HW 4 – Fall 2019

Baker Street Settlement Statement

Using Excel (no handwritten forms) fill out the settlement statement form for the transaction
described below. The various closing costs will be allocated between the parties in the
customary way unless otherwise noted. Use a 360-day year and 30-day month for your
prorations. Round dollar amounts to four decimal places for each step in your calculations.
(Digits from 1 through 4 should be rounded down; digits from 5 through 9 should be rounded
up.) DO NOT change anything else in the worksheet. DO NOT fiil in any white cells. The gray
cells require formulas, and the yellow cells require numbers provided in the case.

The house at 314 Baker Street, in Los Angeles County, sells on January 28 for $575,000. 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 6½%.

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 $580,000. The terms of the commitment include an 80% loan for 30 years
at 6½% 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. The seller has paid the first installment, but not the second.

Liens against the property that the seller will pay off at closing include a first deed of trust that
will have a balance of $398,571.47 after the March 1 payment is made, and a home equity
loan that will have a balance of $13,425.35 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; the documentary transfer tax is 55 cents per $500 of value; the premium for
the owner’s title insurance policy is $1,080; the premium for the lender’s title policy 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.

Hint: first calculate how the purchase price of $575,000 will be paid. There is a 1 st mortgage, a
2nd mortgage and a down payment, of which the good faith deposit is a portion.