i. GA Real Estate Math

If you are given the dimensions only (e.g. 300' x 200'), the first number is considered to be the _____ footage

"front"

Graduated Commission Example: A broker list a property for $259,000 and agrees to accept a 5% commission on the first $100,000 of the selling price, 6% of the next $100,000, and 7% on the portion over and above $200,000. How much is the broker's total commission on a sales price of $335,300?

$100,000 x 5% = $5,000 $100,000 x 6% = $6,000 $135,300 x 7% = $9,471 TOTAL = $20,471

State Taxes Example: Sally sells her home to Dan for $159,000. Dan secures a new first mortgage from Shifty Savings and Loan in the amount of $130,000. The taxes due on this transaction are:

$159,000 div by 100 = 1,590 (units of $100) x .70 = $1,113.00 (Doc on Deed) $130,000 div by 100 = 1,300 (units of $100) x .35 = $ 455.00 (Doc on Note) $130,000 x .002 = $260.00 (Intangible on Mortgage)

Comparable Sales Approach: Begin with identifying the sales price of the comparable property, then adjust its value either higher or lower depending on how the comparable property differs from the subject property.

CBS (Comparable Better Subtract) CIA (Comparable Inferior Add)

Comparable Sales Approach Example: Comp. #1 sold for $180,000. Comp #1 is identical to the subject in all aspects except that Comp #1 has a fireplace and the subject does not. If a fireplace is worth $5,000, what is the adjusted value of Comp #1?

CBS (comp. better subtract) $180,000 - $5,000 = $175,000 adjusted value

Interim interest

Charged by lender when borrower obtains new loan. It is for the term from time from the day of closing thru the end of the closing month. Example of interest paid in advance

Linear measures

Defines length or depth. Called linear feet/running feet. Measures frontage (front feet) on road or lake.

A-frame, A-shaped, gable roof

Describe triangular prism 1/2 base x width x height= volume of triangular prism OR base x width x height

OFFICE BUILDING SQUARE FOOTAGE Sometimes the student is asked to calculate how many offices will fit in a multi-floor office location.

FIRST: FIGURE OUT HOW MUCH SQUARE FOOTAGE IS AVAILABLE FOR ONE FLOOR. SECOND: CALCULATE HOW MANY OFFICES CAN BE FITTED ON ONE FLOOR. THIRD: MULTIPLY THE NUMBER OFFICES ON ONE FLOOR BY THE NUMBER OF FLOORS

Cubic units

How volume is measured Multiply 3 measures, length/width/height Measures the volume of a room

Income Capitalization Example: If Net Operating Income is $40,000, and the capitalization rate is 10%, what is the value of the property?

I ---- R X V I ----- R $40,000 ------------- = $400,000 10%

Amortization: Amortization is the systematic process of paying down a debt through payments of principal and interest. The principal portion of the payment is the part that amortizes the debt.

I --------- P x R x T I = Amount of interest paid in dollars P = Principal balance of a loan R = Rate of Interest T = Time length of the loan in terms of years Nine months = .75 of a year Six months = .50 of a year Three months = .25 of a year

Income Capitalization Approach: The income capitalization approach formula is: I --(divided by)--- R X V

I = Net Operating Income R = Capitalization Rate V = Value When you know the value of two of the letters, you can determine the value of the third letter by properly dividing or multiplying.

12" = 1 foot

Inches divided by 12 =feet 144in div by 12 =12 '

Discount Points Formula

LA × DP% = Cost eg: $100,000 × 4% = $4000 5.5% → current interest rate 5.0% → interest rate buyer wants .5% → is reduction goal *buyer would have to buy 4 (.5) points to get .5% interest reduction * for buyer to reduce interest rate *(Effect of points on interest rate); each point reduces buyer interest rate by 1/8th of %; but increases lender profit by 1/8th of %. 1/2 (.125) 2/8 (.25) 3/8 (.375) 4/8 (.5) 5/8 (.625) 6/8 (.75) 7/8 (.875) 8/8 (1) LA = Loan Amount DP = Discount Points Cost = Cost of Discount Points

Interest and Principle Formula (Amortization)

LA × IR% = Ann eg: $123,200 x 5% = $6160 To calculate monthly interest (Ann Interest Paid ÷ 12) eg: $6160 ÷ 12 = $513.33 *If monthly payment in this case is $700, then amount going to principle per month is $186.67. Found by $700 − $513.33 = $186.67 *To find interest paid over life of loan: Take total monthly payments and multiply by 12 (year); multiply by term of loan (eg 30 years); take final number and subtract the original loan amount; difference is how much was paid in interest. LA = Loan Amount IR% = Interest Rate Ann = Annual Interest Paid ($)

Intangible Tax Formula

LA ÷ 500 (rounded up to nearest whole number) ×1.50 = IT LA= Loan Amount *Every answer should end in 00 or .50 if doesn't you made a mistake

Depth

Length

Prorating accrued interest

Loan amount X interest rate= Annual interest ÷ 360 = daily interest X number of days owed

Calculating interest adjustments or prepaid interest

Loan amount X interest rate= annual interest ÷ 360= daily rate X days owed= total

Property Tax Assessment Formula

Market Value (MV) Assessment Rate (AR) Assessment Value (AV) Annual Tax (AT) Mill Rate (MR) MV × AR = AV AV × MR = AT *Tax Assessment Rate in GA is 40% - percent of your property value being taxed on *Never pay taxes on full value of property; pay taxes on assessment rate

How to determine the number of acres in a square or in a rectangular shape property?

Multiply length x width then divide by 43,560 (number of square feet in one acre of land

Calculating intangibles tax

New loan amount ÷ 500= rounded up to the next whole number= taxable amount X $1.50 = the intangible tax

In the event a buyer assumes an existing debt, a new promissory note will be executed and a Doc Stamp will be paid (.35/$100).

No intangible tax is levied on assumed loans.

Proft or loss

Now= Then X percentage N=T x %

Front foot/frontage/width

Number of units on frontage of lot. Normally street frontage/can b water frontage. If 2 dimensions r given, first is frontage if not labeled. "Width" also means frontage.

Discount Points: Discount points are pre-paid interest. For every point that a lender charges, their yield increases 1/8 of one percent. When a lender charges points, they are paid at closing by the borrower.

One point is calculated as one percent of the loan amount; two points, two percent; etc.

Loan Amount Formula - MOST IMPORTANT

SP × LTV = LA (round down to nearest 100) eg: $129,763 × 95% = $123,274.85 (round down, $123,200 is LA) SP − LA = DP eg: $129,763 - $123,200 =$6563 SP = Sale Price LTV = Loan to Value LA = Loan Amount DP = Down Payment

Transfer Tax Formula (based on sale price)

SP − LA ÷ 100 (rounded up to nearest whole # if there is change) × .10 (10 cents) = TT *If there is no loan assumption then, SP ÷ 100 × .10 *If there is loan assumption - no intangible tax; intangible tax is based on new loans SP = Sales Price LA = Loan Assumption

Calculating transfer tax

Sales price (minus loan assumed if any) ÷ 100= and rounded up to the nearest whole number if necessary X .10= the transfer tax

Seller's Net Example: Seller Alexa notifies her broker that she wants to net $100,000 from the sale of her home. The seller's closing costs will be $8,000 and the broker must earn a commission of 10%. How much should the property sell for so that both the seller and broker receive the amount of money they want?

