REP 6 - Completion Accounts in Property Transactions
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Questions and Answers

What is the primary purpose of a completion account?

  • To inform the purchaser of the amount payable on completion (correct)
  • To calculate future earnings from property
  • To establish the market value of the property
  • To assess the vendor's property tax obligations

Which type of completion account is used to determine the amount payable by the purchaser to finance their purchase?

  • Vendor solicitors to purchaser solicitors
  • Vendor solicitors to the vendor
  • Purchaser’s mortgage lender to the purchaser
  • Purchaser solicitors to the purchasers (correct)

What information is NOT required to create a completion account?

  • The completion date
  • The amount already paid by the purchaser
  • The sale price
  • The property’s current market trend (correct)

In the example, what is the sale price of the condominium property?

<p>$1 million (A)</p> Signup and view all the answers

What is the total amount paid so far by the purchaser in the example for option and stakeholder money?

<p>$45,000 (C)</p> Signup and view all the answers

What is the monthly property tax amount mentioned in the example?

<p>$200 (C)</p> Signup and view all the answers

Which date range is given for the rental period in the example?

<p>August 1st to August 31st (B)</p> Signup and view all the answers

What is the total payment the purchaser has to make upon completion?

<p>$948,258.06 (B)</p> Signup and view all the answers

How much was paid in maintenance charges per month?

<p>$150 (C)</p> Signup and view all the answers

What amount does the vendor need to transfer to the purchaser as a rental deposit?

<p>$2,000 (A)</p> Signup and view all the answers

For how many days from 19th August to the end of August is the rental proceeds apportioned?

<p>13 (C)</p> Signup and view all the answers

How much does the purchaser owe to the bank?

<p>$300,000 (A)</p> Signup and view all the answers

What is the main factor used to calculate the refund for the rental proceeds?

<p>31 (D)</p> Signup and view all the answers

How much is the option money paid by the purchaser?

<p>$10,000 (B)</p> Signup and view all the answers

What refund amount is calculated for maintenance from 19th August to 30th September?

<p>$838.71 (B)</p> Signup and view all the answers

What is the sale price listed for the property?

<p>$1,000,000 (C)</p> Signup and view all the answers

What is the total amount paid by the purchaser that goes directly to the vendor?

<p>$27,500 (B)</p> Signup and view all the answers

Which of the following components does not receive part of the vendor's sale proceeds?

<p>The purchaser's loan (B)</p> Signup and view all the answers

How much of the vendor's loan balance is allocated to the vendor's bank?

<p>$50,000 (C)</p> Signup and view all the answers

What is required for the vendor solicitors to process the payments from the conveyancing account?

<p>A statutory declaration authorizing payments (C)</p> Signup and view all the answers

Once the payout form is filed in the EPI system by the vendor solicitors, what is the next step?

<p>The bank issues a check for the vendors to collect. (D)</p> Signup and view all the answers

How is the property tax calculated for the month of August?

<p>Divide the factor by 31 days, then multiply by 13 days. (A)</p> Signup and view all the answers

What is the total amount to be paid to the vendor after deducting the vendor's debts?

<p>$48,258.06. (D)</p> Signup and view all the answers

What additional calculations are needed for property tax if the month has 29 days?

<p>Divide the factor by 29 days. (C)</p> Signup and view all the answers

What cashiers' orders does the purchaser need to prepare for the vendor's debts?

<p>Three orders for $600,000, $300,000, and the remainder. (A)</p> Signup and view all the answers

What additional information is required when preparing the vendor's account for legal completion?

<p>Commission paid to the agent and legal fees. (C)</p> Signup and view all the answers

During property tax calculation, how is the amount for September handled?

<p>It adds the factor calculated for August. (B)</p> Signup and view all the answers

How does the presence of a month with less than 31 days, like February, affect calculation procedures?

<p>Use a different factor for February based on available days. (B)</p> Signup and view all the answers

Why might a vendor instruct their solicitor to deduct commission and legal fees from the sale proceeds?

<p>To avoid administrative tasks related to payments. (C)</p> Signup and view all the answers

In computing refunds, which days are considered for maintenance?

