Chapter 17 Quiz

Question 1

The value of your house, not including the lot, is $91,000 today. What was the original cost if it has depreciated 5 percent per year for the past seven years?

Answer 1

$140,000.00

$140,000 Original Cost 5% Depreciation per year x 7 years – 35% Total Depreciation
Today’s Value of $91,000 = 65% of original price
Part divided by the percent = the whole
$91,000/.65 = $140,000

Question 2

What did the owners originally pay for their home if they sold it for $98,672, which gave them 12 percent profit over their original cost?

Answer 2

$88,100

12% profit means that the current price of $98,672 is 112% of the original cost
$98,672 = 112% of the original cost
The whole divided by the percentage = the part (original cost)
$98,672/1.1 = $88,100

Question 3

What would you pay for a building producing $11,250 annual net income and showing a minimum rate of return of 9 percent?

Answer 3

$125,000

$11,250 net operating income = part and 9% Cap Rate is the percentage
Part divided by the percentage = the whole
Net Operating Income divided by the Cap Rate = Purchase Price
$11,250/.09 = $125,000

Question 4

An owner agrees to list his property on the condition that he will receive at least $47,300 after paying 5 percent broker’s commission and paying $1,150 in closing costs. At what price must it sell?

Answer 4

$51,000

$47,300 Net to Seller and $1,150 Closing Costs
$47,300 + $1,150 = $48,450 Before Commission
Commission = 5% therefore Dollars before Commission = 95%
$48,450/.95 = $51,000 Selling Price

Question 5

A gift shop pays rent of $600 per month plus 2.5 percent of gross annual sales in excess of $50,000. What was the average monthly rent last year if gross annual sales were $75,000?

Answer 5

$652.08

$652.08 Average Monthly Rent
$75,000 Gross Annual Sales
$50,000 Excluded from Percentage Calculation
2.5 % of Net Gross Annual Sales
$75,000 – $50,000 = $25,000 Gross Annual Sales used for Rent Calculation
$25,000 x 2.5% = $625 Annual Percentage Rent
$625/12 = $52.08 = Monthly Percentage Rent
Monthly Base Rent + Monthly Percentage Rent = Average Monthly Rent
$600.00 + $52.08 = $652.08

Question 6

If your monthly rent is $1,050, what percent would this be of an annual income of $42,000?

Answer 6

30 percent

$1,050 Monthly Rent x 12 = $12,600 Annual Rent
$42,000 Annual Income
Part divided by the whole = percent
Annual Rent/Annual Income = % Rent compared to Annual Income
$12,600/$42,000 = 30%

Question 7

Two Sponsoring Brokers split the 6 percent commission on a $73,000 home. The selling licensee was paid 70 percent of his broker’s share. The listing licensee was paid 30 percent of her broker’s share. How much did the listing licensee receive?

Answer 7

$657

$73,000 Selling Price and 6% Commission
$73,000 x 6% = $4,380 Full Commission
Managing Brokers shared commission 50-50
$4,380/2 = $2,190 = Managing Broker Share
Listing Agent = 30% of Managing Broker’s Share
$2,190 x 30% = $657 — Listing Agent’s Commission

Question 8

The buyer has agreed to pay $175,000 in sales price, 2.5 loan discount points, and a 1 percent origination fee. If the buyer receives a 90 percent loan-to-value ratio, how much will the buyer owe at closing for points and the origination fee?

Answer 8

$5,512.50

$175,000 Purchase Price – 90% Loan to Value Ratio
$175,000 x .9 = $157,500 loan
$157,500 Loan, 2.5 Discount Points and 1 Point Loan Origination Fee
3.5 points total for this loan
1 point = 1% of the Loan
3.5 points = $157,500 x 3.5% = $5,512.50 for Total Points

Question 9

Calculate eight months of interest on a $5,000 interest-only loan at 9.5 percent.