Selling Price = Seller's Net + Closing Costs (divided by) 100% - Commission % $100,000 + $8,000 (divided by) 100% - 10% $108,000 (divided by) 90% = $120,000

To calculate the appropriate selling price so that the seller will receive a certain amount of money after paying closing costs and the sales commission, remember the following formula:

Selling Price = Seller's Net + Closing Costs divided by 100% - Commission %

Cost-Depreciation Approach: Determining the value of a property using the cost-depreciation approach, a two-step math process is followed:

Step One: Reproduction Cost ÷ Economic Life x Effective Age ======================= Total Deprecation Step Two: Reproduction Cost - Total Depreciation (calculated from Step One) + Land Value ================================== Depreciated Value of the Property

Cost-Depreciation Approach Example: If a building is valued at $300,000, it has an economic life of 20 years and an effective age of 4 years, what is the value of the property if the lot is worth $40,000?

Step One: $300,000 ÷ 20 x 4 ================ $60,000 Step Two: $300,000 - 60,000 + 40,000 ================ $280,000

Prorating Property Taxes Example: Prorate the taxes between the buyer and seller if the day of closing is March 14th, annual taxes are $2,200, and the day of closing belongs to the seller (the seller pays the taxes for March 14th):

Step One: Calculate the number of days between January 1st and March 14 31 + 28 + 14 = 73 days Step Two: Calculate the daily tax rate by dividing the annual taxes by 365 days: $2,200 ÷ 365 = $6.02739726 (don't round up the decimal) Step Three: Multiply the daily tax rate by the number of days $6.02739726 x 73 = $440.00

Before Tax vs. After Tax Example: If a person is in a 32% tax bracket, which of the following represents the most desirable investment? a. 22% Before Taxes b. 20% Before Taxes c. 18% After Taxes d. 16% After Taxes

Step One: Convert the before tax returns to after tax returns: a. = .22 x 68% = 14.96% after taxes b. = .20 x 68% = 13.6% after taxes Step Two: Compare all the after tax returns and select the highest one a. = 14.96% b. = 13.6% c. = 18% d. = 16% Step Three: Select the highest after tax return choice Answer: C 18% after taxes

Prorating Rent Example: Prorate the rent between the buyer and seller if the day of closing is March 24th, the monthly rent is $1,000, and the day of closing belongs to the seller (the seller gets the rent for March 24th):

Step One: Prorate Calculate the number of days of rent the buyer is entitled to (March 25th through March 31st) 25, 26, 27, 28, 29, 30, 31 = 7 days ------------------------------------------------------------ Step Two: Calculate the daily rate by dividing the monthly rent by the number of days in the subject month $1,000 ÷ 31 = $32.25806451 (don't round up the decimal) ------------------------------------------------------------ Step Three: Multiply the daily rental rate by the number of days $32.25806451 x 7 = $225.81

Solving % prolems

TOTAL X RATE = PART PART div RATE = TOTAL PART div TOTAL = RATE MULTIPLY when part is unknown DIVIDE when PART is known When you div always enter PART in calc first

Calculating tax escrow

Tax amount ÷ 12 X number from chart = tax escrow amount. (If closing is on July 1st, use 3)

For example, if a person is in a 30% tax bracket, that means they get to keep 70% of their money after taxes. To calculate a 22% return before taxes and convert it to AFTER TAX rate of return, multiply by the percentage that a taxpayer gets to keep.

That will convert a before tax return to an AFTER TAX return. On the test, choose the answer that gives the greatest AFTER TAX rate of return.

State Taxes: When a property sells, a Documentary Stamp Tax on the Deed is paid to the Department of Revenue regardless if the transaction is cash or financed.

The Doc Stamp on the Deed is .70 per $100 of the purchase price. The seller usually pays this stamp tax.

If the buyer finances the property, a new mortgage and note is created on behalf of the lender. The buyer is required to pay an Intangible Tax on the new mortgage and a Documentary Stamp Tax on the new promissory note.

The Doc Stamp on the Note is .35 per $100 on the new debt and the Intangible Tax is .002 (2 mills) on the new debt.

area

The amount of space within the boundaries of a parcel of real estate.

capitalization rate (cap rate)

The annual rate of return produced by the operations of an income property, calculated by dividing the net operating income by the property's price.

Mill Rate

The mill rate is the % of Tax Rate; to find # mills x .001 = MR eg. 25 x .001 = .025 MR

net operating income (NOI)

The net revenue generated by an income producing property, calculated as the sum of a property's gross operating income less the property's operating expenses.

Prorating Property Taxes: At closing, the seller's share of the annual taxes from January 1st to the day of closing must be calculated, with the seller giving this amount to the buyer.

The number of days from January 1st and the cost of the taxes per day must be determined.

Prorating Rent: At closing, the buyer's share of the monthly rent from the day of closing until the last day of the month must be calculated, with the seller giving this amount to the buyer.

The number of days from closing until the end of the month and the cost of the rent per day must be determined.

Gross Rent Multiplier Example: If the monthly rent is $900 and the Gross Rent Multiplier is 94, what is the value of the property?

V ---------- R X M $84,600 ------------ R X M

Gross Income Multiplier Example: If the value of a property is $720,000 and the annual rental income is $60,000, how much is the gross income multiplier?

V ---------- R X M $720,000 -------------- = 12 $60,000

Gross Income Multiplier Approach: The Gross Income Multiplier (GIM) is an easy calculation to determine the value of a property when analyzing the property's income for the entire year. The formula is: V ----------------- R X M

V = Value R = Annual Rental Income M = Multiplier If you know the value of two of the letters, you can determine the value of the third letter by properly dividing or multiplying.

Gross Rent Multiplier Approach: The Gross Rent Multiplier (GRM) is an easy calculation to determine the value of a property if the monthly rent is the same each month. The formula is: V ---------------------- R X M

V = Value R = Monthly Rental Income M = Multiplier If you know the value of two of the letters, you can determine the value of the third letter by properly dividing or multiplying.

Before Tax vs. After Tax: When asked to analyze an investor's choice, select the investment that provides the greatest return after taxes. If the selection provides the before-tax return, we must convert the before tax-return percentage to an after-tax return percentage

When comparing the returns on investments, it is only helpful to compare AFTER TAX rate of return. On an exam, convert all before tax returns to AFTER TAX returns.

foot, linear foot, running foot, front foot

When those words r used, must determine TTL length of object. Doesn't have to be straight line

To convert square footage to acreage:

divide the number of square feet by 43,560

To determine a rectangle's square footage:

multiple the length of one side by the length of the other side

To convert acreage to square feet:

multiply the number of acres by 43,560

To calculate a sales commission:

multiply the selling price by the commission rate

To calculate a commission split between a broker and sales associate:

multiply the total sales commission by the appropriate percentage that either the broker or sales associate is entitled to receive.

Calculate Commission Example: Broker Gary sold a home for $375,000 with an agreed upon commission of 7.5% of the sales price. How much is the sales commission?