<p>August and September only. (B)</p> Signup and view all the answers

If the total figure reached is $948,250.06, what does this amount represent?

<p>Total amount due from the purchaser. (B)</p> Signup and view all the answers

What amount is added to the vendor's completion account?

<p>$40,000 (A)</p> Signup and view all the answers

How much does the vendor owe to the bank?

<p>$300,000 (C)</p> Signup and view all the answers

After all deductions, how much cash does the vendor ultimately receive?

<p>$75,758.06 (C)</p> Signup and view all the answers

From which source does the vendor get the shortfall of $27,500?

<p>Vendor solicitors account (A)</p> Signup and view all the answers

What is the total deduction amount the vendor must pay?

<p>$912,500 (D)</p> Signup and view all the answers

Which of the following is NOT included in the vendor's expenses?

<p>Property tax refund (D)</p> Signup and view all the answers

How much does the vendor pay to his agent?

<p>$10,000 (B)</p> Signup and view all the answers

What is the initial completion account amount before adding the stakeholders' money?

<p>$948,000 (B)</p> Signup and view all the answers

To which entity does the vendor pay $2,500?

<p>Lawyer (D)</p> Signup and view all the answers

What is the total amount deducted from the vendor's account after all expenses?

<p>$912,500 (C)</p> Signup and view all the answers

Flashcards

Completion Account

An account prepared by vendor solicitors for purchaser solicitors, detailing the amount due on property completion.

Types of Completion Accounts

Vendor solicitors to purchaser solicitors, vendor solicitors to vendor, purchaser solicitors to purchaser.

Completion Date

The specific date the property sale is finalized and ownership is transferred.

Sale Price

The agreed-upon total cost of purchasing the property.

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Option Money/Deposit

Initial payments made by purchaser as part of the purchase agreement. (typically 5% of sale price.)

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Rental Payments

Includes rental amount, deposit and rental period, relevant to determining rental apportionments.

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Property Tax

Monthly property tax, crucial for apportioning costs.

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Rental Deposit Transfer

Amount transferred from vendor to purchaser, representing rent for the property.

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Rental Proceeds Apportionment

Dividing rental income between the vendor and purchaser based on the ownership transfer date.

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Maintenance Charges

Monthly cost to maintain a property.

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Property Tax Refund

Money returned to the seller for covering property taxes that already paid.

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CPF and Bank Loans

The amount of money owing respectively to the Central Provident Fund (CPF) and bank.

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Refund Calculation

Determining the amount to be refunded for taxes and maintenance costs.

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Final Payment Amount

Total payment owed to the vendor after all adjustments and refunds (sale price less deductions)

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Property Tax Calculation (August)

Calculate property tax for August by dividing a fixed amount (e.g., $200) by the number of days in August (31), then multiplying by the 13 days for August.

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Property Tax Calculation (additional months)

Calculate property tax for extra months (September, October, November, December) by multiplying a fixed amount (e.g., $200) by the number of months (4) and the relative days of the month.

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Maintenance Calculation (August and September)

Calculate maintenance for August and September using a fixed amount. Divide the amount by the number of days and multiply by the relevant days in that month.

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Variable Month Day Calculation

Adjust calculations when months have a different number of days (e.g., February with 29).

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Vendor Payment Distribution

Distribute a total payment amount by creating separate payments to various parties: CPF, bank, and vendor.

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Cashier's Orders

Purchaser must create separate cashier's orders for different accounts (CDF board, bank, vendor).

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Vendor Solicitor Accounts

Solicitors collect money for vendors involved in legal transactions.

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Vendor Commission and Legal Fees

Vendor solicitor accounts deduct vendor's agent commissions and legal fees from sale proceeds.

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Vendor Solicitor to Vendor

Information required by vendor solicitors for vendor completion accounts, includes information on commission and legal fees.

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Purchaser Solicitor to Vendor Solicitor

The process of the purchaser solicitor distributing funds to vendor solicitor for costs involved in legal transactions. This involves splitting funds based on the specific costs and parties involved.

