Real Estate Calculations
A three year insurance policy was purchased on October 20, 2014 at a cost of $360. The property is sold and settlement is held on June 20, 2015. If the insurance is pro-rated at the time of settlement, how much credit will be given to the buyer? A.$0 B.$160 C.$200 D.$360
$0 (calculations for transactions) This is not a math problem, but a reading problem. When insurance is pro-rated, it is always a credit to the seller (since the seller paid for the policy) and a DEBIT or charge to the buyer.
A salesperson sells property listed by another broker for $84,500. If the listing broker is to receive 50% of the 6% commission rate, how much will the salesperson receive if he earns 40% of his broker's share? A.$1,014 B.$1,521 C.$2,535 D.$6,070
$1,014 (calculations for transactions) First, determine the total commission on the sale as follows: $84,500 x 0.06 = $5,070. Next, determine the broker's share of the total commission: $5070 x 0.5 = $2,535. Finally, determine the salesperson's share of the broker's commission: $2,535 x 0.4 = $1,014.
An agent is to receive 5% commission on a piece of property that was listed for $30,000. How much commission would he receive if the owner reduced the selling price by 15%? A.$1,275 B.$1,380 C.$1,500 D.$4,500
$1,275 (calculations for transactions) First, determine the sales price if the listing amount were reduced by 15%. Then, calculate the new expected commission amount: Price Reduction = $30,000 x 0.15 = $4,500 New Price = $30,000 - $4,500 = $25,500 Commission = $25,500 x 0.05 = $1,275
A homeowner is planning to install carpeting in the family room of his house. The area to be carpeted is 30ft by 15ft. The cost for the carpet is $24.50 per sq. yd. There will also be a flat charge of $265 for the installation. How much will the carpeting and installation cost? A.$11,290 B.$10,025 C.$1,490 D.$1,225
$1,490 (general math concepts) First, determine the amount of carpet that will be needed: Area = 30 ft. x 15 ft. = 450 sq. ft. From here, we need to convert this area into square yards: 1 yard = 3 ft. 1 sq. yard = 3 ft. x 3 f.t = 9 sq. ft. Area = 450 sq. ft. / 9 sq. ft = 50 sq. yards. Now, we can add up the total costs for the carpeting: Carpeting cost = $24.50 x 50 = $1,225 Installation costs = $265 Total costs = $1,225 + $265 = $1,490
Under the terms of an FHA loan, a lender agrees to loan 96.5% for the sale of a $46,000 home. The lender is quoting four loan discount points. How much would the seller pay in discount points if he agreed to pay all four points? A.$1,776 B.$1,797 C.$2,300 D.$2,329
$1,776 (lending calculations) Remember that points are computed on the loan amount, not the sales price. Discount points are worth 1% of the loan amount. Loan amount = $46,000 x 0.965 = $44,390 Discount point = $44,390 x 0.01 = $443.90 Total Points = $443.90 x 4 = $1,775.60 Rounded to the nearest dollar, the seller would pay $1,776 if he agreed to all four discount points.
When a homeowner made his current payment of $865, he saw that $800 was applied to interest and the rest was applied to principal. If the interest rate of the loan is 9%, what is the loan balance before this payment is made? Select one: A.$88,888 B.$96,111 C.$106,667 D.There is not enough information to compute the answer
$106,667 (calculations for transactions) First, determine the annual interest from the monthly interest: Annual interest = $800 x 12 = $9,600 interest Annual interest rate = 9% of the total loan So, we know that "something" times 9% will equal $9,600. Therefore, we can use this information to determine the loan balance before the payment was made. 0.09X = $9,600 X = $9,600 / 0.09 = $106,666.66 Rounded to the nearest dollar, we can say that the loan balance was $106,667 before the payment was made.
A house was originally purchased for $20,000. It depreciated 5% each year below the previous year's value. What was the house worth at the end of 3 years? A.$16,387.15 B.$17,147.50 C.$18,000.00 D.$19,000.00
$17,147.50 (calculations for valuation) Note that this particular question formats depreciation in comparison to the previous year's value (not from the original sales price). We can use the depreciation rate to determine the current value as follows: First Year = $20,000 x 0.95 = $19,000 Second Year = $19,000 x 0.95 = $18,050 Third Year = $18,050 x 0.95 = $17,147.50
Taxes are $2,100 per year. The tax rate is $3.00 per $100. The assessed value of the property is 40% of the estimated market value. What is the market value of the property? A.$70,000 B.$90,000 C.$157,000 D.$175,000
$175,000 (property tax calculations) First, calculate the assessed value of the property: Tax rate = $3.00 / $100 = 0.03 Assessed Value = Property Tax / Tax rate Assessed Value = $2,100 / 0.03 = $70,000 assessed value Using this information, we can now determine the market value of the property. 40% x Market Value = Assessed Value 40% x Market Value = $70,000 0.40X = $70,000 X = $70,000 / 0.40 = $175,000 market value.
A lender requires that three months of interest be held in a reserve account for all new construction loans. If a $860,000 loan is made at 8.5% interest, how much interest will the lender require for the reserve account? A.$6,091 B.$7,310 C.$13,401 D.$18,275
$18,275 (general math concepts) Calculate the interest amounts as follows: Annual interest = $860,000 x 0.085 = $73,100 Monthly Interest = $73,100 / 12 = $6,091.67 Reserve amount = $6,091.67 x 3 = $18,275.01 Rounded to the nearest dollar, the lender will require $18,275 in the reserve account.