$375,000 x 7.5% = $28,125

Commission Split Example: Broker Bob has agreed to pay Salesperson Rafael two-thirds all commissions earned as a result of Rafael's efforts. If Rafael sells a property for $600,000 with an agreed upon commission of 6%, how much is Bob's share of the commission?

$600,000 x 6% = $36,000 $36,000 ÷ 3 = $12,000

Amoritization Example: $80,000 loan for 30 years at an annual interest rate of 8% with monthly principal and interest payments of $587.01:

$80,000 x .08 = $6,400 (annual interest) ÷ 12 = $533.33 (monthly interest) $587.01 (P&I) - $533.33 (I) = $53.68 (P) $80,000 - $53.68 = $79,946.32 new principal balance after the 1st payment. $79,946.32 x .08 = $6,395.71 ÷ 12 = $532.98 $587.01 - $532.98 = $54.03 $79,946.32 - $54.03 = $79,892.29 new principal balance after the 2nd payment.

Discount Points Example: Shifty Savings and Loan is making a $90,000 loan with an annual interest rate of 7%. If the lender charges 4 discount points at closing to make the loan, what is the yield to the lender and how much will the points cost the borrower?

$90,000 x 4% = $3,600 cost of points Four points adds 4/8 or ½ of a percent to the lender's yield

43,560 sq ft =

1 acre

5,280 feet =

1 mile Feet div 5280= miles 10560 div 5280= 2 miles

320 rods =

1 mile Rods div 320= miles 640 rods div 320 = 2 mls Miles times 320 = rods 2 miles x 320= 640 rods

16 1/2 feet

1 rod Feet div 16.5= rods 82.5 div 16.5=5 rods

640 acres =

1 section= 1 sq mile

1296 in=

1 sq yard

9 sq ft=

1 sq yard

144 in. =

1 square Foot

144 in

1 square foot

Square Footage / Office Building Example: Donald wants to rent out 3 floors of a bank building that measure 55,000 square feet each. On each floor, 30% of the square footage must be set aside for hallways, elevators, stairs, and other common areas. Donald decides that each office needs to be at least 1,400 square feet. How many offices can Donald fit if he rents out all 3 floors?

1) Determine how much square footage is available for offices on one floor 55,000 x 70% = 38,500 square feet 2) Divide the number of available square feet by the size of each office 38,500 ÷ 1,400 = 27.5 offices. NEVER ROUND UP AT THIS STAGE. Therefore there are 27 offices on one floor 3) Multiply the number of offices by the number of floors to be rented 27 X 3 = 81 offices

To amortize a loan, the steps are

1. Loan amount x Annual interest rate = Annual interest div by 12 = Monthly interest 2. Mortgage payment (principal & interest) - Monthly interest = Principal portion 3. Principal balance of loan - principal portion of payment = New loan balance 4. Repeat same steps for next payment amortization.

Area of triangle

1/2 base x height Or Base x height div 2

1 foot

12 inches

40 acres

1320'x1320'

20 acres

1320x660 0r 660x1320

1 mile

1760 yards

Covert fractions to decimals to multiply

2/3 = 2 div 3 or 0.67 5/8 = 5 div 8 or 0.625

640 acres

2640'x2640'

1 yard

3 feet

1 square rod

30.25 square yards

1 yard

36 inches

160 rods

40 chains

Example Problem #1: A parcel of land measures 400' x 400' (square). How many acres are contained in this parcel?

400' x 400' = 160,000 square feet 160,000 sq. ft. ÷ 43,560 = 3.6731 acres

There are _____ square feet in an acre.

43,560

Example Problem #2: A parcel of land is 7.5 acres. How many square feet are in the parcel?

43,560 x 7.5 = 326,700 sq. ft.

1 mile

5,280 feet

one mile by one mile

5.280x5.280

1 Acre

53,640 square ft

1 section of land

640 acres

64. If Broker Christianson brought in an offer of 10% less than the listing price of $15,300 and the seller would agree to the price if the broker would accept a 20% reduction of his commission, the broker's commission would amount to: A. $660.96 B. $689.85 C. $735.84 D. $827.82

: A. $15,300 - $1530 (10%) = $13,770; $13,770 x 6% = $826.20; 80% of $826.20 (less 20%) = $660.96

50. An investor was going to have a building constructed which was to cost $150,000 and could, when completed, be leased for $2,500 per month. The annual operating expenses for the property would be $6,000. The amount he could invest in the land to realize a 12% return would be: A. $50,000 B. $75,000 C. $100,000 D. $150,000

: A. $2,500 x 12 = $30,000; $30,000 - $6,000 = $24,000; $24,000 divided by .12 = $200,000; $200,000 - $150,000 = $50,000

46. An investor owns a 20-unit apartment house. When compared to comparable apartment properties he loses $200 net income a month because his property is located next to a busy freeway. Appraisers are using a 12% capitalization rate for this neighborhood of income properties. The subject property has suffered a loss in value in the amount of: A. $20,000 B. $25,000 C. $30,000 D. $35,000

: A. $200 x 12 = $2,400; $2,400 divided by 12% = $20,000

20. What is the monthly return on an income property with a 6 1/2% return on its value of $46,500? A. $251.88 B. $302.50 C. $151.25 D. $3,630.00

: A. $46,500 x .065 = $3,022.50 Income; $3,022.50 divided by 12 = $251.88 per month.

29. Mr. Morton paid $945 interest on a straight note loan of $7,000, at a rate of 9%. What was the term of the loan? A. 18 months B. 36 months C. 48 months D. 60 months

: A. $7,000 x .09 = $630 interest for 1 year; $630 divided by 12 = $52.50 interest/month; $945 (interest) / $52.50 = 18 months

37. A rectangular parcel of land measures 1,780' x 1,780' and contains how many acres? A. 73 B. 316 C. 632 D. 1,780

: A. 1,780 x 1,780 = 3,168,400 square feet; 3,168,400 divided by 43,560 = 73 acres

40. A house sold for $16,350 which was 9% more than its original cost. What was the original cost? A. $15,000 B. $20,000 C. $25,000 D. $30,000

: A. 100% + 9% = $16,350; $16,350 divided by 1.09 = $15,000

19. An owner depreciated the improvements based on a cost basis of $160,000 using the straight line method. Improvements are depreciated 37.5% to date and the remaining economic life is estimated to be 15 years. Which of the following is correct? The: A. Rate of depreciation exceeds 4% per annum B. Time of depreciation to date is over ten years C. Value of the building is $120,000 D. Rate of depreciation cannot be determined from the data given

: A. 100% - 37.5% = 62.5% remaining to depreciate; 62.5% divided by 15 years = 4.17% per year

99. A one acre parcel of land that is square is divided into four lots of equal size. If the lots are rectangular, parallel to each other and are 240' deep, the width of each lot is most nearly: A. 45.4' B. 90.8' C. 181' D. 240'

: A. 43,560 square feet divided by 240' = 181.5' wide 181.5 divided by 4 = 43.375' 45.4' is closest.

52. Which of the following contains the largest area? A. 4 square miles B. 5,280' X 10,560' C. 2 sections D. 1/10 of a township

: A. A parcel that is 4 square miles is the largest. 1/10 of a town- ship is 3.6 square miles. 5,280' X 10,560' is a parcel that is 1 mile X 2 miles or 2 square miles. 2 sections contain 2 square miles.