Answer 9

$316.67

$5,000 Loan and 9.5% Annual Interest
$5,000 x 9.5% = $475 = Annual Interest
Annual Interest divided by 12 = Monthly Interest
$475/12 = $39.58 per month
Eight months of interest = monthly interest x 12
$38.58 x 8 = $316.67 ($38.58 not rounded off, but extra decimal places included)

Question 10

A 100-acre farm is divided into lots for homes. The streets require one – eighth of the whole farm, and there are 140 lots. How many square feet are in each lot?

Answer 10

27,225

100 Acre Plot, 1/8 for streets – 8/8 – 1/8 = 7/8 7/8 = 87.5%
100 Acres x 87.5% = 87.5 Acres for Lots
87.5 x 43,560 sq ft per Acre = 3,811, 500 sq. ft for lots
140 lots
3,811,500/140 = 27,225 sq ft per lot

Question 11

What is the monthly net income on an investment of $115,000 if the rate of return is 12.5 percent?

Answer 11

$1,197.92

Net Operating Income = Purchase Price x Cap Rate
$115,000 x 12.5% = $14,375 Net Operating Income (Annual) Monthly NOI = Annual NOI/12
$14,375/12 = $1,197.92 = Monthly Net Operating income

Question 12

A licensee sells a property for $58,500. The contract he has with his Sponsoring Broker is 40 percent of the full commission earned. The commission due the managing broker is 6 percent. What is the licensee’s share of the commission?

Answer 12

$1,404

Selling Price = $58,500 and Commission is 6%, with Licensee getting 40% $58,500 x 6% = $3,510 = Sponsoring Broker Commission
$3,510 x 40% = $1,404 = Licensee’s share of the Commission

Question 13

What is the interest rate on a $10,000 loan with semiannual interest of $450?

Answer 13

9 percent

$10,000 loan, $450 semi-annual interest payment
$450 x 2 = $900 = Annual Interest Payment
Part divided by the whole = percent
$900/$10,000 = 9% Annual Interest

Question 14

A warehouse is 80 feet wide and 120 feet long with ceilings 14 feet high. If 1,200 square feet of floor surface has been partitioned off from floor to ceiling for an office, how many cubic feet of space will be left in the warehouse?

Answer 14

117,600

Warehouse = 80 x 120 feet in area and 14 feet high
Total Cubic Feet = 80 x 120 x 14 = 134,400 Cubic Feet
Office Space is 1200 sf x 14 ft (HIGH)= 16,800 cubic feet
Net Warehouse Cubic Space is Total Warehouse Space less Office Cubic Space
134,400 cubic feet – 16,800 cubic feet = 117,600 net cubic feet for the warehouse

Question 15

The lot you purchased five years ago for $30,000 has appreciated 3.5 percent per year. What is it worth today?

Answer 15

$35,250

$30,000 original cost, 3.5% appreciation for 5 years 3.5% x 5 = 17.5% Appreciation
Original 100% plus 17.5% = 117.5% = Current Value $30,000 x 117.5% = $35,250 = Today’s Value

Question 16

A lease calls for $1,000 per month minimum plus 2 percent of annual sales in excess of $100,000. What is the annual rent if the annual sales were $150,000?

Answer 16

$13,000

$1,000 per month base rent, $150,000 Gross Annual Sales, $100,000 excluded from percentage
Percentage of Gross Annual Sales = 2%
Gross Sales for Percentage Calculation = $150,000 less $100,000 = $50,000
$50,000 x 2% = $1,000 Annual Percentage Rent
$1,000 per month base rent x 12 = $12,000 Annual Base Rent
Annual Base Rent and Percentage Rent = $12,000 + $1,000 = $13,000

Question 17

There is a tract of land that is 1.25 acres. The lot is 150 feet deep. How much will the lot sell for at $65 per front foot?

Answer 17

$23,595

1.25 acres and a selling price of $65 per front foot
One side of the lot is 150 feet
Area of lot = 1.25 x 43,560 = 54,450 sq. ft.
Divide area by one side to obtain the length of the other side
54,450/150 = 363 feet
363 front feet x $65 per front foot = $23,595 selling price

Question 18

A woman earns $20,000 per year and can qualify for a monthly PITI payment equal to 25 percent of her monthly salary. If the annual tax and insurance is $678.24, what is the loan amount she will qualify for if the monthly PI payment factor is $10.29 per $1,000 of loan amount?

