Real estate part 3
Phoebe's gross monthly income is $4,200, and she has $360 in monthly non-housing debt payments. The lender's qualifying ratios are 28% for the housing ratio and 36% for the total DTI ratio. What's the maximum housing payment she can afford?
$1,152 The maximum house payment is the lesser of the amounts calculated using both ratios. DTI: $4,200 x .36 = $1,512. $1,512 - $360 = $1,152. Housing ratio: $4,200 x .28 = $1,176. Phoebe's maximum payment is $1,152.
A seller received $800,000 for a 5.5 acre rectangular parcel alongside a road frontage. The property is 400 feet deep. What was the price per front foot of the property?
$1335.67 First, find the square footage (5.5 × 43,560 = 239,580). You're given one dimension of the rectangle, so find the other: 239,580 ÷ 400 = 598.95 front feet. To find the price per front foot, $800,000 ÷ 598.95 = $1,335.67 per front foot.
Michael paid $385,000 for his home, which now has an assessed value of $392,000. His tax rate is 0.51%. How much will his monthly taxes be?
$166.60 Annual property tax amount = assessed value × tax rate. Multiply $392,000 × 0.51% (or .0051) for a total of $1,999.20. Then, to find the monthly property tax amount, divide $1,999.20 by 12 (months in a year) = $166.60.
An appraiser used the cost approach to estimate a property's value at $220,000. The site value was $50,000, and the total depreciation estimate was $4,000. What was the estimated cost of improvements?
$174000 To estimate value, an appraiser adds the site value to the estimated cost to replace improvements then subtracts the estimated depreciation. So to solve the equation, you need to solve for cost of improvements. In order to do this, you have to move the given values to the other side of the equation - $50,000 + $4,000 . Here's the equation used to find the cost of improvements = $220,000 ‒ $50,000 + $4,000.
Giant Industries has a $674,232 gross operating income, operating expenses of $329,129, and other expenses totaling $38,719. What is the net operating income?
$345,103 The formula for finding net operating income is: gross income - operating expenses = net operating income. So, $674,232 - $329,129 = $345,103. Other expenses like loan interest and debt repayment aren't included in this calculation.
A homeowner has $80,000 of principal left to pay on her mortgage. Her home was recently appraised at $156,000, which is $13,000 more than what she purchased it for. How much equity does she have in her home?
$76,000 To find how much equity she has, subtract the amount she still owes on her mortgage from the appraised value.
Bonnie is calculating the square footage of a listing. The upper level of the home is 450 square feet. The main floor is 1,200 square feet, including an unfinished laundry area that's 225 square feet. The 1,200-square-foot basement is finished. Bonnie's MLS system disregards below-grade square footage. What square footage will Bonnie mention in her MLS listing and marketing materials?
1,425 Only finished above-ground space should be counted in Bonnie's MLS listing. That means the square footage of the upper floor plus the main floor (minus the unfinished laundry area). Bonnie should report 1,425 square feet (450 + 1,200 - 225).
The Simpsons are buying the Martins' house for $415,000, and closing is set for March 15. The Martins have a loan balance of $230,000 at a rate of 4.7% and have prepaid property taxes ($2,506) and insurance ($1,400), and they also have mortgage interest to consider. Using a 365-day proration method, calculate the prorated amount the Simpsons will owe the Martins at closing. Assume February has 28 days this year. The sellers own the day of closing.
1,997.62 Calculate daily rates for taxes to be prorated: $2,506 ÷ 365 = $6.87. The Martins pay the first 74 days (January 1 through March 15): 74 x $6.87 = $508.38. $2,506 - $508.38 = $1,997.62 owed by the Simpsons. Homeowner's insurance isn't prorated between the buyer and seller. A homeowner's insurance policy is an agreement between the insurance company and the policyholder, so any refund due to the seller/homeowner will be handled between those two parties.
A buyer with a 15-year, $250,000 loan at a 5.5% interest rate has a monthly principal and interest payment totaling $2,042.71. How many payments will the borrower make over the course of the loan?
180 The borrower will have 180 payments (assuming the loan isn't paid off early). This is 12 monthly payments per year for 15 years: 12 x 15 = 180.
