Unit 13: RE Business

1. What is the capital gains tax exclusion available to homeowners who file their income tax as single filers? a. $500,000 b. $225,000 c. $125,000 d. $375,000

$375,000

A building lot was sold for $88,000. If the seller made a profit of 10 percent, what was the original cost of the property? a. $61,000 b. $79,000 c. $79,200 d. $80,000

$80,000

A property was listed for sale at $100,000. If the original cost was 80% of the list price, what will the profit be if it sells for $100,000? a. 10% b. 15% c. 20% d. 25%

25%

A man wants to buy his first home but doesn't know how much he can afford to pay. He has a gross monthly income of $3000. According to the traditional lender's rule of thumb formula, what is the total housing expense he can bear? A) 1080 B) 1152 C) 840 D) 648

840

The buyers paid cash for their new home. At the same time, they purchased flood insurance. At what time will the flood insurance be effective? a. After 30 days b. Immediately c. Seven days after closing d. 60 days after closing

After 30 days

Commercial real estate includes all of the following except A) a retail space for lease B) apartments for rent C) fast-food restaurants D) an office building for sale

Apartments for rent

Most homeowners' insurance policies contain which of the following clauses? a. Property improvement clause b. Coinsurance clause c. Co-ownership clause d. Property devaluation clause

Coinsurance clause

When a person buys a house using a mortgage loan, the difference between the amount owed on the property and what it is worth represents the homeowner's A) tax basis B) replacement cost C) capital gain D) equity

Equity

For which risk would a homeowner have to purchase a special policy in addition to a typical basic or broad form homeowners' insurance policy? a. the cost of medical expenses for a person injured in the policyholder's home b. theft c. vandalism d. flood damage

Flood damage

In addition to the affordability of a home, what is a primary consideration in the selection of a property? a. Construction specifications b. Age of the improvements c. Location of the property d. Landscaping and exterior

Location of the property

Each room of a house was preassembled at a factory, driven to the building site on a truck, and then lowered onto its foundation by a crane. Later, workers finished the structure and connected plumbing and wiring before the owners moved in. Which term BEST describes this type of home? A) manufactured B) mobile C) converted D) modular

Modular

What is the largest trade association that serves real estate licensees? a. National Association of REALTORS® (NAR) b. National Association of Real Estate Brokers (NAREB) c. Real Estate Educators Association (REEA) d. American Society of Home Inspectors (ASHI)

National Association of REALTORS (NAR)

A couple bought their house in 1968 for $25,000. Today, the neighborhood has become very fashionable, and they plan to sell the house for $450,000. How much of the gain is taxable on the couple's joint return this year? a. $25,000 b. $637,000 c. all d. none

None

Which of the following affects demand? a. Population b. Construction costs c. Government controls d. The labor force

Population

The real cost of owning a home includes certain costs/expenses that many people overlook. Which of the following is NOT such a cost/expense of home ownership? A) Income lost on cash invested in the home B) Interest paid on borrowed capital C) Maintenance and repair expenses D) Taxes on personal property

Taxes on personal property

A building that is remodeled into residential units and no longer used for the purpose for which it was originally built is A) planned unit development B) an example of urban homesteading C) modular home D) a converted-use property

a converted-use property

A home inspector discovered some small problems in the bathroom of the home he inspected for the buyers. He offers to make these repairs. In PA, when can he make these repairs? A) after 12 months B) immediately C) never D) after 6 months

after 12 months

Which of the following best expresses the concept of equity? A) current market value minus property debt B) replace cost minus depreciation C) current market value minus capital gain D) current market value minus cost of land

current market value minus property debt

All of the following affect how quickly the forces of supply and demand work EXCEPT a. degree of standardization of the product. b. mobility of the product. c. degree of standardization of the product's price. d. mobility of the parties to the transaction.

degree of standardization of the product's price

All of the following are categories of the uses of real property EXCEPT a. residential. b. developmental. c. agricultural. d. industrial.

developmental

All of the following factors tend to affect supply EXCEPT A) employment and wage level B) construction costs C) government controls D) labor force

employment and wage level

The point at which supply and demand are equal is known as a. highest and best use. b. balance. c. conformity. d. equilibrium.

equilibrium

That portion of the value of owners' property that exceeds the amount of their mortgage debt is called A) equality. B) escrow. C) surplus. D) equity.

equity

which of the following affects supply? A) population B) fiscal policies C) demographics D) wage levels

fiscal policies

A basic homeowners' insurance policy would protect against all of the following EXCEPT a. fire and lightening. b. flooding. c. windstorm and hail. d. water damage.

flooding

Who in the real estate transaction is most likely to prepare an analytical report about the condition of the property? A) home inspector B) appraiser C) listing agent D) lender

home inspector

Real estate markets are local due to the physical characteristics of A) immobility and uniqueness B) population C) government controls and fiscal policies D) labor force and construction costs

immobility and uniqueness

A world-renown company plans to open a new large manufacturing plant. In this area, housing prices are likely to a. increase due to increased demand. b. decrease since workers can remain in their homes and drive further distances. c. be unaffected because those who build the manufacturing plant will relocate after the plant has been built. d. wildly fluctuate, sometimes losing value.

increase due to increased demand

The object of planned unit developments is to A) merge diverse land uses in one self-contained development. B) encourage separation of housing and commercial units. C) minimize open space by enlarging lot sizes and street areas. D) avoid the use of community associations.

merge diverse land uses in one self-contained development

In order to offset expenses, a highrise condominium community rents out the ground floor to a convenience store. The building is an example of a. mixed use. b. special-purpose use. c. c. commercial use. d. a planned unit development (PUD).

mixed-use

a high-rise development that includes office space, stores, theaters, and apartment units is an example of a A) planned unit development B) proprietary lease properties C) special cluster zoning D) mixed-use development

mixed-use development

When preparing his annual income tax return, the homeowner may be able to deduct all of the following EXCEPT a. real estate taxes. b. mortgage interest on a first home. c. mortgage interest on a second home. d. mortgage interest on a third home.

mortgage interest on a third home

In general, when the supply of a certain commodity increases, A) demand tends to drop B) demand tends to rise C) prices tend to rise D) prices tend to drop

prices tend to drop

When the supply of a commodity decreases, a. prices tend to rise. b. prices tend to drop. c. demand tends to rise. d. demand tends to drop.

prices tend to rise

The basic responsibility of a property manager is to a. protect the owner's investment. b. minimize the return on investment. c. slash expenses. d. increase rents.

protect the owner's investment

Federal income tax regulations allow homeowners to reduce their taxable income by amounts paid for a. repairs and maintenance. b. hazard insurance premiums. c. real estate taxes. d. principal and interest.

real estate taxes

The desirability of the location of a residence is influenced by all of the following EXCEPT a. retirement prospects. b. employment opportunities. c. social services. d. cultural advantages.

retirement prospects

In the event that a homeowner's insurance policy provides coverage for at least 80 percent of the full replacement cost of the dwelling, the loss of the residence will be settled for A)the total replacement cost. B)either the actual cash value or the prorated repair cost. C)the market value of the property less the land value. D)the lowest repaid bid.

the total replacement cost

The two characteristics that have the MOST influence on the market value of land are A) residential and commercial B) uniqueness and immobility C) demographics and constructions costs D) rental market and sales market

uniqueness and immobility

Under the current tax law, MOST homeowners a. may use a one-time $250,000 exclusion if they file their taxes jointly. b. will be taxed at the current capital gains rate. c. will never pay capital gains tax on the sale of their homes. d. will be taxed at a lower rate as they get older.

will never pay capital gains tax on the sale of their homes.