Real Estate 101
A buyer purchased a $100,000 home with an 80% loan. There was a real estate commission of 8% and a loan origination fee of $100. The buyer's attorney charged $75 and the credit report was $35. If the loan discount points were 2% of the loan, what was the total of the buyer's closing costs?
$1,810 $100,000 X 80% = $80,000 (loan). The buyer owes the loan origination fee ($100) PLUS attorney`s fees ($75) PLUS credit report ($35) PLUS discount points ($80,000 X 2% = $1,600) = $1,810. Note: the seller pays the commission and the down payment is not a closing cost.
A selling broker was to receive 60% of a total commission of $3,450. The selling broker, however, had to pay $260 for a termite treatment. What would the selling broker net on this transaction?
$1,810 $3,450 x 60% = $2,070 minus $260 = $1,810.
A house sold for $84,500 with a commission rate of 6%. The listing broker received 50% of the commission. How much would the selling salesperson receive if the salesperson and the broker split their portion of the commission 40/60?
$1014 $84,500 X 6% = $5,070 (commission). $5,070 / 2 = $2,535 (selling broker). $2,535 X 40% = $1,014 (the first name in the clause receives the first number).
A buyer was considering purchasing a house that contained 1,500 square feet. Based on the comparable houses that had sold in the area, houses were selling for $70 per square foot. The agent told the buyer, however, that the house needed painting which would cost $3,000 and new shingles which would cost $5,000. What price should the buyer offer for the house?
$ 97,000 1,500 square feet times $70 per square foot equals $105,000. $105,000 minus the $3,000 for the painting and the $5,000 for the shingles means the buyer would offer $97,000.
A property manager is compensated at 10% of the gross income. The total rents collected were $12,000 with expenses of $600 for utilities, $350 for insurance, $219 for repairs and maintenance, and $60 for advertising. What was the property manager's compensation?
$1,200 $12,000 (gross income) X 10% = $1,200 (compensation). The other numbers are just there to see if one knows the difference between gross (before expenses) and net (after expenses).
A buyer purchased some real estate and obtained a $25,000 loan at 12% interest. The interest on the loan is due on the first of each month. If the buyer is responsible for the day of closing and the closing takes place on October 17, what would be the amount of pre-paid interest charged to the buyer at closing?
$116.67 Using a 30 day month, the buyer is responsible for 14 days (counting both the 17th and the 30th) since the buyer owes from the day of closing through the end of the month of closing. $25,000 X 12% = $3,000 (per year) / 12 months = $250 (per month) / 30 days = $8.33 (per day) X 14 days = $116.67.
A seller wanted to net $80,000 after paying a clerks fee of $60, $150 for a survey, $450 for title insurance, a loan pay-off of $36,000 and a 5% commission. What would the sale price have to be?
$122,800 $80,000 + $60 + $150 + $450 + $36,000 = $116,660 \ 95% = $122,800.
A commercial property had an annual gross income of $620,000, annual expenses, credit losses and vacancies of $380,000, and a capitalization rate of 10%. What would be the value of the property?
$2,400,000 $620,000 minus $380,000 = $240,000 net operating income \ 10% capitalization rate = $2,400,000 for the value.
A seller netted $23,000 after paying a 7% commission and $615 in closing costs. What was the sales price?
$25,392 The sale price is made up of 3 factors: (1) the $23,000, (2) the 7% commission, and (3) the $615 closing costs. If you take the 7% commission away, the $23,000 and the $615 must make up the other 93% of the selling price. $23,615 / 93% = $25,392 (sale price).
A buyer bought a $72,000 property obtaining a 90% loan. The lender required annual private mortgage insurance (PMI) of .5% paid up front and 1/12 each month. What was the monthly PMI?
$27 $72,000 x 90% = $64,800 loan x .5% = $324 PMI per year \ 12 = $27 PMI per month
Real estate taxes of $975 were paid for the year on January 1. The house sold with a closing date of September 15. How much would the seller receive back?
$284.40 The seller prepaid for the year but did not use 3 full months (Oct, Nov & Dec) plus 15 days of September. 3 months X 30 days = 90 days. 90 days + 15 days = 105 days owed. $975 (year) / 360 days = $2.71 per day. $2.71 (day) X 105 days = $284.37 (rounded).
