Maine Real Estate 16 - 22

Uncle Buddy's farm contains 10,333,652 square feet. It sold for $1,050 per acre and the brokerage was paid a 5% commission. How much did the brokerage earn?

10,333,652 ÷ 43,560 = 237.23 acres $1,050 x 237.23 = $249,091.50 $249,091.50 x 5% = $12,454.58

Carrie purchased a farm and 12% was used for roads, 11% was unusable, and the remaining 190 acres were divided into lots that were 175' x 200'. How many acres did she buy?

12% - Roads 11% - Unusable 100% - 12% - 11% = 77% for lots 190 ÷ 77% = 246.75 acres

If a property rents for $750 per month and the appraiser has determined that the gross rent multiplier is 120, what is the value of the property? a. $90,000 b. $84,000 c. $75,000 d. $70,000

120 GRM x $750 Monthly Rent = $90,000 Value

A building contains 125,000 square feet, and it leases for $25 per square foot. It has depreciated at rate of 10%, and the land is valued at $95,000. What is the value of the property? (Hint: Square footage x Cost per square foot = Value or Replacement Cost) a. $2,812,500 b. $2,907,500 c. $3,125,000 d. $3,215,000

125,000 x $25 = $3,125,000 $3,125,000 Replacement Cost - 10% Depreciation $2,812,500 + 95,000 Land $2,907,500

When the borrower negotiated a 15-year fixed rate loan, he had to pay 2 discount points and a 1 percent loan origination fee. The loan amount was $145,000 at 5% interest and the monthly payment was $1,146.65. What was the loan balance after the second payment?

145,000 * .05 = 7,250 / 12 = 604.167 1,146.65 - 604.17 = 542.48 145,000 - 542.48 144,457.52 * .05 = 7,222.88/12 = 601.91 1,146.65 - 601.91 = 544.74 144,457.52 - 544.74 = 143,912.78

How many square feet are in the following diagram? (Top 175', left 60' bottom 200' right 90' trapezoid)

175 + 200 / 2 * 60 = 11,250

A property was listed for $189,500. The buyer's offer of seven-eighths of the listed price was accepted by the sellers. The borrowers had a 10% down payment and negotiated a 30-year loan at a 4.25% interest rate. If the buyers were charged 1 point, how much will they pay?

189,500 / 8 * 7 = 165,812.5 -16,581.25 =149231.25 * .01 = 1,492.31 (plus initial down payment of 16,581.25)

What is the annual property tax bill if the appraised value is $195,000, the assessment rate is 55%, and the tax rate is 35 mills?

195,000 * .55 = 107250 107250 x .0375 = 3754.75 (3754)

A property was listed for $199,999 and the buyer made an offer for 95% of the listed price. The offer was accepted and the buyer secured a 95% loan. If the lender charged an origination fee of 2%, how much did the borrower pay the lender to process the loan?

199,999 x .95 = 189,999.05 x .95 = 180,499.10 180,499.10 x .02 = 3609.98

An agent measures the interior rooms of a house as follows: Living room: 20' x 25'; kitchen: 15'x 25'; bedroom 1: 12' x 12'; bedroom 2: 15' x 15'; bedroom 3: 14' x 25'; bathroom 1: 4' x 10'; bathroom 2: 6' x 12'; and a hallway that is 4' x 15'. What is the total square footage of the interior of this home?

20' x 25' = 500 sq. feet 12' x 12' = 144 sq. feet 14' x 25' = 350 sq. feet 6'x12' =72 sq. feet 15' x 25' = 375 sq. feet 15' x 15' = 225 sq. feet 4' x 10' = 40 sq. feet A=4'x15'=60 sq. feet 500+375+144+225+350+40+72+60=1,766 square feet

A vacant lot that measures 200' by 250' is listed for $1,890 per front foot. If the broker sells the lot at that price and is paid an 8% commission, what was the broker paid?