A property was listed at $155,000. A buyer made a $140,000 offer, which the seller rejected. He then countered at $147,500, which the buyer accepted. The salesperson is to receive 60% of the brokers 5% commission on the sale. What is the commission due to the salesperson? A.$4,650 B.$4,425 C.$4,200 D.$2,950
$4,425 (calculations for transactions) Commissions are calculated based on the SELLING price of the property. We can use this to determine the commission amount: Total Commission = Sales Price x Commission Rate Total Commission = $147,500 x 0.05 = $7,375 This is the total commission paid to the broker. Now, we can use this amount to determine how much is due to the salesperson: Salesperson's Commission = $7,375 x 0.60 = $4,425
Mr. Jones' property is valued at $17,700. It is assessed at $10,000 and taxed at a rate of $0.036 per dollar. If the tax is increased to $0.040 per dollar with the same assessment, how much more will Jones be required to pay? A.$36 B.$40 C.$360 D.$400
$40 (property tax calculations) First, determine the increase in the tax rate: Tax Rate Increase = $0.040 - $0.036 = $0.004 per dollar Now, apply the following formula: Assessed Value x Tax Rate Increase = Total Tax Increase $10,000 x $0.004 = $40 Tax Increase
Each floor of a two-story office building is 10.5 feet high, 18 feet wide, and 54 feet long. How many cubic yards is in the entire building? A.378 B.756 C.10,206 D.20,412
756 (general math concepts) Remember that Volume = Length x Width x Height. Use this formula to calculate the volume of the building in cubic feet: Volume (per floor)= 54ft x 18ft x 10.5ft = 10,206 cubic ft. Volume (entire building) = 10,206 cubic ft. x 2 = 20,412 cubic ft Now, we can convert the volume into cubic yards. 1 cubic yard = 27 cubic ft. Volume = 20,412 cubic ft. / 27 = 756 cubic yd.
A property is purchased for $125,000 with a 20% down payment. When the first month's payment is made, $800 is applied to interest. What is the interest rate on this loan? Select one: A.8.0% B.8.7% C.9.6% D.10%
9.6% (general math concepts) First, determine the loan amount as follows: Loan amount = $125,000 x 0.80 = $100,000 Next, determine the annual interest: Annual Interest = $800 x 12 = $9,600 Finally, determine the interest rate: Interest rate = $9,600 / $100,000 = 0.096 = 9.6%
A property is valued at $170,000. The value of the land is estimated to be $20,000. Based on age-life tables, the improvements have an estimated life of 50 years. What is the estimated value of the property after 5 years? Select one: A.$170,000 B.$155,000 C.$153,000 D.$135,000
$155,000 (calculations for transactions) Remember that you NEVER depreciate the value of land. First, calculate the value of the improvements for the property: Value (improvements) = $170,000 - $20,000 = $150,000 Then, determine the depreciation amount for the property improvements: Depreciation rate = 100% value / 50 years = 2% depreciation rate Depreciation amount = $150,000 x 0.02 = $3,000 per year Total Depreciation = $3,000 x 5 = $15,000 Finally, deduct the total depreciation from the total property value: Current Value = $170,000 - $15,000 = $155,000
A developer has 25 acres, which he plans to sub-divide into 1/2 acre building lots. Of the total tract, he must dedicate 5% for streets, and 15% for recreation and open space. Each lot will sell for $19,560. What is the developer's potential income? A.$978,000 B.$789,375 C.$782,400 D.$391,200
$782,400 (calculations for valuation) First, understand that the total number of acres to develop is 25. Next, deduct the amount of land that will not be sold as a building lot (streets and recreation), or 5 acres. Other property = 5% + 15% = 20% Sold property = 100% - 20% = 80% Sold property = 25 acres x 0.80 = 20 acres Next, calculate the number of 1/2 acre lots that can fit on the development and multiple the number of lots by the selling price: Number of Lots = 20 acres x 2 = 40 lots Profit = $19,560 x 40 = $782,400. If you forgot that these were 1/2 acre lots and multiplied by 20, you may have selected $391,200
A property has a market value of $50,000, is assessed at 18% of market value, and taxed by the county at a rate of $75 per $1000 valuation. If the city received $10 for each $75 of taxes collected by the county, how much does the city receive? A.$56 B.$90 C.$562 D.$900
$90 (property tax calculations) First, determine the amount of taxes collected by the county: Assessed value = $50,000 x 0.18 = $9,000 County Tax rate = $75 / $1,000 = 0.075 County Taxes = $9,000 x 0.075 = $675 Next, we can use this information to determine the amount of taxes received by the city: City Tax rate = $10 / $75 = 0.133 City Taxes = $675 x 0.133 = $89.78 Rounded to the nearest dollar, the city will receive $90 in taxes from the county.
An $80,000 property has a gross income of $10,000 a year. Management fees are $700 annually, and heating is $92 per month. What is the approximate rate of return to the owner? Select one: A.7% B.8% C.10% D.14%
10% (calculations for valuation) First, we must convert all items to a 1 year period of time: Annual heating = $92 x 12 =$1,104 Annual management fees = $700; Total annual expenses = $1,104 + $700 = $1,804. Total net income = $10,000 - $1,804 = $8,196 Finally, we determine the rate of return (capitalization rate) by dividing the net income by the value of the investment. Cap rate = Net Income / value Cap rate = $8,196 / $80,000 = 0.102 = 10.2% Rounded to the nearest percentage, the owner will have 10% rate of return.
An owner receives $42,500 net income from an investment property that is valued at $542,000. What is the investor's capitalization rate? A.7.0% B.7.8% C.8.0% D.12.75%
7.8% (calculations for valuation) The formula is as follows: Capitalization rate = Net Operating Income / Property Value; Capitalization rate = $42,500 / 542,000 = 0.078 Capitalization rate = 0.078 = 7.8%
A $90,000 property has a gross income of $10,000 a year. Management fees are $800 annually, and heating is $85 per month. What is the approximate rate of return to the owner? A.7% B.8% C.9% D.12%
9% (calculations for valuation) First, calculate the annual expenses for the property: Heating = $85 x 12 = $1,020 annually Annual Expenses = $800 + $1,020 = $1,820 Then, use this information to calculate the rate of return NOI = $10,000 - $1,820 = $8,180 Cap Rate = $8,180 / $90,000 = 0.0909 = 9% rate of return
A property sold for $162,500, and the seller agreed to pay a 6.5% commission to the broker. He also had to pay off an existing loan of $86,250 and the closing costs were $3,750. What did the seller NET from the sale of the property? A.$148,187.50 B.$76,250.50 C. $65,687.50 D.None of the above
None of the above (calculations for transactions) First, list out all of the payouts: Commission amount = $162,500 x 0.065 = $10,562.50 Existing Loan = $86,250 Closing Costs = $3,750 Now, we can determine the net profit by deducting the total payments from the selling price: Total Payments = $10,562.50 + $86,250 + $3,750 = $100,562.50 Net Profit = $162,500 - $100,562.50 = $61,937.50 Therefore NONE OF THE ABOVE is the correct answer.
