National Real Estate Calculations Flashcards

Question 1

Q

One lender charges 6.5% interest and the second lender charges 7%. How much money will the borrower save the first year on a $150,000 loan if he goes with the first lender?

A)
$650
B)
$750
C)
$850
D)
$500

Answer

A

One lender charges 6.5% interest and the second lender charges 7%. How much money will the borrower save the first year on a $150,000 loan if he goes with the first lender?

A)
$650
Incorrect Answer
B)
$750
Correct Answer
C)
$850
Incorrect Answer
D)
$500
Incorrect Answer
Explanation
The first lender would charge $150,000 × 6.5% (0.065) = $9,750. The second lender would charge $150,000 × 7% (0.07) = $10,500. $10,500 – $9,750 = $750.

Reference: Real Estate Calculations > Finance

Question 2

Q

A property was listed with a broker who belonged to a multiple listing service and was sold by another member broker for $253,500. The total commission was 6% of the sales price. The selling broker received 60% of the commission, and the listing broker received the balance. What was the listing broker’s commission?

A)
$5,475.60
B)
$7,605
C)
$6,084
D)
$9,126

Answer

A

A property was listed with a broker who belonged to a multiple listing service and was sold by another member broker for $253,500. The total commission was 6% of the sales price. The selling broker received 60% of the commission, and the listing broker received the balance. What was the listing broker’s commission?

A)
$5,475.60
Incorrect Answer
B)
$7,605
Incorrect Answer
C)
$6,084
Correct Answer
D)
$9,126
Incorrect Answer
Explanation
There are two steps to finding the listing broker’s commission: (1) Find total commission, and (2) using the total commission, find the listing broker’s 40% share of it.

(1) Brokerage rate (6%) × selling price($253,500) = total commission ($15,210)

(2) Listing broker’s share (40%) × total commission ($15,210) = $6,084

Reference: Real Estate Calculations > Settlement/Closing Calculations

Question 3

Q

The rooms in Sandy’s house measure as follows: living room, 20 ft. × 25 ft.; dining room, 18 ft. × 20 ft.; bedroom, 14 ft. × 26 ft.; bedroom, 15 ft. × 15 ft.; bedroom, 12 ft. × 14 ft.. The carpet she has selected costs $9.95 per square yard. How much will it cost to carpet the entire house?

A)
$732.39
B)
$836.91
C)
$950.77
D)
$1,787.68

Answer

A

The rooms in Sandy’s house measure as follows: living room, 20 ft. × 25 ft.; dining room, 18 ft. × 20 ft.; bedroom, 14 ft. × 26 ft.; bedroom, 15 ft. × 15 ft.; bedroom, 12 ft. × 14 ft.. The carpet she has selected costs $9.95 per square yard. How much will it cost to carpet the entire house?

A)
$732.39
Incorrect Answer
B)
$836.91
Incorrect Answer
C)
$950.77
Incorrect Answer
D)
$1,787.68
Correct Answer
Explanation
To determine the total square footage, see chart.

1,617 ÷ 9 = 179.6667 sq. yds.

179.667 × $9.95 = $1,787.68 for entire house

Total house square footage
20 ft. × 25 ft. = 500 sq. ft.
18 ft. × 20 ft. = 360 sq. ft
14 ft. × 26 ft. = 364 sq. ft
15 ft. × 15 ft. = 225 sq. ft.
12 ft. × 14 ft. = 168 sq. ft.
Total 1,617 sq. ft
Reference: Real Estate Calculations > Measurement

Question 4

Q

The buyer assumed a loan of $50,000 at 8.25% interest. Payments are due on the first of the month. The last payment was made on April 1, and the closing took place on April 20, with the seller having the day of closing, and using a 360-day year. Which of these is TRUE?

A)
$119.60 DB, CS
B)
$229.17 DS, CB
C)
$229.20 CS, DB
D)
$119.60 CS, DB

Answer

A

The buyer assumed a loan of $50,000 at 8.25% interest. Payments are due on the first of the month. The last payment was made on April 1, and the closing took place on April 20, with the seller having the day of closing, and using a 360-day year. Which of these is TRUE?

A)
$119.60 DB, CS
Incorrect Answer
B)
$229.17 DS, CB
Correct Answer
C)
$229.20 CS, DB
Incorrect Answer
D)
$119.60 CS, DB
Incorrect Answer
Explanation
Step 1, determine the amount of interest owed: $50,000 × 8.25% (0.0825) = $4,125. Step 2, determine what days the buyer owes: April 1 to April 20 = 20 days. Step 3, determine the amount owed. Total amount due ÷ total days × days owed. $4,125 ÷ 360 × 20= $229.17.

Reference: Real Estate Calculations > Settlement/Closing Calculations

Question 5

Q

A property manager of a 15-unit residential apartment building was considering bids on four proposed projects. For which of the following will the property manager typically NOT have the authority to make a decision and bind the principal?

A)
A bid to repair a swimming pool at the apartment complex
B)
A bid to repair an existing deck next to the proposed swimming pool
C)
A bid to add a swimming pool to the apartment complex
D)
A bid to replace a number of roofing shingles

Answer

A

A property manager of a 15-unit residential apartment building was considering bids on four proposed projects. For which of the following will the property manager typically NOT have the authority to make a decision and bind the principal?

