, the seller retains $40,000.

D ($116,500) YOUR ANSWER

This option miscalculates the seller's net proceeds by not properly accounting for the brokerage fee and the existing mortgage balance. The seller's final amount is lower than this figure due to the necessary deductions that should be considered.

Conclusion

The calculation of net proceeds from the sale of a property involves deducting closing costs and the brokerage fee from the sale price, as well as accounting for any existing mortgage balances. In this case, after correct calculations, the seller is left with $40,000, confirming that option C is the accurate answer. Understanding these deductions is crucial for sellers to know their financial outcome in real estate transactions.

A property sells for $150,000. The existing mortgage balance is $30,000 and the seller's closing costs are $3,500. What should the seller net if the brokerage fee is 5.5%?

The seller should get $40,000 after paying the brokerage fee and closing costs.

Related Questions

Related Quizzes

How familiar were you with this question?

Report an Issue

Rate this Practice Test