Review Prep 5 MATH
The absence of which of the following would render an earnest money contract unenforceable?
legal purpose.
If the tax value is 50% of the assessed value, which is $89,990, what are the annual taxes if the rate is $4.10 per $100?
$1,844.80. assessed value × tax rate = annual tax $89,990 × 0.5 = $44,995 4.10 ÷ 100 = 0.041 $44,995 × 0.041 = $1,844.80 annual tax (rounded)
If the assessed value of a property is $340,000, and the annual taxes are $4,250, what is the tax rate per $100 of tax value?
$1.25. assessed value × tax rate = annual taxes $4,250 ÷ $340,000 = 0.0125 per $100 = $1.25 tax rate
A 10.5% loan has an interest charge of $962.50 this month. What is the principal balance of the loan?
$110,000. $962.50 interest per month × 12 months = $11,550 per year $11,550 ÷ 0.105 interest rate = $110,000 loan balance
If the annual interest rate on a loan is 8% and the monthly interest payment is $120, the principal sum owed would be:
$18,000.00. Annual interest (120 × 12) = 8% × Loan 120 × 12 = $1,440 $1, 440/8% = $18,000 Loan
The property taxes that are paid in arrears are $6,000, and the closing is January 21st. The buyer has the day of closing. Using a 365-day year, what will be the amount on the settlement sheet?
$180.82 debit seller, credit buyer
The monthly payment of principle and interest is $861.60. The loan balance is presently $145,675, and the interest rate is 5 1/2%. How much of the next payment will go toward the loan's principle?
$193.92. Take the balance and multiply by the interest rate, which represents a year's interest. Divide that number by twelve to determine a month's interest, which when subtracted from the total payment of principle and interest, will give that payment's principle. $14,5675 × .055 = $8,012.125012$8,012.125012 = $667.67708; $861.60 − $667.67708 = $193.92292.
On a straight term loan of $480,000 with a 4% interest rate, what is the monthly interest?
$1,600. Monthly interest is always the same formula: Principle × rate ÷ 12 = monthly interest: $480,000 × .04 = $19,200 (annual interest) ÷ 12 = $1,600 monthly interest
The purchase price of a property is $86,300, and the purchaser has secured an 85% conventional loan. The lender charges a 1% origination fee, and additional closing costs total $2,625. How much cash must the purchaser bring to the closing if she has already paid an earnest money deposit of $3,000?
$13,304. $86,300 price × 0.85 loan-to-value ratio = $73,355 loan $73,355 loan × 0.01 loan origination fee = $734 (rounded) For the buyer's required cash: $86,300 price + $734 loan origination fee + $2,625 additional closing costs = $89,659 total charges $89,659 − $73,355 loan = $16,304 $16,304 − $3,000 earnest money deposit = $13,304 total due at closing
The listing price of a property is $149,900, the offer is $147,500, and the appraisal comes in at $147,250. If the transaction is based on a 90% loan, what is the loan amount?
$132,500. First, the listing price has no bearing on the loan amount, so the base for the loan is either the sales price or the appraised value. Lenders are going to minimize their risk, so the loan will be based on the lower of the two prices (offer and appraisal). In this case, the appraisal is the lower. So, take the appraised value, which is $147,250, then multiply by the Loan-to-Value, which is 90%. $147,250 × .90 = $132,525. This is answer choice B, but it is not correct because lenders tend to round loans off to hundred dollar increments, and again, to minimize risk, lenders round new loan amounts down. Therefore, $132,525 would round down to $132,500.
A parking lot containing 2 acres nets $12,000 per year. The owner wishes to retire and sell his parking lot for an amount that will net him $12,000 per year by investing the proceeds of the sale at 8.5% per year. What must the selling price be to accomplish the owner's objective?
$141,176. Investment × rate of return = annual net income $12,000 ÷ 0.085 = $141,176 selling price (rounded)
A house sells for $165,000. If the seller agrees to pay 5.5% discount points on a $155,000 mortgage, and the broker's fee is 6%, how much does the seller net?
