Chapter 3: Concepts Of Home Ownership

Question 1

What cannot exceed 28% of gross income

Answer 1

Mortgage payments

Principal and interest

Taxes and insurance impounds

Question 2

Represents the paid off share of the property held free of any mortgage

Answer 2

Equity

Question 3

What is not a cost or expense of owning a home

Answer 3

Taxes on personal property

Question 4

What can homeowners not the deduct when preparing their income tax return

Answer 4

Mortgage interest on a third home

Question 5

A building that is remodeled into residential units and is no longer used for the purpose of which it was originally built is an example of?

Answer 5

A converted use property

Question 6

A high-rise development that includes office space, stores, theaters, an apartment units is an example of what?

Answer 6

Mixed use development

Question 7

Each room of the 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 finish the structure and connected plumbing and wiring before the owners moved in. What type of home is this?

Answer 7

Modular

Question 8

When married homeowners who filed jointly realize a profit from the sale of their home that exceeds $500,000 what is true

Answer 8

The excess gain will be taxed at the current applicable capital gains rate

Question 9

Theft, smoke damage, and damage from fire are covered under which type of homeowners insurance policy?

Answer 9

Basic form

Question 10

One result of the capital gains tax lot is that most homeowners what?

Answer 10

May use the $250,000 exclusion if they lived in the property for two out of the last five years

Question 11

Into thousand and 11, a buyer paid to discount points at the closing. What is not to Deductible from his gross income?

Answer 11

The gain realized from the sale or exchange of a principal residence

Question 12

A community that merges housing, recreation, and commercial units into one self-contained development is called?

Answer 12

PUD

Question 13

What is an effort to increase homeownership?

Answer 13

Lower closing cost for first time homebuyers

Question 14

The real cost of owning a home include certain cost/expenses that many people overlook. What is not a cost/expense of homeownership?

Answer 14

Personal property taxes

Question 15

What is never covered in any homeowners insurance policy?

Answer 15

Flood

Question 16

Which clause is found in most homeowners insurance policies?

Answer 16

Co-ownership clause

Question 17

That portion of the value of an owners property value that exceeds the amount of their mortgage that is called

Answer 17

Equity

Question 18

Requires that the owner maintain insurance equal to a specified percentage, usually 80% of the replacement cost of the dwelling

Answer 18

Coinsurance clause

Question 19

What is the basic cost of home owning a home. PITI

Answer 19

Principal

Interest

Taxes

Insurance

Question 20

The real estate broker’s responsibility to keep the principal informed of all the facts that could affect the transaction is the duty of?

Answer 20

Disclosure

Question 21

Which of the following would be considered dual agency?

Answer 21

The sponsored licensee acting for both the buyer and the seller in the same transaction

Question 22

The relationship of a broker to his or her client is that of?

Answer 22

Fiduciary

Question 23

What is true of a duty of the real estate broker who is acting as the agent of the seller?

Answer 23

The broker is obligated to render faithful service to the principal

Question 24

A licensee is permitted to represent both the seller and the buyer in the same transaction when?

Answer 24

Both parties have been informed in writing and have agreed to the dual representation

Question 25

Which action would be considered lawful practice in real estate brokerage?

Answer 25

Exaggerated statements about the property

Question 26

As an agent for the seller, a real estate broker can?

Answer 26

Solicit an offer to purchase the property from a prospective buyer

Question 27

A seller has listed her home with the broker for $290,000 in the broker tells a prospective buyer to submit a low offer because the seller is desperate to sell. The buyer offers $285,000 and the seller excepts it. In this situation?

Answer 27

The broker has violated his agency relationship with the seller

Question 28

A listing broker was told by his principal not to advertise her property and a newspaper that was out of the area. The broker complied because he?

Answer 28

Must obey the lawful instructions of his principal

Question 29

It is the duty of an agent to disclose to the principal every step taken in the transaction of the principals business. This is because the?

Answer 29

Agent has fiduciary obligations to the principal

Question 30

Upon discovering a latent defect in the property, the licensee should discuss the problem with the seller and then?

Answer 30

Inform any prospective buyers of the defect

Question 31

Which phrase best to find the traditional law of agency?

Answer 31

The rules of law that define the responsibilities of an agent to the principal

Question 32

A broker who is the agent of the buyer should do which of the following?

Answer 32

Advise the buyer if the listing price of the sellers house is unrealistic

Question 33

In Illinois, a licensee working with a buyer sells a property listed by another brokerage firm in the MLS. The licensee has been working with the buyer for many months but does not have a written agency contact with the buyer. This licensee has created an implied agency with?

Answer 33

The buyer

Question 34

A buyer who is shown properties listed for rent by a broker is the brokers?

Answer 34

Customer or client

Question 35

Property manager is hired to manage your property while the owner is overseas for two years. The property manager is?

Answer 35

A general agent

Question 36

A broker who represents the seller is showing a house to prospective buyer. The broker knows that the house occasionally has seepage in the basement. What would withholding the information prevent?

Answer 36

Prevents the buyer from making an informed decision

Question 37

The foremost consideration in the purchase of a home is its affordability. What is the second?

Answer 37

The location of the property

Question 38

The real cost of owning a home include certain costs expenses that many people overlook. What is not a cost expense of homeownership?

Answer 38

Personal property taxes

Question 39

Most homeowners insurance policies contain which of the following clauses?

Answer 39

A coinsurance clause

Question 40

The owners of the vacation homes sold it for $188,000. If they made a profit of 10%, what was the original cost of the property?

Answer 40

$170,900

Question 41

In the event that homeowners insurance policy provides coverage for less than 80% of the full replacement cost of the dwelling, then the loss of the residence will be settled for?

Answer 41

Either the actual cash value are the prorated repair cost

Question 42

What is the type of development that combines office space, stores, and residential units in a single community?

Answer 42

Mixed use development

Question 43

Under the provisions of the federal income tax code, what is the maximum allowable gain that may be claimed as tax exempt by a couple filing jointly?

Answer 43

$500,000

Question 44

A basic homeowners insurance policy does not protect against?

Answer 44

Earthquake and volcanoes

Question 45

Federal income tax regulations allow homeowners to reduce their annual taxable income by amounts paid for?

Answer 45

Real estate taxes

Question 46

A borrower applied for a 30 year loan instead of the 25 year loan. In this situation, what is true?

Answer 46

The longer-term mortgage result in lower monthly payments

Question 47

Homeowner has insurance coverage that covers fire and water damage. If you wants to increase his coverage, the policy will protect against which additional risk?

Answer 47

Liability coverage

Question 48

A married couple has been living in a condominium at the shore for the past four years in the same house that they bought 25 years ago to a tenant. If they sell their house, how much of the capital gain will be taxable?

Answer 48

100%

Question 49

The value that an owner has a property that exceeds the amount of the mortgage that is called?

Answer 49

Equity

Question 50

A property owner listed a property for sale at $100,000 if the owners cost was 80% of the listing price, what will be the percentage of profit when the real estate is sold for the listing price?

Answer 50

25 percent

Question 51

The philosophy behind and exchange is that?

Answer 51

Income tax should not apply as long as a real estate investment remains intact