A)
A bid to repair a swimming pool at the apartment complex
Incorrect Answer
B)
A bid to repair an existing deck next to the proposed swimming pool
Incorrect Answer
C)
A bid to add a swimming pool to the apartment complex
Correct Answer
D)
A bid to replace a number of roofing shingles
Incorrect Answer
Explanation
Typically, the authority of a property manager does not extend to making decisions related to capital improvements. A capital improvement adds to or alters real estate by 1) increasing the value of the real estate or prolonging its useful life, and 2) becoming a permanent part of the real estate. The addition of a swimming pool falls under the category of a capital improvement.

Reference: Real Estate Calculations > Property Management Calculations

Question 6

Q

All of these are typically prorated at closing EXCEPT

A)
property taxes.
B)
security deposits.
C)
water.
D)
rent.

Answer

A

All of these are typically prorated at closing EXCEPT

A)
property taxes.
Incorrect Answer
B)
security deposits.
Correct Answer
C)
water.
Incorrect Answer
D)
rent.
Incorrect Answer
Explanation
Security deposits are transferred in full from the seller to the buyer to hold for the tenants.

Reference: Real Estate Calculations > Settlement/Closing Calculations

Question 7

Q

A borrower secured an $80,000 loan at 8.25% interest, and the lender’s cash outflow was $77,600. What was the effective yield to the lender?

A)
8.38%
B)
8.85%
C)
8.50%
D)
8.63%

Answer

A

A borrower secured an $80,000 loan at 8.25% interest, and the lender’s cash outflow was $77,600. What was the effective yield to the lender?

A)
8.38%
Incorrect Answer
B)
8.85%
Incorrect Answer
C)
8.50%
Incorrect Answer
D)
8.63%
Correct Answer
Explanation
$80,000 – 77,600 = $2,400

2,400 ÷ $80,000 = 3 points (0.03)

0.125 × 3 = 0.375

8.25% + 0.375 = 8.63%

Reference: Real Estate Calculations > Finance

Question 8

Q

If the amount of a loan is $13,500 and the interest rate is 6%, what is the amount of the semiannual interest payment?

A)
$405
B)
$59,655
C)
$20,250
D)
$810

Answer

A

If the amount of a loan is $13,500 and the interest rate is 6%, what is the amount of the semiannual interest payment?

A)
$405
Correct Answer
B)
$59,655
Incorrect Answer
C)
$20,250
Incorrect Answer
D)
$810
Incorrect Answer
Explanation
A semiannual interest payment is paid twice a year. To find the amount of the payment, divide the annual interest amount by 2:

$13,500 × 6% (0.06) (the interest rate) = $810 (annual interest amount)

$810 ÷ 2 = $405 (semiannual interest)

Reference: Real Estate Calculations > Finance

Question 9

Q

The listing broker and the buyer’s broker agree to split a 7% commission 50-50 on a $196,900 sale. The buyer’s brokerage firm gives its salesperson 35% of the commission. How much does the buyer’s salesperson earn from the sale?

A)
$2,412.03
B)
$1,206.01
C)
$1,174.78
D)
$4,824.05

Answer

A

The listing broker and the buyer’s broker agree to split a 7% commission 50-50 on a $196,900 sale. The buyer’s brokerage firm gives its salesperson 35% of the commission. How much does the buyer’s salesperson earn from the sale?

A)
$2,412.03
Correct Answer
B)
$1,206.01
Incorrect Answer
C)
$1,174.78
Incorrect Answer
D)
$4,824.05
Incorrect Answer
Explanation
196,900 × 7% (0.07) = $13,783 (total commission)

$13,783 ÷ 2 (between both brokers) = $6,891.50

$6,891.50 × 35% (0.35) = $2,412.03 (salesperson’s commission)

Reference: Real Estate Calculations > Settlement/Closing Calculations

Question 10

Q

A homeowner sold his property for $99,500. He paid a real estate commission of 6%, paid an attorney $250, paid a transfer tax of $99.50, paid his existing mortgage of $50,140, and agreed to a purchase money mortgage of $10,000. What were his net proceeds at the closing?

A)
$33,050.40

B)
$43,050.40

C)
$33,040.50

D)
$53,040.50

Answer

A

A homeowner sold his property for $99,500. He paid a real estate commission of 6%, paid an attorney $250, paid a transfer tax of $99.50, paid his existing mortgage of $50,140, and agreed to a purchase money mortgage of $10,000. What were his net proceeds at the closing?

A)
$33,050.40
Incorrect Answer
B)
$43,050.40
Incorrect Answer
C)
$33,040.50
Correct Answer
D)
$53,040.50
Incorrect Answer
Explanation
$99,500 × 6% (0.06) = $5,970

Debits Credits
$5,970.00 $99,500
$250
$99.50
$50,140
$10,000
$66,459.50 $99,500
$99,500 ‒ $66,459.50 = $33,040.50
Reference: Real Estate Calculations > Settlement/Closing Calculations

Question 11

Q

A broker sold a property and received a 6.5% commission. The broker gave the listing salesperson $3,575, which was 30% of the firm’s commission. What was the selling price of the property?

A)
$55,000
B)
$95,775
C)
$152,580
D)
$183,333

Answer

A

A broker sold a property and received a 6.5% commission. The broker gave the listing salesperson $3,575, which was 30% of the firm’s commission. What was the selling price of the property?

A)
$55,000
Incorrect Answer
B)
$95,775
Incorrect Answer
C)
$152,580
Incorrect Answer
D)
$183,333
Correct Answer
Explanation
The answer requires two steps: (1) find the firm’s full commission, and (2) find the selling price using the full commission and the rate.