$146,575. points: loan × number of points as percentage = dollars in points $155,000 × 0.055 = $8,525 dollars in points commission: sales price × rate of commission = total commission $165,000 × 0.06 = $9,900 total commission $9,900 + $8,525 = $18,425 total expenses $165,000 − $18,425 = $146,575 net to seller
A broker's commission is 7% of the first $100,000 of the sales price and 6% of the amount over $100,000. What is the total selling price of the property if the broker receives a total commission of $10,000?
$150,000. sales price × rate of commission = total commission $100,000 × 0.07 = $7,000 $10,000 − $7,000 = $3,000 $3000 ÷ 0.06 = $50,000 $100,000 + $50,000 = $150,000
The annual property taxes are $915.00 and are paid in arrears. With the seller having the day of closing and using a 365-day year, prorate the property taxes for a closing date of March 4.
$157.93. Paid in arrears means it is a SOB (seller owes buyer). The formula is always the same: Total Amount Due ÷ Total days × Days owed. The seller owes 63 days. The solution $915.00 ÷ 365 × 63 = $157.93
A property was sold for $200,000 but was appraised for $202,500. If the lender will provide an 85% loan, the loan amount would be?
$170,000. Loan value is sales price or appraised value whichever is less. $200,000 × .85 = $170,000
A lender charges 2.25 discount points to allow the borrower to buy down the rate to 4%. What will the borrower pay for discount points on a sale of $128,000 with a LTV of 90%?
$2,592. $128,000 price × 0.90 loan-to-value ratio = $115,200 loan $115,200 loan × 0.0225 points = $2,592 in points
Jamal sells a property for $185,000. The commission on this sale to the real estate firm with whom Jamal is associated is 5%, of which he will receive 50%, which is 60% of the sales price. What is Jamal's share of the commission in dollars?
$2,775. sales price × rate = commission × company rate × salespersons split = answer $185,000 × 0.05 = $9,250 × 0.60 = $5,550 to the company × 0.50 = $2,775 salespersons commission
A house has an assessed value of $142,000. The property is taxed at 80% of the assessed value at a rate of $2.12 per $100. If the assessed valuation is increased by 18%, what is the amount of taxes to be paid on the property?
$2,841.82. $142,000 × 1.18 = $167,560 increased valuation $167,560 × 0.80 = $134,048 new tax basis assessed value × tax rate = annual taxes 2.12 ÷ 100 = 0.0212 $134,048 × 0.0212 = $2,841.82 annual taxes
The purchase price of a property is $128,000. If a lender's maximum loan-to-value ratio is 80% without private mortgage insurance (PMI), but 90% if PMI is charged, what is the down payment required if the buyers want to avoid the PMI?
$25,600. To avoid PMI, the borrower must put a 20% down payment for a maximum loan amount of 80% $128,000 price × 0.20 down payment = $25,600 down payment
The closing date is January 15. The taxes for the calendar year begin accruing on January 1 and are paid in arrears. If the taxes are $6,000 per year, using a 360-day year, with the seller having the day of closing, what will be the entry on the closing statements?
$250 debit seller
If a seller netted $269,800 after paying closing expenses of $2,800 and a 6% commission, the sale price was?
$290,000. In this problem, we are looking for the Whole (Sale Price). Therefore: $269,800 + $2,800 (P) 100% - 6% (R) Sale price $_____ (W) W = ($269,800 + $2,800) ÷ (100% - 6%) W = $272,600 ÷ 94% W = $272,600 ÷ 0.94 W = $290,000
A salesperson is on a 70/30 split with her broker, which according to the contract between them, changes to 60/40 if the salesperson should leave the firm. The salesperson wrote a contract for a $175,000 purchase price at a 6% commission on a 50/50 split with a cooperating firm. After writing the contract, but before the closing, the salesperson transfers to a firm offering an 80/20 split. What will be the salesperson's earnings from this transaction?
