A seller in Brookings, South Dakota accepts an offer of $280,000 for her home. The buyer obtains an 80% loan-to-value conventional mortgage. The seller pays a 6% brokerage commission and no real estate transfer tax applies in South Dakota. The seller also pays $1,400 in prorated property taxes and $800 in title insurance. What are the seller's total closing costs (excluding mortgage payoff)?
Correct Answer
D) $19,000
Step 1 — Calculate the brokerage commission: $280,000 × 6% = $16,800. Step 2 — Add prorated property taxes: $1,400. Step 3 — Add title insurance: $800. Step 4 — Total closing costs: $16,800 + $1,400 + $800 = $19,000. No real estate transfer tax is added because South Dakota imposes no transfer tax on real property sales. The buyer's loan amount ($280,000 × 80% = $224,000) is irrelevant to the seller's closing costs.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Closing costs are the fees and expenses paid by the buyer and seller at the closing of a real estate transaction, beyond the purchase price. They typically range from 2-5% of the purchase price.
A conventional loan is a mortgage that is not insured or guaranteed by a government agency such as the FHA, VA, or USDA. It is originated and funded by private lenders and may be conforming or non-conforming.
The debt-to-income ratio (DTI) compares a borrower's monthly debt obligations to their gross monthly income. It is used by lenders to determine how much mortgage a borrower can afford.
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