$3,575 (the listing salesperson’s commission) = 30% × full commission

(1) To find the full commission, divide the listing salesperson’s commission by the salesperson’s share of 30%: full commission = $3,575 ÷ 30% (0.30) = $11,916.67.

(2) To find the sales price, divide the full commission by the brokerage commission rate: full commission ($11,916.67) ÷ brokerage rate (6.5%) = sales price ($183,333).

Reference: Real Estate Calculations > Settlement/Closing Calculations

Question 12

Q

A salesperson took a listing on a house that sold for $329,985. The commission rate was 8%. A salesperson employed by another broker found the buyer. The listing broker received 60% of the commission on the sale. The other broker received 40%. If the listing broker kept 30% and paid the listing salesperson the remainder, how much did that salesperson earn on this sale?

A)
$7,391.66
B)
$11,087.50
C)
$3,167.86
D)
$15,839.28

Answer

A

A salesperson took a listing on a house that sold for $329,985. The commission rate was 8%. A salesperson employed by another broker found the buyer. The listing broker received 60% of the commission on the sale. The other broker received 40%. If the listing broker kept 30% and paid the listing salesperson the remainder, how much did that salesperson earn on this sale?

A)
$7,391.66
Incorrect Answer
B)
$11,087.50
Correct Answer
C)
$3,167.86
Incorrect Answer
D)
$15,839.28
Incorrect Answer
Explanation
The listing broker received $329,985 × 8% (0.08) × 60% (.60) = $15,839.28. The listing broker kept $15,839.28 × 30% (0.30) = $4,751.78. The listing salesperson received $15,839.28 – $4,751.78 = $11,087.50.

Reference: Real Estate Calculations > Settlement/Closing Calculations

Question 13

Q

Federal income tax law excludes gains realized on the sale of a primary residence for couples filing jointly. The amount of this exclusion is

A)
$200,000.
B)
$250,000.
C)
$500,000.
D)
$600,000.

Answer

A

Federal income tax law excludes gains realized on the sale of a primary residence for couples filing jointly. The amount of this exclusion is

A)
$200,000.
Incorrect Answer
B)
$250,000.
Incorrect Answer
C)
$500,000.
Correct Answer
D)
$600,000.
Incorrect Answer
Explanation
Federal tax laws permit a couple filing jointly to exclude up to $500,000 in profits from capital gains taxes on a primary home, not on an investment property.

Reference: Real Estate Calculations > Investment

Question 14

Q

After closing expenses of $550 and a 6% commission was paid, the seller received a check for $149,850. What was the sale price of the property?

A)
$155,424
B)
$159,424
C)
$150,400
D)
$160,000

Answer

A

After closing expenses of $550 and a 6% commission was paid, the seller received a check for $149,850. What was the sale price of the property?

A)
$155,424
Incorrect Answer
B)
$159,424
Incorrect Answer
C)
$150,400
Incorrect Answer
D)
$160,000
Correct Answer
Explanation
100% – 6% = 94%

$149,850 + 550 = $150,400 (needed before commission)

$150,400 ÷ 94% (0.94) = $160,000.

Reference: Real Estate Calculations > Property Valuation

Question 15

Q

A first-time buyer paid $135,500 for her property. Taxes in her community are assessed at 80% of the market value. If the tax rate is 700 mills per $100, how much will be escrowed for taxes for her monthly PITI payment?

A)
$63.23
B)
$63
C)
$75.88
D)
$75.60

Answer

A

A first-time buyer paid $135,500 for her property. Taxes in her community are assessed at 80% of the market value. If the tax rate is 700 mills per $100, how much will be escrowed for taxes for her monthly PITI payment?

A)
$63.23
Correct Answer
B)
$63
Incorrect Answer
C)
$75.88
Incorrect Answer
D)
$75.60
Incorrect Answer
Explanation
Tax rate = 700 mills ÷ 1,000 = 0.7 ÷ 100 = 0.007

Assessed value $135,500 × 80% (0.80) = $108,400

$108,400 × 0.007 = $758.80 annual taxes

$758.80 ÷ 12 = $63.23 monthly tax

Reference: Real Estate Calculations > Investment

Question 16

Q

A salesperson received $2,250 as his 50% share of the brokerage fee on a $75,000 sale. What was the full brokerage commission rate?

A)
5.5%

B)
6.5%

C)
6%

D)
5%

Answer

A

A salesperson received $2,250 as his 50% share of the brokerage fee on a $75,000 sale. What was the full brokerage commission rate?

A)
5.5%
Incorrect Answer
B)
6.5%
Incorrect Answer
C)
6%
Correct Answer
D)
5%
Incorrect Answer
Explanation
$2,250 (the salesperson’s commission) ÷ $75,000(the sales price) = 3% (0.03) (salesperson’s share)

3% ÷ 50% (0.50) (salesperson’s percentage of full commission) = 6% (0.06) (the full commission)

Reference: Real Estate Calculations > Settlement/Closing Calculations

Question 17

Q

How much monthly PITI payment can a purchaser qualify for if he earns $6,600 gross income monthly and the lender applies 28/36 qualifying ratios?

A)
$1,650
B)
$1,848
C)
$2,376
D)
$2,300

Answer

A

How much monthly PITI payment can a purchaser qualify for if he earns $6,600 gross income monthly and the lender applies 28/36 qualifying ratios?