200 front feet x $1,890 per front foot = $378,000 Sale Price $378,000 x 8% = $30,240

An owner is putting up a new fence around a rectangular lot. If the lot measures 200' by 300' and the one gate is 5' long, how many linear feet of fence is needed?

200' + 300' + 200' + 300' = 1,000' 1,000' - 5' for the gate = 995 linear feet. (Sometimes this is called running feet.)

To purchase her condo, Kathy negotiated a $200,000 loan at 5% for 30 years and she paid 2 discount points. Her monthly payment, which includes principal and interest, is $1,073.64. How much does she owe after the first payment?

200000 * 100 = 200,000 * .05 = 10,000 = 833.00 . 1073.64-833.00 = 240.64 (240) 200,000 - 240 = 199,760

A property appraised for $249,900 and it is assessed at 95% of the appraised value. If the tax rate is 3.75 per $100, what are the monthly property taxes?

249,900 * .95 = 237,405 / 100 * 3.75 = 8902.69

A borrower negotiated a $250,000 fully amortized loan at 3.5% interest for 30 years. Her monthly principal and interest payments (PI) are $1,122.61. How much will she owe after her first payment?

250000 * .035 = 729.17 1122.61 - 729.17 = 393.44 250000 - 393.44 = 249,606.56

What is the Housing Expense Ratio

28%

Three apartments rent for $550 per month, and three apartments rent for $650 per month. There is a 5% vacancy rate and additional income of $125 per month. Monthly expenses are $600 and the investor wants an 8% return. How much will he pay for the property?

3 x $550 x 12 = $19,800 3 x $650 x 12 = $23,400 $125 x 12 = $600 x 12 = $43,200 Potential Gross Income - 5% Vacancy Rate $41,040 + $1,500 Additional Income $42,540 Effective Gross Income - $7,200 Expenses $35,340 Annual Net Operating Income $35,340 Annual Net Operating Income ÷ 8% Cap Rate = $441,750 Value

How many cubic yards of concrete will it take to pour a sidewalk that measures 175' x 6' and is 3" thick?

3" ÷ 12 = .25 ft. V = 175' x 6' x .25' V= 262.50 cubic feet 262.50 cu. ft. ÷ 27 = 9.7222 cubic yards. Here you would round up because you can't buy part of a cubic yard. If the answer 9.8 is not available then the answer 10 would be the best one.

When the sales contract was negotiated, the seller agreed to pay 2 discount points on a $310,000 loan. How much will the seller pay in discount points?

310000 * .02 = 6,200

A property sold for $335,500 and it was assessed at 30% of the sales price. The semi- annual tax bill was $5,279.55. What was the tax rate per $100?

335,500 * .3 = 100,650 5279 * 2 = 10,559.10 / 100650 = 0.1049 * 100 = 10.49

Property is assessed at 95% of the sale price. If the monthly tax bill is $339 and the tax rate is $3.39 per $100, what is the sale price value?

339* 12 = 4,068 3.39 / 100 = 0.0339 4,068 / 0.0339 = 120,000 / .95 126,315.79

What is the Debt to Income Ratio

36 %

Harry sold his home to a buyer who secured a loan for $135,500. The borrower paid $4,065 in discount points. How many points did he pay?

4065 / 135500 = .03 or 3%

John bought 40 acres of land and reserved 175,000 square feet for roads. He divided the remainder into lots that are 200' by 225'. How many lots does he have?

43,560 x 40 acres = 1,742,400 sq. ft. 1,742,400 - 175,000 = 1,567,400 sq ft. A = 200' x 225' = 45,000 square feet 1,567,400 ÷ 45,000 = 34.83 or 34 lots. You can't round up because there isn't enough land for one more lot.

A 9.3-acre lot sold for $419,000. What was the cost per square foot?