1. The fastest way to calculate one month's interest on a real estate loan with an interest rate of 7.2% interest per annum is to multiply the principal balance by: A. 0.006 B. 0.6 C. 7.2% and divide by 12 D. 12 and divide by 7.2%

: A. By dividing the 7.2% rate by 12 first, you can find one month's interest by multiplying the loan amount by .006; 7.2% divided by 12 = .006, rate for one month.

17. Mr. and Mrs. Smith acquired a home in 1977 for $48,000. In 1987 they sold it for $60,500 and moved into an apartment unit. During the ten year period of ownership, permanent improvements totaling $12,750 were made to their house. If Mr. Smith's income consists entirely of wages, how would the sale affect his 1987 federal income return? A. No affect B. $125.00 loss C. $250.00 loss D. $12,500 gain

: A. Cost $48,000 + Additions $12,750 = $60,750; Book value = $60,500; Selling price = $ 250 loss Losses are not deductible on the sale of a residence.

22. The Phillips sold their home for $36,850, which represents a 17% profit over the original price. What was the original price? A. $31,495 B. $35,000 C. $53,540 D. $19,850

: A. Cost Rule: Selling Price divided by (100% + %) 100 + 17 = 1.17 $36,850 divided by 1.17 = $31,495

62. Assume that a second trust deed of $1000 was to be paid in annual installments of $300 plus 6% interest, with a balloon payment of the balance at the end of the third year. The remaining balance of the principal after the annual installment had been paid was: A. $400 B. $424 C. $506 D. $520

: A. Since the payments on the principal are $300 per year and the borrower has made two payments plus whatever interest was due, the balance is $400. $1000 - $600 = $400

42. Assume that a second trust deed of $1,000 was to be paid in annual installments of $300 plus 6% interest, with a balloon payment of the balance at the end of the third year. The remaining balance of the principal after the second annual installment was paid would be: A. $400.00 B. $424.00 C. $505.60 D. $520.00

: A. Since the payments on the principal are $300 per year and the borrower has made two payments plus whatever interest was due, the balance would be $400. $1,000 - $600 = $400

69. An owner of a section of land dedicates an easement for a road along the south side of his section. The easement contained 3 acres. The width of the road was approximately: A. Twenty feet B. Thirty feet C. Forty feet D. Fifty feet

: A. The length of the road is one mile, or 5280 feet. The total area is three acres, or 130,680 square feet (43,560 x 3 = 130,680 square feet) 130,680 divided by 5280 feet = 24.75 feet

23. If a building's costs increased 20 percent, the value of the investor's dollar has decreased by: A. 16 and 2/3% B. 20% C. 25% D. 33 and 1/3%

: A. The material I bought yesterday for $100 now costs 20% more or $120. If I only have $100, I can only buy 100/120 or 5/6ths of what I could yesterday. My dollar has decreased 1/6 or 16 2/3%.

9. An apartment house property costs $240,000 and this price has been verified to be an accurate estimate of the property value. In comparable circumstances it is also verified that the owner may use a 10% capitalization rate to the purchase price in determining his net income. Should there be a 10% increase in rental income with no increase in the owner's expense and should the capitalization rate of the property be increased to 12%, what would be the estimated value of the property be? A. $220,000 B. $240,000 C. $264,000 D. None of the above

: A. Value x Cap Rate = Income $240,000 x 10% = $24,000 Income; 10% income increase = $2,400; New income = $26,400; new Cap Rate = 12%; Value = $26,400 divided by 12% = $220,000

33. If $150 interest is paid in 8 months on a straight note loan of $2,500, what is the annual rate of interest? A. 9% B. 10% C. 11.50% D. 12%

: A.8 months = 2/3 year = $150 interest; $150 divided by 0.67 = $227.27 interest for 8 months; $2257.27 divided by $2,500 = .09 = 9%

100. Natalie Johnson owns a $100,000 property based on a 6% capitalization rate. If due to changes in economic conditions investors now require a higher capitalization rate or 8%, what would the value of the property be using the same dollar income? A. $90,000 B. $75,000 C. $80,000 D. $60,000

: B. $100,000 if capitalized at 6% would give a net income projection of $6,000. $6,000 net income capitalized at 8% would give $75,000 in value. $6,000 divided by 0.08 (8%) = $75,000.

81. An income property was appraised for $100,000 based on a 6% capitalization rate. If an investor used an 8% cap rate, the value of the property would be: A. $60,000 B. $75,000 C. $80,000 D. $90,000

: B. $100,000 x 6% = $6000 net income; $6000 divided by 8% = $75,000 value

30. A man paid $140 in interest for a 90 day period on a $7,000 loan. What was the interest rate on the loan? A. 6% B. 8% C. 10% D. 11%

: B. $140 x 4 (12 months divided by 3 months) = $560; $560 divided by $7,000 = 8%

67. What is the annual interest rate on a $16,000 loan when the interest payments are $160.00 per quarter on the full amount? At least: A. 3%, but less than 4% B. 4%, but less than 5% C. 5%, but less than 6% D. 6%, but less than 7%

: B. $160.00 x 4 = $640.00; $640.00 divided by $16,000 = 4%

48. A man bought two 60 foot lots for $18,000 each and divided them into three lots which he sold for $15,000 each. What was his percentage of profit? A. 15.00% B. 25.00% C. 28.00% D. 30.00%

: B. $18,000 x 2 = $36,000; $15,000 x 3 = $45,000; $45,000 - $36,000 = $9,000; $9,000 divided by $36,000 = .25 = 25%

82. If a note in the amount of $22,250 specifies monthly payments over a period of 30 years at 6.6% interest per annum, what is the first month's interest payment? A. $111.25 B. $122.38 C. $130.71 D. $140.50

: B. $22,250 x 6.6% = $1468.50 $1468.50 divided by 12 = $122.38

44. A man had an income property which suffered a $300 monthly loss of net income when a freeway was built nearby. At a capitalization rate of 12%, how much did his property lose in value? A. $20,000 B. $30,000 C. $40,000 D. $50,000

: B. $300 x 12 = $3,600; $3,600 divided by .12 = $30,000

94. A holder of a second trust deed and straight note with a face amount of $3740 sold it for $2431. This amounted to a discount of: A. 26% B. 35% C. 45% D. 55%

: B. $3740 - $2431 = $1309 discount $1309 divided by $3740 = 35%

6. Lots "A", "B" and "C" sold for a total price of $39,000. If lot "B" was priced at $6,400 more than lot "A", and lot "C" was priced at $7,100 more than lot "B", the price of lot "A" was: A. $13,000.00 B. $6,366.67 C. $5,433.33 D. $4,633.00

: B. $39,000 = A + B + C = A + $6,400 + A + $7,100 + $6,400 + A; 39,000 = 19,900 + (3 x A); 39,000 - 19,900 = 3 x A; 19,100 = 3 x A; 19,100 divided by 3 = A; $ 6,366.67 = A

45. Kent was the owner of a straight note with an annual interest rate of 8.4%. In five years he had received $5,460 in interest. The principal amount of the note was most nearly? A. $12,000 B. $13,000 C. $14,000 D. $15,000