A)
$1,650
Incorrect Answer
B)
$1,848
Correct Answer
C)
$2,376
Incorrect Answer
D)
$2,300
Incorrect Answer
Explanation
$6,600 income × 28% (0.28) = $1,848 (monthly PITI payment). The lender’s 28/36 qualifying ratios mean that the purchaser’s total monthly housing expenses should be no more than 28% of his total monthly gross income, and that the purchaser’s total monthly obligations must not exceed 36% of his total monthly gross income.

Reference: Real Estate Calculations > Finance

Question 18

Q

If a bank wants to earn $3,150 on a loan of $50,000 over 12 months, what interest rate would the bank have to charge?

A)
6%
B)
6.25%
C)
5.5%
D)
6.3%

Answer

A

If a bank wants to earn $3,150 on a loan of $50,000 over 12 months, what interest rate would the bank have to charge?

A)
6%
Incorrect Answer
B)
6.25%
Incorrect Answer
C)
5.5%
Incorrect Answer
D)
6.3%
Correct Answer
Explanation
$3,150 (amount of yearly interest) ÷ $50,000 (loan amount) = 6.3% (0.063) (the interest rate)

Reference: Real Estate Calculations > Finance

Question 19

Q

A small condo sold for $62,250, which was 75% of the list price. What was the list price?

A)
$81,250
B)
$77,812
C)
$83,000
D)
$74,700

Answer

A

A small condo sold for $62,250, which was 75% of the list price. What was the list price?

A)
$81,250
Incorrect Answer
B)
$77,812
Incorrect Answer
C)
$83,000
Correct Answer
D)
$74,700
Incorrect Answer
Explanation
$62,250 (sales price) ÷ 75% (0.75) = $83,000 (the list price)

Reference: Real Estate Calculations > Property Valuation

Question 20

Q

A property was purchased for $175,000. If the loan was $131,250, what was the loan-to-value (LTV) ratio?

A)
90%
B)
75%
C)
80%
D)
70%

Answer

A

A property was purchased for $175,000. If the loan was $131,250, what was the loan-to-value (LTV) ratio?

A)
90%
Incorrect Answer
B)
75%
Correct Answer
C)
80%
Incorrect Answer
D)
70%
Incorrect Answer
Explanation
$131,250 ÷ $175,000 = 75% (0.75)

Reference: Real Estate Calculations > Finance

Question 21

Q

A broker received a 6% commission from the sale of a property. The broker gave the salesperson $3,500, which was 30% of the firm’s commission. What was the selling price of the property?

A)
$196,000
B)
$75,000
C)
$194,450
D)
$83,333

Answer

A

A broker received a 6% commission from the sale of a property. The broker gave the salesperson $3,500, which was 30% of the firm’s commission. What was the selling price of the property?

A)
$196,000
Incorrect Answer
B)
$75,000
Incorrect Answer
C)
$194,450
Correct Answer
D)
$83,333
Incorrect Answer
Explanation
To find the broker’s total commission, divide the salesperson’s commission by the percentage of the salesperson’s commission: $3,500 ÷ 0.30 (30%) = $11,667. The broker’s commission is 6% of the sales price. To find the sales price, divide the broker’s commission by the percentage of the broker’s commission: $11,667 ÷ 0.06 (6%) = $194,450.

Reference: Real Estate Calculations > Settlement/Closing Calculations

Question 22

Q

A savings and loan agreed to make a $65,000 mortgage at 8% interest for 30 years and charged three points to negotiate the loan. What was the effective yield to the lender?

A)
8.35%
B)
8.25%
C)
8.38%
D)
8.735%

Answer

A

A savings and loan agreed to make a $65,000 mortgage at 8% interest for 30 years and charged three points to negotiate the loan. What was the effective yield to the lender?

A)
8.35%
Incorrect Answer
B)
8.25%
Incorrect Answer
C)
8.38%
Correct Answer
D)
8.735%
Incorrect Answer
Explanation
The lender yield per point is 1.25% (0.125).

0.125 × 3 = 0.375

8% + 0.38 = 8.38%

Reference: Real Estate Calculations > Finance

Question 23

Q

An investment property was purchased for $250,000. The owner added a tennis court at a cost of $10,000. Two years later, the property sold for $325,000 and the seller paid a 7% commission plus $250 in attorney fees. If he purchases another property for $350,000, how much capital gains will he exclude?

A)
$42,520
B)
$22,750
C)
$42,250
D)
$42,000

Answer

A

An investment property was purchased for $250,000. The owner added a tennis court at a cost of $10,000. Two years later, the property sold for $325,000 and the seller paid a 7% commission plus $250 in attorney fees. If he purchases another property for $350,000, how much capital gains will he exclude?

A)
$42,520
Incorrect Answer
B)
$22,750
Incorrect Answer
C)
$42,250
Incorrect Answer
D)
$42,000
Correct Answer
Explanation
$250,000 + 10,000 = $260,000

$325,000 – 22,750 (7%) = $302,250 – 250 = $302,000

$302,000 – 260,000 = $42,000

Question 24

Q

What is the sales price of a property whose owner paid a $7,000 commission at a 7% rate?

A)
$136,000
B)
$42,000
C)
$100,000
D)
$420,000

Answer

A

What is the sales price of a property whose owner paid a $7,000 commission at a 7% rate?

A)
$136,000
Incorrect Answer
B)
$42,000
Incorrect Answer
C)
$100,000
Correct Answer
D)
$420,000
Incorrect Answer
Explanation
$7,000 (commission) ÷ 7% (0.07) = $100,000 (sales price)

Reference: Real Estate Calculations > Settlement/Closing Calculations

Question 25

Q

An owner of income-producing property asked the property manager to prepare a report showing the cash flow of the property. Which of the following accurately shows the formula for calculating a rental property’s cash flow?

