Calculations topic guide
Seller net and buyer funds at closing
The arithmetic is usually straightforward. The harder part is deciding what each number already includes. A deposit is money paid already, a payoff is not merely the last principal balance, and a closing-cost subtotal may already reflect a credit. Write a separate buyer and seller ledger before calculating the final amount.
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The short answer
Seller closing cash is the amount due to the seller minus the amount due from the seller. Buyer cash to close is buyer obligations minus financing, applied deposits and other credits. Before calculating, check whether costs are gross, already reduced by a credit or already paid. Count each item once and label who must provide or receive the result.
Reviewed October 25, 2026. PSI National XI.A.1 and XI.A.2 cover seller net proceeds and buyer funds needed at closing. The whole Real Estate Calculations domain has 7 of 100 scored national questions, with no separate quota for this page. Examples use supplied amounts and allocations. Closing Disclosure references concern covered mortgage transactions, rather than every sale or loan type. This is an exam calculation guide, not loan-program approval or a complete settlement-compliance manual.
Build the ledger before doing the arithmetic
- Name the requested amount. Seller total net proceeds, the seller's remaining closing disbursement, buyer down payment and buyer cash to close are different results. If the problem asks for the final disbursement, account for proceeds already paid to that party.
- Write the buyer obligations and funding separately. Begin with the stated price, buyer costs and debit adjustments. Subtract available loan funds, the deposit actually remaining for closing and separate applicable credits. If a total already excludes a paid item or includes a credit, do not subtract that amount again.
- Build the seller ledger. Start with amounts due to the seller, including any buyer reimbursement. Subtract valid closing-date payoffs, seller-paid costs, credits and other seller debits. A deposit previously distributed to the seller reduces the amount still payable at closing; it is not another selling expense.
- Read financed fees and prepaid charges carefully. One reliable exam method adds all stated buyer obligations and subtracts the supplied financing and prior payments once. Do not credit the full loan and then deduct the same financed fee again. Keep the loan amount distinct from the Truth in Lending Amount Financed disclosure.
- Assign each proration before adding it. A seller obligation the buyer will pay later generally gives the buyer a credit and the seller a debit. Reimbursement for the buyer's benefit from a seller prepaid item goes the other way. Use the contract and question's period, allocation and day-count method.
- Reconcile the sign and the scope. A positive buyer result means funds from the buyer; a negative result means funds to the buyer on the stated ledger. For the seller, a positive result is payable to the seller and a negative result is a shortage. Arithmetic alone does not authorize a loan credit, refund or shortfall arrangement.
| Item or calculation | Effect on the worksheet | Check before using it |
|---|---|---|
| Buyer cash to close | Buyer obligations - funding and credits | Use consistent gross or net subtotals |
| Seller closing cash | Amounts due to seller - amounts due from seller | Include any proceeds already distributed |
| Down payment in a simple purchase | Price - stated purchase financing | Different from remaining closing cash |
| Earnest money applied at closing | Reduces remaining buyer funds | Count only the amount still available |
| Mortgage payoff | Reduces seller proceeds | Use the valid payoff for the specified date |
| General seller credit | Reduces buyer cash and seller proceeds | Do not also count the same item-specific payment |
| Lender credit | Reduces buyer costs | May already be included in the net cost total |
| Cost paid before closing | Reduces the amount still needed | Only if included in the starting obligation |
| Unpaid seller-period obligation | Buyer credit; seller debit | Use the stated allocation |
| Buyer reimbursement of seller prepayment | Buyer debit; seller credit | Do not reverse the benefit period |
| Negative seller cash | Amount needed from seller | Resolve the shortage under actual requirements |
The distinctions that matter
| Distinction | How it works | What to notice |
|---|---|---|
| Down payment vs. cash to close | In a simple purchase, down payment is the price less stated purchase financing. Cash to close also reflects costs, deposits, credits, prior payments and adjustments. It can be less than the total down payment. | A different calculation, not necessarily a larger number. |