$3,150. The commission is a total of 6% of the sales price ($175,000 × .06 = $10,500), which is split equally with the cooperating company ($10,500 × .50 − $5,250), which is split between the salesperson and her broker. The initial split was 70/30. However, the salesperson transferred to a different company, where the split will be 80/20. According to the contract between the salesperson and the broker, the split is reduced to 60/40 should the salesperson leave the firm. Therefore, the salesperson's share is $3,150 ($5,250 × .60 = $3,150).
The purchase price is $178,900.00, with a 6% commission, which is being split on a 50/50 basis with the buyer's brokerage. The buyer's agent has a 60/40 split with her broker. What is the buyer's agents commission?
$3,220.20. Take the purchase price, multiply it by the full commission, divide between the two brokers, and then divide 60% for the buyer's agent. ($178,900 × .06 = $10,7342$10,7342 = $5,367 × .60 = $3,220.20).
An apartment building has 10 apartments rented at a monthly rate of $780. The property closed on August 18, with the seller having the day of closing. Using a 365-day year, what will be the seller debit on the closing statement?
$3,271. 10 × $780 = $7,800 per month $7,800 ÷ 31 = $251.6129 per day $251.6129 × 13 = $3,270.9677 = $3,271 debit (rounded)
A property is sold for $64,000 by a salesperson. The commission is 8%, of which the salesperson receives 65% and the brokerage firm receives 35%. How much did the salesperson receive?
$3,328. sales prices × rate of commission = total commission $64,000 price × 0.08 = $5,120 $5,120 × 0.65 = $3,328
A mortgage payment this month consists of $225 in interest and $70 applied to the principal. What is the annual debt service?
$3,540. Debt service equals principal and interest payments on a given loan for an entire year. $225 interest + $70 principal = $295 per month $295 × 12 months = $3,540 annual debt service
The property manager has negotiated a two-year lease of a 3,500-square-foot industrial space at $1.85 per square foot per month and will be paid 3% of the gross rent to be paid. How much is the total commission?
$4,662. 3,500 square feet × $1.85 per square foot = $6,475 per month. $6,475 per month × 24 months = $155,400 total rent. $155,400 × 0.03 = $4,662 commission.
If a lender received $24,000 as a discount by charging 6 points, what was the loan amount?
$400,000. $24,000 ÷ 0.06 = $400,000
A buyer pays $45,000 for a lot. Five years later, he puts it on the market for 20% more than he originally paid. The lot then sells for 10% less than the asking price. What is the selling price of the lot?
$48,600. $45,000 × 1.20 (120%) = $54,000 asking price $54,000 × 0.90 = $48,600 selling price
The annual interest on a seller's existing loan is $9,600, and the date of closing is April 18. The seller pays for the day of closing. The amount of accrued interest the seller will owe at closing is:
$480.. The first step is to get to monthly interest by dividing $9,600 by 12, which gives monthly interest of $800. The formula is always the same: Total Amount Due ÷ Total days × Days owed. $800 ÷ 30 × 18 = $480.
A salesperson and a broker have a 70-30 commission split program (70% to the salesperson). What is the salesperson's commission on a sale of $124,500, with a 6% total sales commission, if there are no other brokers or salespersons involved?
$5,229. sales prices × rate of commission = total commission $124,500 price × 0.06 = $7,470 total commission $7,470 × 0.70 = $5,229 commission
The seller has agreed to pay the broker a commission of 4%. An offer of $140,000 is accepted on August 4th, What is the brokerage firm's commission?
$5,600.00. $140,000 × .04 = $5,600 to the brokerage firm.
On May 3rd, the listing agent listed a property at $149,500, with a 4% commission. An offer for $142,000 was countered at $147,500 and accepted by the buyer. The property appraised for $146,000, which the executory sales contract was amended to reflect. What is the listing brokerage firm's fee?