A)
Net income – (expenses and debt service) = cash flow
B)
Income + (operation costs and debt service) = cash flow
C)
Rental income – debt service = cash flow
D)
Gross income – (expenses and debt service) = cash flow

Answer

A

An owner of income-producing property asked the property manager to prepare a report showing the cash flow of the property. Which of the following accurately shows the formula for calculating a rental property’s cash flow?

A)
Net income – (expenses and debt service) = cash flow
Incorrect Answer
B)
Income + (operation costs and debt service) = cash flow
Incorrect Answer
C)
Rental income – debt service = cash flow
Incorrect Answer
D)
Gross income – (expenses and debt service) = cash flow
Correct Answer
Explanation
The general formula to calculate a rental property’s cash flow is gross income – (expenses and debt service) = cash flow. The formula requires that expenses be subtracted from gross income, not net income. Net income typically refers to income where expenses have already been subtracted. Operation costs (expenses) and debt service (e.g., mortgage payments) would be subtracted from—not added to—income.

Reference: Real Estate Calculations > Property Management Calculations

Question 26

Q

A homeowner received $321,480 after 6% was deducted as the agreed upon brokerage commission. What was the selling price of the property?

A)
$340,785
B)
$342,000
C)
$340,000
D)
$345,000

Answer

A

A homeowner received $321,480 after 6% was deducted as the agreed upon brokerage commission. What was the selling price of the property?

A)
$340,785
Incorrect Answer
B)
$342,000
Correct Answer
C)
$340,000
Incorrect Answer
D)
$345,000
Incorrect Answer
Explanation
$321,480 (seller’s net) ÷ 94% (0.94) (100% ‒ 6% commission) = $342,000 (the sales price)

Reference: Real Estate Calculations > Settlement/Closing Calculations

Question 27

Q

A buyer purchased two parcels of land. One parcel was 2 miles square and the other contained 30 acres. If the price of the land was $2,000 an acre, what was the purchase cost?

A)
$1,626,000
B)
$2,620,000
C)
$1,800,000
D)
$1,340,000

Answer

A

A buyer purchased two parcels of land. One parcel was 2 miles square and the other contained 30 acres. If the price of the land was $2,000 an acre, what was the purchase cost?

A)
$1,626,000
Incorrect Answer
B)
$2,620,000
Correct Answer
C)
$1,800,000
Incorrect Answer
D)
$1,340,000
Incorrect Answer
Explanation
One square mile is 640 acres, so 2 square miles is 1,280 acres. The two parcels together contain 1,310 acres (1,280 + 30 = 1,310). To find the cost, multiply the cost per acre by the total acres: 1,310 × $2,000 = $2,620,000.

Reference: Real Estate Calculations > Property Valuation

Question 28

Q

When the seller listed a property, he agreed to pay a 7% commission. The property sold for $190,000. If the listing agent was paid 2%, and the selling agent was paid 1.5%, how much was the broker paid after paying his agents?

A)
$6,650
B)
$2,850
C)
$3,800
D)
$13,300

Answer

A

When the seller listed a property, he agreed to pay a 7% commission. The property sold for $190,000. If the listing agent was paid 2%, and the selling agent was paid 1.5%, how much was the broker paid after paying his agents?

A)
$6,650
Correct Answer
B)
$2,850
Incorrect Answer
C)
$3,800
Incorrect Answer
D)
$13,300
Incorrect Answer
Explanation
7% – 2% – 1.5% = 3.5% to the broker.

$190,000 × 3.5% (0.035) = $6,650

Reference: Real Estate Calculations > Settlement/Closing Calculations

Question 29

Q

A loan officer is paid 45% of the origination fee that her company charges. The loan officer negotiated a reverse mortgage, and her company was paid 2% of the appraised value of $190,000. How much was the loan officer paid?

A)
$5,200
B)
$1,710
C)
$6,400
D)
$3,800

Answer

A

A loan officer is paid 45% of the origination fee that her company charges. The loan officer negotiated a reverse mortgage, and her company was paid 2% of the appraised value of $190,000. How much was the loan officer paid?

A)
$5,200
Incorrect Answer
B)
$1,710
Correct Answer
C)
$6,400
Incorrect Answer
D)
$3,800
Incorrect Answer
Explanation
$190,000 × 2% (0.02) = $3,800 total origination fee

$3,800 × 45% (0.45) = $1,710

Reference: Real Estate Calculations > Finance

Question 30

Q

A sales associate works for ABC Realty, and she referred a buyer to a sales associate who works for XYZ Realty in another state. The referring agent’s check was for $2,062.50, or 25% of the buyer agent’s portion. The 7% commission was split as follows: listing brokerage, 2%; listing agent, 2%; buyer’s brokerage, 1.5%; buyer’s agent, 1.5%. What was the sale price of the property?

A)
$650,000
B)
$600,000
C)
$550,000
D)
$500,000

Answer

A

A sales associate works for ABC Realty, and she referred a buyer to a sales associate who works for XYZ Realty in another state. The referring agent’s check was for $2,062.50, or 25% of the buyer agent’s portion. The 7% commission was split as follows: listing brokerage, 2%; listing agent, 2%; buyer’s brokerage, 1.5%; buyer’s agent, 1.5%. What was the sale price of the property?