A property sold for $84,500 with a settlement date of August 1st. The property's tax assessment was $12,000 for the land and $59,500 for the improvements. Tax payments are due on January 1st and July 1st for the calendar year. Only the January 1st payment was made. If the tax rate is $2.69 per hundred, which of the following statements is true? Select one: A.Seller receives $189.42; Buyer owes $189.42 B.Buyer receives $189.42; Seller owes $189.42 C.Seller receives $160.28; Buyer owes $160.28 D.Buyer receives $160.28; Seller owes $160.28
buyer receives $160.28; seller owes $160.28 (calculations for transactions) The seller owes 1 month of taxes and the buyer receives 1 month of taxes: Assessed value = $12,000 + 59,500 = $71,500; Tax rate = $2.69 / $100 = 0.0269 Tax amount (annual) = $71,500 x 0.0269 = $1,923.35 Tax amount (per month) = $1,923.35 / 12 = $160.28 Therefore, the buyer receives and seller owes $160.28
A property was purchased for $125,000 with a down payment of $25,000. The current loan amount is $94,000, and the appraised value is $132,400. What is the owner's equity? Select one: A.$31,400 B.$37,400 C.$38,400 D.There is not enough information to answer
$38,400 Equity is defined as the difference between value and the debt associated with the property. Expressed another way: Equity = Value - Debt. Value = $132,400; Debt = 94,000; Equity = $132,400 - $94,000 = $38,400.
Ben and Becky purchased a home for $250,000. They have an LTV of 80%. How much of a down payment did Ben and Becky make? A.$100,000 B.$50,000 C.$25,000 D.$10,000
$50,000 (lending calculations) To find the total loan amount, multiply the Sales Price by the LTV: Loan amount = $250,000 x 0.80 = $200,000. Next, we can determine the down payment by subtracting the sales price from the loan amount: Downpayment = $250,000 - $200,000 = $50,000
An eligible VA buyer applies for a VA loan. What is the maximum amount that a lender will loan based on the following information: (i) Selling Price of property: $102,500; (ii) CRV by VA appraiser: $104,300; and (iii) County Assessed value: $96,200? Select one: A.$96,200 B.$102,500 C.$104,300 D.$184,000
$102,500 (lending calculations) This is not really a math problem. Lenders establish their loan-to-value ratios on the basis of the selling price or the appraised value, whichever is LOWER. The maximum amount that a lender will loan in this situation is $102,500, which is the appraised value.
Tom built a 28' by 140' single-story home. The average cost of construction was $11.25 per square foot. What is the total cost of the house? Select one: A.$441,000 B.$63,250 C.$44,100 D.$4,410
$44,100 (general math concepts) First, determine the square footage as follows: 28' x 140' = 3920 square feet. Next, multiply the square footage by the average cost per square foot as follows: $11.25 x 3,920 = $44,100
After Pruitt sold his house, the selling price ended up being 23% more than the original cost of $52,500. What was the selling price of his house? A.$55,750 B. $60,350 C.$62,525 D.$64,575
$64,575 (general math concepts) Use the information given to determine the selling price of the property: Selling Price = 100% Original Price + 23% Original Price = 123% Original Price Selling Price = X + 0.23X = 1.23X Selling Price = 1.23 x $52,500 = $64,575
Murphy is going to buy 2 parcels of land. One piece of land contains 3.5 acres and a second is 0.5 square miles in area. If the price is $2,000 per acre, what would Murphy have to pay for both parcels? A.$7,000 B.$628,540 C.$647,000 D. $777,560
$647,000 (general math concepts) First, determine the cost of the first parcel as follows: 3.5 acres x $2,000 per acre = $7,000. Next, understand that 1 sq. mi. = 640 acres. Now, apply these figures as follows: 640 acres / 2 = 320 acres in the 2nd parcel; 320 x $2,000 = $640,000 for the 2nd parcel; $7,000 + $640,000 = $647,000. Therefore, Murphy had to pay $647,000 for both parcels.
Harry the Homeowner buys a new home. The purchase is financed with a conventional, amortized loan equal to $67,000. The interest rate on the loan is 8%, payable over 30 years. Harry's first monthly payment is $500. What is the loan balance after Harry's first payment? A.$60,000.00 B.$64,557.00 C.$65,088.65 D.$66,946.67
$66,946.67 (lending calculations) First, you must calculate the annual and monthly interest as follows: Interest (annual) = $67,000 x 0.08 = $5,360 Interest (monthly) = $5,360 / 12 = $446.67. Next, deduct Harry's monthly payment from the monthly interest to determine the principal amount, and then the new loan balance: Principal = $500 - $446.67 = $53.33. Loan balance = $67,000 - $53.33 = $66,946.67.
Jill owns a lot that is 1,600 square feet. The lot is 80 feet in length. What is the width of her lot? A.10 feet B.20 feet C.30 feet D.40 feet
20 feet (general math concepts) Determine the width of Jill's lot as follows: Area = Length x Width Width = Area / Length Width = 1,600 sq. ft / 80 ft. = 20ft.
