Question

Palo Alto buyer Mitch deposited $2,250.00 with the listing broker as earnest money. How is this earnest money going to be recorded on Mitch's closing statement? A) Credit $2,250.00 to both buyer and seller. B) Credit $1,125.00 to both buyer and seller. C) Credit the buyer only $2,250.00. D) Debit the seller only $2,250.00.

Answer 1

The earnest money deposited by Palo Alto buyer Mitch would be credited only to the buyer, Mitch, in the amount of $2,250.00 on the closing statement, as it's part of the buyer's total payment towards the property.

Step-by-step explanation:

The earnest money deposited by Palo Alto buyer Mitch is recorded on his closing statement. The correct recording would be C) Credit the buyer only $2,250.00.

Earnest money is credited to the buyer at closing because it represents the buyer's initial deposit to secure the transaction on a property. This amount is usually applied towards the buyer's down payment or closing costs.

Since the earnest money is only between the buyer and the seller, and it is a part of the buyer's total payment for the property, it is not credited to the seller on the closing statement.

Answer 2

the correct recording on the closing statement would be C) Mitch's earnest money deposit of $2,250.00 is credited only to him on the closing statement, as it will be applied towards his purchase of the property.

Step-by-step explanation:

When Palo Alto buyer Mitch deposited $2,250.00 as earnest money with the listing broker, this amount will be recorded on Mitch's closing statement in a specific way. Earnest money is typically credited to the buyer, as it represents the buyer's upfront commitment to the real estate transaction and is applied towards the purchase. Therefore, the correct recording on the closing statement would be C) Credit the buyer only $2,250.00. This indicates that the $2,250.00 will be applied toward Mitch's purchase, reducing the amount he needs to pay at closing.