A)
$650,000
Incorrect Answer
B)
$600,000
Incorrect Answer
C)
$550,000
Correct Answer
D)
$500,000
Incorrect Answer
Explanation
$2,062.50 ÷ 25% (0.25) = $8,250

$8,250 ÷ 1.5% (0.015) = $550,000

Reference: Real Estate Calculations > Settlement/Closing Calculations

Question 31

Q

A broker sold a property for $250,000. He was paid 6% on the first $100,000, 5% on the next $100,000, and 4% on the balance. How much was the broker paid?

A)
$13,000
B)
$6,000
C)
$24,000
D)
$5,000

Answer

A

A broker sold a property for $250,000. He was paid 6% on the first $100,000, 5% on the next $100,000, and 4% on the balance. How much was the broker paid?

A)
$13,000
Correct Answer
B)
$6,000
Incorrect Answer
C)
$24,000
Incorrect Answer
D)
$5,000
Incorrect Answer
Explanation
$100,000 × 6% (0.06) = $6,000

$100,000 × 5% (0.05) = $5,000

$50,000 × 4% (0.04) = $2,000

$6,000 + $5,000 + $2,000 = $13,000

Reference: Real Estate Calculations > Settlement/Closing Calculations

Question 32

Q

The seller’s net after paying a 6% commission was $355,000. The approximate sale price of the property was

A)
$381,720.
B)
$379,850.
C)
$377,660.
D)
$376,300.

Answer

A

The seller’s net after paying a 6% commission was $355,000. The approximate sale price of the property was

A)
$381,720.
Incorrect Answer
B)
$379,850.
Incorrect Answer
C)
$377,660.
Correct Answer
D)
$376,300.
Incorrect Answer
Explanation
100% – 6% = 94%

$355,000 ÷ 94% (0.94) = $377,659.57

Reference: Real Estate Calculations > Settlement/Closing Calculations

Question 33

Q

A vacant lot that measures 100 ft. × 125 ft. is listed at $250 per front foot. What is the listing price of the property?

A)
$15,000
B)
$12,500
C)
$25,000
D)
$20,000

Answer

A

A vacant lot that measures 100 ft. × 125 ft. is listed at $250 per front foot. What is the listing price of the property?

A)
$15,000
Incorrect Answer
B)
$12,500
Incorrect Answer
C)
$25,000
Correct Answer
D)
$20,000
Incorrect Answer
Explanation
The front foot refers to the measurement along the frontage of a lot. The frontage is usually the street frontage, but it might be the water footage for lots bordering on water. When two dimensions are given for a tract of land and they are not labeled, the first dimension is the frontage. The word width also means frontage, as the length of a parcel is called the depth. To solve this problem, multiply 100 feet by the cost per front foot, $250. $250 × 100 = $25,000.

Reference: Real Estate Calculations > Measurement

Question 34

Q

If a house sells for $80,000 and the buyer obtains a loan for $72,000, how much money will the buyer pay for points at closing if the lender charges three discount points?

A)
$2,400
B)
$2,160
C)
$2,328
D)
$240

Answer

A

If a house sells for $80,000 and the buyer obtains a loan for $72,000, how much money will the buyer pay for points at closing if the lender charges three discount points?

A)
$2,400
Incorrect Answer
B)
$2,160
Correct Answer
C)
$2,328
Incorrect Answer
D)
$240
Incorrect Answer
Explanation
A discount point equals 1% of the loan amount. Three discount points is 3% of the loan amount of $72,000. $72,000 (loan amount) × 3% (0.03) = $2,160

Reference: Real Estate Calculations > Finance

Question 35

Q

A sales associate for XYZ Realty listed and sold a $175,000 home. The seller paid a 6% commission of which the sales associate received 2% for listing the property, and 1.5% for selling the property. How much was the brokerage’s share of the commission?

A)
$10,500
B)
$6,125
C)
$4,375
D)
$5,250

Answer

A

A sales associate for XYZ Realty listed and sold a $175,000 home. The seller paid a 6% commission of which the sales associate received 2% for listing the property, and 1.5% for selling the property. How much was the brokerage’s share of the commission?

A)
$10,500
Incorrect Answer
B)
$6,125
Incorrect Answer
C)
$4,375
Correct Answer
D)
$5,250
Incorrect Answer
Explanation
Total commission = $175,000 × 6% (0.06) = $10,500. Sales associate’s share = 3.5% (2% + 1.5%) $175,000 × 3.5% (0.035) = $6,125. $10,500 ‒ $6,125 = $4,375 for the brokerage. Or 6% ‒ 3.5% = 2.5% for the brokerage times the sales price.

Reference: Real Estate Calculations > Settlement/Closing Calculations

Question 36

Q

When dimensions are stated as 75 × 125, the first measurement given refers to

A)
the building dimensions.
B)
the setback footage.
C)
the foot frontage.
D)
the foot side.

Answer

A

When dimensions are stated as 75 × 125, the first measurement given refers to

A)
the building dimensions.
Incorrect Answer
B)
the setback footage.
Incorrect Answer
C)
the foot frontage.
Correct Answer
D)
the foot side.
Incorrect Answer
Explanation
Foot frontage is the first measure that appears in a lot size. For example, a measurement of 75 ft. × 125 ft. indicates that 75 ft. is the front footage.

Reference: Real Estate Calculations > Measurement

Question 37

Q

How many cubic yards of concrete must a builder buy to pour a sidewalk that measures 45 ft. × 3.25 ft. and is 5 inches thick?

A)
0.4167
B)
6.7708
C)
2.2571
D)
60.9375

Answer

A

How many cubic yards of concrete must a builder buy to pour a sidewalk that measures 45 ft. × 3.25 ft. and is 5 inches thick?