Real Estate taxes on a property are $1,004. If the property is sold with a closing date of April 23rd and the seller is responsible for the day of closing, what would be the seller's responsibility for the real estate taxes?
$315 The seller owes taxes from January 1st through April 23rd (3 months and 23 days or 113 days). $1,004 \ 360 days equals = $2.79 per day x 113 days = $315.27.
A house was listed for $127,000. An offer of $120,000 was made and accepted. The commission on the sale was 7% of which the salesperson received 40%. How much would the salesperson receive?
$3360 $120,000 (actual sale price) X 7% = $8,400 (total commission). $8,400 X 40% = $3,360 (salesperson`s share).
A buyer bought a lot for $28,000 and a house for $250,000. The owner wanted to sell the property making a 5% profit on the lot and 30% on the house. What would the sale price have to be?
$354,400 $28,000 times 5% equals $1,400. $250,000 times 30% equals $75,000. $28,000 plus $1,400 plus $250,000 plus $75,000 equals a total price of $354,400.
A property had a sale price of $91,000, an existing loan of $47,000, taxes of $575 paid in arrears, a real estate commission of 6% and title insurance of $400 which was the responsibility of the seller. If closing took place on December 15th, how much would the seller net out on this transaction?
$37,588 The seller owes taxes from December 1st to December 15th. That is 11 months and 15 days or 345 days. $575 \ 360 days = $1.60 per day x 345 days = $552. $91,000 x 6% = $5,460 in commission. $91,000 less $47,000 less $552 less $5,460 less $400 = $37,588 seller net.
A business owner was interested in purchasing a strip mall. The mall brought in gross annual receipts of $63,000 and had gross annual expenses of $24,000. If the owner wanted a 10% return, what would the price be?
$390,000 $63,000 minus $24,000 equals NOI of $39,000 divided by 10% equals a value of $390,000.
A seller sold a home for $50,000 with the buyer putting $5,000 down. If the seller agreed to pay 3 discount points, a 1% loan origination fee and a 6% commission, what would be the seller's total closing costs?
$4,800 $50,000 less $5,000 = $45,000 loan. $45,000 x 3% = $1,350. $45,000 x 1% = $450. $50,000 x 6% = $3,000. $1,350 + $450 + $3,000 = $4,800.
Which of the following would be exempt under the Federal Fair Housing Law of 1968?
An individual selling a personal residence who does NOT discriminate in advertising An owner who does not use a broker and does not discriminate in advertising is exempt (B).
Which of the following terms BEST describes the practice of encouraging owners to move from an area due to minorities moving in making the neighborhood more integrated?
Blockbusting Blockbusting (B) is encouraging owners to move due to integration.
A rental property sold with a closing date of September 18th. The rent of $500 had been paid on September 1st. The buyer is credited with the day of closing. Which of the following statements is correct?
Seller pays the buyer $216.67 The seller collected the September rent (30 days) but was only due 17 days (the buyer in this case gets the day of closing). Therefore, the seller owes the buyer for 13 days. $500 / 30 (days) X 13 = $216.67 the seller owes the buyer.
A buyer's new loan would show up on the closing statement as a:
credit to the buyer On a closing statement, if a person owes money it is a debit; if a person receives money it is a credit. Since the buyer receives the loan money at closing to help pay for the property, this is shown as a credit to the buyer only; it does not show up on the seller's side of the closing statement at all.
In advertising for prospects, all of the following terms could be used EXCEPT:
national origin (D) "National origin" is a protected class under fair housing and is illegal to be used in advertising.
A broker found a ready, willing and able minority who offered full price for a house. The seller refused to sell because the buyer was a minority. The broker could legally do all of the following EXCEPT:
show the property only to non-minorities Since the broker has performed, the broker can sue for the commission (A).
A property manager of a 10 unit apartment received a commission of 8% of the annual gross rental income plus $175 for each new tenant. Six of the units rent for $650 each per month and the remainder rent for $550 each per month. The manager was able to find four new tenants during the year. If there was a 10% vacancy factor, what was the property manager's annual income?
