Math 2

Question 1

mill

Answer 1

An abbreviation for millions. To express a tax rate as a decimal instead, move the decimal point back three places. If a property tax rate is 35 mills, it is .035 in decimal form.

Question 2

mill rate

Answer 2

The property tax rate percentage by which the assessed value of your property is multiplied to determine how much property tax you owe.

Question 3

depreciation

Answer 3

Start by finding the building value: the sales price plus closing costs, multiplied by 70%. Next, take this value and divide it by the life of the property in years (27.5 in our example). According to the IRS, different types of buildings have different values.

Question 4

banker’s year

Answer 4

A 360 day year, used because it divides more evenly. Each month is treated as having 30 days.

Question 5

tax proration

Answer 5

The method of determining how much property tax for a year a party owes. Add the number of days in which the property was owned by the party in question, then multiply it by the total property tax, then divide it by 365 days. In other words, multiply the fraction of the year in which the party owned the property by the total year’s tax. The seller
is responsible for property tax up through the day of closing.

Question 6

operating expense ratio

Answer 6

Operating expenses divided by expected gross income. In other words, what percentage of
your property’s earnings is the operating cost?

Question 7

area (square footage)

Answer 7

Multiply the number of acres by 43,560 to find the square footage. Square footage can be
calculated by multiplying length times width.

Question 8

rent proration

Answer 8

The dividing of rent money between a seller and a buyer, based upon how many days of the month the seller owned the property. Divide the number of days the seller owned the property by the number of days in the month, then multiply the total rent by that amount.

Question 9

calculating special assessments

Answer 9

Improvement assessments by the city may be payable by owners based upon the property measurements. For example, an assessment for a sidewalk may be based upon the front footage of the property.

Question 10

front footage

Answer 10

The distance across the front of a property.

Question 11

volume measurement

Answer 11

To measure cubic feet, multiply length times width times depth. In other words, multiply the area by the depth.

Question 12

acre foot

Answer 12

A unit of volume equal to the volume of a sheet of water one acre in area and one foot in depth.

Question 13

capitalization rate (cap rate)

Answer 13

The ratio of net operating income to property asset value. Find by dividing the NOl by the property value.

Question 14

A 50-unit apartment building sold for $1,500,000. Closing costs are $14,300 and the land represents 30% of the value. How much depreciation can be taken each year for income tax purposes?
A: $38,188
B: $38,546
C: $45,000
D: $55,065

Answer 14

B: $38,546

Question 15

David purchased a property for $650,000. It was assessed at 68%. The tax rate is .019468. Compute David’s property taxes.
A: $8,605
B: $4,420
C: $12,654
D: $44,200

Answer 15

A: $8,605

Question 16

Thayne paid $2555 in property tax. His assessed rate was 30% and his tax rate was 76.8 mills, compute the appraised value of Thayne’s home.
A: $196,224
B: $33,268
C: $76,650
D: $110,894

Answer 16

D: $110,894

Question 17

A developer is subdividing a 20 acre tract into lots measuring 90’ by 120’. Each lot has a perimeter of 420 feet and will sell for $120,000. The developer has allowed 160,000 square feet for streets and sidewalks. What is the maximum number of salable lots that will be realized?
A: 72
B: 66
C: 80
D: 81

Answer 17

B: 66

Question 18

Property taxes for the year are $2200. The Closing day is August 31 (243rd day of the year) with the day of Closing belonging to the Seller. Using a 365 day year, what is the correct prorated amount on the Closing Disclosure?
A: $1,205
B: $1,447
C: $1,465
D: $1,808

Answer 18

C: $1,465

Question 19

The city decided to add a sidewalk in one neighborhood and is assessing all local owners to pay for this improvement. If a property owner’s lot is 95 x 160 feet, and the cost per front foot is $95, how much will the owner save if the city is paying 30% of the cost?
A: $15,200
B: $9,025
C: $6,318
D: $2,708

Answer 19

D: $2,708

Question 20

A building lot is 120 feet wide and 240 feet deep. What is the square footage?
A: 720
B: 28,800
C: 34,400
D: 57,600

Answer 20

B: 28,800

Question 21

You represent Investor Ivan. He tells you he expects an 9% cap rate and he has $1,500,000 to invest. What NOI does he need to have?
A: $135,000
B: $166,667
C: $120,000
D: $180,000