43,560 x 9.3 = 405,108 sq. ft. $419,000 ÷ 405,108 = 1.03429 or $1.03 per square foot

The owner of a five-unit apartment building receives $1,000 per month per apartment and $20 per month per parking space. The parking lot will hold 20 cars, which are always paid annually. The vacancy rate is 5% and the annual operating expenses are $18,500. The owner places $400 per month into the reserve fund. With an 8% cap rate, what is the value of the property? a. $395,378 b. $399,632 c. $478,250 d. $487,250

5 x $1,000 x 12 = $60,000 20x$20x12= +$4,800 Total $400 x 12 = $64,800 Potential Gross Income - 5% Vacancy Rate $61,560 Effective Gross Income - $18,500 Operating Expenses - $4,800 Reserve Funds $38,260 ANOI $38,260 Annual Net Operating Income ÷ 8% Cap Rate = $478,250 Value

Five apartments each rent for $600 per month, five apartments each rent for $650 per month, and five apartments each rent for $700 per month. Monthly expenses are $2,500 and the vacancy rate is 8%. If the owner wants a 9% return on her investment, how much will she pay for the property?

5 x $600 x 12 = 5 x $650 x 12 = 5 x $700 x 12 = $2,500 x 12 = $36,000 $39,000 $42,000 $117,000 Pot Gross Income - 8% Vacancy Rate* $107,640 Efftive Gross Income - 30,000 Expenses $77,640 Annual Net Operating Income $77,640 Annual Net Operating Income ÷ 9% Cap Rate = $862,667 Value

A borrower was charged $525.95 in interest the first month that he had the loan. He had a 10% down payment and the interest rate is 5.5%. What is the appraised value of the property?

525.95 * 12 = 6311.4 / .055 = 114,752.73 /.9 = 127,503

How many square feet are in this triangular shaped lot?

60 * 80 / 2 = 2400

A family room measures 25' by 25'. If carpet costs $18.99 per square yard, how much will it cost to carpet the family room?

625 sq. ft. ÷ 9 = 69.44 sq. yds. 69.44 x $18.99 = $1,318.67

How many square feet are in a rectangular lot that measures 90' x 185'?

90 * 185 = 16,650 square feet

How many square feet are in a circular lot that has a diameter of 90'?

90 / 2 = 45 * 45 * 3.1416 = 6361.74

The seller and buyer agreed to split the points. The seller paid $900 and the buyer paid $893.50. If the loan was $179,350, how many discount points were charged?

900 + 893.5 / 179350 = .01 or 1%

Property in the Happy Dale subdivision is assessed at one-fourth of the market value. If the monthly tax bill is $949 and the tax rate is $2.99 per $100, what is the appraised value?

949 * 12 = 11,388 2.99 / 100 = .0299 11,388 / 0.0299 = 380,870 380,870 * .25 = 1,523,480

A home office is 25' x 16'. Carpet is $15.99 per square yard and installation is 95 cents per square foot. How much will it cost to carpet the room?

A = 25' x 16' = 400 square feet 400 x .95 = $380 installation cost 400 ÷ 9 = 44.44 per square yards $15.99 x 44.44 = $710.60 $710.60 + $380 = $1,090.60

If a person dies intestate, he did not have a will; the court appoints an ___________________ to settle the estate.

Administrator

What is included on Debt to Income Ratio

All debt, including PITI.

COMPUTING OPERATING INCOME VALUE

Annual Net Operating Income / Cap Rate = Value

The essential elements of a real estate sales contract are:

Competent parties Legality of purpose Offer Acceptance Consideration Written contracts Communication

An exchange of promises is the __________________ in a contract for real estate.

Consideration

How many square yards are in the following diagram? 75' High by 125' wide (square) with an 25' x 25' extension (square)

Drop an imaginary line and label areas A and B. Area A A = 125' x 75' = 9,375 square feet Area B A= 25' x 25' = 625 square feet 9,375 + 625 = 10,000 square feet 10,000 ÷ 9 = 1,111.11 square yards

Forces that contribute to value are:

Economic Social Governmental Physical

To be ________________, a contract must have a legal purpose.

Enforceable

If a person dies testate, he had a will; the ______________ is responsible for settling the estate.