| Earnest money vs. down payment | Earnest money is a contract deposit paid earlier. When applied, it reduces the buyer's remaining obligation. Do not reduce the price or count an amount already spent on a closing charge as still available in the deposit. | Funds already deposited versus total equity contribution. |
| Closing costs vs. cash to close | Closing costs are the loan and transaction cost subtotal, excluding down payment. Cash to close is the remaining amount due from or to the buyer after obligations, funding, prior payments and adjustments. | Cost subtotal versus final check or wire. |
| Seller credit vs. price reduction | A seller credit pays eligible buyer costs or obligations while the contract price stays stated. A price reduction changes the consideration and can change the loan calculation. | Offset costs versus lower price. |
| Seller credit vs. lender credit | The seller funds the first under the contract. The lender provides the second, commonly through a rate and cost tradeoff. | Seller concession versus creditor rebate. |
| Loan balance vs. payoff | A statement balance may show principal at a point in time. Payoff states the amount needed to satisfy the loan on a specified date, including adjustments. | Accounting balance versus settlement demand. |
| Seller net vs. seller equity | Equity is value minus secured debt. Seller net is sale proceeds after payoffs, costs, credits, and adjustments. | Ownership value versus cash disbursed at this closing. |
| Seller net vs. taxable gain | Seller closing cash is a settlement result. A home-sale gain calculation uses amount realized and adjusted basis, followed by applicable tax rules. Paying off a mortgage is not a substitute for that calculation. | Closing calculation versus tax calculation. |
| Buyer debit vs. buyer credit | A debit increases what the buyer must fund. A credit reduces the buyer's remaining settlement obligation. | Charge increases cash versus source reduces cash. |
Work through the facts
Calculate a seller's net
A property sells for $480,000. Seller charges are a 5% brokerage fee, a $286,400 mortgage payoff, a $7,500 buyer closing-cost credit, and $3,100 in title, legal, and other seller costs.
- Brokerage fee: $480,000 x 0.05 = $24,000.
- Total seller debits: $24,000 + $286,400 + $7,500 + $3,100 = $321,000.
Answer: Seller net is $480,000 - $321,000 = $159,000, before any additional prorations or changes.
Calculate buyer cash to close
A buyer purchases for $375,000 with a $300,000 loan. Buyer closing costs, prepaids, and escrow total $12,600. The buyer already deposited $7,500 and receives a $5,000 seller credit. The $12,600 is before that separate credit; no part was paid earlier and no other adjustment applies.
- Total buyer obligation is $375,000 + $12,600 = $387,600.
- Credits and funding are $300,000 + $7,500 + $5,000 = $312,500.
Answer: Buyer cash to close is $387,600 - $312,500 = $75,100.
Do not count earnest money twice
A $420,000 purchase uses an 80% loan. The buyer deposited $10,000 and has $14,000 in buyer-paid closing charges with no other credits. The deposit remains available, the loan does not include financed fees, and no cost was paid earlier.
- Loan: $420,000 x 0.80 = $336,000. Down payment: $84,000.
- Remaining down payment after deposit is $84,000 - $10,000 = $74,000, then add $14,000 costs.
Answer: Cash to close is $88,000. The deposit reduces the remaining down payment once; it does not reduce the $420,000 sale price.
A payoff is not yesterday's balance
The seller's statement shows $198,000 principal. The closing-date payoff is $199,180 because it includes accrued interest and fees. The exam asks for settlement net.
- The valid dated payoff, rather than the statement principal, is the stated amount needed to satisfy the debt. Recording the resulting lien release is a separate step.
- The stated payoff is the correct settlement debit.
Answer: Subtract $199,180 from seller proceeds. Using $198,000 would overstate the seller net by $1,180.
A cost was already paid
Price is $400,000, loan funds are $320,000 and the available deposit is $10,000. Total buyer costs are $10,000, including a $600 appraisal the buyer paid separately before closing. No other credit or adjustment applies.
- Unpaid costs are $10,000 - $600 = $9,400.
- Using all costs: $400,000 + $10,000 - $320,000 - $10,000 - $600 = $79,400.
- Using unpaid costs: $400,000 + $9,400 - $320,000 - $10,000 = $79,400.
Answer: The buyer brings $79,400. Starting with $9,400 and subtracting the $600 again would understate the funds needed.
