In estimating net proceeds, which item is included as a deduction from the sale price?

• A. Mortgage payoff
• B. The seller's personal debt
• C. The buyer's closing costs
• D. The property's assess value

Answer: (A)

Estimating net proceeds focuses on what must be paid out of the sale price at closing. The mortgage payoff is included as a deduction because the loan secured by the property has to be paid off to transfer clear title to the buyer; the payoff amount is taken from the seller’s proceeds. In other words, the sale price funds the loan balance first, and whatever remains becomes the seller’s net proceeds after other closing costs and commissions are subtracted.

This isn't about the seller's personal debts outside the property, nor about the buyer's closing costs, and the property's assessed value doesn’t enter into this calculation. For example, if the sale price is 350,000 and the outstanding mortgage payoff is 280,000, those funds would come out of the sale price before considering closing costs and commissions, leaving the remaining amount as net proceeds to the seller.