- Official section
- National XI.A-B: Seller Net, Buyer Funds, and Prorations
- Broker weight
- A core setup skill across the closing calculations in the national outline
- Expected scored items
- The current PSI broker outline tests seller net, buyer funds, tax and other prorations, and transfer fees
Closing ledger guide
Buyer cash and seller net from separate ledgers
A debit or credit makes sense only after you name the party. A buyer credit reduces buyer cash needed; a seller credit increases seller proceeds. Build two columns, post each fact once, and resist the urge to force every third-party payment into an equal opposite entry for the other party. Keep the economic source attached to every credit. A deposit paid earlier, borrowed loan proceeds, a seller concession, and a lender credit can all reduce current buyer cash, but they are not interchangeable.
Last updated: August 1, 2026
What calculation do you need to make?
Short answer: For the buyer, debits increase the amount due and credits or funding sources reduce remaining cash needed. For the seller, credits increase proceeds and debits reduce net. Purchase price is commonly a buyer debit and seller credit. Applied earnest money and loan proceeds are buyer credits or sources. The seller's mortgage payoff, brokerage compensation, seller-paid costs, seller credits to the buyer, and seller proration obligations are seller debits. A general seller concession is commonly a seller debit and buyer credit. Accrued unpaid seller-period tax commonly follows that same direction when buyer pays later. A buyer reimbursement for a seller-prepaid item can be a buyer debit and seller credit. Not every entry mirrors between buyer and seller because lenders, lienholders, brokers, governments, and service providers can be the counterparty. Calculate buyer cash and seller net separately, count each economic item once, and reconcile only the paired items that truly transfer value between the parties.
This guide uses simplified debit-credit language for exam setup. Actual covered mortgage transactions use the prescribed Closing Disclosure, and separate buyer-only and seller-only forms may be used. A generalized seller credit can appear in the transaction summary, while a seller payment for one specific loan or other cost can appear in that item's seller-paid column. Contracts, payoff demands, invoices, escrow instructions, title records, tax estimates, local charges, rent rolls, deposit records, and governing law determine actual entries. A word such as credit can describe different economic sources, and accounting terminology outside closing may follow a different framework. This is exam preparation, not settlement, accounting, lending, tax, title, property-management, or legal advice. Sources were checked through August 1, 2026.
How do you classify real estate debits and credits?
- Name the party first and create separate buyer and seller columns before classifying any item, with a brief written reason beside uncertain entries.
- Write the transaction event, recipient, payer, timing, and whether the amount was paid already, remains due, or is held.
- Post buyer charges as debits and valid buyer funding or allowances as credits or sources.
- Post amounts due to seller as credits and seller charges, payoffs, and obligations as debits.
- For a buyer-seller proration or concession, verify whether equal opposite entries belong on both sides.
- For lender, lienholder, government, broker, or service-provider items, avoid inventing a mirror entry for the other party.
- Add each party's columns separately, calculate buyer cash and seller net, and preserve negative shortfalls.
- Reconcile paired entries, identify any third-party counterparty clearly, and confirm every economic item appears once.
- Item
- Purchase price
- Buyer side
- Debit
- Seller side
- Credit
- Item
- Applied earnest money
- Buyer side
- Credit/source
- Seller side
- No automatic debit
- Item
- New buyer loan
- Buyer side
- Credit/source
- Seller side
- No automatic debit
- Item
- Seller mortgage payoff
- Buyer side
- No ordinary entry
- Seller side
- Debit
- Item
- Seller-paid commission
- Buyer side
- No ordinary entry
- Seller side
- Debit
- Item
- General seller credit
- Buyer side
- Credit
- Seller side
- Debit
- Item
- Accrued seller tax paid later by buyer
- Buyer side
- Credit
- Seller side
- Debit
- Item
- Buyer reimburses seller prepaid item
- Buyer side
- Debit
- Seller side
- Credit
- Item
- Buyer recording fee
- Buyer side
- Debit
- Seller side
- No ordinary entry
- Item
- Lender credit
- Buyer side
- Credit
- Seller side
- No seller debit
Can you follow the calculation from facts to answer?
