- Official section
- National XI.B: Seller Net and Buyer Funds at Closing
- Broker weight
- 7% of the national broker portion
- Expected scored items
- Real Estate Math accounts for about 7 of 100 items
Calculations topic guide
Seller net and buyer funds at closing
Closing math is bookkeeping with direction. Every line is due from someone, paid by someone, or credited to someone. Label the party first, then decide whether the line increases or decreases that party's cash.
Last updated: August 1, 2026
What calculation do you need to make?
Short answer: Seller net equals amounts due to the seller minus the seller's payoffs, costs, credits, and other debits, plus any reimbursements. Buyer cash to close equals amounts due from the buyer plus buyer costs and debits, minus loan proceeds, deposits, seller or lender credits, and other buyer credits. Keep price, down payment, closing costs, and cash to close separate.
The national outline effective June 24, 2026 tests seller net and buyer funds needed at closing. Exam questions often simplify the settlement statement, while actual transactions use the Loan Estimate and Closing Disclosure rules. Follow the numbers and allocation stated in the problem, and never assume who pays a negotiable item when the question does not say.
The LEDGER method for closing calculations
- Label the party. Mark each amount buyer, seller, lender, or third party before deciding its effect.
- Enter starting obligations. Put sale price and buyer charges in the buyer column, and sale price or other proceeds in the seller column.
- Deduct funding and credits. Credit buyer financing, deposits, seller credits, lender credits, and other verified sources exactly once.
- Group seller reductions. Add payoffs, liens, brokerage compensation, transfer charges, title, attorney, repair, assessment, credit, and other seller debits.
- Evaluate adjustments. Determine the ownership period, who paid, who benefited, day-count method, and debit-credit direction before calculating.
- Reconcile subtotals. Confirm that price, down payment, costs, prepaids, escrow, financing, and credits were not omitted or double counted.
- Read the sign and direction. State cash from buyer, cash to buyer, cash to seller, or cash from seller, then compare with the settlement statement.
- Calculation
- Seller net
- Starting formula
- Sale price - seller debits
- Common adjustment
- + buyer reimbursements to seller
- Calculation
- Buyer down payment
- Starting formula
- Price - acquisition financing
- Common adjustment
- Check secondary financing
- Calculation
- Buyer cash to close
- Starting formula
- Buyer charges - financing - credits
- Common adjustment
- Subtract deposits paid already
- Calculation
- Commission
- Starting formula
- Sale price x commission rate
- Common adjustment
- Use stated compensation base
- Calculation
- One payoff
- Starting formula
- Supplied payoff amount
- Common adjustment
- Do not substitute original loan
- Calculation
- Seller credit
- Starting formula
- Subtract from seller and buyer obligation
- Common adjustment
- Do not double count specific paid fee
- Calculation
- Lender credit
- Starting formula
- Subtract from buyer costs
- Common adjustment
- Rate may be higher
- Calculation
- Negative seller net
- Starting formula
- Seller debits exceed proceeds
- Common adjustment
- Seller brings shortage funds
Can you follow the calculation from facts to answer?
Calculate a seller's net
Scenario: 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
Scenario: 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.
- 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
Scenario: 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.
- 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
Scenario: 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 principal balance is not the amount needed to satisfy and release the lien on the closing date.
- 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.
Which math errors cost the most points?
- Trap
- Earnest money reduces the contract sale price.
- Correction
- It is a buyer credit toward the settlement obligation; the stated price remains unchanged.
- Trap
- Down payment and cash to close always match.
- Correction
- Cash to close also reflects costs, prepaids, escrow, deposits, credits, and adjustments.
- Trap
- Closing costs include the down payment.
- Correction
- The Closing Disclosure treats closing costs and down payment as separate cash-to-close components.
- Trap
- A seller credit always lowers the sale price.
- Correction
- A credit typically offsets permitted costs while the contract price remains the same.
- Trap
- Lender credits have no tradeoff.
- Correction
- They commonly offset upfront costs in exchange for a higher interest rate than another available structure.
- Trap
- Subtract a specific seller-paid fee and the same general credit twice.
- Correction
- Read whether the seller payment is item-specific or a separate lump-sum credit and count each economic amount once.
- Trap
- Use the seller's original mortgage amount as the payoff.
