Alabama Real Estate Broker Exam — All Questions
2 questions
You are preparing the seller's estimated closing statement on an Alabama home selling for $263,200 in an all-cash sale, with no mortgage recorded. What deed tax must be paid before the deed can be recorded?
- a.$263.20
- b.$394.80
- c.$263.50✓
- d.$526.40
Section 40-22-1(c) fixes the recording privilege tax on a conveyance at "$.50 for each $500 or fraction thereof in value of property conveyed by such instrument," and no deed "shall be received for record unless the privilege or license tax is paid prior to the instrument being offered for record." Divide first: $263,200 divided by $500 is 526.4. The statute taxes the fraction as a whole unit, so round up to 527 units and multiply by $0.50, giving $263.50. $263.20 is what you get by treating the rate as a flat $1.00 per $1,000 and stopping — arithmetically the same rate, but it throws away the four words "or fraction thereof" that the statute prints on purpose. $394.80 applies the mortgage tax rate of $0.15 per $100 under Section 40-22-2 to the sale price; that rate runs on the indebtedness a mortgage secures, not on the conveyance. $526.40 takes the raw 526.4 units and charges $1.00 for each instead of $0.50. This is a figure the licensee has to have right before closing rather than at it: Rule 790-X-3-.04 requires a complete estimated closing statement each time a written offer or counteroffer is presented or prepared.
An Alabama buyer is purchasing for $189,500 with a new first mortgage of $151,640. She has already deposited $2,000 in earnest money, her other closing costs total $2,347.25, and by agreement she pays the mortgage tax while the seller pays the deed tax. How much must she bring to closing?
- a.$38,207.25
- b.$38,434.71
- c.$38,624.30
- d.$38,434.80✓
Two steps. First the mortgage tax: Section 40-22-2(1)a charges "$.15 for each $100 of such initial indebtedness or fraction thereof," so $151,640 divided by $100 is 1,516.4, which rounds up to 1,517 units, and 1,517 times $0.15 is $227.55. Then the statement: $189,500 purchase price, less the $151,640 loan, less the $2,000 earnest money already on deposit, plus $2,347.25 of other closing costs, plus the $227.55 mortgage tax, equals $38,434.80. $38,434.71 comes from multiplying $151,640 by 0.0015 and stopping at $227.46, which is the same arithmetic sin as ignoring "or fraction thereof" — the statute rounds the part-unit up to a whole one. $38,207.25 leaves the mortgage tax off the buyer's side of the statement altogether. $38,624.30 charges her the deed tax as well: $189,500 divided by $500 is exactly 379 units, which at $0.50 each is $189.50 — a real Alabama charge, but on these facts the seller's, and note that it needs no rounding because the price divides evenly.