$5,840. Typically a broker's fee is based on the sales price. Although the parties originally agreed to a selling price of $147,500, the amendment changed the contract sales price to $146,000. $146,000 × .04 = $5,840.
An owner lists a property for sale with a broker. At what price must the property be sold to net the owner $7,000 after paying a 7% commission and satisfying the existing $48,000 mortgage?
$59,140. sales prices × rate of commission = total commission $7,000 + $48,000 = $55,000 100% − 7% commission = 93% $55,000 ÷ 0.93 = $59,140 price at which property must be sold (rounded)
If an interest-only loan of $12,500, with 9.5% interest per year, is paid back six months from the date of loan origination, how much interest will be paid?
$593.75. $12,500 loan × 0.095 interest rate = $1,187.50 interest per year $1,187.50 ÷ 12 months = $98.9583 per month $98.9583 monthly × 6 months = $593.75 total interest paid
If the purchase price is to be $129,950 and the loan-to-value is to be 80%, with an interest rate of 7% and a payment factor of 6.66 per thousand, with annual taxes of $1,450 and an insurance premium of $480, what is the indicated monthly payment?
$691.97. This is an 80% loan, so no tax or insurance reserve is required. All that is necessary is the principle and interest portion of the payment. Take the purchase price of $129,950 and multiply by the loan-to-value ($129,950 × .80 = $103,960), which is then rounded down to the nearest hundred ($103,960 rounds down to $103,900). Divide this sum by 1,000 and multiply by the monthly payment factor ($103,9001000$103,9001000 = $103.9 × 6.66 = $691.9740 or simply $691).
A seller lists her house with a broker for $119,900, with a commission of 6.5%. The broker negotiates a sales contract for $116,500. The buyer is required to deposit $4,500 as an initial escrow deposit and an additional escrow deposit of $5,500 within five days, and to apply for a new mortgage of $106,500. The real estate commission would be:
$7,572.50. sales prices × rate of commission = total commission $116,500 price × 0.065 commission rate = $7,572.50 total commission All other information is irrelevant
A sale closes on February 12, with the seller having the day of closing. The buyer is assuming the seller's mortgage, which has an outstanding balance of $28,000 as of the closing date. The last mortgage payment was made on February 1. The annual interest rate is 7.75%, and interest is paid in arrears. What interest proration appears on the buyer's closing statement?
$72.36 credit. $28,000 × 0.0775 = $2,170 yearly $2,170 ÷ 12 months = $180.83/month $180.83 ÷ 30 days = $6.03/day $6.03 × 12 days = $72.36 used portion (as payments are made in arrears, this amount is a credit to the buyer and a debit to the seller)
The closing on the sale of a rental property is to be held June 10. The seller has received the rent for June in the amount of $1,200. What entry will appear on the seller's and buyer's closing statements if the seller has the day of closing?
$800 credit to buyer. $1,200 ÷ 30 = $40 rent per day $40 × 20 days due to buyer $800 rent credit to buyer
If a seller netted $315,180 after paying closing expenses of $6,260, an existing mortgage balance of $430,000, and a 7% commission, how much was the sales price?
$808,000. In this problem, we are looking for the Whole (Sale Price). Therefore, $315,180 + $430,000 + $6,260 (P) 100% - 7% (R) Sale Price $_____ (W) W = ($315,180 + $430,000 + $6,260) ÷ (100% - 7%) W = $751,440 ÷ 93% W = $751,440 ÷ 0.93 W = $808,000
The property has a market value of $250,000.00. The assessment rate is 40%. There is a homestead exemption of $10,000.00. The city's mills are 33.5, and the county mills are 6.405. What are the quarterly taxes?
$897.86. The value is multiplied by the assessment rate and then the exemption is subtracted. The mills are divided by 1,000 to convert to a mileage (tax) rate and multiplied by the taxable base from the first step and then divided by four to convert to quarterly. $250,000 × .40 = $100,000 − $10,000 = $90,000. 33.5 + 6.405 = 39.905100039.9051000 = .039905. 90,000 × .039905 = $3591.454$3591.454 = $897.8625 or $897.86
An 11% loan for $95,000 is made with principal and interest payments of $898.93 per month. What is the balance after the first payment?