The lender credit is already in the subtotal
Price is $400,000, loan funds are $320,000 and the deposit is $10,000. Gross buyer costs are $10,000. A $1,500 lender credit leaves net costs of $8,500. No other adjustment applies.
- Gross method: $400,000 + $10,000 - $320,000 - $10,000 - $1,500 = $78,500.
- Net method: $400,000 + $8,500 - $320,000 - $10,000 = $78,500.
Answer: The buyer brings $78,500. Do not deduct the lender credit again from the $8,500 net total.
A specific seller-paid fee is not a second general credit
Price is $400,000, loan funds are $320,000 and the deposit is $10,000. Of $10,000 in listed transaction charges, the seller pays a specific $2,000 title fee. The buyer-cost subtotal therefore contains only $8,000. There is no separate general seller credit.
- The buyer ledger uses $8,000 of buyer costs: $400,000 + $8,000 - $320,000 - $10,000 = $78,000.
- The seller's $2,000 payment is already excluded from that subtotal.
Answer: Buyer cash to close is $78,000. Subtracting another $2,000 would count the same seller payment twice.
Financed fees remain part of the loan and the obligations
Price is $400,000. The $325,000 loan funds include $5,000 allocated to financed fees and $320,000 toward the price. All buyer fees total $12,000, including the financed $5,000. The available deposit is $10,000; nothing else applies.
- Add the complete obligations: $400,000 + $12,000 = $412,000.
- Subtract the full financing and deposit once: $412,000 - $325,000 - $10,000 = $77,000.
- This example uses the complete-obligations method. It does not label the $80,000 price-funding gap as the formal Closing Disclosure Down Payment/Funds from Borrower amount.
Answer: The buyer brings $77,000. The financed $5,000 is already covered within the $325,000 loan credit; do not deduct it again.
Two adjustments point in opposite directions
Before prorations, buyer cash is $75,000 and seller cash is $160,000. The supplied allocation gives the buyer a $3,000 credit for an unpaid seller obligation. The buyer also reimburses the seller $600 for a prepaid item benefiting the buyer.
- Buyer: $75,000 - $3,000 + $600 = $72,600.
- Seller: $160,000 - $3,000 + $600 = $157,600.
Answer: The buyer brings $72,600 and the seller receives $157,600. These allocations are given facts, not a universal Illinois proration convention.
Seller costs exceed the proceeds
Sale price is $200,000, the required payoff is $205,000 and all other seller charges total $5,000. There are no other funds or adjustments.
- $200,000 - $205,000 - $5,000 = -$10,000.
- The negative seller result identifies a shortage rather than a payment to the seller.
Answer: The worksheet shows $10,000 needed from the seller. Closing still requires funds or another properly authorized resolution of the shortage.
An all-cash buyer has overfunded the closing
An all-cash purchase has a $200,000 price and $5,000 in buyer costs. A valid $210,000 buyer deposit is held and fully available for this settlement. No other item applies.
- $200,000 + $5,000 - $210,000 = -$5,000.
- The negative buyer result is payable to the buyer under the stated complete ledger.
Answer: The held overpayment is $5,000 to the buyer. This is not approval of unlimited mortgage-concession cash back.
Total net proceeds differ from the remaining disbursement
Price is $300,000 and all seller payoffs and selling charges total $30,000. A $20,000 deposit was already properly distributed to the seller and is part of the price, not extra consideration. Nothing else applies.
- Total net sale proceeds are $300,000 - $30,000 = $270,000.
- The seller already received $20,000, leaving $270,000 - $20,000 = $250,000 to be disbursed.
Answer: Total net proceeds are $270,000; the remaining closing disbursement is $250,000. The $20,000 is a prior receipt, not an additional selling expense.
Mistakes to avoid
- Earnest money reduces the contract sale price. It is a buyer credit toward the settlement obligation; the stated price remains unchanged.
- Down payment and cash to close always match. Cash to close also reflects costs, prepaids, escrow, deposits, credits, and adjustments.
- Closing costs include the down payment. The Closing Disclosure treats closing costs and down payment as separate cash-to-close components.
- A seller credit always lowers the sale price. A credit typically offsets permitted costs while the contract price remains the same.