A borrower paid $4,550 interest on a $16,000 interest-only, 10% note. What was the term of the loan? A.24 months B.29 months C.34 months D.39 months
34 months (general math concepts) First, calculate the amount of interest that is paid in each interest-only payment. Interest (annual) = $16,000 x 0.10 = $1,600 Interest (monthly) = $1,600 / 12 = $133.33 From here, we can determine the number of monthly payments (the loan term): Number of payments = $4,550 / $133.33 per month = 34.12 months The closest, and therefore the best, answer is 34 months
Joel is interested in an $80,000 property and is qualified for a $60,000 loan. What would Joel's LTV be? A.33% B.50% C.70% D.75%
75% (lending calculations) To determine the Loan-to-Value Ratio (LTV), use the following formula: LTV = Loan amount / Property value LTV = $60,000 / $80,000 = 0.75 = 75%
Which of the following formulas is used to determine annual real estate taxes? A.Sales price x Tax rate B.Assessed value x Tax rate C.Appraised value x Tax rate D.Market value x Tax rate
Assessed value x Tax rate (property tax calculations) Annual taxes are calculated by this formula: ANNUAL TAXES = ASSESSED VALUE x TAX RATE. Market value, sales price, and appraised value are determined by other elements.
Property sold for $168,000. There was an existing 1st mortgage in the amount of $75,000. The seller paid 6% commission and $2,100 in closing costs. What was the seller's net proceeds from the sale of his property? A.$165,900 B.$93,900 C.$90,900 D.None of the above
None of the above (calculations for transactions) In order to find the net profit, we need to subtract the seller's pay-outs from the total selling price: Total Commission = $168,000 x 0.06 = $10,080 Profit = Sales Price - Existing Debt - Closing Costs - Total Commission Profit = $168,000 - $75,000 - $2,100 - $10,080 = $80,820
Which of the following options will net the greatest amount to the seller at closing? A.Sale Price: $54,000; Commission: 6%; Expenses: $510 B.Sale Price: $55,530; Commission: 6%; Expenses: $1,900 C.Sale Price: $55,670; Commission: 7%; Expenses: $975 D.Sale Price: $56,300; Commission: 7%; Expenses: $1,360
Sale Price: $56,300; Commission: 7%; Expenses: $1,360 (calculations for transactions) First, determine the net percentages as follows: Net for a 6% Commission = 100% - 6% = 94% of the sale price; Net for a 7% Commission = 100% - 7% = 93%. of the sale price. Next, apply these percentages to the figures as follows: Net profits = (Sales price x Net Percentage) - Expenses; A. $54,000 x 0.94 - $510 = $50,250.00 B. $55,530 x 0.94 - $1,900 = $50,298.20 C. $55,670 x 0.93 - $975 = $50,798.10 D. $56,300 x 0.93 - $1,360 = $50,999.00 Finally, choose the greatest amount ($50,999).
A house was purchased for $86,000. The lender required a 20% down payment and charged the buyer 3 points. How much is the buyer required to pay for points in this loan? A.$2,580 B.$2,100 C.$2,064 D.None of the above
$2,064 (lending calculations) First, we need to determine the loan amount: Loan Amount = $86,000 x 0.80 = $68,800 loan Now, we can determine the amount of money required for three discount points. Remember that a discount point is worth 1% of the loan amount (NOT the selling price): Discount points = $68,800 x 0.03 = $2,064
A purchaser agrees to buy a house for $47,000, obtaining a 90% loan. The buyer makes an earnest money deposit of $2,500. If the closing costs are $225, how much will the buyer need to bring to the closing? A.$2,425 B.$4,700 C.$44,550 D.$47,000
$2,425 (general math concepts) First, determine the loan amount and downpayment amount: Loan amount = $47,000 x 0.90 = $42,300 Downpayment = $47,000 - $42,300 = $4,700 Now, deduct the earnest money deposit and add in the closing costs Total Needed = $4,700 - $2,500 + $225 = $2,425
Sara is purchasing a home. How much should Sara put down if she agrees to pay $80,000 for a house and wants to make a mortgage down payment of 25%? A.$15,000 B.$20,000 C.$25,000 D.$30,000
$20,000 (general math concepts) Determine Sara's down payment as follows: House cost x Percentage = Down payment; $80,000 x 0.25 (25%) = $20,000
Real estate taxes for each fiscal year are due on June 30th. The seller hadn't yet paid taxes because the property sells and closes on April 15th (before the bill is due). If the annual property taxes are $2,580, what is the settlement sheet entry for the proration of taxes? Select one: A.Credit to buyer: $2042.50 B.Debit to buyer: $2042.50 C.Debit to seller: $537.50 D.Credit to seller: $537.50
credit to the buyer $2042.50 (calculations for transactions) The buyer will get a credit since taxes for the year have NOT been paid. When the bill comes, the buyer will be in possession of the property and will have to pay the full amount, though he has only lived there for 2-1/2 months (1/2 Apr, May, and June). As such, the seller is DEBITED (charged) and the buyer is CREDITED for the previous months: Monthly Taxes = $2,580 / 12 = $215 Buyer's total taxes = $215 x 2.5 = $537.50 Reimbursement = $2,580 - $537.5 = $2,042.50 credit to buyer The seller would have a debit for the same amount, but that is NOT one of your choices.