The main floor of Kinsey's home is 1,425 square feet. The upper level is 875 square feet with one unfinished bedroom that measures 150 square feet. The finished basement is 1,425 square feet with 7.5-foot ceilings. Kinsey's MLS listing includes below-grade square footage in livable area. What's the reportable square footage for Kinsey's home?
3,575 **Kinsey should exclude the 150-square-foot unfinished bedroom. This gives us a calculation of: 1,425 + (875 - 150) + 1,425, or 3,575 square feet.
Related to title insurance, what is "subrogation"?
A covered party grants permission to the title company to pursue the party who caused a claim or loss. When the title company is forced to pay a claim against the policy, the covered parties give the title company permission to pursue the party who caused the loss. The covered parties are said to "subrogate" their rights to the title company.
A quitclaim deed does which of these
A quitclaim deed provides no warranties or covenants; it only guarantees that the grantor is transferring any interest or title he or she may have in the property.
Which of the following is an example of constructive eviction?
A tenant moves out of the apartment after repeated unsuccessful requests to the landlord to repair the broken water heater. A constructive eviction occurs if a tenant vacates the property because the landlord failed to uphold the warranty of habitability.
The Adams family is financing their loan through Acme Bank and their agent negotiated a great sales price on their new home. Smith Title Company processed the loan documents. The Adamses must purchase mortgage insurance. Who does the insurance protect?
Acme Bank Private mortgage insurance is protection for the lender in the event of buyer default; it is used when the borrower does not have a large enough (usually 20%) down payment.
Rennie owns a 240-foot by 130-foot lot. How do you calculate the perimeter?
Add two times the length to two times the width. The perimeter equals the sum of the lengths of each side of the shape (240 × 2) + (130 × 2).
Which of these is NOT a likely features of a bridge loan?
Amortized loan paid back over a period of no more than five years A bridge loan is usually a temporary, short-term interest-only loan secured by the borrower's existing home.
A fence that's placed two feet onto a neighbor's property line meets the legal definition of _______.
An Encroachment A physical intrusion onto another person's property is an encroachment.
What does the Federal Trade Commission consider to be an unfair ad?
Any ad or business practice that causes or is likely to cause injury
Jeanetta leases an apartment from Quad City Leasing. Jeanetta has filed a complaint with the state real estate licensing division stating that Marissa, Quad City's property manager, breached her fiduciary duty of loyalty to Jeanetta. Which of these statements about this situation is true?
As a property manager, Marissa owes fiduciary duties to her client and the apartment community. Property managers owe fiduciary duties to their clients (the landlord) and the community as a whole, not to individual residents.
What type of value is of interest to taxing authorities?
Assessed value Local taxing authorities are interested in assessed values, which are used to determine property taxes.
Tristan's offer has been signed by all parties and delivered to the seller. This means that ______ has occurred.
Binding acceptance happens when a signed contract is delivered according to the delivery procedures and deadline outlined in the contract.
Which of the following is an action borrowers take to temporarily lower the interest rate on their mortgage loan?
Buydown is when buyers voluntarily pay points to temporarily bring interest rates down. For example, a 3-2-1 buydown would reduce the interest rate by 3% the first year, 2% the second year, and 1% the third year.
Why did the implementation of TRID impact closing dates?
Certain financing changes may trigger a new three-day waiting period. Increases in the annual percentage rate, the addition of a pre-payment penalty, or changes to the basic loan product require that the lender issue a new Closing Disclosure, necessitating a new three-day waiting period.
Which of these principles of value is related to how a change to a portion of a property impacts the value as a whole?
Contribution. The principle of contribution says that a change to a portion of a property impacts the overall value. For example, adding a swimming pool could add to the value for some buyers and detract from the value for others.
Which of the following loans may require compliance with Appraiser Independence Requirements?
Conventional AIR may apply to conventional loans used to purchase a single-family dwelling of one to four units. Federally insured or guaranteed loans (such as FHA or VA or commercial loans) are exempt.
With the cost approach to value, what is the replacement cost?
Cost to build a functionally equivalent improvement The replacement cost reflects the cost to build a functionally equivalent improvement, as opposed to the reproduction cost, which is the cost to build an exact replica of the subject, with the same materials and deficiencies.
Which of the following situations is an example of a non-agency relationship?
Dutton was previously a licensee. He's selling his home, and he wants Wanda, who's currently licensed, to assist him with the paperwork. A non-agent, also referred to as a transaction broker, may assist a customer with ministerial tasks.
