ch 4 quiz: Home Ownership
Bill, who is unmarried, is selling his rental home and plans to put off buying another home for five years. He earns $325,000 annually, putting him in the highest tax bracket at 23.8 percent. If he nets $200,000 on the transaction, how much will his tax liability be for the capital gain portion of his return only?
$47,600 (Dollars) =($200,000 x 0.238 = $47,600.)
Denis bought a home fresh out of college from his parents for $10,000. He is ready to sell the home now, 20 years later, which substantially increased in value. He is concerned about paying capital gains taxes. His real estate agent told him that the long-term tax rate for most homeowners ranges from zero to ............, depending on several factors, and referred him to a tax accountant to discuss his particular situation in detail. A20 percent B10 percent C5 percent D35 percent
20 %
Which characteristic differentiates a Fee-simple time-share from a Leasehold time-share purchase?
A Fee-simple time-share is deeded in perpetuity
All of the following are loan vehicles for a first mortgage, except? A HELOC B FHA C Conventional D VA
A) Heloc
What kind of insurance protects lenders against losses if a buyer fails to make payments? APrivate mortgage insurance BHomeowners insurance CCommercial operators coverage DE&O insurance
APrivate mortgage insurance
An investor has several multi-family buildings he wants to sell in the next year. His real estate agent tells him that he can force the appraised value to rise by...? AAdding amenity packages based on trends in the local area BOverstating the value of his property on listing sites CTrying to force competing property values to fall DDropping base rents
Adding amenity packages based on trends in the local area
The monetary gain resulting from the increase in the market value of an investment, excluding additions of capital, is known as...? AAppreciation BDepreciation CCapital loss DAssessment
Appreciation
Which list below covers the three most common homeowner policy coverage areas? ABuildings, building contents, and medical coverage for people who are hurt on your property BStructures, land, and landscaping, and medical liability CBuilding, land, and building contents DNone of the answer choices provided are correct
Buildings, building contents, and medical coverage for people who are hurt on your property
What type of real estate transaction allows owners to swap property under certain conditions without creating a capital gain tax liability? ABusiness to business 1031 Exchanges for like-kind properties BA transaction between one private condo owner and a private single-family homeowner CA business to private owner swap that transfers ownership of a multi-family apartment complex in exchange for one or more single-family housing units DA bank transfer of commercial property to a private owner who wants to convert the property to a personal residence.
Business to business 1031 Exchanges for like-kind properties
Which housing accommodation is purchased as stock or shares in a corporation, and entitles the shareholder to occupy a particular unit? ACooperative BCondominium CCorporate apartment DOwner-occupied investment unit
Cooperative
A buyer is looking for a multi-family option that includes common area maintenance and will allow him to take advantage of tax incentives for homeowners. His agent may recommend he choose a condo over a co-op because...?
Cooperatives are never fully owned, you only purchase the exclusive right to use
Which of the following offers a low down payment option for home buyers? AFHA insured loan BConventional loan CARM DAll of the answer choices provided are correct
FHA insured loan
Candice wants to buy a new home. She doesn't have a lengthy credit bureau file and is looking for a loan vehicle that will not require a large down payment. She is surprised to learn that the ............ considers non-borrower income and nontraditional credit sources when reviewing mortgage applications. AFannie Mae HomeReady mortgage program BVA financing program CConventional loan standards DFresh Start Home Buyers Program
Fannie Mae HomeReady mortgage program
Mark is trying to decide if he should rent or own a home. His job requires that he frequently travel, sometimes even for long periods of time. As Mark's real estate agent, what should you suggest to Mark?
He should rent a home
George has done some research about insurance policies online. He is planning to add more rental properties to his portfolio this summer, and asks his agent if she knows whether he will qualify for replacement value cost (RVC) NFIP coverage. His agent, Paula tells him "no," because...?
In order to qualify for RVC coverage, George must live in a home 80 percent of the time. (This policy typically does not apply to real estate investors.)
One benefit of buying a home is...?