: B. $5,460 divided by 5 = $1,092; $1,092 divided by 8.4% = $13,000

21. Andrew Blacker was the owner of a straight note with an annual interest rate of 8.4%. In 5 years, he had received $5,460 in interest. What was the principal amount of the note? A. $1,092 B. $13,000 C. $6,500 D. $3,250

: B. $5,460 divided by 5 years = $1,092 annual interest; $1,092 divided by .084 = $13,000 principal amount

49. If a man paid $50,000 for a business which gave him a 6% return on his money, how much did he make during the first year that he owned it? A. $1,500 B. $3,000 C. $4,500 D. $6,000

: B. $50,000 x 6% = $3,000

77. The Richard Rock sold his home and had to carry back a second trust deed and note of $5310. If he sold the note for $3823.20 before any payments had been made on the note, the rate of discount amounted to: A. 25% B. 28% C. 54% D. 72%

: B. $5310 (original amount of note) $3823.20 (net received from sale) 5310 - 3823.20 = $1486.80 (amount of discount) $1486.20 divided by $5310 = 28% discount.

39. A man borrowed $750 on a straight note at an interest rate of 7.2%. If his total interest payment was $67.50, the length of the loan was? A. Twelve months B. Fifteen months C. Twenty four months D. Thirty months

: B. $750 x 7.2% = $54; $54 divided by 12 months = $4.50 interest/month; $67.50 divided by $4.50 = 15 months

31. A rectangular parcel containing 540 square yards which has a frontage of 45' would be how many feet deep? A. 54' deep B. 108' deep C. 270' deep D. 540' deep

: B. 1 sq. yard = 9 sq. ft. 540 x 9 = 4,860 sq. ft. Area = L x W W = 45, so 4,860 divided by 45 = 108 ft.

41. A homeowner sold his house for $23,000. This selling price represented a 15% profit over what he had originally paid for the house. What was the original price of the home? A. $15,000 B. $20,000 C. $25,000 D. $30,000

: B. 100% + 15% = $23,000; $23,000 divided by 1.15 = $20,000

98. An investor purchased two lots and paid $18,000 for each one. Since each lot had a 60' frontage he was able to subdivide the combined parcels in 3 lots with equal front footage. If the 3 lots sold for $15,000 each, his rate of profit on his investment was: A. 20% B. 25% C. 33% D. 40%

: B. 3 lots x $15,000 each = $45,000 selling price $45,000 less cost of $36,000 (2 x $18,000) = $9000 profit; $9000 divided by $36,000 = 25%.

10. Able purchased a $15,000 home. His down payment amounted to 6 2/3% of the purchase price; the balance was carried as a first trust deed bearing interest at 8.4% per annum. The principal is to be repaid at $50.00 per month. A three-year insurance policy costs $72.00; the property taxes are $360.00 per year. Able is required to make a proportionate monthly payment to a loan trust fund for these items. The total amount of the first monthly payment most nearly would be: A. $267 B. $182 C. $186 D. $188

: B. 6 2/3% = Fraction 1/15; $15,000 x 6 2/3% (or 0.07) = $1,000; $15,000-$1,000=$14,000 Loan; $14,000 x 0.084 = $1,176 Interest per year; $1,176 divided by 12 = $98 Interest per month Principal = 50.00 Principal 3-Year $72.00 divided by 36 months = 2.00 Insurance; $360 Taxes divided by 12 = $30.00 Taxes; 98 + 50 + 2 + 30 = $180.00 most nearly.

76. An individual borrowed $750 on a straight note at an interest rate of 7.2%. If the total interest payment on the loan was $81.00, the term of the loan was: A. 15 months B. 18 months C. 21 months D. 24 months

: B. Calculate the amount of interest expense for one month and then find how many months worth of interest was paid. $750 x 7.2% = $54.00 per year; $54.00 divided by 12 = $4.50 per month; $81.00 divided by $4.50 = 18 months.

12. A house sold for $16,350, which amount was 9% more than the cost of the house. The cost of the house was: A. $14,878.50 B. $15,000.00 C. $16,000.00 D. $17,821.50

: B. Cost (100%) + Profit (9%) = $16,350 109% = $16,350 $16,350 divided by 109% = $15,000

57. Ms. Rodgers sold her house and took back a note for $4200 secured by a second deed of trust. She promptly sold the note for $2730. This represents a discount of: A. 28% B. 35% C. 51% D. 73%

: B. Face amount = $4200; Net amount = $2730; $4200 - $2730 = $1470; Discount = $1470 divided by $4200 = 35%

18. Eddie Ronquillo sold his house and took back a note for $4,200 secure a second deed of trust. He promptly sold the note for $2,730. This represents a discount of: A. 28% B. 35% C. 55% D. 65%

: B. Face amount: $4,200; Net amount: $2,730; $4,200 - $2,730 = $1,470 % discount = $1,470 divided by $4,200 = 35%

65. A man enters into a lease agreement on a grocery store with the following terms: $350 minimum monthly rent or 5% grocery sales, 7% of meat sales, 6% of deli sales, and 8% of produce sales, whichever is greater. The grocery sales were $27,000 annually, meat sales $500 per month, deli sales $300 per month and produce sales $3,000 annually. What was the annual rent on the store? A. $3,180 B. $4,200 C. $4,386 D. $5,120

: B. Grocery Sales: $27,000 x 5% = $1350; Meat Sales: ($500 x 12) x 7% = $420; Deli Sales: ($300 x 12) x 6% = $216; Produce Sales: $3,000 x 8% = $240; Total of above = $2226 (or) the minimum rent would be $350 x 12 = $4,200, since $4,200 is greater, then the annual rent would be $4,200.

8. Smith and Allen wish to exchange real property. Smith owns a property valued at $150,000 against which there is a $35,000 trust deed. Allen owns property worth $105,000 on which there is an existing first trust deed of $25,000 and a second trust deed of $20,000. Allen has $15,000 in cash which he is willing to pay towards the exchange. If Smith is willing to accept a second trust deed and note from Allen in order to effect the exchange, the amount of the note would be: A. $20,000 B. $40,000 C. $50,000 D. $70,000

: B. Market Value - Loan = Equity Smith $150,000 - $35,000 = $115,000 Allen $105,000 - $25,000 = $60,000 Differences in Equity $115,000 - $60,000 = $55,000; $55,000 - $15,000 Cash = $40,000 Second

51. An investor purchased property for a total price of $72,000, paying $20,000 down and financing the balance of $52,000 using a straight note. If the investor eventually sold the property after it had doubled in value and had made no principal payments on the loan, each dollar invested would show a return of: A. $2.00 B. $4.60 C. $5.60 D. $8.70

: B. New selling price is $72,000 x 2 = $144,000; $144,000 less $52,000 loan = $92,000 return; $92,000 divided by $20,000 = $4.60

14. An acre is to be divided into four equal lots. If the lots are parallel to each other, rectangular, and 200 feet deep, the width of each lot would most nearly be: A. 15 feet B. 55 feet C. 200 feet D. 218 feet

: B. One acre = 43,560 square feet; 43,560 divided by 200 = 217.80; 217.80 divided by 4 = 54.45 feet; 55 is nearest