A property's $784 insurance premium is due on October 2. The deed conveys title at closing on July 15. The insurance is being assigned to the buyer. How much does the buyer owe for insurance? Select one: A.$176.63 B.$233.02 C.$616.31 D.None of the above
none of the above (calculations for transactions) As a rule of thumb for prorations, assume a 30 day month and a 360 day year (known as a banker's year). This type of accounting is referred to as the "statutory method". Another method of calculation is to use the "actual number of days method", which assumes a 365 day year. With the default rule, we can calculate the insurance rate as follows: Insurance Rate = $784 / 360 days = $2.18 per day insurance Number of days = 77 days (assuming a 30 day month) Insurance due = $2.18 x 77 = $167.86
A seller wants to sell his property and net $14,000 from thA seller wants to sell his property and net $14,000 from the proceeds of the sale. He must pay off his existing mortgage debt of $83,500, closing costs of $3,250, and has agreed to pay a 7% commission to his broker. How much must the property sell for to realize that $14,000? A.$108,333 B.$107,803 C.$104,839 D.$100,750
$108,333 (calculations for transactions) Start by adding all of the pay-outs: Existing mortgage = $83,500; Pay closing costs = $3,250; Seller's desired net =$14,000. Amount required (not including commission) = $83,500 + $3,250 + $14,000 = $100,750. In addition, the broker will receive a 7% commission on the sales price. Using that information, we can assume that $100,750 is 93% of the selling price. 100% - 7% = 93% So, we know that "something" times 93% is equal to $100,750. 0.93X = $100,750 Therefore, dividing $100,750 by 93% will allow us to figure out what that "something" is. X = $100,750 / 0.93 X = $108,333
Paul purchased a home for $150,000. He obtained a 9.5% interest, 30-year loan for $120,000. The monthly payment is $1,009.03. What is the balance of Paul's loan after the second payment has been made? A.$120,071.32 B.$119,881.47 C.$118,990.97 D.$117,981.94
$119,881.47 (calculations for transactions) First, we need to determine the interest and principal paid during Paul's initial payment: Annual interest = $120,000 x 0.095 = $11,400 annual interest Monthly interest = $11,400 / 12 = $950 monthly interest Monthly principal = $1,009.03 - $950 = $59.03 principal. Loan Balance = $120,000 - $59.03 = $119,940.97 new balance Now, we need to use the new balance to determine the interest and principal during the second month's payment: Annual interest = $119,940.97 x 0.095 = $11,394.39 annual interest Monthly interest = $11,394.39 / 12 = $949.53 monthly interest Monthly principal = $1,009.03 - 949.53 = $59.50 principal Loan Balance = $119,940.97 - $59.50 = $119,881.47 new balance
Using a Gross Rent Multiplier of 120, what is the value of a property that generates $12,000 annual income? A.$120,000 B.$130,000 C.$150,000 D.None of the above
$120,000 (calculations for valuation) The GRM is calculated as value divided by monthly rental income. From there, you can determine that Value = GRM factor x Monthly income. Monthly income = $12,000 / 12 = $1,000; Value = 120 x $1,000 = $120,000 value.
A man buys a house for $11,000. In the years following his purchase, the value of his house appreciates 45%, then decreases 11.5% below the high point. What is the current value of the house? A.$14,116 B.$14,575 C.$15,950 D.$18,342
$14,116 (calculations for transactions) First, calculate the appreciated value and depreciation amounts: Appreciated value = $11, 000 x 1.45 (145%) = $15,950. Depreciation: $15,950 x 0.115 = $1,834.25. From here, we can determine the current value of the property: Current value = $15,950 - $1,834.25 = $14,115.75. Rounded to the nearest dollar, the current value of the house is $14,116.
A house sold for $140,000 and the buyer made a 20% down payment. Assuming a rate of $1.00 per $1,000, the grantor's tax would be: Select one: A.$28, based on the down payment B.$112, based on the loan amount C.$140, based on the selling price D.None of the above
$140, based on selling price (calculations for transactions) The grantor's tax (also known as the transfer tax) is based on the selling price of the property. Calculate the Grantor's tax as follows: Tax rate = $1 / $1,000 = 0.001 Grantors's Tax = Sales Price x Tax Rate Grantor's Tax = $140,000 x 0.001 = $140.
A homeowner has a 95% PMI loan. If the loan balance is $60,000, what is the PMI insurance for the third year of the loan? Select one: A.$75 B.$150 C.$300 D.$600
$150 (general math concepts) This is a really tough question because you must supply a missing assumption. PMI insurance premiums vary between the insurance company and the policy of the lender. However, the general rule is that PMI is 0.25% of the loan amount: $60,000 x 0.0025 = $150 This questions demonstrates that a person may come across unfamiliar information on the licensing exam.
A broker's contract to sell a building includes a 6% fee on the first $10,000 and a 2.50% fee on everything over that amount. The broker's total fee was $760. What was the sales price? A.16,000 B.16,400 C.17,000 D.17,400
$16,400 (calculations for transactions) First, calculate the commission on the first $10,000 of the sales price: Commission on the first $10,000 = $10,000 x 0.06 = $600 Next, subtract the initial commission from the total fee. This is the amount of commission due for any price over $10,000. Remaining commission = $760 - $600 = $160 We know that anything over 10,000 is priced at a 2.5% commission. Therefore, we can use this information to determine the sales price: Sales price x 0.025 = Remaining commission 0.025X = $160 X = $160 / 0.025 = $6,400 Finally, we add up the initial $10,000 and the remaining sales price to determine the total price for the property: Total Sales Price = $10,000 + $6,400 = $16,400
A new property was valued at $179,000 with an estimated life of 50 years. The value of the land has been estimated at $19,000. After allowing for depreciation, what is the total value of the property at the end of 5 years? Select one: A.$163,000 B.$161,100 C.$144,000 D.$106,000