Answer 21

A: $135,000

Question 22

A property’s annual net income is $36,000. It is valued at $450,000. What is its capitalization rate?
A: 5%
B: 6%
C: 7%
D: 8%

Answer 22

D: 8%

Question 23

A property has a net income of $25,000 per year. In order to earn 7% on her investment, how much does Betty Boop pay for this property?
A: $175,000
B: $250,528
C: $122,500
D: $357,143

Answer 23

D: $357,143

Question 24

calculating commissions

Answer 24

When calculating commissions from a transaction, be sure to calculate using the sales price rather than the listing price.

Question 25

paying off a lien

Answer 25

To remove a mechanic’s lien from a home: pay the subcontractor in full, have the subcontractor remove the lien by signing a reconveyance of his interest to the title to the property, and record the conveyance. Sellers must convey a clear title to the buyer on closing, so all such liens must be removed
first.

Question 26

insurance proration

Answer 26

Although this is not typically done, the calculation is the same as prorating taxes or rent. Multiply the fraction of the year by the total insurance cost.

Question 27

risk of loss

Answer 27

The party bearing the burden of risk of damage occurring. Once the buyer has closed on the home, this becomes his or her responsibility.

Question 28

Property taxes for the year are $1040. The closing day is June 16 with the day of closing belonging to the seller. Using a 360 day/year, which is the correct entry for the closing statement?
A: $208
B: $476
C: $570
D: $1,040

Answer 28

B: $476

Question 29

If the total monthly rent is $575 per month, and a tenant moves in on July 19th, how much total rent will the tenant pay for the month of July?
A: $1000
B: $230
C: $150
D: $345

Answer 29

B: $230

Question 30

Developer Scott is subdividing a 15 acre tract into lots measuring 90’ x 120’. Each lot has a perimeter of 380 feet and will sell for $8,500. The developer has allowed 161,800 square feet for required streets and sidewalks. What is the maximum number of salable lots that will be realized?
A: 50
B: 46
C: 57
D: 58

Answer 30

B: 46

Question 31

A property is listed for $355,000 and sells for $345,000. The total commission was 6% to the listing brokerage. What is the amount of commission retained by the listing brokerage?
A: $14,910
B: $6,390
C: $20,700
D: $6,210

Answer 31

C: $20,700

Question 32

A property is listed for $355,000 and sells for $345,000. The total commission was 6%. The buyers agent is at a 70% split with the brokerage. 3% will go to the buyers broker and 3% will go to the listing broker. What is the amount of commission retained by the buyers agent?
A: $14,910
B: $6,390
C: $7,245
D: $6,210

Answer 32

C: $7,245

Question 33

Samantha Seller has a contract for sale on her home that will close on October 24th. The seller is responsible for taxes on the property through the day of closing. If taxes are $1,645 per year, what is the pro-rated amount of taxes the seller will be charged at closing? Assume a 365 day year.
A: $306
B: $1,338
C: $1,506
D: $1,645

Answer 33

B: $1,338

Question 34

A 200-unit apartment building sold for $6,000,000. Closing costs are $41,800 and the land represents 30% of value. How much depreciation can be taken each year for income tax purposes?
A: $140,975
B: $153,791
C: $219,702
D: $1,268,778

Answer 34

B: $153,791

Question 35

A property sold for $825,000 and closed on March 8th. The property taxes are $5875. What is the amount of the tax proration for the seller assuming a 360 day year?
A: $1,109
B: $1,078
C: $1,404
D: $2,292

Answer 35

A: $1,109

Question 36

The city decided to add a sidewalk in one neighborhood and is assessing all local owners to pay for this improvement. If a property owner’s lot is 75 x 130 feet, and the cost per front foot is $85, what is the owner’s portion of the special assessment?
A: $6,375
B: $8,500
C: $9,750
D: $10,050

Answer 36

A: $6,375

Question 37

A property is 268 feet by 455 feet and is being sold with 2 acre feet of water for each acre of ground being conveyed. How many cubic acre feet of water are being conveyed?
A: 100,674
B: 121,940
C: 201,348
D: 243,880

Answer 37

D: 243,880