68. A homeowner sold his house for $23,000. If the selling price represented a 15% profit over what he had originally paid for the house, the original price of the home was: A. $19,550 B. $20,000 C. $27,000 D. None of the above

: B. Selling price = cost (100%) + profit (15%) = 115% = $23,000; $23,000 divided by 1.15 = $20,000

25. Escrow closed May 1 with interest on a $4,415 second trust deed paid to June 1. The interest rate is 7 2/10%. What is the debt to the buyer, if the buyer assumes the loan? A. $22.09 B. $26.49 C. $4,415.00 D. None of the above

: B. Since the sellers paid one month's interest in advance, this must be returned to them by the buyer. This will be a debit on the buyer's statement. $4,415 x .006 (7.2% divided by 12) = $26.49

60. Escrow closed May 1st with interest on a $4415 second trust deed paid to June 1st. If the interest rate is 7.2%, the debit to the buyer, if the buyer assumed the loan, would be: A. $22.09 B. $26.49 C. $4,415.00 D. None of the above

: B. Since the sellers paid one month's interest in advance, this must be returned to them by the buyer. This will be a debit on the buyer's statement. $4415 X .006 (7.2% divided by 12) = $26.49

85. A married couple purchased a property for a total price of $18,000, paying $5000 down and having the seller take back a first trust deed in the amount of $13,000. The terms of the $13,000 trust deed called for no payments in the first year. If at the end of the first year, they were to sell the property at twice its original cost, their original dollar is now worth: A. $2.00 B. $4.60 C. $7.20 D. $8.00

: B. The owners had an equity or investment of $5000. If the property doubles in value to $36,000 and you deduct the $13,000 loan, their equity increased to $23,000. $5000 divided into $23,000 equals $4.60.

70. There are five units in a condo. Smith paid $12,600, Jones paid $13,500, Kahn paid $13,750, Poe paid $14,400 and Clark paid $15,250. If there was an $1800 annual maintenance fee and each owner was to pay his proportionate share based upon the ratio of his unit purchase price to the total purchase price of all units, the monthly share of Smith's unit would be: A. $8.00 B. $27.00 C. $32.40 D. $36.00

: B. Total purchase price was $69,500 $12,600 divided by $69,500 = 18%; $1800 divided by 12 months = $150 per month; $150 x 18% = $27.00

66. A building was insured for $19,500 at a rate of .18 per hundred. If the three year policy was 2 1/2 times the one year rate, what amount per month should be added to the monthly payments to properly cover the insurance cost? A. $7.31 B. $2.92 C. $2.44 D. $1.46

: C. $0.18 x 2.5 = $0.45 per $100; ($19,500 x $0.45) divided by 100 = $87.75; $87.75 divided by 36 = $2.44

95. A seller took back a second trust deed and note in the amount of $11,400, payable $240 per month, including interest at 7% per annum. If interest on the note begins July 15 and the first payment is made on August 15, the amount of the first payment that is applied to the principal is: A. $66.50 B. $79.80 C. $173.50 D. $240.00

: C. $11,400 x 7% = $798 per year $798 divided by 12 = $66.50 per month $240 - $66.50 = $173.50.

55. A seller took back a second trust deed and note in the amount of $11,400 payable $240 per month, including interest at 7% per annum. If interest on the note begins July 15 and the first payment is made on August 15, the amount of the first payment that is applied to the principal is: A. $66.50 B. $79.80 C. $173.50 D. $240.00

: C. $11,400 x 7% = $798 per year; $798 divided by 12 = $66.50 per month; $140 - $66.50 = $173.50

38. A borrower paid $120 interest on a 90-day straight note. The principal was $6,000. What was the interest rate? A. 6% B. 7% C. 8% D. 9%

: C. $120 x 4 = $480; $480 divided by $6,000 = .08 = 8%

80. A borrower signed a straight note for a term of eight months in the amount of $2500. If she paid $150 in interest on the loan, the interest rate was: A. 8% B. 9% C. 9% D. 10%

: C. $150 divided by 8 months = $18.75 per month; $18.75 x 12 = $225 per year; $225 divided by $2500 = 9%.

75. Eddie Ronquillo sold his home for $17,200. If this represents 9% more than what he paid for it, the cost of the home was most nearly: A. $15,424 B. $15,500 C. $15,800 D. $16,000

: C. $17,200 divided by 1.09 = $15,779.82 Closest answer is $15,800.

78. A real estate syndicate paid $193,600 for a lot on which they planned to build a high rise apartment. If the lot was 200 feet deep and they paid $4.40 per square foot, the cost per front foot was: A. $220 B. $440 C. $880 D. $960

: C. $193,600 divided by $4.40 = 44,000 square feet of lot; 44,000 divided by 200 feet = 220 feet frontage; $193,600 divided by 220 feet = $880 per front foot.

93. An individual who receives $225.00 per month on a money market savings account that pays 7.5% per year, has invested which of the following amounts? A. $125,000 B. $27,000 C. $36,000 D. $48,000

: C. $225 x 12 = $2700 per year $2700 divided by 7.5% = $36,000 .

54. An individual who receives $225 per month on a money market savings account that pays 7 1/2% per year, has invested which of the following amounts? A. $12,500 B. $27,000 C. $36,000 D. $48,000

: C. $225 x 12 = $2700 per year; $2700 divided by 7.5% = $36,000

11. A husband and wife own a vacation home in the mountains. The annual taxes on the property are $400.00. Since the total taxes cannot exceed 1% of the full cash value of the property, the "full cash value" of the property would be: A. $10,000 B. $20,000 C. $40,000 D. $80,000

: C. $400 divided by 1% = $40,000

27. One month's interest on a straight note amounted to $45. At 4 1/2% per year, what was the face amount of the note? A. $2,025 B. $1,200 C. $12,000 D. $24,000

: C. $45 x 12 = $540 interest/year; $540 divided by .045 = $12,000

83. If Haeli McDonald paid a commission of 6% of the selling price of a property valued at $54,375, the selling broker would receive: A. $4,275.00 B. $3,375.00 C. $3,262.50 D. $3,191.50

: C. $54,375 x 6% = $3262.50

73. Arnold held a straight note which carried an annual interest rate of 8.4%. If in five years he had received $5,460 in interest, the principal amount of the note was: A. $10,000 B. $11,500 C. $13,000 D. $15,000

: C. $5460 divided by 5 = $1092 interest per year; $1092 divided by 8.4% = $13,000

96. A homeowner made a regular monthly payment of $550 on her home loan. Out of the total payment, the lender deducted the interest that was due for the month and applied the remaining balance of $43.85 to the principal. If the outstanding balance of the loan was $56,500, the interest rate on the load was most nearly: A. 8.50% B. 9.25% C. 10.75% D. 12.50%

: C. $550 - $43.85 = $506.15 interest for 1st month $506.15 x 12 = $6073.80 per year $6073.80 divided by $56,500 = 11%.

91. The interest rate on a straight note in the amount of $27,000 that calls for interest payments of $573.75 each quarter would most nearly be: A. 6.6% B. 7.2% C. 8.6% D. 9.2%

: C. $573.75 x 4 = $2295 interest for one year $2295 divided by $27,000 = 0.85 or 8.5% 8.6% is closest.