Build a buyer ledger
Scenario: Purchase price is $360,000, buyer costs are $9,000, loan proceeds are $288,000, applied earnest money is $8,000, and seller credit is $4,000. What buyer cash remains?
- Buyer debits or uses are $360,000 + $9,000 = $369,000.
- Buyer credits and sources are $288,000 + $8,000 + $4,000 = $300,000.
- $369,000 - $300,000 = $69,000.
Answer: The simplified buyer funds needed are $69,000.
Build a seller ledger
Scenario: Sale price is $360,000, payoff is $205,000, commission is $18,000, other seller costs are $7,000, and seller gives a $4,000 buyer credit.
- Seller credit is the $360,000 sale price.
- Seller debits total $205,000 + $18,000 + $7,000 + $4,000 = $234,000.
- $360,000 - $234,000 = $126,000.
Answer: Estimated seller net is $126,000.
Post an accrued tax proration
Scenario: The calculated seller-period unpaid property-tax share is $3,250, and buyer will later pay the bill. What entries apply?
- The seller incurred the tax share during ownership.
- The buyer will bear the later payment and therefore receives a credit.
- The equal opposite transaction entry is a seller debit.
Answer: Debit seller and credit buyer $3,250.
Post a prepaid-item reimbursement
Scenario: Seller prepaid an association charge, and $900 of the paid benefit belongs to buyer's ownership period. The problem requires reimbursement.
- Seller already paid for the buyer-period benefit.
- Buyer owes the reimbursement, so buyer is debited.
- Seller receives the matching credit.
Answer: Debit buyer and credit seller $900.
Avoid mirroring a seller payoff
Scenario: Seller's mortgage payoff is $180,000. How does it appear in an ordinary simplified purchase ledger?
- The payoff is disbursed from seller proceeds to the seller's lienholder.
- It reduces seller net as a seller debit.
- It is not a buyer credit merely because the buyer receives title free of that released lien.
Answer: Post a $180,000 seller debit and no ordinary buyer-side mirror.
Count one seller contribution once
Scenario: The Closing Disclosure detail states seller pays a $1,500 buyer title cost. No additional general seller credit exists. What is the economic seller contribution?
- The seller-paid column already assigns the $1,500 specific cost to seller.
- The buyer does not pay that item, so buyer cash is lower by the specific allocation.
- Do not add a second $1,500 general credit.
Answer: The stated seller contribution is $1,500, counted once.
Which math errors cost the most points?
- Trap
- Classify debit or credit without naming a party.
- Correction
- The same transaction can be a debit to one party and credit to another.
- Trap
- Call every buyer credit free money.
- Correction
- Loan proceeds are debt and earnest money was paid earlier.
- Trap
- Charge applied earnest money again at closing.
- Correction
- Credit the properly applied deposit against the remaining buyer amount due.
- Trap
- Post the seller payoff as a buyer credit.
- Correction
- It is ordinarily a seller debit paid to a lienholder.
- Trap
- Deduct a brokerage split in addition to total commission.
- Correction
- An internal allocation does not create another party charge unless separately stated.
- Trap
- Count a specific seller-paid fee and general credit twice.
- Correction
- Post one economic contribution once unless two distinct obligations exist.
- Trap
- Credit seller for accrued unpaid seller-period tax.
- Correction
- When buyer pays later, debit seller and credit buyer.
- Trap
- Debit seller for a buyer reimbursement of seller's prepaid item.
- Correction
- Buyer is debited and seller credited for the reimbursed buyer-period benefit.
- Trap
- Treat rent and security deposit as identical credits.
- Correction
- Earned income and held tenant funds have different obligations.
- Trap
- Force every entry to mirror between buyer and seller.
- Correction
- Identify outside lenders, lienholders, governments, brokers, and service providers.
- Trap
- Combine buyer and seller columns into one net number.
- Correction
- Calculate buyer cash and seller proceeds independently.
- Trap
- Treat a classroom grid as the final Closing Disclosure.
- Correction
- Use current prescribed forms, documents, and settlement instructions for an actual closing.
Can you solve these original problems?
These questions are original study items aligned to the published outline. They are not copied, recalled, or predicted PSI questions.
