Question

A building was sold for $715,000. Earnest money in the amount of $65,000 was deposited in escrow, and the buyer obtained a new loan for the balance of the purchase price. The lender charged two discount points on the loan. What was the total amount of cash used by the buyer for this purchase?

Answer 1

The total amount of cash used by the buyer for this purchase is $78,000.

Step-by-step explanation:

The total amount of cash used by the buyer for this purchase can be calculated by subtracting the earnest money deposit and the loan amount from the purchase price. The earnest money deposit is $65,000, and the purchase price is $715,000. Therefore, the loan amount can be calculated as $715,000 - $65,000 = $650,000.

The lender charged two discount points on the loan. To calculate the discount points, we need to multiply the loan amount by the discount point rate. A discount point is equal to 1% of the loan amount, so two discount points would be 2% of the loan amount. Therefore, the discount points can be calculated as $650,000 * 0.02 = $13,000.

The total amount of cash used by the buyer for this purchase is the earnest money deposit plus the discount points, which is $65,000 + $13,000 = $78,000.