73. A buyer will be purchasing an office building in downtown Dubuque, Iowa for $750,000. The banker who is financing the property wants the buyer to deposit 3 months of property taxes into an escrow account. If the taxes are based on 3% of the sale price, what is the dollar amount of taxes the buyer needs to deposit into the escrow account?
Answer: B
The buyer needs to deposit $5,625 into the escrow account for property taxes.
To determine the amount the buyer must deposit into the escrow account, we first calculate the annual property taxes, which are based on 3% of the sale price of $750,000. The resulting amount for three months is $5,625.
A) $5,600
This amount is incorrect as it does not accurately reflect 3% of the sale price when calculated for three months. The annual taxes would need to be calculated first, and $5,600 falls short of the correct estimate.
B) $5,625
This option is correct. The annual property taxes are calculated as 3% of $750,000, which equals $22,500. Dividing this by 4 gives a quarterly tax amount of $5,625, which is the amount required for the escrow account.
C) $5,650
This amount is incorrect because it exceeds the calculated quarterly property tax. The proper calculation shows that the taxes for three months should be $5,625, making this option an inaccurate figure.
D) $5,675
This option is also incorrect as it is higher than the calculated amount. The correct quarterly tax figure based on the sale price and tax rate does not reach this value, confirming that this choice does not meet the requirement.
Conclusion
The correct answer is $5,625, as it accurately represents the three-month deposit required based on the annual property tax calculated from the sale price. All other options fail to provide the correct figure, either being lower or higher than the calculated amount based on the specified rate.