3. Mr. Brown, licensed broker, took an offer from Mr. Green on land for $6,000 with the following terms: $2,000 down and purchase money trust deed and note for the balance, payable $70 per month including interest at 7.2%. If the offer was accepted by the seller, what is the balance of the loan after the first 3 months payment? A. $3,186 B. $3,467 C. $3,861 D. $3,790

: C. $6,000 price - $2,000 down = $4,000 first trust deed. $4,000 x .006 = $24.00 interest first month. $70 - $24 = $46.00 applied to principal. $4,000 - $46 = $3,954 balance after first month. $3,954 x .006 = $23.72 interest second month. $70 - $23.72 = $46.28 applied to principal. $3954 - $46.28 = $3907.72 balance after second month $3,907.72 x .006 = $23.45. $70 - $23.45 = $46.55 applied to principal. $3,907.72 - $46.55 = $3,861.17.

32. How many acres are contained in a parcel of land 1,320' by 2,640'? A. 40 acres B. 60 acres C. 80 acres D. 120 acres

: C. 1,320' x 2,640' = 3,484,800'; 3.484,800' divided by 43,560' = 80 acres

. 74. Escrow companies normally base their prorations on an escrow year of: A. 350 days B. 355 days C. 360 days D. 365 days

: C. 12 months at 30 days each = 360 days per year.

28. If the interest is paid at a rate of $60 per month and the rate of interest is 8% per year, what is the principal amount of the loan? A. $5,760 B. $8,560 C. $9,000 D. $90,000

: C. 12 months x $60 = $720 interest/year; $720 divided by .08 = $9,000

24. One month's interest on a 5 year straight note amounted to $225.00. At a 7 1/2% per year interest rate, what was the face amount of the note? A. $2,700 B. $1,688 C. $36,000 D. $44,000

: C. 12 x $225 = $2,700; $2,700 divided by .075 = $36,000

26. A man owns an apartment building with 20,000 square feet of living space and wants to carpet 60% of the area. If the carpet costs $6.00 a square yard, what is the total cost of the carpeting? A. $3,996 B. $4,000 C. $7,998 D. $24,000

: C. 20,000 x .60 = 12,000 square feet; 12,000 divided by 9 (9 square feet = 1 square yard) = 1,333 square yards; 1,333 x $6.00 = $7,998

79. A rectangular parcel of land that measures 220' X 330' contains most nearly: A. 1 1/4 acres B. 1 3/5 acres C. 1 2/3 acres D. 2 acres

: C. 220' x 33' = 72,600 square feet; 72,600 divided by 43,560 square feet per acre = 1.67 acres; 1.67 = 1 2/3 acres.

34. A parcel of land 1/4 mile by 1/4 mile is how many acres? A. Ten acres B. Twenty acres C. Forty acres D. Eighty acres

: C. 5280 divided by 4 = 1320; 1320 x 1320 = 1,742,400; 1,742,400 divided by 43,560 = 40 acres

88. The number of townships in a tract of land that is 28 miles square is most nearly: A. Eleven B. Seventeen C. Twenty two D. Fifteen

: C. A township is 6 miles square and contains 36 square miles 28 miles x 28 miles = 784 square miles; 784 divided by 36 = 21.77 townships.

5. Keith Johnson purchased a property at 20% less than the listed price and later sold the property for the original listed price. What was the percentage of profit? A. 10% B. 20% C. 25% D. 40%

: C. Assume that the property was listed at $10,000. Listed price less 20% = $8,000 purchase price. If it was sold at the listed price of $10,000, the owner made $2,000 profit. $2,000 profit divided by $8,000 cost = 25%.

59. A man purchased a property at 20% less than the listed price and later sold the property for the original listed price. What was the percentage of profit? A. 10% B. 20% C. 25% D. 40%

: C. Assume the property was listed at $10,000. Listed price less 20% is $8000 purchase price. If it was sold at the listed price of $10,000, the owner made $2000 profit. $2000 profit divided by $8000 cost = 25%

15. A prospect is considering the purchase of an income property which has an operating statement showing $94,500.00 deducted from gross income to arrive at the net income. The deductions amount to 60% of the gross income. If the prospect wants a 12% return on the purchase price of any investments he makes, what should he pay for the property? A. $81,000 B. $196,000 C. $504,000 D. $720,000

: C. Expenses = $94,500 = 60% of Gross Income or $94,500 = 0.6 x Gross Income $94,500 divided by 0.6 = Gross Income = $157,500 Gross Income - Expenses = Net Income $157,500 Gross income - $94,500 Expenses = $63,000 Net Income Value = Net Income divided by Rate of Return; Value = $63,000 divided by 12% = $36,000 divided by 0.12 = $525,000

36. A building that has interior dimensions of 26' x 30' and has 6" walls would cover how much square footage of land? A. 58 B. 428 C. 837 D. 3,680

: C. L = 26' + 6" + 6" = 27'; W = 30' + 6" + 6" = 31'; 27' x 31' = 837 square feet

2. A duplex with a fair market value of $20,000 and an outstanding loan balance of $12,000 was exchanged for a four-plex with a market value of $35,000 and an outstanding $18,000 loan balance. The owner of the duplex would pay in cash or secondary financing A. $6,100 B. $8,100 C. $9,100 D. $15,100

: C. Market Value - Loan = Equity Duplex $20,000 - $12,000 = $8,000 Four-plex $35,000 - $18,000 = $17,000 Difference in equities amounts to $9,000.

72. The total number of lineal feet on one side of a Section is: A. 1,000 B. 2,640 C. 5,280 D. 43,560

: C. One side of a section is one mile long, or 5280 feet

35. A man bought a home for $31,680 and now wishes to sell. He is informed that the cost of selling will amount to 12% of the selling price. He wishes to sell at a price so as not to have a loss. How much would the home have had to appreciate in order to offset the selling costs? A. $1,080 B. $2,160 C. $4,320 D. $5,400

: C. Selling Price Rule: 100% - (Net divided by %) = Gross Selling Price; 100% - 12% = 88%; $31,680 divided by .88 = $36,000; $36,000 (gross selling price) - $31,680 (purchase price) = $4,320 (appreciation)

71. A property in probate was offered for sale and an offer of $12,000 was received. If anyone else wishes to bid on the property at the time of the confirmation, the initial minimum overbid must be: A. $12,000 B. $13,000 C. $13,100 D. $13,500

: C. The first additional bid (overbid) must be at least the original bid plus 10% of the first $10,000 of the original bid and 5% of any excess. Original bid = $12,000 $10,000 x 10% = $1,000 $2,000 excess at 5% = $100 Total of above = $13,100

13. The Southern Pacific Railroad Company sold ABS Developers three sections of land that had been divided into 20 acre parcels. 16 sold at $4,000 each and the remainder sold at $5,000 each. Which of the following was most nearly the total amount realized by the seller? A. $350,000 B. $358,000 C. $475,000 D. $500,000

: C. Three sections = 3 x 640 acres = 1920 acres; 1920 divided by 20 acres per parcel = 96 parcels; 16 parcels x $4,000 each = $ 64,000; 80 parcels x $5,000 each = $400,000; 96 parcels = $464,000; Closest answer is $475,000

86. If a borrower pays $1650 interest per quarter on a straight note of $60,000, the interest rate would be: A. 8.50% B. 9.00% C. 10.50% D. 11.00%

: D. $1650 = interest for 3 months; $1650 x 4 = $6600 interest for one year; $6600 divided by $60,000 = .11 or 11%.