Kurt bought a vacant lot in a development that was 85% completed. When he started working with the builder to lay out where the house and driveway would lie, it was determined that he would need an easement because his driveway would spill over onto the adjacent lot by a few feet. What type of easement is this?
Easement appurtenant An easement appurtenant is attached to a parcel of land and transfers with the land. It grants the right to use adjoining land.
Jerry and Lewis have entered into a sales contract. They're about three weeks into the transaction, with several terms of the agreement yet to be met. What type of contract do Jerry and Lewis have?
Executory A valid contract that is in progress is an executory contract, which means that one or more terms of the agreement remain undone.
The Nettles have accepted the Briars' purchase offer, and both parties have signed the sales contract. The funds, and the title, should transfer in a matter of days, but otherwise the all elements and terms of the contract have been met. What type of contract do the Nettles and the Briars have?
Executory The Nettles and Briars have a valid contract that's in the process of being completed. Because one or more terms of the contract must still be completed, they have an executory contract.
Commander Halfback retires after 25 years of service in the Coast Guard. He is looking to buy a home. What type of loan should he use?
FHA, VA, or conventional The fact he was in the military doesn't mean he has to take a VA loan. There isn't enough information to determine the best loan, so at this point all loans mentioned are viable options to consider.
To make valid computations of adjustments for the sales comparison approach to value, elements of comparison must be applied in a specific order. Which element is applied first?
Financing terms and cash equivalency When using the sales comparison approach, appraisers consider elements in a specific order: financing terms and cash equivalency, conditions of sale, market conditions at the time of contract and closing, location, and physical characteristics.
Roxanne just finished making a buyer presentation to Fred and Regina Jones. Now that they understand the difference between being customers and being clients, they're anxious to be represented. What is one of Roxanne's duties to them as their buyer's agent?
Finding properties to show to Fred and Regina Under a buyer rep agreement, the agent's duties include showing properties, assisting in negotiations, and providing guidance.
Your buyers step outside to view the backyard of a property they're touring, but then they can't get the back door closed again. You recognize that this could be a symptom of ____, and realize that if they are interested in this property, they will want to discuss this issue with a home inspector.
Foundation problems Misaligned doors and windows, or cracked drywall, can indicate that there are settlement problems with the foundation.
Brittany has a small office in a professional building. She has a set monthly lease payment that has been calculated to include maintenance of the common areas in the building, such as the restroom and small kitchen, and all nets, utilities, and janitorial charges for her space. The payment also includes taxes and insurance. The landlord takes these payments and pays the individual expenses himself. What type of lease does Brittany have?
Gross lease (In a gross lease, all expenses related to the property, such as taxes, insurance, and maintenance, are part of the lease payment.)
Fred is an agricultural lender who helps the ranchers and farmers in his community by providing credit for purchasing land, making repairs to their buildings, and improving their agricultural property. He's able to do this in part because of the ______ offered by the USDA Farm Service Agency.
Guaranteed loans
Celia was obtaining a conventional loan, and she put $50,000 down as a down payment. Why might her lender also require her to obtain private mortgage insurance?
Her down payment of $50,000 isn't at least 20% of the purchase price. When loan-to-value ratios exceed 80% on a conventional loan, lenders may require private mortgage insurance.
Jason's having trouble paying his monthly rent. His landlord agrees to float him the rent for the next few months with 20% interest. The deal with his landlord is in violation of the state's usury law. Which of these statements must be true?
His state's personal loan interest rate cap is less than 20%. Usury prohibits excessive interest charges on personal and consumer loans. Many states have a cap on the percentage that can be charged. Jason's deal with his landlord would be in violation if the interest rate is higher than the cap.
Related to reasonable accommodation of being allowed to have an assistance animal, which statement is true?
If the disability for which the tenant is making the request is obvious, the landlord may not ask why it is needed. Housing providers may inquire as to the nature of the disability if it's not apparent, and they must permit assistance animals for tenants with documented disabilities without charging an additional pet deposit.
What does a balloon payment represent at the end of a loan term?
It means that some principal remains at the end of the loan term. A balloon payment is due at the end of a balloon loan, because the loan has only been partially amortized, which means that some of the principal remains at the end of the loan term.