- Correction
- Use the closing-date payoff supplied by the lender or problem.
- Trap
- Seller equity and seller net are identical.
- Correction
- Seller net subtracts transaction costs, credits, and adjustments in addition to secured debt.
- Trap
- A negative result should always be made positive.
- Correction
- The sign tells whether money is due from or to the party and must be labeled.
- Trap
- The broker can choose wire instructions from an email change without verification.
- Correction
- Closing funds require secure, independently verified instructions because settlement wire fraud is a major risk.
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. 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?
- $152,000
- $162,000
- $190,000
- $462,000
Show answer and explanation
Answer: A
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?
- $72,000
- $81,000
- $87,000
- $105,000
Show answer and explanation
Answer: C
$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 reduces the contract sale price
- It is credited against the buyer's remaining settlement obligation
- It is always paid to the lender as interest
- It increases the seller's mortgage payoff
Show answer and explanation
Answer: B
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?
- $280,000
- $230,000
- $231,425
- $49,425
Show answer and explanation
Answer: C
The closing payoff is the amount required to satisfy the debt on the settlement date.
5. Which amount is broader than the buyer's down payment?
- Cash to close
- Sale price only
- Loan principal only
- Earnest money only
Show answer and explanation
Answer: A
Cash to close combines the remaining down payment with costs and adjustments, net of deposits and credits.
Which numbers and formulas are easy to confuse?
- Terms
- Down payment vs. cash to close
- Difference
- Down payment is the price portion not financed. Cash to close incorporates down payment, costs, prepaids, deposits, credits, and adjustments.
- Question cue
- Equity contribution versus final settlement funds.
- Terms
- Earnest money vs. down payment
- Difference
- Earnest money is a contract deposit paid before closing. Down payment is the total unfinanced price portion, toward which the deposit may be credited.
- Question cue
- Funds already deposited versus total equity contribution.
- Terms
- Closing costs vs. cash to close
- Difference
- Closing costs are transaction and loan charges, excluding the down payment. Cash to close is the net amount the buyer must provide after all components and credits.
- Question cue
- Cost subtotal versus final check or wire.
- Terms
- Seller credit vs. price reduction
- Difference
- 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.
- Question cue
- Offset costs versus lower price.
- Terms
- Seller credit vs. lender credit
- Difference
- The seller funds the first under the contract. The lender provides the second, commonly through a rate and cost tradeoff.
- Question cue
- Seller concession versus creditor rebate.
- Terms
- Loan balance vs. payoff
- Difference
- 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.
- Question cue
- Accounting balance versus settlement demand.
- Terms
- Seller net vs. seller equity
- Difference
- Equity is value minus secured debt. Seller net is sale proceeds after payoffs, costs, credits, and adjustments.
- Question cue
- Ownership value versus cash disbursed at this closing.
- Terms
- Seller net vs. taxable gain
- Difference
- Seller net is settlement cash. Taxable gain uses adjusted basis, amount realized, exclusions, depreciation, and tax rules.
- Question cue
- Closing calculation versus tax calculation.
- Terms
- Buyer debit vs. buyer credit
- Difference
- A debit increases what the buyer must fund. A credit reduces the buyer's remaining settlement obligation.
- Question cue
- Charge increases cash versus source reduces cash.
What does the outline expect you to calculate?
- Topic
- Settlement accounting language
- What to know
- Buyer, seller, settlement agent, due from, due to, debit, credit, charge, payment, disbursement, adjustment, proration, reimbursement, deposit, loan proceeds, payoff, closing costs, cash to close, cash from seller, and balance
- Best exam move
- Write B or S beside every item and mark plus or minus before doing arithmetic.
- Topic
- Sale price and buyer obligation
- What to know
- Contract price, personal property, assumed loan, purchase-money note, additional deposit, option fee, rent credit, construction allowance, unpaid assessment, buyer charge, seller-paid item, price amendment, and final consideration
- Best exam move
- Begin the buyer column with total consideration due, then credit the financing and funds already provided.
- Topic
- Down-payment calculation
- What to know
- Purchase price, base value, down-payment percentage, primary loan, secondary loan, required investment, gift, grant, financed fee, LTV, CLTV, earnest money, cash portion, and lender rule
- Best exam move
- Down payment = price - acquisition financing when the problem uses a simple purchase structure.