1. How is applied earnest money normally treated in a simplified buyer funds calculation?
- Buyer credit
- Buyer debit
- Seller debit
- Seller payoff
Show answer and explanation
Answer: Buyer credit
The deposit was paid earlier and reduces the buyer's remaining amount due when applied.
2. How is the seller's mortgage payoff normally treated?
- Seller debit
- Seller credit
- Buyer credit
- Buyer debit
Show answer and explanation
Answer: Seller debit
The payoff reduces the seller's proceeds and is paid to the lienholder.
3. Seller gives buyer a $5,000 general closing-cost credit. What paired entries apply?
- Seller debit and buyer credit
- Seller credit and buyer debit
- Debit both
- Credit both
Show answer and explanation
Answer: Seller debit and buyer credit
The concession reduces seller net and buyer funds needed.
4. Buyer reimburses seller $800 for a seller-prepaid item benefiting buyer after closing. What entries apply?
- Buyer debit and seller credit
- Buyer credit and seller debit
- Debit both
- No entry
Show answer and explanation
Answer: Buyer debit and seller credit
The buyer owes the reimbursement and the seller receives it.
5. Which item normally has no equal opposite entry on the other transaction party's side?
- Seller mortgage payoff to a lienholder
- General seller credit to buyer
- Accrued seller tax credit to buyer
- Buyer reimbursement of seller prepaid item
Show answer and explanation
Answer: Seller mortgage payoff to a lienholder
The lienholder is the counterparty, not the buyer.
Which numbers and formulas are easy to confuse?
- Terms
- Buyer debit vs. buyer credit
- Difference
- A buyer debit increases buyer uses. A buyer credit or source reduces remaining buyer cash needed.
- Question cue
- More cash due versus less cash due.
- Terms
- Seller debit vs. seller credit
- Difference
- A seller debit reduces seller net. A seller credit increases proceeds due to seller.
- Question cue
- Less seller cash versus more seller cash.
- Terms
- Earnest money vs. new cash
- Difference
- Earnest money was paid earlier and credited when applied. New cash is the remaining amount delivered at closing.
- Question cue
- Paid already versus paid now.
- Terms
- Loan proceeds vs. down payment
- Difference
- Loan proceeds are borrowed buyer funding. Down payment is the purchase portion not financed under the stated setup.
- Question cue
- Debt source versus buyer investment.
- Terms
- Seller payoff vs. buyer loan
- Difference
- Seller payoff satisfies existing seller debt. Buyer loan creates new buyer financing.
- Question cue
- Old lien release versus new debt.
- Terms
- General seller credit vs. specific seller-paid fee
- Difference
- A general credit offsets buyer costs broadly. A specific payment is assigned to one listed cost.
- Question cue
- Lump sum versus itemized payment.
- Terms
- Accrued vs. prepaid proration
- Difference
- Accrued is owed for a used period but unpaid. Prepaid is paid for a period extending beyond ownership.
- Question cue
- Payment later versus reimbursement now.
- Terms
- Rent vs. security deposit
- Difference
- Rent is occupancy income. Security deposit is held subject to lease and statutory obligations.
- Question cue
- Earned payment versus held tenant funds.
- Terms
- Paired proration vs. third-party charge
- Difference
- A paired proration moves value between buyer and seller. A third-party charge pays an outside recipient.
- Question cue
- Mirror entry versus outside disbursement.
- Terms
- Classroom ledger vs. Closing Disclosure
- Difference
- A classroom grid teaches direction. The federal form follows prescribed categories, labels, columns, and transaction summaries.
- Question cue
- Study shorthand versus regulated document.
What does the outline expect you to calculate?
- Topic
- Party-first classification
- What to know
- Buyer, seller, borrower, creditor, lienholder, broker, government, service provider, debit, credit, and transaction side
- Best exam move
- Write buyer or seller before deciding whether an item is a debit or credit.
- Topic
- Buyer debit
- What to know
- Purchase price, buyer closing cost, prepaid item, initial escrow, recording fee, proration reimbursement, assessment, and cash needed
- Best exam move
- Add buyer debits to the buyer's total uses of money.
- Topic
- Buyer credit
- What to know
- Earnest money, loan proceeds, seller credit, lender credit, tax proration credit, deposit, rebate, funding source, and cash reduction
- Best exam move
- Subtract valid buyer credits and sources from buyer uses once.