Which of these is an encroachment?
Jeff installed a sidewalk next to his driveway, six inches outside his property. An encroachment occurs when someone illegally places a structure or object on another person's property. Jeff's installation of a sidewalk off of his property is an example.
Which of these is an example of severability?
Jules and Katrina are under contract for the purchase of Katrina's house. A dispute arises over some contract terms, and they end up in court. The court rules one of the terms invalid but leaves the remainder of the contract in force. Severability refers to the concept that a court can strike down one or more contract terms while leaving the remainder in place.
Which of these is an example of puffery?
Kevin's MLS remarks note that the condo has the city's "most beautiful twilight view of downtown and the bay."
Which of the following describes a right-of-way easement?
Land that a railroad company runs its track through Right-of-way easements allow pass-through and can be as short as a driveway or as long as a railroad track.
Which of these is the best definition of real estate?
Land, plus all things permanently attached to it naturally or artificially Real estate includes land, plus all things permanently attached to it naturally or artificially.
Sondra, a buyer, signs all the required mortgage documentation, promising to make all payments to her lender. Unfortunately, Sondra falls on hard times and misses multiple payments, and the bank indicates that it's going to foreclose on her. The foreclosure proceedings are more difficult for the lender because Sondra holds the deed to the land. What kind of state does Sondra live in?
Lien theory state the mortgage becomes a lien on the property, but deed remains with the buyer. Foreclosure proceedings in a lien theory state may be more difficult for the lender.
When agents put their clients' interests ahead of their own, this describes the duty of ______.
Loyalty Loyalty means putting the client's interests first ... ahead of customers' interests and ahead of your own.
Lucas, Ivan, Chad, and Trace own a property as joint tenants. After a few years, Ivan sells his interest to Tom (with permission from Lucas, Chad, and Trace). Chad dies intestate but is survived by a wife, Amy. Trace also then passes away but wills his property to Monique. Who owns the property after Trace's death?
Lucas and Tom Joint tenants are allowed to sell their interests, so Tom became a property owner when Ivan sold his interest. However, joint tenancy is not inheritable but instead includes the right of survivorship. Trace's and Chad's interests passed to Lucas and Tom.
Margo's accountant tells her that she's eligible to deduct the property taxes she paid last year. Select the statement about this deduction that's true.
Margo is in the ownership stage of the property ownership lifecycle. Both homeowners and investors may be eligible to deduct annual property taxes paid, depending on the circumstances.
John is considering purchasing an office building and is trying to determine whether or not it's a good investment. The methods of income approach he may use when estimating the value are all of the following EXCEPT for which?
Market or sales comparison Properties that rely heavily on rental income often use the income approach to estimate their value. Three ways to estimate value are the capitalization method, the gross income multiplier, and the gross rent multiplier.
Which of these statements about title marketability standards is correct?
Marketable title carries a higher standard of assurance than insurable title.
The Bransons have a conventional loan for which they were required to obtain private mortgage insurance. Their local real estate market has been going like gangbusters, and their house is now appraised at twice their loan balance! Will their PMI be cancelled?
Maybe, but they'll have to petition their lender Cancellation of PMI happens once the borrower reaches a 22% equity position. This is determined by loan-to-value ratio at the time of the purchase. Unless loan-to-value ratio is now 78% or lower, the Bransons would have to petition to get PMI cancelled.
Which of these is an example of conversion of funds?
Monica used funds from the firm's trust account to pay her firm's rent.
Which of the following is the price a lender believes the property will bring at a foreclosure sale?
Mortgage value Lenders won't lend on what they can't recoup. Therefore, the loan amount will be based on what a lender would hope to recoup, should a foreclosure sale be necessary.
An example of this type of leasehold estate is a month-to-month lease.
Periodic estate A periodic estate automatically renews at the end of its lease term, such as at the end of a given month.
A surveyor created a lot and block survey for a new residential development. The first thing she did when she surveyed the new neighborhood was to reference a metes and bounds land description. From there, she divided the land into numbered lots and blocks. This output is known as a ______.
Plat map The plat map is a detailed map of the given land, including streets, access roads, and measurements between features.
What's the best definition of real property?
Real property includes real estate, plus all of the interest, benefits, and rights included in ownership.
Ashton, an appraiser, is estimating value using the sales comparison approach. He applies more weight to two comparables over several others he used. What process is he utilizing?