- Topic
- Earnest-money deposit
- What to know
- Initial deposit, additional deposit, escrow holder, cleared funds, contract credit, refund, forfeiture, dispute, transfer to closing, buyer-paid-before-closing, source documentation, and double counting
- Best exam move
- Credit the deposit once against the buyer's obligation; do not subtract it from price and then subtract it again from cash to close.
- Topic
- Buyer closing costs
- What to know
- Origination charge, points, appraisal, credit report, lender service, title search, lender title policy, owner title policy, settlement, recording, transfer charge, inspection, survey, attorney, prepaid interest, homeowner insurance, property tax, initial escrow, association fee, and other
- Best exam move
- Add only the buyer-paid costs stated in the question and keep prepaids or escrow separate when the item asks for a subtotal.
- Topic
- Seller credits and seller-paid costs
- What to know
- General closing-cost credit, repair credit, builder allowance, specific seller-paid fee, commission concession, loan-program cap, interested-party contribution, contract amendment, Closing Disclosure seller-paid column, price reduction, and unused credit
- Best exam move
- Subtract the seller credit from buyer cash and from seller net only when it is actually charged to the seller; avoid counting a specific paid fee again as a general credit.
- Topic
- Lender and third-party credits
- What to know
- Lender credit, rate tradeoff, tolerance cure, premium pricing, rebate, employer contribution, housing grant, assistance loan, family gift, principal reduction, cost offset, eligibility, source, and final disclosure
- Best exam move
- Identify who provides the credit and whether it offsets cost, funds down payment, or creates subordinate financing.
- Topic
- Seller mortgage and lien payoffs
- What to know
- First mortgage, second mortgage, HELOC, judgment lien, tax lien, association lien, payoff statement, unpaid principal, daily interest, late charge, advance, release fee, prepayment charge, escrow credit, short payoff, and validity date
- Best exam move
- Use the closing-date payoff amount and subtract it from seller proceeds once.
- Topic
- Seller costs
- What to know
- Brokerage compensation, listing side, cooperating side, title charge, transfer tax, attorney fee, recording release, survey, inspection, repair invoice, home warranty, association document, move-out escrow, tax proration, special assessment, seller credit, and other contract charge
- Best exam move
- Group percentage-based costs, fixed costs, payoffs, and prorations separately to reduce missed lines.
- Topic
- Adjustments and prorations
- What to know
- Property tax, rent, security deposit, association dues, fuel, water, prepaid seller item, unpaid seller item, day of closing, 360-day year, 365-day year, calendar days, statutory or local method, buyer credit, seller debit, buyer debit, and seller credit
- Best exam move
- First decide who owes whom for the period, then calculate the time and amount using the method stated.
- Topic
- Seller net worksheet
- What to know
- Sale price, seller credits, buyer reimbursement, assumed debt, commission, payoff, lien, transfer charge, title cost, attorney, repair, tax proration, assessment, miscellaneous debit, preliminary net sheet, updated payoff, and final cash from or to seller
- Best exam move
- Use sale price + seller credits - seller debits = seller cash, with a clear sign for funds due to or from the seller.
- Topic
- Buyer cash-to-close worksheet
- What to know
- Purchase price, buyer costs, prepaids, initial escrow, adjustments, down payment, loan amount, secondary financing, deposit, seller credit, lender credit, gift, grant, prior payment, financed costs, fund source, cashier's check, wire, verification, and final cash
- Best exam move
- Use total buyer charges - financing - deposits - credits = cash to close, then reconcile with the final disclosure.
How should you drill this calculation?
- Session
- 1. Learn debit and credit direction
- Focus
- Buyer debit, buyer credit, seller debit, seller credit, due from, due to, cash from buyer, cash to seller, and negative balance
- Proof you are ready
- Classify forty settlement lines without doing arithmetic.
- Session
- 2. Build buyer cash worksheets
- Focus
- Price, loan, secondary financing, deposit, down payment, closing costs, prepaids, escrow, seller credit, lender credit, grant, and adjustment
- Proof you are ready
- Solve fifteen buyer-funds problems at 90% accuracy.