- Topic
- Seller credit
- What to know
- Sale price, buyer reimbursement, prepaid item, rent reimbursement, amount due to seller, assumed obligation, and proceeds
- Best exam move
- Add amounts genuinely due to the seller before subtracting seller debits.
- Topic
- Seller debit
- What to know
- Mortgage payoff, lien payoff, brokerage compensation, title charge, transfer fee, attorney cost, seller credit, repair, proration, and net reduction
- Best exam move
- Subtract seller charges and obligations once from seller proceeds.
- Topic
- Purchase price entry
- What to know
- Due from buyer, due to seller, contract price, personal property allocation, adjustment, buyer debit, seller credit, and gross amount
- Best exam move
- Post price on both party ledgers in the conventional simplified setup.
- Topic
- Earnest money
- What to know
- Deposit, paid already, escrow, applied at closing, buyer credit, forfeiture, refund, dispute, and contract condition
- Best exam move
- Credit only the amount actually applied for the buyer under the stated facts.
- Topic
- Loan proceeds
- What to know
- New mortgage, borrowed funds, buyer source, principal, lender, cash to close, debt, financing, and no seller debit
- Best exam move
- Use the loan as buyer funding without treating it as buyer income or seller charge.
- Topic
- Seller mortgage payoff
- What to know
- First mortgage, second mortgage, HELOC, lienholder, accrued interest, payoff demand, release, seller debit, and proceeds
- Best exam move
- Subtract the stated payoff from seller net and keep it off the buyer ledger unless special facts say otherwise.
- Topic
- Brokerage compensation
- What to know
- Negotiated fee, seller-paid, buyer-paid, firm, cooperating allocation, total charge, internal split, debit, and agreement
- Best exam move
- Post the fee to the party charged and do not duplicate internal brokerage allocations.
- Topic
- General seller credit
- What to know
- Concession, closing-cost credit, allowance, buyer credit, seller debit, contract cap, lender rule, and double counting
- Best exam move
- Post equal opposite entries when the stated credit transfers value directly between seller and buyer.
- Topic
- Specific seller-paid cost
- What to know
- Seller-paid column, buyer fee, inspection, warranty, title item, loan cost, general credit distinction, and once-only charge
- Best exam move
- Do not add the same specific payment again as a general seller credit.
- Topic
- Accrued tax proration
- What to know
- Unpaid seller period, buyer later pays, seller debit, buyer credit, annual tax, daily rate, closing day, and estimate
- Best exam move
- Calculate the responsible share before posting the paired entry.
- Topic
- Prepaid-item proration
- What to know
- Seller paid in advance, buyer benefit, buyer debit, seller credit, rent, insurance, association fee, service, and period
- Best exam move
- Reimburse the party who paid for the other party's period when directed.
- Topic
- Rent and security deposits
- What to know
- Rent collected, earned period, unearned rent, tenant security deposit, held funds, liability, transfer, buyer credit, seller debit, and lease
- Best exam move
- Separate earned rent proration from transfer of held tenant funds and obligations.
- Topic
- Third-party entries
- What to know
- Lender credit, recording fee, tax stamp, title fee, attorney, appraiser, insurer, lienholder, no mirror, and disbursement
- Best exam move
- Do not invent an opposite buyer-seller entry when the counterparty is outside the pair.
- Topic
- Buyer cash calculation
- What to know
- Buyer debits, loan, deposit, credits, down payment, closing costs, prepaid items, cash to close, negative result, and funding
- Best exam move
- Add buyer uses and subtract buyer sources and credits.
- Topic
- Seller-net calculation
- What to know
- Seller credits, seller debits, sale proceeds, payoff, commission, costs, credit, proration, net, and shortfall
- Best exam move
- Subtract seller debits from seller credits and preserve a negative shortfall.
How should you drill this calculation?
- Session
- Session 1
- Focus
- Name the party and direction
- Proof you are ready
- Classify 50 buyer and seller items as debit, credit, source, or no entry with a one-sentence reason.
- Session
- Session 2
- Focus
- Build buyer ledgers
- Proof you are ready
- Solve 20 buyer cash-to-close worksheets with price, costs, deposits, loans, and credits separated.
