Florida Real Estate Sales Associate Examination Content OutlineReal Estate Closings and Post-ClosingHard
Which of the following would typically be considered an 'item paid by others' on a Closing Disclosure and would not directly impact the borrower's cash to close?
- APrepaid homeowner's insurance premium
- BOwner's title insurance premium paid by the seller
- CLender's origination fee
- DAppraisal fee
Show answer & explanationAnswer & explanation
Correct answer: B. Owner's title insurance premium paid by the seller
If the seller pays for the owner's title insurance premium, it is an 'item paid by others' (specifically the seller) and reduces the seller's proceeds, but does not increase the borrower's 'cash to close' amount. The other options are typically direct costs to the borrower.
Why the other options are wrong
- A. This is a direct cost to the borrower, typically paid at closing.
- C. This is a direct cost to the borrower, affecting their cash to close.
- D. This is a direct cost to the borrower, affecting their cash to close.
Closing Disclosure 'Paid by Others'
On the Closing Disclosure, 'Paid by Others' refers to costs associated with the transaction that are covered by a party other than the borrower (e.g., seller concessions, third-party contributions), which reduce the borrower's out-of-pocket expenses.
- Reduces borrower's cash to close.
- Common examples include seller contributions or lender credits.
- Must be disclosed clearly.
Memory trick: Cash to Close: Borrower's burden, unless others lighten the load.