A)
0.4167
Incorrect Answer
B)
6.7708
Incorrect Answer
C)
2.2571
Correct Answer
D)
60.9375
Incorrect Answer
Explanation
5 in. ÷ 12 in. = 0.4167 in.

45 ft. × 3.25 ft. × 0.4167 ft. = 60.9423 cu. ft.

60.9423 ÷ 27 = 2.2571 cu. yds.

Reference: Real Estate Calculations > Measurement

Question 38

Q

The N½ of the SW¼ of a section contains how many acres?

A)
40 acres
B)
80 acres
C)
60 acres
D)
20 acres

Answer

A

The N½ of the SW¼ of a section contains how many acres?

A)
40 acres
Incorrect Answer
B)
80 acres
Correct Answer
C)
60 acres
Incorrect Answer
D)
20 acres
Incorrect Answer
Explanation
A section has 640 acres. A section is divided into halves (320 acres) and quarters (160 acres). Each of those parts is further divided into halves and quarters. In this problem, a ½ of a ¼ of 640 equals 80 acres. 2 × 4= 8 640 ÷8= 80 acres.

Reference: Real Estate Calculations > Measurement

Question 39

Q

Three years ago, the owner paid $165,000 for her investment property. During her period of ownership, she added a family room valued at $16,500 and $10,000 worth of other improvements. If she sells the property for $240,000 and pays a 7% commission, what capital gains may she exclude?

A)
$31,700
B)
$38,700
C)
$25,300
D)
$48,500

Answer

A

Three years ago, the owner paid $165,000 for her investment property. During her period of ownership, she added a family room valued at $16,500 and $10,000 worth of other improvements. If she sells the property for $240,000 and pays a 7% commission, what capital gains may she exclude?

A)
$31,700
Correct Answer
B)
$38,700
Incorrect Answer
C)
$25,300
Incorrect Answer
D)
$48,500
Incorrect Answer
Explanation
$240,000 – $16,800 (7%) = $223,200

$165,000 + $16,500 + $10,000 = $191,500

$223,200 – $191,500 = $31,700

Reference: Real Estate Calculations > Investment

Question 40

Q

How many square feet of living area are in the following house?

A)
2,990.5
B)
2,150
C)
2,087.5
D)
2,775

Answer

A

How many square feet of living area are in the following house?

A)
2,990.5
Incorrect Answer
B)
2,150
Incorrect Answer
C)
2,087.5
Correct Answer
D)
2,775
Incorrect Answer
Explanation
35 ft. × 40 ft. = 1,400 sq. ft.

[(15 ft. + 40 ft.) ÷ 2 × 25 ft.] = 687.5 sq. ft.

1,400 + 687.5 = 2,087.5

Reference: Real Estate Calculations > Measurement

Question 41

Q

A salesperson lists and sells a home for $825,000 at a 7.5% commission. How much does the salesperson receive after his broker deducts 20% for the company share plus a $500 transaction fee?

A)
$49,300
B)
$49,060
C)
$39,160
D)
$49,000

Answer

A

A salesperson lists and sells a home for $825,000 at a 7.5% commission. How much does the salesperson receive after his broker deducts 20% for the company share plus a $500 transaction fee?

A)
$49,300
Incorrect Answer
B)
$49,060
Incorrect Answer
C)
$39,160
Incorrect Answer
D)
$49,000
Correct Answer
Explanation
$825,000 (sales price × 7.5% (0.075)(commission rate) = $61,875 (total commission) ‒ 20% (0.20) (the company share)

20% (0.20) × $61,875 = $12,375 (the company share)

$61,875 ‒ $12,375 = $49,500

$49,500 ‒ $500 (the transaction fee) = $49,000 (the salesperson’s commission)

Reference: Real Estate Calculations > Settlement/Closing Calculations

Question 42

Q

A seller is interviewing agents to list her property. She has the following quotes from two different companies: XYZ Realty, 7% commission; and LMN Realty, 5.5% commission. If her house sells for $225,000, how much will she save if she lists her property with LMN Realty?

A)
$5,400
B)
$4,500
C)
$3,357
D)
$3,375

Answer

A

A seller is interviewing agents to list her property. She has the following quotes from two different companies: XYZ Realty, 7% commission; and LMN Realty, 5.5% commission. If her house sells for $225,000, how much will she save if she lists her property with LMN Realty?

A)
$5,400
Incorrect Answer
B)
$4,500
Incorrect Answer
C)
$3,357
Incorrect Answer
D)
$3,375
Correct Answer
Explanation
$225,000 × 7% (0.07) = $15,750

$225,000 × 5.5% (0.055) = $12,375

$15,750 – $12,375 = $3,375 savings

Reference: Real Estate Calculations > Settlement/Closing Calculations

Question 43

Q

Semiannual property taxes of $450 were paid only for the first half of the year. The property sold on July 11 and closed on September 19, with the seller having the day of closing. If the taxes were prorated and paid between the buyer and the seller as of the date of sale, using a 360-day year, what will the seller owe at closing?

A)
$252.50
B)
$197.50
C)
$251.50
D)
$387.50

Answer

A

Semiannual property taxes of $450 were paid only for the first half of the year. The property sold on July 11 and closed on September 19, with the seller having the day of closing. If the taxes were prorated and paid between the buyer and the seller as of the date of sale, using a 360-day year, what will the seller owe at closing?