$163,000 (calculations for valuation) Remember that you can ONLY depreciate the value of improvements: Total Value - Land Value = Property Value (improvements) Property Value (improvements) = $179,000 - $19,000 = $160,000 Now, the question did not tell us the rate of depreciation, but we can determine that information since we know the property's estimated life: 1 year Depreciation = 1 year / 50 years = 0.02 = 2% depreciation 5 years Depreciation = 2% x 5 = 10% depreciation Now that we know the amount of depreciation, we can calculate the depreciated property values: 5 years Depreciation = $160,000 x 0.10 = $16,000 Depreciated value (improvements) = $160,000 - $16,000 = $144,000 Total Depreciated value = $144,000 + $19,000 = $163,000
A house was purchased for $75,000. The lender requires a 20% down payment and will charge the buyer 3.5 points. How much is the buyer required to pay at closing? A.$2,100 B.$2,625 C.$17,100 D.$18,425
$17,100 (lending calculations) First, calculate the amount of the loan: Downpayment = $75,000 x 0.20 = $15,000 Loan amount = $75,000 - $15,000 = $60,000 Next, calculate the cost of the points as follows. Remember that one point is considered to be 1% of the loan amount. So, 3.5 points would be 3.5% of the loan amount: $60,000 x 0.035 = $2,100. Finally, in order to know how much the buyer should bring to closing, we need to add the downpayment to the cost for the points: Total needed: $15,000 + $2,100 = $17,100
Betty makes a down payment of $20,000 for a house that costs $80,000. What percentage of the house price is her down payment? A.15% B.20% C.25% D.27%
25% (general math concepts) Determine Betty's percentage as follows: Down payment percentage = Down payment / House cost Down payment percentage = $20,000 / $80,000 = 0.25 = 25%
A property is worth $12,000, and its furniture and household goods are worth $4,000. The owner insures them both for 80% of their value. The annual rate on the dwelling is $2.80 per $1,000, and the furniture and household goods are $3.30 per $1,000. If the premium for a three-year policy is 2-1/2 times the premium for one year, what savings would be affected by taking out a 3-year policy? A.$10.56 B.$18.72 C.$28.88 D.$37.44
$18.72 (general math concepts) Let's separate this into an easy to read format. First, determine the annual premium for the real property: Insured Property Value = $12,000 x 0.80 = $9,600 Rate for Insured Property = $2.80 / $1,000 = 0.0028 Premium for Insured Property = $9,600 x 0.0028 = $26.88 Next, determine the annual premium for the household goods: Insured Goods Value = $4,000 x 0.80 = $3,200 Rate for Insured Goods = $3.30 / $1,000 = 0.0033 Premium for Insured Goods = $3,200 x 0.0033 = $10.56 Now, we can figure the premium for a 1 yr policy and for a 3 yr policy: Premium for a 1-year policy = $26.88 + $10.56 = $37.44 Premium for a 3-year policy = $37.44 x 2.5 = $93.60 Finally, we can use these numbers to determine the amount of savings: Premium for three 1-year policies = $37.44 x 3 = $112.32 Total savings = $112.32 - $93.60 = $18.72
A house sells for $54,000 and is assessed at $39,400. Annual taxes are calculated at $0.92 per $100 and are paid every 6 months. What is the semi-annual tax bill? A.$496.80 B. $363.40 C.$248.40 D.$181.24
$181.24 (property tax calculations) First, write out the key information: Property tax (annual) = Assessed value x Tax rate Assessed value = $39,400 Tax rate = $0.92 / $100 = 0.0092 From here, we can use this information to determine the semi-annual tax bill: Property tax (annual)= $39,400 x 0.0092 = $362.48 Property tax (semi-annual) = $362.48 / 2 = $181.24
A property sold for $188,000. The broker's commission rate was 5%. The salesperson is to receive 70% of the total commission. How much will the broker net from this sale? Select one: A.$9,400 B.$6,580 C.$2,820 D.None of the above
$2,820 (calculations for transactions) Calculate the commission rates as follows: Total Commission = $188,000 x 0.05 = $9,400 Seller's Commission = $9,400 x 0.70 =$6,580 Broker's Commission = $9,400 - 6,580 = $2,820 Remember that the question asks how much the BROKER will net.
Jill's property sells for $150,000. The state transfer tax is $1 per $1,000 and the county transfer tax is $0.50 per $1,000. How much must Jill pay in total transfer taxes? A.$175 B.$200 C.$225 D.$250
$225 (calculations for transactions) Transfer taxes are calculated by the following formula: Total Transfer Tax = (Sales Price x State Tax) + (Sales Price x County Tax) State Tax = $1 / $1000 = 0.001 County Tax = $0.50 / $1000 = 0.0005 From here, we can add this information into the Transfer Tax Formula: Total Transfer Tax = ($150,000 x 0.001) + ($150,000 x 0.0005) Total Transfer Tax = $150 + $75 = $225
A property was sold and appraised for $156,000. The assessed value of the property is based on 50% of the appraised value. What are the annual taxes on this property if the local tax rate is $3.00 per $100 value? A.$468 B.$864 C.$1,170 D.$2,340
$2340 (property tax calculations) First, write out the key information: Tax rate = $3.00 / $100 = 0.03 Assessed value = $156,000 x 0.50 = $78,000 From here, we can use the supplied information to calculate the annual taxes for the property: Annual Taxes = Assessed value x Tax rate Annual Taxes = $78,000 x 0.03 = $2,340
A lady buys a house for $25,000. In the years after her purchase, the value of her house appreciates 35%, then decreases 6.25% below this high point. What is the current value of the house if rounded to the nearest dollar? A.$31,641 B.$32,350 C.$36,251 D.$39,342
$31,641 (calculations for valuation) To determine the highest value of the property, use the following calculations: Value = (1 x $25,000) + (0.35 x $25,000) = $25,000 + $8,750 = $33,750 As an alternative, one can also use the following shortcut: Value = 1.35 x $25,000 = $33,750 From there, we can calculate the later depreciation to reach the current value for the property: Depreciation = $33,750 x 0.0625 = $2,109.38 Current Value = $33,750 - $2109.38 = $31,640.62 Rounded to the nearest dollar, $31,641 is the current value of the property.