Executor

Three ways that a sales contract can be discharged by operation of law are:

Forfeiture Condemnation Bankruptcy

A loan officer collected the following information from a potential borrower: Gross monthly income: $6,000; car payment: $389; credit card 1: $125; credit card 2: $75; sale price: $149,500; estimated property taxes are $125 per month; estimated homeowners' insurance is $45 per month; and PI payment is $713.74. Using all of the above debt information, what are the actual front-end and back-end ratios for this borrower?

Front End = 125 + 45 + 713.74 = 883.74 Back End = (Above) 883.74 = 389 + 125 + 75 = 1,472.74

An ___________ contract is created through the actions of the parties. I borrowed my neighbor's lawn mower, a lawn implement that I know my neighbor charges other people on the street to use. When I return his lawn mower, he expects that I will pay him.

Implied

The three approaches to value are:

Market Cost Income

With an ________________ contract, the seller agrees to take the property off the market for a period of time.

Option

An express contract may be written or _________ . I order lunch at a diner; there is an express contract that I will pay $6.95 for my meal when I am finished eating.

Oral

Effective Gross Income

Potential Gross - Vacancy Rate and Credit Losses + Additional Income = Effective Gross Income

What is included in the Housing Expense Ratio

Principal, Interest, Taxes and Insurance (an any homeowners association fees) PITI

An offer may be terminated by the following:

Revocation at any time before it is accepted Counteroffer Rejection Time Death of the offeror/offeree Destruction of the property Operation of law Material change of circumstances

Economic principles that affect value are:

Utility Transferability Supply and Demand Anticipation Contribution Substitution Conformity Change Competition Assemblage and Plottage Regression and Progression Low of Increasing and Decreasing Returns

Both parties exchange promises in a ____________ contract; a Purchase and Sale Agreement is an example.

bilateral

A loss in value is known as _______________________.

depreciation

In a real estate contract, liquidated damages are usually limited to the________________________.

earnest money deposit.

Two houses build the same year may vary widely in _______________________ depending on the level of maintenance each has received and how each was constructed.

effective age

An _______________ contract may be brought to court in a lawsuit.

enforceable

An acceptance of an offer means that the offeree accepts ___________________ . There is not one thing that the parties do not agree on.

every term of the offer.

An _____________contract is one for which all parties have performed all duties; a Purchase and Sale Agreement the day after a successful closing is an example.

executed

An __________________ contract is one that has not yet been completed; an example is the Purchase and Sale Agreement between its effective date and the closing.

executory

Negative factors outside the property cause _______________ obsolescence; an example is that a major employer shuts down and the city loses thousands of jobs.

external

Most state laws allow for a licensee to __________________ on a prepared contract form; licensees need to avoid the unauthorized practice of law.

fill in blanks

Poor design causes ___________________obsolescence; an example is a house with all bedrooms on the second floor and the only bathroom on the first floor.

functional

Improvements can be depreciated for tax purposes; ______________cannot be depreciated.

land

The definition of ________________ value is the highest value that a property will bring in a competitive open market.

market

A Right of First Refusal is a contract to buy property that is __________________. If the owner ever puts the property on the market, the holder of the right has the first opportunity to buy the property.

not currently for sale

An appraiser reconciles data from the three approaches to develop an _____________________________.

opinion of value.

Normal wear and tear causes ______________ obsolescence; an example would be a porch in poor condition.

physical

"Highest and best use" of a property is that which preserves its utility and yields a net income flow that forms the highest ________________________.

present value of the land

When a party rescinds the contract, the parties return to the ______________________ they held before entering into the contract. For example, the buyer didn't like the results of the building inspection so, according to the terms of her contract with the seller, the buyer got her earnest money back and went on her merry way.

same legal positions

The market approach is used to appraise __________________ .

single-family homes and vacant land.