Long term appreciation
Which statement is true about homeowners and insurance coverage in the United States? AMany US homeowners are under-insured. BMost US homeowners are over-insured. CEvery US homeowner is required to maintain continuous coverage on buildings and contents. DLess than 10 percent of homeowners in the US have active insurance policies.
Many US homeowners are under-insured.
While talking to a client about non-federal tax liabilities, Dana mentioned local property taxes. She told her client that tax assessments are based on ............, but every district offers discounts to certain groups, such as people over 65 and permanently disabled individuals.
Market Value
Katie owns 100 percent of her home and wants to add a small kitchen to a master suite to create a mini apartment she can rent out to help defray the costs of owning her home. Can she still deduct all eligible expenses as personal home expenses?
No. Renting a portion of a home that can be considered a complete home, makes some expenses ineligible.
Katlin told her real estate agent that she is looking for an investment property. She recently took a class on buying low and selling high, so she plans to buy a home in a low-income neighborhood, furnish it with high-end appliances and all the latest in home technology. Her real estate agent cautions her against this strategy, because...?
Over renovating doesn't guarantee a quick and high-profit turnover.
Which statement is true of PMI? APMI is usually only required on conventional loans with a down payment less than 20%, or if the buyer wants to refinance a home with less than 20% equity built up. BPMI is typically required for loans processed with a minimal down payment. CPMI is equally divided among all installment payments for the life of the loan. DHomeowners purchase PMI through independent agents and make separate payments directly to the insurance company.
PMI is usually only required on conventional loans with a down payment less than 20%, or if the buyer wants to refinance a home with less than 20% equity built up.
Most homeowners insurance policies cover specific events that fall into two different categories:
Perils and non-perils (fire,theft)
Mike is working with an investor/developer who wants to create a new mixed-used area that combines individual homes, retail space, multi-family housing, and public recreation spaces. He will need to get approval before starting this ............ project because zoning and density guidelines are not within the established comprehensive plan. APlanned unit development (PUD) BModified residential subdivision CModified commercial subdivision DMulti-family business district
Planned unit development (PUD)
While explaining the differences in insurance options, Kelly tells a potential buyer that she has a homeowners policy that covers the total loss up to a maximum value. So, if her home is covered, the insurance company will...? AReimburse her (or the mortgage company) the maximum amount listed in her policy, regardless of repair costs. BReimburse her up to the balance on her mortgage. CReimburse the actual cost of repair, up to the maximum amount listed in her policy. DReimburse the actual cost of repair, minus applicable depreciation or deductibles.
Reimburse her (or the mortgage company) the maximum amount listed in her policy, regardless of repair costs.
The IBC classifies any structure with occupied living space higher than 75 feet above ............ as a high-rise building.
The lowest level of fire department access
The most common type of depreciation is the ............. You calculate the annual depreciation by dividing the value of the home by......?
Straight-line depreciation is the most simple and commonly used depreciation method. You can calculate straight-line depreciation by subtracting the asset's salvage value from the original purchase price and then dividing it by the total number of years it is expected to be useful for the company.
Lisa is a real estate agent who also helps clients lease single-family homes. She advises every potential tenant to purchase HO-4, also known as ............, because it is a perils content policy. ATenant Coverage BDwelling & Content Coverage CNamed Perils Coverage DComprehensive Coverage
Tenant Coverage
Gene is showing homes to a first-time buyer in an area that is prone to floods. The client tells him he likes the houses, but he has already lost two homes to floods and doesn't think he will be able to afford insurance. Gene tells his client there is an option called the ............ specifically designed for his situation. AThe Fair Access to Insurance Requirement (FAIR) program BFEMA's Minimum Coverage for Flood-prone Designations plan CHome & Land Flood Protection Plan DThe High Risk Flood Zone program
The Fair Access to Insurance Requirement (FAIR) program
Christine is looking at an older home in a quiet neighborhood. She knows that it might be hard to repair or replace the dwelling if it was directly hit by a tornado or there was a fire. The best homeowner policy for her is probably an HO-8 policy specifically designed for older homes. Which statement most accurately gives an overview of the Older Home Coverage?
The plan doesn't cover water damage without an additional rider, but pays the actual cash value minus depreciation.