- Session
- Session 3
- Focus
- Build seller ledgers
- Proof you are ready
- Solve 20 seller-net worksheets with payoffs, compensation, costs, concessions, and prorations.
- Session
- Session 4
- Focus
- Post paired adjustments
- Proof you are ready
- Post 30 accrued, prepaid, seller-credit, and reimbursement items on both ledgers.
- Session
- Session 5
- Focus
- Identify third-party entries
- Proof you are ready
- Classify 30 loan, payoff, title, tax, broker, government, and service-provider entries without inventing mirrors.
- Session
- Session 6
- Focus
- Complete a mixed ledger set
- Proof you are ready
- Score at least 90% and justify every party, direction, timing, counterparty, duplicate check, cash result, and net result.
Do not count recognition as mastery. Close the notes and explain the rule, apply it to a new fact pattern, and identify why each distractor fails.
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Questions students ask about Real Estate Debits and Credits at Closing
What is a debit in a real estate closing?
A debit is an amount charged to a party in the transaction ledger. A buyer debit generally increases buyer funds needed, while a seller debit generally reduces seller net. The label tells direction on that party's side, not whether the item is good or bad in every context.
What is a credit in a real estate closing?
A credit is an amount received, allowed, or already paid on a party's side of the ledger. A buyer credit generally reduces cash needed at closing. A seller credit generally increases the amount due to the seller before seller debits are subtracted.
Is purchase price a debit or credit?
In a simplified two-party transaction summary, purchase price is due from the buyer and due to the seller, so it is a buyer debit and seller credit. Actual federal disclosures use prescribed transaction-summary labels rather than a classroom debit-credit grid alone.
Is earnest money a buyer debit or credit?
Earnest money already paid and properly applied is a buyer credit because it reduces the remaining buyer funds due. It is not a second payment at closing and is not automatically a seller debit. Its handling depends on the contract and settlement facts.
Are loan proceeds a buyer credit?
In a simplified buyer cash-to-close calculation, loan proceeds are a buyer funding source or credit that reduces cash the buyer must provide. They are new debt, not income, free money, a seller debit, or a reduction of the purchase price.
Is a seller mortgage payoff a buyer credit?
No in the ordinary simplified purchase ledger. The payoff is a seller debit because it is paid from seller proceeds to satisfy the seller's lien. It normally has no buyer-side entry unless the facts describe assumption, subject-to treatment, or another specific arrangement.
How is a seller credit posted?
A general seller credit to the buyer is a seller debit and buyer credit. A seller-paid specific buyer fee may appear in the seller-paid column for that cost rather than as a second general credit. Count the same economic contribution once.
What is the entry for accrued unpaid property tax?
When the seller owes the buyer for the seller's accrued period and the buyer will later pay the tax bill, debit seller and credit buyer for the calculated share. Confirm the tax period, estimate, proration method, and closing-day allocation first.
Does every debit have an equal credit to the other party?
No. A two-party proration or seller concession often has equal opposite buyer-seller entries. A buyer loan, seller mortgage payoff, third-party service fee, brokerage charge, recording fee, or lender credit can involve an outside party and need not mirror on the other transaction party's side.
Are these official Illinois broker exam questions?
No. They are original scenarios aligned to the PSI Illinois broker outline effective June 24, 2026. Current federal Closing Disclosure requirements, current Illinois property-tax guidance, and current Illinois security-deposit law were checked through August 1, 2026.
Primary sources
- PSI Illinois Candidate Information Booklet dated June 24, 2026
- Consumer Financial Protection Bureau, current Closing Disclosure explainer
- 12 CFR 1026.38, current Closing Disclosure transaction-summary requirements
- Consumer Financial Protection Bureau, current guide to federal mortgage disclosure forms
- Illinois Department of Revenue, current seller property-tax responsibility at closing
- 765 ILCS 710, current Illinois Security Deposit Return Act
The current official outline controls the tested scope. Statutes, regulations, and official agency materials control when a general study rule and a jurisdiction-specific rule differ.
Editorial status
Checked against primary sources
The Pass Illinois editorial team last checked this guide on August 1, 2026. Every practice question is an original study item, and the source links above let you verify the rules that support the lesson.