Computations and closing of transactions is 6% of the exam, and closing-statement questions borrow from the math section too. They look like bookkeeping, but nearly every one comes down to one question asked of each item: does it pass between buyer and seller, or between one of them and someone else? Answer that and the statement builds itself. An orientation, not legal or tax advice. Leer en español.
A debit is a charge: money that party owes at closing. A credit is money in that party's favor. Then:
| Item | Buyer | Seller |
|---|---|---|
| Sale price | Debit | Credit |
| Earnest money deposit | Credit | — |
| New loan from a lender | Credit | — |
| Existing mortgage the buyer assumes | Credit | Debit |
| Purchase-money mortgage (seller financing) | Credit | Debit |
| Seller’s loan paid off at closing | — | Debit |
| Property taxes unpaid (Florida’s usual case) | Credit | Debit |
| An expense the seller prepaid, such as HOA dues | Debit | Credit |
| Unused part of rent the seller collected in advance | Credit | Debit |
| Tenants’ security deposits | Credit | Debit |
| Brokerage commission | — | Debit |
| Documentary stamps on the deed | — | Debit |
| Stamps on the note, intangible tax on the mortgage | Debit | — |
| Lender’s title policy, loan fees, recording the mortgage | Debit | — |
Three rows catch most people. The deposit is a buyer credit only: the seller is credited the full price, and the deposit is already part of it. An assumed or seller-financed mortgage is the one loan that shows on both sides, because the seller takes it in place of cash. And unpaid taxes are a seller debit because Florida taxes are paid in arrears: the bill for the whole year comes out in November and the buyer pays it, including the months the seller owned the home. Who pays the owner's title policy varies by county and contract, so a question will tell you.
A home outside Miami-Dade sells for $300,000, closing June 30. The buyer put down a $15,000 deposit and is borrowing $240,000. The seller owes $150,000 on their loan and pays a 6% commission. This year's taxes of $3,650 are unpaid. Use a 365-day year, with the seller responsible for the day of closing.
| Item | Debit | Credit |
|---|---|---|
| Sale price | $300,000 | |
| Deposit | $15,000 | |
| New loan | $240,000 | |
| Unpaid taxes (proration) | $1,810 | |
| Note stamps | $840 | |
| Intangible tax | $480 | |
| Totals | $301,320 | $256,810 |
Cash due from the buyer = debits − credits = $301,320 − $256,810 = $44,510.
| Item | Debit | Credit |
|---|---|---|
| Sale price | $300,000 | |
| Loan payoff | $150,000 | |
| Commission | $18,000 | |
| Deed stamps | $2,100 | |
| Unpaid taxes (proration) | $1,810 | |
| Totals | $171,910 | $300,000 |
Cash to the seller = credits − debits = $300,000 − $171,910 = $128,090.
For most residential loans, federal TRID rules replaced the old HUD-1 with the Loan Estimate, due within 3 business days of the loan application, and the Closing Disclosure, which the borrower must receive at least 3 business days before closing. A cash sale with no lender has no Closing Disclosure; the closing agent uses a settlement statement instead. The debit and credit logic is the same on every form.
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