- Lender credits have no tradeoff. They commonly offset upfront costs in exchange for a higher interest rate than another available structure.
- Subtract a specific seller-paid fee and the same general credit twice. Read whether the seller payment is item-specific or a separate lump-sum credit and count each economic amount once.
- Use the seller's original mortgage amount as the payoff. Use the closing-date payoff supplied by the lender or problem.
- A negative result should always be made positive. The sign tells whether money is due from or to the party and must be labeled.
- The broker can choose wire instructions from an email change without verification. Use a trusted contact and independently obtained number to verify payment instructions. Do not use the contact details supplied in a last-minute change message.
- Subtract lender credits from a cost subtotal that is already net of those credits. Choose either the gross-cost method with a separate credit or the net-cost method, and reconcile them.
- A deposit spent on a prepaid charge is still entirely available at closing. Credit the remaining deposit and the paid charge in their proper places; do not credit the same dollars twice.
- The seller's total net proceeds must equal the final check. A prior distribution or separately paid item can make total proceeds and the remaining closing disbursement different amounts.
- Amount Financed always means the loan funds to credit in the closing ledger. The Truth in Lending disclosure is a different calculation. Use the stated loan amount and actual funding treatment for this settlement problem.
Check your understanding
These are original teaching questions, not recalled or predicted PSI questions. Answer first, then explain why the other choices fail.
1. A home sells for $500,000. The seller pays 6% brokerage compensation, a $310,000 payoff, and $8,000 in other seller costs. What is the seller's net before prorations? No seller proceeds were distributed earlier.
- $462,000
- $190,000
- $162,000
- $152,000
Show answer and explanation
Answer: D. $152,000
Commission is $30,000. Net = $500,000 - $30,000 - $310,000 - $8,000 = $152,000.
2. A buyer owes a $450,000 price and $15,000 in costs. The loan is $360,000, the deposit is $12,000, and a seller credit is $6,000. What is buyer cash to close? The costs are before that credit, the full deposit remains available, and no cost was paid earlier.
- $87,000
- $72,000
- $81,000
- $105,000
Show answer and explanation
Answer: A. $87,000
$450,000 + $15,000 - $360,000 - $12,000 - $6,000 = $87,000.
3. Which statement about earnest money is correct when it is applied at closing?
- It is credited against the buyer's remaining settlement obligation
- It increases the seller's mortgage payoff
- It is always paid to the lender as interest
- It reduces the contract sale price
Show answer and explanation
Answer: A. It is credited against the buyer's remaining settlement obligation
The deposit is funds already paid by the buyer and therefore reduces the amount still needed at closing.
4. A seller's original loan was $280,000, the latest statement principal is $230,000, and the valid closing payoff is $231,425. Which amount is used as the settlement debit?
- $230,000
- $280,000
- $231,425
- $49,425
Show answer and explanation
Answer: C. $231,425
The closing payoff is the amount required to satisfy the debt on the settlement date.
5. Which calculation combines buyer obligations, costs, applied deposits, financing and adjustments to find the amount still due at settlement?
- Sale price only
- Cash to close
- Earnest money only
- Loan principal only
Show answer and explanation
Answer: B. Cash to close
Cash to close measures the final amount due from or to the buyer. It includes more components than a simple down payment but is not necessarily numerically larger.
6. Price is $400,000, loan funds $320,000 and available deposit $10,000. Costs total $10,000 including a $600 charge already paid separately. Nothing else applies. What remains due from the buyer?
- $89,400
- $78,800
- $79,400
- $80,000
Show answer and explanation
Answer: C. $79,400
Only $9,400 of costs remains unpaid. $400,000 + $9,400 - $320,000 - $10,000 = $79,400.
7. A worksheet already uses $8,500 net buyer costs after a $1,500 lender credit. What should happen to that same credit?
- Do not subtract it again from that net-cost setup
- Replace it with a seller credit
- Subtract it once more
- Add it back as a buyer debit without another change
Show answer and explanation
Answer: A. Do not subtract it again from that net-cost setup
The lender credit is already reflected in the net costs. Deducting it again understates cash needed by $1,500.