An _______________________ contract is one for which neither party can sue to enforce in court. An example is an oral agreement to purchase real estate.

unenforceable

One party makes a promise and the other party forms the contract by completing the action in a ______________ contract; offering a reward if someone finds your lost pet is an example. Another example is a listing agreement between a consumer and a real estate brokerage agency.

unilateral

The economic life a building is a measurement of its ________________ The appraiser uses this information to compute depreciation.

useful life.

A __________________contract contains all the essential elements and is enforceable in court.

valid

A _______________ contract lacks one or more of the essential elements; for example, a contract for James to sell cocaine to Duncan is a void contact as it is not for a legal purpose.

void

A ________________ contract offers one or both of the parties the option to rescind or disaffirm the contract; for example, one of the parties was 16 years old when she made a contract to buy a bicycle. The parties can go through with the sale if they wish. Or either party can disaffirm the sale.

voidable

The Statute of Frauds required that in order to be enforceable in court, real estate contracts must be ______________________________-.

written (in writing and signed)

A small shopping center recently sold for $2,500,000. The monthly rent paid to the owner was $12,000. What is the GIM for the property? a. 17 b. 20 c. 48 d. 50

$12,000 x 12 = $144,000 Annual Rent $2,500,000 Value ÷ $144,000 Annual Rent = 17.36 GIM

In the first quarter of the year, Nessie paid $1,500 in quarterly interest payments on a $75,000 loan. What is the interest rate?

$1500 x 4 = 6000 / 75000 = 8 %

If a quarterly income of $155,000 yields an investor a 7% return, how much did he pay for the property? a. $2,214,285.72 b. $4,255,999.33 c. $8,857,142.86 d. $9,758,389.99

$155,000 x 4 = $620,000 $620,000 ÷ 7% = $8,857,142.86

A property has a value of $162,300 and the owner collects rent of $900 per month. What is the GRM of the property? a. 170 b. 180 c. 190 d. 200

$162,300 Value ÷ $900 Monthly Rent = 180.33 GRM

The buyers' offer of $173,000 was accepted but the home was appraised for $175,000. The borrowers had a 25% down payment and they negotiated a loan for 30 years with an interest rate of 4.5%. How much will the borrower pay in interest the first month of the loan?

$173000 x .75 = 129,750 x .045 = 5838.75 / 12 = 486.56

Twenty years ago, the Hammonds bought a property for $175,000. Over the years they added a gazebo and a swimming pool that cost $185,000. Today, they sold the property for $550,000 and paid a 5% commission. They have signed a sales contract to buy another property for $650,000. How much capital gain can they exclude?

$175,000 Original Investment +185,000 Improvements $360,000 Adjusted Basis $550,000 - 27,500 $522,500 Adjusted Sales Price $522,500 Adjusted Sales Price - 360,000 Adjusted Basis $162,500 Capital Gains that can be exclude

The monthly rent on a shopping center with nine tenants is $18,000. If the GIM for the property is 14, what is the value? a. $2,250,000 b. $2,520,000 c. $3,024,000 d. $3,240,000

$18,000 x 12 = $216,000 14 GIM x $216,000 Annual Rent = $3,024,000 Value

When a farm sold, the brokerage firm was paid a 6% commission rate, or $18,000. The land sold for $1,500 per acre. The farm contained how many square feet?

$18,000 ÷ 6% = $300,000 $300,000 ÷ $1,500 = 200 acres 200 x 43,560 = 8,712,000 square feet

The appraiser has determined that the replacement cost of a building is $199,000, the land is valued at $25,000, and the depreciation is 5%. What is the value of the property? a. $189.050 b. $212,800 c. $214,050 d. $241,050

$199,000 Replacement Cost - 5% Depreciation $189,050 + 25,000 Land $214,050 Value

The appraiser has determined that the replacement cost of a building is $355,000, the land is valued at $75,000, and the depreciation is 10%. What is the value of the property? a. $309,500 b. $319,500 c. $387,000 d. $394,500

$355,000 Replacement Cost - 10% Depreciation $319,500 + 75,000 Land $394,500 Value