Reconciliation Through the reconciliation process, the most weight may be given to one or two comparables, or equal weight may be given to all. The term correlation is often synonymous with reconciliation. Another term for this is weighted averaging.
Which statement most accurately describes the type of notice provided by recording a change of ownership document?
Recording the deed provides constructive notice of the property sale.
Victor's family has always owned this particular lake house. When he was little, he remembers the "beach" being no more than four feet wide before the waterline. Now Victor brings his own children to the lake house, but the beach is almost seven feet wide. What natural process could explain the beach being bigger?
Reliction is the process by which water gradually recedes, which reveals new land.
Kyle owns six acres of land with 400 feet of river frontage. He wants to build a beach along the river bank to make it easier to swim in the river. He can do this because as the owner of river frontage, he has ________ rights.
Riparian rights are granted to property owners whose property is adjacent to flowing water, like a river.
Ari owned acreage in a rural area. He sold a small portion of it to a neighbor in an informal transaction but made no record of the sale or change of ownership. A developer offered Ari several million dollars for the entire acreage, and Ari eagerly accepted the offer. What covenant is Ari in danger of violating?
Seisin The covenant of seisin guarantees that the grantor owns the property that appears in the deed. Because the sale of property to Ari's neighbor was never recorded, his deed still shows that he owns the entire parcel.
Rhonda purchased an existing pet store in her neighborhood, and she's so excited! Her animal-loving aunt is thrilled for Rhonda but disappointed that she won't be able to visit the store in her wheelchair, as the aisles are narrow and there isn't enough room to move around. What is true about Rhonda's responsibilities to her aunt and other people with disabilities?
Since Rhonda purchased an existing building and business, the ADA requirements aren't as strict as with new construction and vary by building. There is no required minimum for existing buildings; instead, each business must make a reasonable effort to resolve usage barriers for people with disabilities.
An encroachment occurs when someone illegally places a structure or object on another person's property. Jeff's installation of a sidewalk off of his property is an example.
Specific Property tax liens are specific, because they represent a lien against a specific piece of property.
The appraisal report submitted to Jenkins, the lender, notes that the property is being conveyed with all property rights intact. Which step in the appraisal process does this represent?
State the problem. (The first step in the appraisal process is to state the problem. This includes a description of the rights associated with the property.)
Trinity has applied for a home equity line of credit to perform some upgrades on her home. Within what timeframe must her lender provide the Closing Disclosure?
The Closing Disclosure isn't required for a HELOC. Home equity lines of credit aren't subject to TRID disclosures, so Trinity's lender isn't obligated to provide a Closing Disclosure, though other disclosure forms may be required.
Kenneth plans to shop around for his mortgage loan to be sure he's getting the best interest rate and terms. What lender-provided document outlines loan rates and fees so he can make comparisons?
The Loan Estimate permits Kenneth to comparison shop. The Loan Estimate, issued three days after loan application, permits borrowers to compare loan terms between various lenders and loan programs.
Lawrence is a buyer closing on a home for which he's obtaining financing. Which document will give Lawrence an estimate of the costs he'll likely pay at closing?
The Loan Estimate, required by the Dodd-Frank Act, provides buyers with the costs they're likely to pay at settlement and discloses the mortgage loan specifics, such as its key features, costs, and risks.
A seller tells his agent that he has to sell his house quickly because of a divorce proceeding and that he's willing to accept less than his list price. His agent tells a buyer that the seller will accept as much as $10,000 less than the list price. Which of these is true?
The agent has breached his duty of confidentiality to his client. The agent breached his duty of confidentiality to his client. Even if the client has given the agent permission to note the price is flexible, providing the reduction the seller is willing to make impacts his ability to negotiate for the best price.
Marketo Building Designs is selling the air rights above its office building. The lot is 450 feet by 350 feet. How would you determine the air lot height in order to calculate the area?
The city or other governing authority establishes the air lot's height. Because of safety and other concerns, municipalities typically establish the height of air lots in their jurisdictions.
Which statement regarding fee simple defeasible estates is true?
The estate includes the full bundle of legal rights, but ownership is based on a condition. A fee simple defeasible estate includes the full bundle of legal rights, but ownership may be terminated if the required condition is violated.