- Session
- 3. Build seller net worksheets
- Focus
- Price, commission, payoff, lien, seller credit, title, transfer charge, attorney, repair, assessment, tax proration, reimbursement, and net
- Proof you are ready
- Solve fifteen seller-net problems at 90% accuracy.
- Session
- 4. Separate look-alike amounts
- Focus
- Price, down payment, earnest money, closing costs, cash to close, statement balance, payoff, equity, seller net, gain, seller credit, and lender credit
- Proof you are ready
- Explain twelve distinctions without notes.
- Session
- 5. Reconcile a settlement
- Focus
- Summaries of transactions, calculating cash to close, seller-paid items, deposits, loan proceeds, payoffs, adjustments, double counting, sign, and direction
- Proof you are ready
- Find ten planted errors in sample worksheets.
- Session
- 6. Apply LEDGER
- Focus
- Party, obligation, funding, credit, seller reduction, proration, subtotal, reconciliation, sign, and final answer
- Proof you are ready
- Score at least 90% on fresh closing-math scenarios.
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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From concept to decision
Drill this topic, then review the explanation
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Questions students ask about Seller Net and Buyer Funds at Closing
How do you calculate a seller's net proceeds?
Begin with the sale price and other amounts due to the seller. Subtract the seller's mortgage and lien payoffs, brokerage compensation, seller-paid closing costs, seller credits, transfer charges, prorated obligations, and other debits. Add buyer reimbursements for seller-paid items when the problem includes them. The final result is cash to or from the seller at settlement.
How do you calculate a buyer's cash to close?
A useful exam setup is purchase price plus buyer closing costs and buyer debits, minus the loan amount, earnest-money deposit, seller credits, lender credits, and other buyer credits. On the actual Closing Disclosure, use the Calculating Cash to Close and Summaries of Transactions tables because financed costs, payoffs, and adjustments can change the shortcut.
Is a down payment the same as cash to close?
No. The down payment is the purchase-price portion not financed by the purchase loan or other financing. Cash to close includes the remaining down payment plus closing costs, prepaids, initial escrow, and adjustments, reduced by deposits, seller credits, lender credits, and other funds already paid or provided.
Does earnest money reduce the purchase price?
No. Earnest money is a deposit and credit toward the buyer's settlement obligation when properly held and applied. It reduces the amount still due at closing, not the contract sale price. If $10,000 was deposited on a $400,000 purchase, the price remains $400,000.
Does a seller credit increase the buyer's down payment?
Not automatically. A seller credit generally offsets permitted buyer costs or another agreed obligation and is subject to contract and loan-program limits. It lowers buyer cash to close when properly applied, but it does not necessarily count as the borrower's required minimum investment or reduce the sale price.
What is a lender credit?
It is an amount from the lender that offsets eligible closing costs, commonly in exchange for a higher interest rate than the comparable option without the credit. It reduces cash needed upfront, but it is not the same as free money, a seller credit, a price reduction, or a principal reduction.
Does a mortgage payoff equal the seller's original loan amount?
No. A payoff is the amount required to satisfy the debt on the stated date. It may include unpaid principal, accrued interest, authorized fees, advances, and recording or release items, minus applicable credits. Use the payoff figure supplied in the question, not the original principal or last statement balance unless instructed.
Are seller net proceeds the same as the seller's profit?
No. Net proceeds describe settlement cash after closing debits and payoffs. Economic or taxable profit also depends on original cost, improvements, depreciation, prior refinancing, selling expenses, tax basis, exclusions, and tax law. Do not use a closing-net calculation as a capital-gain calculation.
What happens if a closing calculation is negative?
A negative buyer cash-to-close result means funds may be due to the buyer, subject to program and settlement rules. A negative seller net means the seller must bring funds or resolve a shortfall before closing. Label the direction of money rather than silently converting the sign to a positive number.
Are these actual PSI exam questions?
No. They are original calculations aligned to the public Real Estate Math outline effective June 24, 2026.
Primary sources
- PSI Illinois Candidate Information Booklet dated June 24, 2026
- CFPB Loan Estimate explainer
- CFPB Closing Disclosure explainer
- CFPB Regulation Z Section 1026.38, Closing Disclosure content
- CFPB Guide to the Loan Estimate and Closing Disclosure forms
- CFPB guidance on mortgage closing costs and payment allocation
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.