The current value of Pete and Martha's home, minus the lot, is $125,000. What did Pete and Martha originally pay, assuming the home depreciated 6% per year for the past 10 years? A.$310,560 B.$312,500 C.$355,000 D.$376,655
$312,500 (calculations for valuation) First, calculate the total depreciation as follows: Total depreciation = 6% per year x 10 years = 60% depreciation From here, we can determine the percentage that is left from the original home value: Current value = 100% Original cost - 60% Depreciation = 40% Original cost Current value = X - 0.60X = 0.40X Finally, we can use this information to determine the Original value of the home: Current value = 40% Original cost = $125,000 Current value = 0.40X = $125,000 X = $125,000 / 0.40 = $312,500 Original cost
Carolyn buys a home for $122,000, agreeing to the lender's terms of a 75% loan and two loan discount points. How much money does Carolyn need to bring to settlement? A.$1,830 B.$30,000 C.$32,220 D.$32,330
$32,330 (lending calculations) Carolyn has to pay the down payment plus the points at settlement. Therefore: Loan amount = $122,000 x 0.75 = $91,500 Discount points = $91,500 loan x 0.02 = $1,830 Down payment = $122,000 - $91,500 = $30,500 Total required at settlement = $30,500 + $1,830 = $32,330
A property sold for $40,625, with an 80% LTV and at 9% interest rate. If the monthly payment is $325, what is the remaining balance on the loan at the end of two months? A.$40,605 B.$40,584 C.$32,419 D.$32,337
$32,337 (general math concepts) First, determine the full loan amount, interest payments, and principal for the initial payment: Loan amount = $40,625 x 0.80 = $32,500 Interest (annual) = $32,500 x 0.09 = $2,925 Interest (monthly) = $2,925 / 12 = $243.75 Principal = $325 - $243.75 = $81.25 Loan balance = $32,500 - $81.25 = $32,418.75 Now, determine the interest, principal, and balance for the second month's payment: Interest (annual) = $32,419.75 x 0.09 = $2,917.69 Interest (monthly) = $243.14 Principal = $325 - $243.14 = $81.86 Loan balance = $32,418.75 - $81.86 = $32,336.89 Rounded to the nearest dollar, the remaining balance after the second payment is $32,337.
A property was purchased for $125,000 with a down payment of $25,000. The current loan balance is $94,000 and the appraised value is $132,400. What is the owner's equity? A.$31,400 B.$37,400 C.$38,400 D.None of the above
$38,400 Equity is the difference between the stated value of property and the debt directly associated with the property. In this case, the value is $132,400 and the debt is $94,000. Equity = $132,400 - $94,000 = $38,400
A house is sold for $47,000, with a 75% loan for 25 years. The interest rate is 0.75% per month. A principal and interest payment of $288 is made every month. What is the total interest paid during the life of the loan? A.$35,250 B.$39,400 C.$79,313 D.$51,150
$51,150 (calculations for transactions) First, let's figure out some key information: Total loan = $47,000 Sales Price x 75% = $35,250 loan (principal) Monthly payment (principal and interest) = $288 per month. The problem tells us that the monthly payment is $288 per month and that the life of the loan is 25 years. Using this information, we can calculate the total paid to the bank over the life of the loan. Total number of payments = 25 x 12 = 300 payments Total amount paid = $288 x 300 = $86,400 From here, we can find the total interest by subtracting the loan principal from the total amount paid over the life of the loan. Total interest = $86,400 - 35,250 = $51,150
What is the sales price of the property if the loan-to-value ratio (LTV) is 80%, the buyer puts 20% down, and then pays $1,000 in cash for two points? Select one: A.$50,000 B.$55,750 C.$62,500 D.$70,000
$62,500 (lending calculations) First, calculate the loan amount using the discount point information. Remember that a point is equal to 1% of the loan amount. 2 points = 2% of the loan amount = $1,000 0.02X = $1,000 X = $1,000 / 0.02 = $50,000 loan amount Next, note that the loan amount is 80% of the sales price. Use this to determine the full sales price for the property: 80% Sales Price = loan amount 0.80Y = $50,000 Y = $50,000 / 0.80 = $62,500 sales price
A term loan is 75% of the property appraisal. The annual interest rate on the loan is 8% and the interest for the first year is $3,870. What was the amount of the appraisal? A.$30,960 B.$41,280 C. $64,500 D.$72,000
$64,500 (general math concepts) First, we can use the interest rate information to determine the loan amount: Loan amount x 0.08 = $3,870 annual interest 0.08X = $3,870 X = $3,870 / 0.08 = $48,375 loan amount Now that we know the loan amount, we can determine the appraised value of the property: Appraised value x 0.75 = $48,375 0.75Y = $48,375 Y = $48,375 / 0.75 = $64,500 appraised value
A homeowner is having carpeting installed in his home. The area to be carpeted is 16'6" x 15'. The cost of the carpet is $19.95 per square yard and the pad is an additional $5.00 per square yard. How much will it cost to install the carpeting? A.$548.63 B.$686.13 C.$2,058.39 D.$6,175.13
$686.13 (general math concepts) First, we need to find the amount of carpet that needs to be installed: Area = 16.5ft x 15 ft.= 247.5 sq. ft Next, we need to convert this information into square yards: 1 yard = 3 ft. 1 sq. yard = 3ft. x 3 ft. = 9 sq. ft Area = 247.5 sq ft. / 9 sq. ft. = 27.5 sq. yards Now, we can determine the amount that it will cost to install the carpet. Price = $19.95 + $5 per sq. yard = $24.95 per sq. yard Price = $24.95 x 27.5 = $686.125 Rounded to the nearest amount, this it will cost $686.13 to install the carpeting.
A seller is willing to pay a 6% commission if the broker can sell the house at a high enough price to pay off the existing $75,300 loan and allow the seller to clear $10,000 cash on the deal. To the nearest dollar, how much must the property sell for to reach these goals? A.$90,745 B.$90,418 C.$85,300 D.$80,106
$90,745 (calculations for transactions) First, let's list out the key information: Amount needed to pay off loan = $75,300 Amount to give seller in cash = $10,000 Total amount needed (before commission) = $75,300 + $10,000 = $85,300 The seller is going to give the broker a 6% commission. From here, we can assume that the amount needed is 94% of the Sales Price. 100% - 6% = 94% Now, we know that "something" times 94% is equal to $85,300. 0.94X = $85,300 Therefore, dividing $85,300 by 94% will let us know what that "something" is. X = $84,300 / 0.94 X = $90,744.68 Rounded to the nearest dollar, the seller needs to sell the property for $90,745
A seller wishes to net $60,000 on the sale of his house after paying off his $32,000 loan balance and a 6% broker commission. What is lowest possible selling price that will give the seller his desired net? A.$97,520 B.$97,759 C.$97,872 D.$98,233
$97,872 (calculations for transactions) Start by adding all of the pay-outs: Existing mortgage = $32,000; Sellers desired net =$60,000. Amount required (not including commission) = $32,000 + $60,000 = $92,000 In addition, the broker will receive a 6% commission on the sales price. Using that information, we can assume that $92,000 is 94% of the selling price. 100% - 6% = 94% So, we know that "something" times 94% is equal to $92,000. 0.94X = $92,000 Therefore, dividing $92,000 by 94% will allow us to figure out what that "something" is. X = $$92,000 / 0.094 X = $97,872.34 Rounded to the nearest dollar, the seller should sell the house for at least $97,872 in order to make his desired net profit. You can prove your answer as follows: $97,872 x 6% = $5,872 commission; $97,872 - $5,872 = $92,000; $92,000 - $32,000 (to pay off old loan) = $60,000 for the seller.
