A seller sold a property for $375,000, with the closing on July 1st, in a jurisdiction where the buyer pays for the day of closing. The seller had a…

The seller's net proceeds are calculated based on the credits and debits on the closing statement. The seller is credited the full purchase price of $375,000. The only debit mentioned that is part of the closing settlement is the seller's mortgage balance payoff of $301,000.

The other costs listed—$400 for utilities, $1,200 for appliances, and $700 for repairs—are expenses the seller incurred prior to closing. They are not prorated or handled as part of the settlement between the buyer and seller. The utility payment covered the period ending before the closing date, so no proration is required. Therefore, the calculation is simply the sale price minus the mortgage payoff: $375,000 - $301,000 = $74,000.

A. $71,700: This is incorrect because it subtracts the pre-closing expenses for utilities, appliances, and repairs, which are not part of the closing statement calculation.

B. $72,400: This is incorrect because it subtracts the pre-closing expenses for appliances and repairs, which are not debits on the settlement statement.

C. $73,600: This is incorrect because it subtracts the pre-closing utility payment. Since the payment period ended before closing, it is not a prorated item.

1. Ling, D. C., & Archer, W. R. (2018). Real Estate Principles: A Value Approach (6th ed.). McGraw-Hill Education.

Chapter 12, Section 12.2, "The Closing Statement." This chapter details the items that appear on a closing statement as debits and credits. It establishes that the sale price is a credit to the seller and the payoff of an existing mortgage is a debit. It also clarifies that personal expenses paid outside of closing are not included in the settlement.

2. New Jersey Administrative Code, Title 11, Chapter 5 (N.J.A.C. 11:5).

Section 11:5-7.2, "Closing statements." This regulation requires brokers to provide a detailed closing statement showing all financial aspects of the transaction. The items in this question that are part of the transaction (sale price, mortgage payoff) would be on this statement, while the seller's prior, independent expenses (repairs, appliances) would not.

3. Jacobus, C. J. (2022). Real Estate Principles (13th ed.). OnCourse Learning.

Chapter 12, "Closing the Real Estate Transaction." This chapter explains the concept of prorating expenses. For an item to be prorated, it must be a prepaid expense that covers a period of time for which the buyer will be in possession. The utility payment in the question covers the second quarter (ending June 30th), and closing is July 1st, so no proration is necessary.