$94,971.90. $95,000 loan × 0.11 interest rate = $10,450 interest per year $10,450 ÷ 12 months = $870.83 interest for the first month $898.93 principal and interest payment − $870.83 interest = $28.10 principal $95,000 old balance − $28.10 principal repaid = $94,971.90 new balance
If a lender received $3,000 for discount points on a $150,000 loan, how many points were charged?
2%. Points are always charged on the loan amount, which was $150,000. To determine the amount of points, divide the amount paid by the loan amount to get the points. $3,000 ÷ $150,000 = 2% or 2 points
A salesperson earns a commission of $6,000 in a sale of a property worth $100,000. What is the commission rate?
6%. sales price × rate of commission = total commission $6,000 ÷ $100,000 = 0.06 = 6% commission rate.
What is the commission rate on a sale of $111,000 if the total commission paid was $7,215?
6.5%. sales price × rate of commission = total commission $7,215 commission ÷ $111,000 sales price = 0.065 or 6.5% commission rate
The appraised value of a property is $425,000. The purchaser borrows $340,000. What is the loan-to-value ratio?
80%. loan ÷ value = ratio $340,000 ÷ $425,000 = 0.80 = 80% loan-to-value ratio
A property on a lake is closing on August 1st. A boat dockage fee, due to the homeowners association, for $240 for a six-month period, from July 1 to December 31 is due September 1, and will be paid by the buyer. What entry appears on the closing statement?
Credit to buyer $40. $240 ÷ 6 = $40 per month × 1 month (July 1-July 31) = $40 credit to buyer.
When transactions involving the sale of real estate are placed in escrow, this means that:
a designated agent, agreed to by the parties, holds the necessary documents until the terms are met.
An escrow is:
beyond the control of any interested parties by themselves
Forcing someone to do something against his or her will in the execution of a contract is called:
duress
A voidable contract is:
enforceable, but is subject to rescission by one of the parties to the contract.
A prospective buyer, gave a deposit to a broker and signed the usual form of an offer to purchase property. The deposit form included the statement, "This offer is for 5 days." A day later before the offer had been accepted by the seller, the buyer contacted the broker and withdrew his offer and demanded the return of his deposit. The broker:
must return the deposit to the buyer as demanded.
A proper escrow, once established, should be:
not subject to the control of any one interested party alone.
When a real estate sales transaction is to be closed in escrow, the escrow agent:
protects the interest of each party to the transaction.
An escrow to purchase property was opened on September 1st, and all instructions were placed in escrow, with closing scheduled for December 1st. Prior to the closing of the escrow, the seller requested the escrow agent change the closing date to January 2nd, for income tax purposes. However, the buyer would not agree to this. The escrow agent should:
refuse to change the closing date without the buyer's approval.
All of the following items are prorated at closing EXCEPT:
sales price.
If escrow instructions differ from the deposit receipt or preliminary sales contract, and the escrow instructions have been signed by both the buyer and the seller, which of the following is correct?
the escrow instructions take precedence
In calculating the transfer tax on a property when the buyer obtains a new loan, the tax is calculated on:
the sales price.
A condominium HOA dues of $345.00 are due on the 1st of each month. The seller has not paid June's dues and has a closing scheduled for June 15th, with the seller having the day of closing. What will be the amount on the settlement statement?
the seller will be debited $172.50, and the buyer will be debited $172.50. Both the seller and buyer owe for the portion of the month they will own the house. Since June has thirty days and the closing in the 15th, each party will owe 15 days. The calculation is always the same: total amount ÷ total days × days owed. $345.00 ÷ 30 × 15 = $172.50.
The tax charged by the state when a property is transferred and the new deed recorded is known as the:
transfer tax.