Which of the following would NOT likely be a location issue of concern to buyers?
The house was built in 1985. Owning a property in an historical neighborhood or that's next to or contains a wetland isn't necessarily a bad thing. However, it's important to know if this is the case, as there may be certain restrictions or guidelines impacting the property's use.
Olivia took out a 15-year loan secured with a deed of trust. She worked two jobs in order to pay the loan back and finally made her last payment this month. What happens now?
The lender tells the trustee to release the title to Olivia. Because the property deed was held by a third-party trustee instead of the lender, the trustee grants a reconveyance deed to Olivia, which grants her the title.
Real estate professionals handle many documents related to real estate transactions. Which one of the items listed below is one of the most important in detecting mortgage fraud?
The original sales agreement and any addenda The original sales agreement and any addenda to that agreement must be accurate. They should clearly identify the property and all parties to the transaction.
Farquhar bought a house at a foreclosure auction. A few weeks later, he was notified that he couldn't take possession of or title to the property. What likely happened?
The previous owners redeemed the property by paying all mortgage payments and fees. Some states have a statutory redemption period after a foreclosure sale within which the homeowners can pay all funds owed to the lender to retain ownership.
The daily property tax rate is $1.23 and closing is August 31. Assuming the buyer owns the property on closing day, and the seller hasn't made any payments, what will the seller owe at closing using the calendar year proration method? Round to the nearest whole dollar.
The seller owes $298. The seller owns the property for 242 days of the year, and 242 days × $1.23 = $297.66, or $298 if rounded to the nearest whole dollar.
The seller and _______ must approve a short sale
The seller's lender Both the seller and the seller's lender must approve a short sale, because the lender will be receiving less than the amount owed.
Tom and Jim are neighbors. Jim wants to buy Tom's rental property. In the contract they sign, Jim is identified only as "the neighbor." Which statute or contract element does this violate?
The statute of frauds requires not only that a contract to convey real property be in writing, but also that the contract identify the parties to the contract.
In what way is a townhome similar to a condominium?
They both typically have HOA dues. Like condominiums, townhomes are single-family homes, and they both often have a homeowners association to which owners must pay dues.
How many parties does a deed of trust involve?
Three: borrower, lender, and trustee A deed of trust involves three parties: the borrower, the lender, and the trustee.
Sheila owns a timeshare that gives her ownership of the property for a certain number of weeks per year in perpetuity. What type of timeshare is this?
Timeshare estate This is a timeshare estate, which conveys ownership, not simply the right to use a property
Jennings has received a Closing Disclosure from his lender. What's the purpose of this form?
To detail all costs Jennings will owe at closing: The Closing Disclosure, provided at least three business days before closing, details the buyer's closing costs, as well as other loan terms, such as the projected monthly payment
Warren signed a contract with the Samsons for the sale of property he didn't own. What type of contract is this?
Void A party can't promise to do something impossible in a contract. Doing so makes the contract void.
Your client is purchasing a single-family home with a conventional loan. The listing price is $410,000. Does this situation require a licensed or certified appraiser?
Yes, it's required. Under FIRREA, minimum federal requirements stipulate that when a financed property is worth more than $400,000 a licensed or certified appraiser is required.
Kennedy tends to be rather informal about her real estate business. Her daughter's teacher, Matthew, tells Kennedy that he'd like her help selling his house. Kennedy agrees and tells Matthew she'll perform all the tasks she'd perform for any listing, though she has no written agency agreement with Matthew. Do Matthew and Kennedy have a legal agreement?
Yes. Express agreements may be verbal or written.
Victor bought a property from Yolanda for $200,000. Under the terms of a land contract, Victor agreed to pay Yolanda in monthly installments of $4,000 over the course of 50 months. Until Victor pays Yolanda the $200,000, who retains the title?
Yolanda The seller retains the title in a land contract. When the loan balance is paid in full, the seller gives the buyer title.
Three brokers meet and agree that all of their listing contracts will have one-year terms. Of which type of antitrust violation is this an example?
price fixing Besides commissions and discounts, price fixing may also apply to contract terms.
Allentown sits on the river, and its many bridges need repair. Which police power is Allentown likely to use in order to fund improvements to its bridges?
taxation The purpose of taxation is to meet the need for public works by funding them through a stable source of income that allows many to share the burden.