8. Price is $400,000, full loan funds $325,000 including a $5,000 financed fee, total buyer fees $12,000 including that fee, and available deposit $10,000. Nothing else applies. What is buyer cash?
- $77,000
- $82,000
- $72,000
- $87,000
Show answer and explanation
Answer: A. $77,000
$400,000 + $12,000 - $325,000 - $10,000 = $77,000. Do not subtract the financed fee again after crediting the full loan.
9. Which adjustment correctly reimburses the seller for a prepaid item benefiting the buyer?
- Buyer debit and seller credit
- A debit to both parties
- Buyer credit and seller debit
- A credit to both parties
Show answer and explanation
Answer: A. Buyer debit and seller credit
The buyer owes the reimbursement, increasing buyer cash and seller receipts. Apply the stated allocation rather than the opposite unpaid-seller-obligation pattern.
10. Price is $200,000, payoff $205,000 and other seller charges $5,000. No other item applies. Which answer is correct?
- $5,000 to the seller
- $10,000 needed from the seller
- $10,000 to the seller
- $205,000 needed from the buyer beyond price
Show answer and explanation
Answer: B. $10,000 needed from the seller
Seller cash is $200,000 - $205,000 - $5,000 = -$10,000. The negative result is a shortage to resolve, not proceeds.
11. Price is $300,000 and all seller charges total $30,000. Of the price, $20,000 was already distributed to the seller. What is the remaining seller disbursement with no other items?
- $230,000
- $250,000
- $270,000
- $290,000
Show answer and explanation
Answer: B. $250,000
Total net proceeds are $270,000. Subtract the prior $20,000 receipt to get the remaining $250,000; it is not a second expense.
12. A valid $210,000 buyer deposit is fully available for an all-cash $200,000 purchase with $5,000 buyer costs and no other item. What does the complete ledger show?
- $5,000 from the buyer
- $210,000 of taxable gain
- $15,000 to the seller beyond price
- $5,000 to the buyer
Show answer and explanation
Answer: D. $5,000 to the buyer
Obligations are $205,000 and funding already held is $210,000, leaving a $5,000 overpayment to return under the supplied facts. No mortgage cash-back permission is assumed.
Common questions
How do you calculate seller net proceeds?
For a simple question, start with price, add amounts due to the seller and subtract seller payoffs, costs, credits and debit adjustments. For the final closing cash, also account for amounts already distributed and items paid outside closing. A prior seller receipt changes the remaining disbursement without becoming a second selling expense.
How do you calculate buyer cash to close?
Add the stated price, buyer costs and buyer debit adjustments. Subtract loan funds, the deposit remaining for closing and other applicable credits or payments. First check whether the cost subtotal already excludes prepaid or seller-paid items or includes a lender credit. On a covered Closing Disclosure, reconcile the Calculating Cash to Close and transaction-summary tables.
Is cash to close always more than the down payment?
No. Costs can increase it, while deposits and applicable credits can reduce the amount still needed. In a simple purchase without financed fees or other complications, down payment is price less purchase financing. Do not confuse that amount with the final cash requirement or treat a required borrower-investment rule as a general cash-to-close formula.
Does earnest money reduce the purchase price?
No. An applied deposit reduces the buyer's remaining obligation. It does not change the contract price. If part of a deposit has already paid a closing charge, that part is no longer also available as a deposit credit. A prior distribution to the seller must also be reflected in the seller's remaining closing cash. For example, a $10,000 deposit with $600 already used for a listed charge leaves $9,400 in deposit credit and a $600 paid-before-closing charge; it does not supply $10,600 of funding.
Do seller credits count as the buyer's down payment?
Do not assume so. A permitted seller contribution may offset specified costs or obligations without changing price. Contribution limits, required borrower investment and permitted uses depend on the transaction and financing rules. This page supplies arithmetic for stated allowed credits, not loan eligibility approval.
How is a specific seller-paid fee different from a general seller credit?
A general seller credit is a separate amount in the transaction summary. A specific seller-paid charge appears in the seller-paid cost column. If that charge is already excluded from the buyer-cost subtotal, do not subtract it again as a general credit. Count the seller's actual economic payment once.
What is a lender credit?