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Stakeholder Monies

Funds held by the vendor's solicitor, representing money owed to the seller (vendor) by the buyer (purchaser) for the property sale.

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Why are Stakeholder Monies Added?

Stakeholder monies are added to the vendor's solicitor's account because they were initially deducted from the sale price, reflecting the amount the buyer paid upfront, which needs to go back to the seller.

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Vendor's Expenses

Costs the vendor incurred as part of the property sale, including CPF contributions, bank loans, agent fees, and legal expenses.

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How is the Final Amount Calculated?

To calculate the final amount payable to the vendor, the stakeholder monies are added to the vendor's solicitor's account, then deduct all vendor's expenses, resulting in the net amount received by the vendor.

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Vendor's Shortfall

The difference between the amount originally expected in the casher's order for the vendor and the actual final payment, arising from deductions for expenses and potential errors.

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Vendor Solicitors Account: Alternative Method

A simplified method of calculating the vendor's final payment, starting with the sale price and deducting all relevant costs and expenses.

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What is Deducted in the Alternative Method?

All costs and expenses associated with the property sale are deducted from the sale price, including property taxes, maintenance fees, and other expenses incurred by the vendor.

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Purpose of the Alternative Method

The alternative method simplifies the calculation of the final amount payable to the vendor, making it easier to understand and track the financial flow during a property sale.

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Conveyancing Account

A dedicated bank account held by stakeholders (typically lawyers) to manage the funds involved in a property transaction.

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Vendor Solicitor Payout

The process by which the vendor's lawyer distributes the funds held in the Conveyancing Account to various parties involved in the transaction.

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EPI System

An online platform used by lawyers to electronically manage and process payments related to property transactions.

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Statutory Declaration

A formal written statement, signed under oath, authorizing the payment of legal fees and agent commissions.

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Purchaser Solicitor Verification

The process by which the purchaser's lawyer reviews and approves the payments made to the vendor and other parties.

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Study Notes

Completion Accounts

  • Completion accounts are used to calculate amounts payable on property transactions
  • Three types of completion accounts exist:
    • Vendor solicitors to purchaser solicitors: Determines the amount the purchaser owes the vendor
    • Vendor solicitors to vendor: Determines the vendor's final balance
    • Purchaser solicitors to purchaser: Determines the purchaser's financing needs

Completion Account Details

  • Completion date: Crucial for calculations
  • Sale price: The total price of the property
  • Payments made: Amount paid by the purchaser so far (option money and deposit)
  • Rental payment: Monthly rental amount and period
  • Property tax: Amounts paid, how long paid for and monthly payment
  • Maintenance charges: Monthly payment and period
  • CPF balance: Vendor's CPF balance
  • Bank loan: Vendor's bank loan amount

Completion Account Calculations

  • Example: A 1millionpropertysale,with1 million property sale, with 1millionpropertysale,with10,000 option money and 40,000stakeholdermoneypaid.Monthlyrentalis40,000 stakeholder money paid. Monthly rental is 40,000stakeholdermoneypaid.Monthlyrentalis2,000 and is due August 1-31. Property tax is 200permonthandmaintenance200 per month and maintenance 200permonthandmaintenance150 per month. Vendor owes 600,000toCPFand600,000 to CPF and 600,000toCPFand300,000 to a bank.
  • Account amounts are calculated based on dates and factors to determine amounts due
  • Rental and other payments are allocated over specific periods to the vendor or purchaser depending on when it was due
  • Amounts are deducted from the sale price to calculate the final balance due

Additional Account Information

  • Vendor solicitors to vendor: Additional information needed includes vendor commission and legal fees
  • Purchaser solicitors to purchaser: Information needed includes purchaser's legal fees and CPF account balance; mortgage loan amounts

Payment Methods

  • Cashier's orders are used for payment

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Related Documents

Completion Accounts Lecture Notes PDF

Description

This quiz covers the details and calculations involved in completion accounts for property transactions. It discusses the types of completion accounts, key components such as sale price and payments, and provides examples to illustrate the calculations. Test your understanding of how these accounts determine the financial aspects of buying and selling property.

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