A seller’s net sheet breaks down all of the debits and credits based on the accepted purchase price for the property. Let’s take a look at the credits first (the easy part).
The first thing on the seller’s net sheet is the selling price or the agreed purchase price. In this example I will use $400,000.00 as the selling price. This is the first line item for the credit column.
The second item on the seller’s net sheet is the prorated taxes. In Michigan we pay our taxes in advance. The summer tax covers from July 1st of this year to June 30th of next year. The winter tax covers from December 1st of this year to November 30th of next year. Buyers that are closing in August are paying the seller for 11 months of summer taxes and 4 months of winter taxes. Here’s another example if you are closing in May. The buyer will pay the seller for 1 month of summer taxes and 6 months of winter taxes.
The third item that could be on there is prorated association dues.
Any amounts that were paid by the seller for annual dues or monthly dues will be pro-rated back to the seller. As a result, this turns into a charge to the buyer.
The fourth item that might come up is prorated trash collection fees. The seller is entitled to the prorated amount in municipalities where trash collection is a monthly charge.
That is really it for the credit side! Pretty simple, huh?
This is where things can get a little complicated. You can not avoid this if you just take your time and follow the math.
Mortgage Pay-offs are first lien position amounts owed that are registered with the county. They are due on the sale of the property.
Any assessments from the city, county or state will be paid out of the proceeds of the sale.
Title Insurance Policy
The seller must pay for an insurance policy from the title company. This is to insure the title is clean when delivered to the buyer.
Real Estate Transfer Tax
In Michigan, the seller is responsible to pay the real estate transfer tax unless otherwise agreed between both parties. This tax has two parts. 1) State transfer tax of $3.75 for every $500 of value transferred and 2) County tax of $0.55 for every $500 of value transferred.
Discharge of Mortgage
If you have a current mortgage on your home, when you sell it, there will be a discharge fee recorded with the county. The cost typically falls around $36.00.
The listing broker charges this fee to cover administrative costs associated with the sale of your home. This fee is separate from any commissions.
If the seller has agreed to provide a home warranty to the buyer, then there will be a line item debit for that cost. This can range from $300 to $1,000 depending on the type of warranty and coverage.
The seller is paying the entire commission amount. The listing brokerage pays a specified amount to the selling brokerage out of the amount collected by the listing brokerage. So if the listing broke charged 7% to list the house and advertised a %3 commission to a potential buyer’s broker/agent, then the listing broker would collect the remaining 4% as their fee for marketing the home for sale. Commissions are completely negotiable!
These are previously agreed upon amounts the seller is willing to pay towards the buyer’s closing costs and pro-rations. In general, on conventional loans this amount cannot exceed 6% of the purchase price. In some cases it is an amount “up to”. If all of the costs are covered within the agreed upon amount, the remainder comes back to the seller, .
Pest Inspection fees, City Certification fees, Delinquent taxes, etc are all types of debits to the seller.
As a result, when we look at all of the credits and debits, we can estimate (based on the offer price) how much the seller will put NET in their pockets.
I always like to show my sellers several price scenarios.
A) This helps them understand if their list price makes sense or not.
B) This helps them negotiate with better information (knowing their bottom-line).
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