A homeowner makes monthly mortgage payments of $994.32. When the current payment was made, $871.40 was applied to interest and the rest of the balance was applied to principal. If the loan interest rate is 10-5/8%, what was the balance of the loan when the payment was made? A.$82,014.12 B.$87,140.00 C.$98,416.94 D.$104,568.00
$98,416.94 (calculations for transactions) The term of the loan is NOT required to answer the question. The following equation solves the problem: Annual Interest = Monthly Interest x 12 Annual Interest = $871.40 x 12 = $10,456.80 Convert the loan interest rate to a decimal format: Interest Rate = 10-5/8% = 10.625% = 0.10625 Now, we can use these numbers to calculate the loan balance at the time: Interest paid = Loan Balance x Interest rate Loan Balance = Interest Paid / Interest Rate Loan Balance = $10,456.80 / 0.10625 = $98,416.94
Fabian owns a lot that measures 80 feet by 20 feet. What is the area of his lot? A.1,200 square feet B.1,400 square feet C.1,500 square feet D.1,600 square feet
1,600 sq ft (general math concepts) Determine Fabian's area as follows: Area = length x width Area = 80ft x 20ft = 1,600 sq. ft.
How many acres are in a square parcel of land if one side is 1/2 mile long? A.640 B.480 C.320 D.160
160 (general math concepts) First, calculate the square footage of the property. Note that as a square piece of property, each side will be 1/2 miles in length. Area = length x width Area = 1/2 miles x 1/2 miles = 1/4 sq. mile = 0.25 sq. mile Now, convert this area into acres, as follows: 1 square mile = 640 acres Area = 0.25 square miles x 640 acres/sq. mile = 160 acres.
Bob and Sue make a combined annual income of $80,000 and pay $1,200 in monthly rent. What percentage is the rent of Bob and Sue's annual income? A.17% B.18% C.25% D.33%
18% (general math concepts) First, determine the annual rent as follows: Annual rent = $1,200 x 12 = $14,400. Next, determine the percentage of the annual rent to Bob and Sue's annual income as follows: $14,400 / $80,000 = 0.18 0.18 = 18%
When the grantor's tax is calculated, how does the tax amount appear on the settlement sheet? A.Debit the buyer; credit the seller B.Debit the seller; credit the buyer C.Credit the seller only D.Debit the seller only
Debit the seller only. (tax aspects) The grantor's tax is paid by the seller because the seller is the grantor. The correct answer is: Debit the seller only
A developer owns four parcels of land. He plans to sell one parcel for construction of an office building. The building plans will require 2 acres, which will include the actual building, landscaping, and parking. Which of the following choices is the smallest parcel that would accommodate this construction? A.Parcel A: 83 feet x 950 feet B.Parcel B: 102 feet x 840 feet C.Parcel C: 120 feet x 860 feet D.Parcel D: 140 feet x 900 feet
Parcel C: 120 ft x 86 ft (general math concepts) First calculate the area needed for the construction: 2 acres x 43,560 (sq. ft. per acre) - 87,120 sq. ft. Then calculate the square footage of each of the lots. 83 x 950 = 78,850; This lot is too small. 102 x 840 = 85,680; This lot is too small. 120 x 860 =103,200; This lot is large enough. 140 x 900 =126,000; This lot is large enough. The question asks which is the smallest lot that would accommodate the construction. Therefore, the answer is Parcel C.
Jimmie the Gent is interested in property valued at $450,000. Jimmie will qualify for a $375,000 loan. However, Jimmie refuses to purchase if his LTV would fall under 80%. Is Jimmie likely to purchase the property? A.Yes, the LTV is within Jimmie's range B.No, unless Jimmie qualifies for another $2,000 C.Yes, so long as Jimmie qualities for another $10,000 D.No, unless Jimmie qualified for another $10,000
Yes, the LTV with the LTV in question (lending calculations) First, determine the LTV from the information supplied. LTV = Loan Amount / Property Value LTV = $375,000 / $450,000 = 0.83 LTV = 0.83 = 83% Now, compare Jimmie's minimum LTV with the LTV in question.
A property was sold and its closing was on May 15th. The taxes for the current year had NOT been paid. Annual taxes are $3,096. What is the settlement sheet entry to prorate the tax between buyer and seller? A.Buyer: $1,161 debit; Seller: $1,161 credit B.Buyer: $1,161 credit; Seller: $1,161 debit C.Buyer: $1,161 credit; Seller: $1,935 debit D.Buyer: $1,935 credit; Seller: $1,935 credit
buyer: $1,161 credit; Seller: $1,161 debit (calculations for transactions) The taxes have NOT been paid; therefore, the seller owes (a debit) for the time he or she occupied the property (Jan 1 to May 15--4.5 months). Next, apply the following formula: Taxes (monthly) = $3,096 / 12 = $258 per month. Taxes due = $258 x 4.5 = $1,161 The seller is DEBITED (charged) $1,161 and the buyer receives a CREDIT for the same amount. There must always be offsetting debits and credits whenever you prorate taxes