Answer 18

$35,000

Earns $20,000 per year, 25% PITT per month
Annual Income/12 = Monthly income
$20,000/12 = $1,666.67 per month
25% of Gross Monthly Income = $1,666.6 x 25% = $416.67 for Monthly PITI
TI (Taxes & Insurance) = $678.24 per year
$678.24/12 = $56.52 = Monthly TI
$416.67 – $56.52 = $360.15 available for PI (Principle & Interest Payment)
$10.29 per $1,000 is the factor
$360.15/$10.29 x $1,000 = $35,000 Loan

Question 19

You pay $65.53 monthly interest on a loan bearing 9.25 percent annual interest. What is the loan amount rounded to the nearest hundred dollars?

Answer 19

$8,500

$65.53 per month interest and interest rate of 9.25% $65.53 x 12 = $786.36 = Annual Interest
Interest divided by rate = Loan
$786.36/.0925 = $8,500 Loan

Question 20

What percentage of profit would you make if you paid $10,500 for a lot, built a home on the lot that cost $93,000, and then sold the lot and house together for $134,550?

Answer 20

30 percent

Paid $10,500 for lot and $93,000 for home
Total Cost = $10,500 + 93,000 = 103,500
Selling Price = $134,550
Net Profit = Selling Price less Cost
$134,500 – $103,500 = $31,050
Percent Profit = Profit divided by Cost
$31,050/$103,500 = .3 = 30% Profit

Question 21

An income-producing property has $62,500 annual gross income and monthly expenses of $1,530. What is the appraised value if the appraiser uses a 10 percent capitalization rate?

Answer 21

$441,400

$1,530 monthly expenses, $62,500 Annual Gross Income,10% cap rate $1,530 x 12 = $18,360 = Annual Expenses
Annual Net Operating Income = Annual Gross Income Less Annual Expenses $62,500 – $18,360 = $44,140 Net Operating Income
Net Operating Income Divided by Cap Rate = Purchase Price
$44,140/.1 = $441,400 = Purchase Price

Question 22

A man pays $2,500 each for four parcels of land. He subdivides them into six parcels and sells each of the six parcels for $1,950. What was his percentage of profit?

Answer 22

17 percent

$2,500 per parcel, 4 parcels = Cost $1,950 per parcel, 6 parcels = Sales
$2,500 x 4 = $10,000 $1,950 x 6 = $11,700
Sales less Cost = Profit $11,700 – $10,000 = $1,700
Profit Dollars divided by Cost Dollars = % Profit $1,700/$10,000 = 17% Profit

Question 23

A property sells for $96,000. If it has appreciated 4 percent per year straight line for the past five years, what did the owner pay for the property five years ago?

Answer 23

$80,000

Property worth $96,000, 4% appreciation for 5 years 4% x 5 = 20%
Current Value = 120% of original cost $96,000 = 120% of Original Cost Current Value divided by 120% = Original Value $96,000/1.2 = $80,000

Question 24

If you purchase a lot that is 125 feet wide by 150 feet deep for $6,468.75, what price did you pay per front foot?

Answer 24

$51.75

$6,468.75 Price for lot on frontage foot basis, lot is 125 wide x 150 feet deep
Width – 125 ft – is considered the front portion of the lot
$6,468.75/125 = $51.75 = Price per front foot.

Question 25

Calculate the amount of commission earned by a broker on a property selling for $61,000 if 6 percent is paid on the first $50,000 and 3 percent is paid on the remaining balance.

Answer 25

$3,330

Selling Price of $61,000, 6% on first $50,000 and 3% on remaining
$50,000 x 6% = $3,000 $61,000 – $50,000 = $11,000 $11,000 x 3% = $330
$3,000 + 330 = $3,330 = Total Commission