$5,970 6 units X $650 X 12 months = $46,800; 4 units X $550 X 12 months = $26,400; $46,800 + $26,400 = $73,200 X 10% (vacancy) = $7,320; $73,200 - 7,320 = $65,880 (effective gross income); $65,880 X 8% = $5,270.40 (percentage fee); 4 (new tenants) X $175 = $700 (fee for procuring new tenants); $5,270.40 + $700 = $5,970.40 (total management fee).
A person obtained a $75,000 loan with the lender charging a 1% loan origination fee. What was the amount of the fee?
$750 $75,000 x 1% = $750
A tenant was leasing a property which rented for $300 per month. On March 20th, the tenant notified the landlord that the tenant was leaving April 20th. The tenant had pre-paid the $300 per month rent on March 1st. The landlord charged the tenant a pro-rated amount of rent for April and a $600 penalty for terminating the lease. What was the total amount owed by the tenant?
$800 The tenant owes 20 days of rent for April (April 1 - April 20). $300 divided by 30 days = $10 per day x 20 days equals $200 prorated April rent. $200 + $600 penalty = $800 total.
A real estate salesperson with CBT Realty lists a property for sale. A salesperson with MRT Realty finds a buyer who buys the listed property. The sales price was $60,000 with a 6% commission. If CBT Realty received 55% of the total commission, how much would the salesperson with MRT Realty receive assuming the split with MRT realty is 50/50 between the broker and salesperson?
$810 $60,000 x 6% = $3,600 total commission. $3,600 x 45% (MRT`s %) = $1,620. $1,620 x 50% = $810 for the salesperson.
A broker was paid commission of 5% of the first $50,000 of a sale price and 3% of all over $50,000. If the total commission was $3,475, what was the sale price?
$82,500 $50,000 X 5% = $2,500. $3,475 (total commission) - $2,500 = $975 (3% of all over $50,000). $975 / 3% = $32,500 (sales price over $50,000). $32,500 + $50,000 = $82,500 (total sales price).
A buyer obtained a $100,000 loan paying 3 discount points, a 1.5% loan origination fee and a 1% funding fee. What would be the net proceeds for the buyer after paying all loan costs?
$94,500 $100,000 x 5.5% = $5,500. $100,000 less $5,500 = $94,500 net proceeds.
Under the Federal Fair Housing Law, which of the following items qualifies as a handicap?
A person who is mentally or physically handicapped Mental or physical handicaps (B) qualify.
A broker sold a commercial property for $1.5 million. The broker earned a total commission of $87,000. If the broker was paid 6% on the first $1.2 million of sales price, what was the broker's rate of commission on the amount of sale price over $1.2 million?
5% $1,200,000 X 6% = $72,000; $87,000 (total commission) - $72,000 = $15,000 (the commission on the other $300,000 (1.5 million - 1.2 million). $15,000 / $300,000 = 5%.
Under the Federal Fair Housing Law, which of the following qualifies as a protected class under the definition of familial status?
A child under the age of 18 A child under 18 living with parent, guardian or designee falls under the familial status protection (C).
If an owner tells a licensee not to show the property to minorities, which of the following statements BEST describes the obligations of the agent?
Inform the owner that the licensee cannot legally accept the listing As this is an illegal instruction, one must say that one cannot list it under those requirements (C).
Which of the following items would be prorated at closing?
Interest on an assumed loan Prorated items are items that both seller and buyer have the use of over different time periods yet only one pays the bill. We then have the one who did not pay the bill pay the other for the time the non-paying owner used it. (A), (B) & (D) are not shared over time, therefore not pro-rated.
Which of the following acts would be permitted under the 1968 Federal Fair Housing Act?
Not renting a house to someone because they have a poor credit history Credit (C) is a valid reason for refusing a tenant.
A buyer obtained a $50,000 loan with a 9% interest rate. The loan was amortized over 30 years with a monthly payment of $403. Which of the following statements is true?
The amount of principal in the first month's payment was $28.00 $403 (P & I per month) X 12 months (per year) X 30 years = $145,080 (total P&I paid over the 30 years) - $50,000 (principal) = $95,080 interest paid over the term of the loan (so A & B are both wrong). $50,000 X 9% = $4,500 (interest per year) / 12 months = $375 (interest the first month); $403 (P&I) - $375 (int.) = $28 principal paid the first month.