Module 15 Quiz

Question 1

What type of rate is used in the calculation of ad valorem taxes of real property?

A) nominal rate
B) mill rate
C) capitalization rate
D) period rate

Answer 1

B) mill rate

Question 2

A motel off the interstate has a property tax of $7,500. The effective tax rate in the area is 1.5 percent of the market value. If the tax assessment ratio is 60 percent, what is the mill rate applicable to this motel property
expressed in mills?

A) 37.5 mills
B) 10.67 mills
C) 25 mills
D) 15 mills

Answer 2

C) 25 mills

$7,500 tax divided by 0.015 effective tax rate = $500,000 market value. $500,000 x 0.60 assessed ratio equals $300,000 assessed value.
Divide the taxes by the assessed value to derive the mill rate. Here are the calculations: $7,500 / $300,000 = 0.025 mill rate and then multiply this rate times 1,000 to get 25 mills.

As an alternative, you could have taken 60 percent of the tax to derive $4,500 and divided that by 0.015 to get the assessed value of $300,000. The remaining calculations would be the same as before, that is to divide
the tax of $7,500 by the assessed value.

Question 3

A purchaser applied for a 70% mortgage, and the seller agreed to pay 4 points on the mortgage. If the seller paid $5,600 in points, what was the selling price of the property?

A) $140,000
B) $200,000
C) $114,286
D) $238,000

Answer 3

B) $200,000

Note:

1) $5,600 / .04 = $140,000 (but you’re not done!)
2) $140,000 / .70 = $200,000

Question 4

A purchaser applied for an 80% mortgage, and the seller agreed to pay 2 points on the mortgage. If the seller paid $3,500 in points, what was the selling price of the property?

A) $187,500
B) $218,750
C) $175,000
D) $210,000

Answer 4

B) $218,750

Note:

1) $3,500 / .02 = $175,000 (but you’re not done!)
2) $175,000 / .80 = $218,750

Question 5

Maurice purchased a property for $187,500. After one year, he sold the property for $200,000. What is the percentage increase over the year of ownership?

A) 6.67%
B) 6.30%
C) 6.25%
D) 6.70%

Answer 5

A) 6.67%

Question 6

Carrie’s boutique store is valued at $395,000. If the owner’s equity in the property is 35%, how much mortgage debt does Carrie have in her retail store?

A) $138,250
B) $276,500
C) $256,750
D) $296,250

Answer 6

C) $256,750

Question 7

Thompson paid an annual property tax this year of $2,940. If the mill rate is 28 and the assessed ratio is 60 percent of market value, what market value did the assessor assign to the Thompson property?

A) $175,000
B) $157,500
C) $262,500
D) None of these answers

Answer 7

A) $175,000

Note: $2,940 / 28 = 105 x 1,000 = $105,000 / 0.60 = $175,000.
The alternative method is $2,940 / 0.028 = $105,000 and then divide that by 60 percent to derive $175,000

Question 8

A homeowner with a 24’ X 40’ home adds an addition with dimensions of 12’ X 20’, what is the percentage increase in the home’s area?

A) 25.00%
B) 2.00%
C) 2.50%
D) 20.00%

Answer 8

A) 25%

Note: 240/960 (or use calculator)

Question 9

An existing building contains 2,500 square feet of space on each of four floors. The site contains a total of 50,000 square feet. What is the floor area ratio?

A) 0.05
B) 0.20
C) 0.10
D) 0.15

Answer 9

B) 0.20

Note: don’t forget t0 2,500 * 4 for each of the four floors

Question 10

Sue purchased a property for $100,000. After making

improvements, she sold the property for 10% more than she paid for it. What is the new sale price?

Answer 10

$110,000

Note: Use T-Bar
Or
$100,000 (base) × 1.10 (percent applied) = $110,000

Question 11

Jim purchased a property for $100,000. He later sold the property during a down market period for 10% less.
What is the new price?

Answer 11

$90,000

Note: $100,000 (base) × 0.90 (percent applied) = $90,000
Think of the new price as 90% of the original purchase price.

Question 12

Sue sold her property for $110,000. This price is 10% more than what she paid for it.
What was the original purchase price?

Answer 12

$100,000

Note:
$110,000 / 1.10 (percent applied) = $100,000 (Base)

Question 13

Jim sold his property for $90,000 during a down market period. This price was 10% less than what he paid for it.
What was the original purchase price?

Answer 13

$100,000

Note: Or $90,000 / 0.90 (percent applied) = $100,000 (Base)

Question 14

Jacquelyn sold her condominium for $126,000. This price was 5% more than she paid for it.
What was the original purchase price?

Clue. First, decide whether the problem has supplied the base number to which a percent is applied, or if you have to apply the percent to another number to obtain the base. Next consider whether the base is inferior or superior.

Answer 14

$120,000

Note: $126,000 / 1.05 (percent applied) = $120,000 (Base)

Question 15

An appraiser selected a property that sold for $253,000 as a comparable sale in an assignment. If the sale is 15% superior to the subject property, what is the value of the subject property?

