Ch 10: Home Ownership Flashcards
Why do people purchase property?
Financial reasons
Psychological reasons
To live in
As an investment
Which type of housing is distinguished by its form of ownership rather than the style of architecture?
Condominiums (also cooperatives)
How does a modular home differ from a manufactured home?
Modular homes are prefabricated housing transported as modules to the building site and then permanently anchored to a foundation. Manufactured homes are housing units similar to trailers which are attached to the land and used as permanent housing.
How does a time share point system work?
Points programs annually give the owner an amount of points equal to the level of ownership. The owner can then use these points to make travel arrangements within the resort group.
What is the major advantage of a Planned Unit Development (PUD)?
Because it is designed to produce a high density of dwellings with maximum use of open spaces, it usually results in lower-priced homes and a minimum of maintenance cost.
List three types of retirement community.
Independent living communities, which offer no personal care services
Congregate housing, which includes at least one shared meal per day with other residents
Mobile homes or RV’s for active adults
What is the most important factor for a prospective homebuyer to consider in the decision to purchase?
Affordability
Why are lower down payments not always a good thing?
The smaller the down payment, the larger the loan itself will be.
What did the Taxpayer Relief Act do with regard to capital gains?
Reduced the top rate on profits from 28% to 20% for assets held at least 18 months, retroactive to May 7, 1997. Taxpayers in the 15% bracket now pay 10% tax.
How does the IRS definition of a first-time home buyer differ from the standard definition?
Technically, the person doesn’t have to be purchasing his or her very first home. The person qualifies under the tax rules as long as that person did not own a principal residence at any time during the two years prior to the acquisition date of the new home.
What is the difference between a realized and an unrealized capital gain?
A realized capital gain is an investment that has been sold at a profit. An unrealized capital gain is an investment that hasn’t been sold yet but would result in a profit if sold.
John and Grace Palmer bought their home in 1994 for $150,000. They just sold it for $550,000. How much will they pay in capital gains tax and why?
They have no capital gains to pay. Their profit was $400,000 and they are eligible for a $500,000 exclusion.
What is usually NOT covered by condominium insurance?
Outside events or damages to the building are not usually covered.
What does it mean if a homeowner receives a Certificate of Flood Insurance from FEMA?
Flood insurance has been provided under a Group Flood Insurance Policy following a Presidential disaster declaration.
What can a homeowner do if he or she discovers that the property was built over an abandoned mine?
Apply for Mine Subsidence Insurance (MSI) from the MSI Fund, administered by the Department of Environmental Protection.
Gary carries an insurance policy that equals 60% of the replacement value of his home. He suffers $8,000 in damage on his home after a windstorm. How will his insurance claim be handled?
It will probably be prorated as follows to give him $6,000:
60% ÷ 80% = 75% x $8,000 = $6,000
How are condominium properties created?
By executing and recording a condominium declaration and a master deed
What are a condominium owner’s responsibilities relating to the apartment?
Maintaining internal systems
Maintaining the property condition
Insuring contents of the unit
What does a person own when purchasing a cooperative unit?
Shares in a non-profit corporation or cooperative association, which in turn acquires and owns an apartment building as its principal asset
How is a cooperative resident’s monthly assessment determined?
The proprietor-tenant is responsible for the unit’s pro rata share of the corporation’s expenses in supporting the cooperative.
What 1997 Act created a tax free IRA alternative?
The Taxpayer Relief Act
When a lender calculates a prospective home purchase, what does the typical formula say a person’s payment percent should be?
No more than 28% of gross monthly income
What happens when there are more properties available for sale than there are buyers to purchase them?
A buyer’s market
Special insurance policies for apartments or condominiums generally provide coverage for fire, theft, and:
windstorms.
Basic homeowner’s policies usually exclude losses for what?
Floods
What type of home is constructed of pre-made parts and unit modules?
A modular home
How is a co-op interest transferred?
By assigning the stock certificates and a lease to the buyer
Owner responsibilities to an apartment include maintaining the property condition, maintaining internal systems, and:
insuring contents of the unit.
What do you call a building that is higher than six floors and is also equipped with elevators?
A high-rise development
What is a database, used by insurance companies, that provides five to seven years of prior claim information on properties?
The Comprehensive Loss Underwriting Exchange Report
Who administers the Mine Subsidence Insurance Fund?
The Department of Environmental Protection
What do you call a large multi-story apartment that is located in an apartment building?
A maisonette
What is an investment called that is sold for a profit?
A realized capital gain
What is the most common type of housing?
A single-family residence
When are real estate taxes deductible?
In the year they are paid to the government