It offsets eligible closing costs and commonly accompanies a higher rate than a comparable option without that credit. The borrower-paid Total Closing Costs on the Closing Disclosure incorporates general lender credits. Check whether the question gives gross costs or that net amount before subtracting a separate credit.
What if the buyer paid an appraisal before closing?
If the starting cost total includes it, remove the amount already paid when finding the remaining funds. If the starting subtotal already contains only unpaid costs, do not deduct it again. Keep a payment made separately distinct from one taken out of the earnest-money deposit.
How do financed closing fees affect the calculation?
Use one consistent ledger. Add the supplied obligations, including the fees, and subtract the supplied loan funding once. If the full loan already includes a financed fee, do not subtract that fee again as though it were another funding source. Formal disclosure calculations can differ from a simplified price-only down-payment shortcut.
Is Amount Financed the same as the note amount?
No. The Truth in Lending Amount Financed disclosure reflects a separate net-credit calculation after relevant upfront finance charges. It is not automatically the loan-amount credit to insert into a purchase settlement ledger. Use the question's actual loan funding and cost treatment.
Why use the payoff instead of the latest mortgage balance?
The payoff is dated and includes the amount required to satisfy the debt, including applicable accrued interest and other amounts. The statement principal may not include them. Use the supplied valid payoff; debt payment and recording a lien release remain separate events.
Which way do prorations affect buyer and seller cash?
For an unpaid seller-period obligation that the buyer will pay later, credit the buyer and debit the seller. If the buyer reimburses a seller prepayment for the buyer's benefit, debit the buyer and credit the seller. The actual contract, period and allocation control; there is no universal day-count or tax-percentage assumption supplied by this page.
Are seller proceeds the same as equity or taxable gain?
No. Equity compares property value and secured debt. Closing cash reflects this sale's receipts, payments and adjustments. A home-sale gain calculation instead starts with amount realized less adjusted basis, followed by applicable tax treatment. The mortgage payoff is not a substitute for adjusted basis or a complete tax calculation.
What does negative seller cash mean?
It identifies an amount needed from the seller on the supplied ledger. The parties must resolve the shortage through available funds or another properly authorized arrangement. Do not reverse the sign and report it as proceeds, or assume a creditor will accept less than the required payoff.
What does negative buyer cash to close mean?
It indicates money due to the buyer on that ledger. For example, a complete all-cash transaction can return an overfunded deposit. This does not mean every loan permits cash back from unused concessions, nor that the arithmetic by itself authorizes a refund.
Does every sale use a Loan Estimate and Closing Disclosure?
No. Those forms concern covered mortgage transactions. An all-cash sale still needs its settlement accounting but does not become a covered mortgage merely because the parties calculate cash to close. This guide does not determine every disclosure exemption or replace applicable form instructions.
Can a correct cash amount make emailed wire instructions safe?
No. Verify payment instructions through a trusted contact using a number obtained independently, rather than a number or link supplied in a last-minute change message. Correct arithmetic does not establish that the receiving account is legitimate.
Are these actual PSI questions or a passing prediction?
No. These are original teaching questions supporting the June 24, 2026 public outline. Explain the party, subtotal, funding and sign before revealing an answer. A practice result is not a validated prediction of passing the licensing exam.
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Official sources and scope
Checked October 25, 2026 against the identified CFPB provisions and explanations, the PSI outline and the current IRS-linked 2025 Publication 523 gain formula. Sources support the stated calculations and distinctions, not approval of a particular closing, loan contribution, refund or tax result. All amounts, rates and scenarios are teaching examples; brokerage fees are supplied terms, not required rates.
- PSI June 24, 2026: National XI.A.1 seller net and XI.A.2 buyer funds
- CFPB Closing Disclosure explainer
- CFPB Loan Estimate explainer
- 12 CFR 1026.38: closing costs and buyer/seller ledgers
- CFPB: payoff amount versus current mortgage balance
- IRS Publication 523 (2025): figuring home-sale gain or loss
- CFPB: mortgage closing scam precautions
This is exam preparation, not advice for a specific transaction. State law and the applicable facts control. Our editorial and corrections process explains how to report an issue.