Clue. The wording used in this question is a bit tricky and makes it confusing whether the comparable sale or the subject property is the base. Moreover, appraisers adjust the comparable sale, not the subject property. However, when you run into a question like this, treat the subject property as the base and solve it.

Answer 15

$220,000

Note: $253,000 / 1.15 = $220,000
Check: $220,000 × 1.15 = $253,000

Question 16

A farm property sold for $1.35 million. The sale was 10% below market due to a forced sale situation.
What is the market price for the property?

Answer 16

$1,500,000

Note: $1,350,000 / 0.90 = $1,500,000
Check: $1,500,000 × 0.90 = $1,350,000

Question 17

A commercial property sold for $850,000, but the sale fell through and the property eventually sold for $816,000.
What is the discount as a percent?

Answer 17

-4%

Note: $816,000 represents 96% of the original sale price so the discount is 4%.
HP 12C calculation: $850,000 \ $816,000 à equals –4.00 (or 4%)

Question 18

Petrie’s property has a market value of $140,000 and is assessed at 60% of its value for tax purposes. If the mill rate is 18 mills, what is the annual tax on the Petrie property?

Answer 18

$1,512

Note: $140,000 (MV) × 0.60 (assessment ratio) = $84,000 assessed value. Use T bar to solve.

Question 19

The McIntosh Orchard Farm has a semiannual tax of $12,000. The mill rate in the area is 30 mills, and properties are assessed at 80% of market value. What market value did the assessor assign for the McIntosh property?

Clue. There are three mathematical steps to solving this problem.

Answer 19

$1,000,000 Market Value

Note:

1) $12,000 × 2 = $24,000 annual property taxes
2) T-bar using $24,000 as the top divided by .030
3) T-bar using $800,000 as the top divided by .80

Or, $24,000 / 0.03 =$800,000 / 0.80 = $1,000,000 market value

Question 20

The McIntosh Orchard Farm has a semiannual tax of $12,000. The mill rate in the area is 30 mills, and properties are assessed at 80% of market value. The market value is $1,000,000.
What is the effective tax rate for the McIntosh Orchard Farm property?

Answer 20

2.4%

$24,000 / $1,000,000 = 0.024 (or 2.4%) effective tax rate, or
the 0.030 mil rate × 0.80 assessment ratio = 0.024 (or 2.4%)

Question 21

If Express Bank has a loan limit of 75% on qualified properties, what is the maximum mortgage available on a $215,000 sale?

Answer 21

$161,250

Question 22

If a buyer places 20% down on a $175,000 sale, what is the mortgage amount?

Answer 22

$140,000

Question 23

The Steiner property sold for $350,000, and the lender stated the buyer could mortgage $315,000 using private mortgage insurance. What is the loan to value (LTV) percentage?

Answer 23

90%

Question 24

A property sold for $635,000, and the credit union provided a commitment to the buyer for $508,000. What down payment percentage did the credit union require?

Answer 24

20%

Question 25

A borrower obtained a loan from a lender who charged an origination fee of 1 point.
How much did the borrower have to pay on a $150,000 mortgage?

Answer 25

$1,500 for 1 point

Question 26

In order to sell her property in a tight market, Collins paid 4½ points on the sale of her $180,000 residence. If the buyer is applying for an 80% loan, what was the dollar amount of the points that Collins paid?

Answer 26

$6,480 in points

Note:

1) First step: $180,000 × 0.80 = $144,000 mortgage amount
2) T-bar with $144,000 in the bottom right

Question 27

The financing on the Collins’ $180,000 residence was changed so that she paid $5,670 to buy
down the interest rate on the buyer’s mortgage.
If it is a 90% mortgage, how many points did Collins pay?

Answer 27

3.5 in points

Note:

1) First step: $180,000 × 0.90 = $162,000 mortgage amount
2) T-bar $162,000 to the right

Question 28

If a land site has 12,500 square feet with a FAR of
7, how many square feet of building area can be
developed on the land?

Answer 28

12,500 sq. ft. × 7 (FAR) = 87,500 sq. ft.

Question 29

A site has 30,000 square feet, and the building will occupy 40% of the land.
If the FAR is 6, how many square feet of building area can be developed, assuming there is no restriction on the number of stories?

Answer 29

30,000 sq. ft. × 6 (FAR) = 180,000 sq. ft.

Question 30

A site has 30,000 square feet, and the building will occupy 40% of the land. The FAR is 6. How many stories must the building be to achieve the maximum building size with the assumption that it will occupy 40% of the land?

Answer 30

15 stories

Note:
6 (FAR) / 0.40 = 15
OR
180,000 sq. ft. / 12,000 sq. ft.

Note: 30,000 sq. ft. site × 0.40 = 12,000 sq. ft. (for the fi rst fl oor)

Question 31

A developer wants to erect a building on a land site using 1/4 of the land area. If the municipality has a FAR of 6, how many stories can the building have?

Answer 31

6 / 0.25 = 24 stories

Question 32

The municipality has a FAR of 6. How many stories can the building have if the developer wanted to build on 3/4 of the land site?

Answer 32

6 / 0.75 = 8 stories