92. A commercial office building yields an annual net income of $174,000. If an appraiser applied a capitalization rate of 8% to the property, the market value of the property would most nearly be: A. $1,392,000 B. $1,666,000 C. $1,932,000 D. $2,175,000

: D. $174,000 income divided by 8% = $2,175,000.

84. A bank agreed to lend the owner of a piece of property a sum equal to 66 2/3% of its appraised valuation. The interest rate charged on the amount borrowed is 5% per annum. The first year's interest amounted to $200.00. What was the valuation placed upon the property by the bank? A. $3,000.00 B. $4,000.00 C. $5,333.33 D. $6,000.00

: D. $200.00 divided by 5% = $4000 loan $4000 divided by 66.66% = $6000

47. In order to earn $208 per month from an investment that yields a 6% return you would have to invest approximately: A. 12480 B. $20,800 C. $24,960 D. $41,600

: D. $208 x 12 = $2,496; $2,496 divided by 6% = $41,600

87. Maria Watson sold a residence that was free and clear of all liens and received a check for $30,580. If closing costs of $430.60 had been deducted as well as the broker's 6& commission, the actual selling price would have been most nearly: A. $31,590 B. $31,825 C. $32,885 D. $32,990

: D. $30,580.00 (net) + 430.00 (closing costs) + 6% commission = selling price ; $31,010.60 divided by 94% = $32,990.00.

63. Assume a real estate salesman sold a residence for $31,000. If the broker's commission was 6% and the salesman was to receive 45% of the total commission for selling the property, the salesman would receive: A. $837.70 B. $959.95 C. $1,860.00 D. None of the above

: D. $31,000 X 6% =$1860 total commission; 45% of $1860 = $837.00 Choice "A" is close, but not exactly $837.00

7. Assume a real estate salesman sold a residence for $31,000. If the broker's commission was 6% and the salesman was to receive 45% of the total commission for selling the property, the salesman would receive: A. $837.70 B. $959.95 C. $1,860.00 D. None of the above

: D. $31,000 x 6% = $1,860 Total commission $1,860 x 45% = $837.00 Choice "A" is close, but not exactly $837.00

43. Mr. John listed his home with Broker Bob for $35,000. The broker was to receive a commission rate of 6%. The broker brought an offer at 10% less than the listed price. The owner agreed to accept the offer if the broker reduced his commission by 20%. If they all agree to these terms, what amount of commission would the broker receive? A. $812 B. $1,012 C. $1,312 D. $1,512

: D. $35,000 x .10 = $3,500; $35,000 - $3,500 = $31,500; $31,500 x .06 = 1,890; $1,890 x .20 = $378; $1,890 - $378 = $1,512

90. Broker Thomas is listing a property owned by Gibson. Gibson has advised Thomas that he wished to realize $37,000 cash from the sale after paying Thomas a 4% commission and paying $600 in closing costs. To accomplish this and assuming that the property is free and clear, the selling price must be at least: A. $37,856 B. $38,480 C. $39,110 D. $39,167

: D. $37,000 + $600 + 4% = selling price; $37,600 divided by 96% = $39,167

97. A square parcel of land that is 1780' X 1780' contains most nearly: A. 27 acres B. 54 acres C. 65 acres D. 73 acres

: D. 1780' X 1780' = 3,168,400 square feet 3,168,400 divided by 43,560 = 72.736 acres.

89. Clever executed a promissory note in the amount of $7000. If the note called for the payment of interest only and Clever paid off the entire sum in 90 days together with interest of $210, the interest rate on the note was most nearly: A. 9% B. 10% C. 11% D. 12%

: D. 90 = approximately 1/4 of a year $210 interest for 90 days x 4 = $840 interest for one year $840 divided by $7000 = 12%.

61. A board foot of lumber could be obtained from a piece of lumber that is: A. 6" X 6" X 1" B. 6" X 12" X 1" C. 12" X 1" X 1" D. 6" X 12" X 12"

: D. A board foot of lumber contains 144 cubic inches of lumber. Choice "D" is the only one that exceeds 144 cubic inches.

4. After subtracting $140.00 escrow fees and 6% commission on gross sales price, a seller receives $13,584.00. What is the selling price? A. $12,770 B. $14,440 C. $14,540 D. $14,600

: D. Selling price (100%) = $13,584 + $140 + 6% 94% = $13,584 + $140 = $13,724 $13,724 divided by 94% = $14,600.

58. After subtracting $140 escrow fees and 6% commission on gross sales price, a seller receives $13,584. What is the selling price? A. $12,770 B. $14,440 C. $14,540 D. $14,600

: D. Selling price (100%) = $13,584 + $140 + 6%; $13,584 + $140 = 94% or $13,724; $13,724 divided by 94% = $14,600

16. Richard Rock sold his residence which was unencumbered. Total deductions in escrow amounted to $215.30 in addition to a broker's commission of 6% of the selling price. The selling price was the only credit item. Richard Rock received a check for escrow amounting to $15,290. The selling price was most nearly: A. $16,200 B. $16,266 C. $16,430 D. $16,495

: D. Selling price (100%) = $15,290 + $215.30 + 6%; $15,290 + $215.30 = $15,505.30 or 94%; $15,505.30 divided by 94% = $16,495

56. Humphreys sold his residence which was unencumbered. Total de- ductions in escrow amounted to $215.30 in addition to a broker's commission of 6% of the selling price. The selling price was the only credit item. Humphreys received a check from escrow amounting to $15,290. The selling price was most nearly: A. $16,200 B. $16,266 C. $16,430 D. $16,495

: D. Selling price (100%) = $15,290 + $215.30 + 6%; $15,290 + $215.30 = $15,505.30 or 94%; $15,505.30 divided by 94% = $16,495

53. Harris obtained a loan in the amount of $20,000 and paid the mortgage lender four discount points and an origination fee of 2%. If the payments on the loan were $163.00 per month, including 8% interest and the average balance over a five year period was $18,500, the gross amount earned by the lender is the 5 years was most nearly: A. $5,100 B. $6,000 C. $7,400 D. $8,600

: D. The lender earned the discount points, origination fee and interest. $20,000 x 4% = $800 in points; $20,000 X 2% = $400 in origination fee; $18,500 X 8% = $1480 annual interest x 5 years = $7400 Total of these three amounts is $8600

amortization table

A schedule of monthly loan payments showing the amount of principal and the amount of interest which comprises each constant payment until the loan is paid in full.

financial calculator

An electronic calculator preprogrammed to perform advanced financial functions needed in real estate transactions.

Prorating insurance

Annual premium ÷ 365 = Daily rate X number of days

Prorate rent

Annual rent income ÷ 365= Daily rent X number of days owed

Prorating property taxes

Annual tax ÷ 365 = Daily rate x Number of days