Which of the following would yield a 14.4% capitalization rate? a. NOI of $19,000; value of $120,000 b. Gross income of $25,000; value of $225,000 c. Net income of $22,500; value of $250,000 d. NOI of $36,000; value of $250,000

$36,000 ÷ $250,000 = 0.144 or 14.4%

A property has an annual gross income of $25,900 and monthly expenses of $475. It has been valued at $365,000. What is the cap rate? a. 5.53% b. 6.69% c. 7.89% d. 8.35%

$475 x 12 = $5,700 Expenses $25,900 Gross - $5,700 Expenses $20,200 Net (Annual Net Operating Income) $20,200 ÷ $365,000 = 0.0553 or 5.53% Cap Rate

The annual net operating income of a property is $49,500. Compute the value if the cap rate is 10%. Next, compute the value if the cap rate is 11.5%. What happens to the value of the property as the cap rate increases? a. The value goes up. b. The value goes down. c. The value doesn't change. d. The value goes down by .5%.

$49,500 Annual net Operating Income ÷ 10% Cap Rate = $495,000 Value $49,500 Annual Net Operating Income ÷ 11.5% Cap Rate = $430,434.78 Value When the cap rate goes up, the value goes down.

A $525,000 sale price was obtained from a 9% capitalization rate. What was the gross income when the total expenses were 10% of the gross? a. $52,500 b. $53,500 c. $54,500 d. $55,500

$525,000 Value x 9% Cap Rate = $47,250 Annual Net Operating Income ? Gross - 10% Expenses $47,250 Net 100% - 10% 90% $47,250 Annual Net Operating Income ÷ 90% Net = $52,500

The gross income of a property is $67,989 and the expenses are 8% of the gross. If the owner wants a 9% return, how much could she pay for the property? a. $755,433 b. $755,333 c. $694,999 d. $699,999

$67,989 Gross - 8% Expenses $62,549.88 Net (Annual Net Operating Income) $62,549.88 ÷ 9% = $694,999 Value

A $694,999 sale price was obtained from a 9% capitalization rate. What was the amount of the gross income when the total expenses were 8% of the gross? a. $62,550 b. $65,250 c. $67,989 d. $68,789

$694,999 Value x 9% Cap Rate = $62,549.91 Annual Net Operating Income ?? Gross (We are solving for the gross.) - 8% Expenses $62,549.91 Net (Annual Net Operating Income) 100% Gross - 8% Expenses 92% Net ($62,549.91) $62,549.91 Annual Net Operating Income ÷ 92% Net = $67,989 Gross Income

An investor paid $735,000 for a property that has an 8% capitalization rate. What was the gross income when the total expenses were 9% of the gross? a. $58,800 b. $63,736 c. $63,637 d. $64,615

$735,000 Value x 8% Cap Rate = $58,800 Annual Net Operating Income ? Gross - 9% Expenses $58,800 Net $58,800 Net ÷ 91% Net Percentage = $64,615.38 Gross Income

Ten acres of land sold for $100,000 and the borrower had a 5% down payment. The property appraised for $95,000 and the lender charged 9% interest on a 10-year loan. How much interest is the lender paid the first month?

$95000 x .95 = $90,250 x .09 = 8122.5 / 12 = $676.88

A property sold for $998,255. The transfer tax is $5.20 for each $1,000 or fractional part of $1,000. How much is the transfer tax?

$998,255 ÷ $1,000 = 998.255 (999) $5.20 x 999 = $5,194.80

Franz negotiated a $250,000 loan at 3.5% interest for 20 years. He paid 2 discount points and a 1% loan origination fee. His monthly payment of principal and interest is $1,159.92. How much will he owe at the end of the second payment?

(250000 x 100 =) 250000 * .035 = 8750 / 12 = 729.17 1159.92 - 729.17 = 430.75 250000 - 430.75 = 249,569.24 ... THEN 249,569.24 * .035 = 8,734.92 / 12 = 727.91 1159.92 - 727.91 = 432.01 249,569.24 - 432.01 = 249,137.23