A)
$252.50
Incorrect Answer
B)
$197.50
Correct Answer
C)
$251.50
Incorrect Answer
D)
$387.50
Incorrect Answer
Explanation
The seller owes July, August, and 19 days of September for a total of 79 days. The formula is total due ÷ total days × days owed. $450 ÷ 180 × 79 = $197.50.

Reference: Real Estate Calculations > Settlement/Closing Calculations

Question 44

Q

A borrower pays $200,000 for a home, makes a down payment of $40,000 and obtains a loan for the balance of the purchase price. The lender charges four discount points for the loan. How much will the borrower pay in discount points?

A)
$8,000
B)
$6,400
C)
$16,000
D)
$12,800

Answer

A

A borrower pays $200,000 for a home, makes a down payment of $40,000 and obtains a loan for the balance of the purchase price. The lender charges four discount points for the loan. How much will the borrower pay in discount points?

A)
$8,000
Incorrect Answer
B)
$6,400
Correct Answer
C)
$16,000
Incorrect Answer
D)
$12,800
Incorrect Answer
Explanation
A discount point is 1% of the loan amount. Four discount points is 4% of the loan amount. The loan amount is $160,000 (subtract the down payment of $40,000 from the purchase price of $200,000). To find the amount of the discount points, multiply the loan amount by 4%: 4% (0.04) × $160,000 = $6,400.

Reference: Real Estate Calculations > Finance

Question 45

Q

A rectangular lot is 275 ft. deep, and it contains 2/3 of an acre. What is the length of the lot?

A)
290.04 ft.
B)
106.5 ft.
C)
105.6 ft.
D)
158.4 ft.

Answer

A

A rectangular lot is 275 ft. deep, and it contains 2/3 of an acre. What is the length of the lot?

A)
290.04 ft.
Incorrect Answer
B)
106.5 ft.
Incorrect Answer
C)
105.6 ft.
Correct Answer
D)
158.4 ft.
Incorrect Answer
Explanation
43,560 ÷ 3 = 14,520 × 2 = 29,040 sq. ft.

29,040 ÷ 275 ft. = 105.60 ft.

43,560 × 0.6667 (2 ÷ 3 = 0.6667) = 29,041.45 sq. ft.

29,041.45 ÷ 275 ft. = 105.6052 ft.

Reference: Real Estate Calculations > Measurement

Question 46

Q

Last month’s loan payment included $412.50 interest on a $60,000 loan balance. What is the annual rate of interest?

A)
8.5%
B)
7.75%
C)
7.5%
D)
8.25%

Answer

A

Last month’s loan payment included $412.50 interest on a $60,000 loan balance. What is the annual rate of interest?

A)
8.5%
Incorrect Answer
B)
7.75%
Incorrect Answer
C)
7.5%
Incorrect Answer
D)
8.25%
Correct Answer
Explanation
To find the annual rate of interest, divide the annual amount of interest by the loan balance. In this problem, to find the annual amount of interest, multiply the monthly amount by 12:

$412.50 × 12 = $4,950(annual interest amount)

$4,950 ÷ $60,000 (loan balance) = 8.25% (0.0825) interest

Reference: Real Estate Calculations > Finance

Question 47

Q

A salesperson signs a listing agreement with her broker to sell her home. The agreement states that the broker will receive a 7% commission. The home sells for $220,000. What is the net amount that the seller will receive from the sale?

A)
$220,000
B)
$15,400
C)
$204,600
D)
$205,678

Answer

A

A salesperson signs a listing agreement with her broker to sell her home. The agreement states that the broker will receive a 7% commission. The home sells for $220,000. What is the net amount that the seller will receive from the sale?

A)
$220,000
Incorrect Answer
B)
$15,400
Incorrect Answer
C)
$204,600
Correct Answer
D)
$205,678
Incorrect Answer
Explanation
The answer requires two steps: (1) find the commission, and (2) subtract the commission from the selling price to find the seller’s amount.

(1) Brokerage rate (7%) × selling price ($220,000) = commission ($15,400)

(2) Selling price ($220,000) – commission ($15,400) = seller’s amount ($204,600)

Reference: Real Estate Calculations > Settlement/Closing Calculations

Question 48

Q

What is the listing price of a lot that sells for $75,200, which is 94% of the listing price?

A)
$78,875
B)
$80,000
C)
$78,125
D)
$79,712

Answer

A

What is the listing price of a lot that sells for $75,200, which is 94% of the listing price?

A)
$78,875
Incorrect Answer
B)
$80,000
Correct Answer
C)
$78,125
Incorrect Answer
D)
$79,712
Incorrect Answer
Explanation
$75,200 (sales price) ÷ 94% (0.94) = $80,000 (the listing price)

Reference: Real Estate Calculations > Property Valuation

Question 49

Q

A parcel of vacant land is 80 feet wide on the street side of the property and 200 feet deep. The parcel was sold for $200 per front foot. How much money would a salesperson receive for his 60% share in the 10% commission?

A)
$2,400
B)
$640
C)
$1,600
D)
$960

Answer

A

A parcel of vacant land is 80 feet wide on the street side of the property and 200 feet deep. The parcel was sold for $200 per front foot. How much money would a salesperson receive for his 60% share in the 10% commission?

A)
$2,400
Incorrect Answer
B)
$640
Incorrect Answer
C)
$1,600
Incorrect Answer
D)
$960
Correct Answer
Explanation
A front foot measures frontage on the front of the property.

80 feet × $200 = $16,000 sale price

$16,000 × 10% commission(0.10) = $1,600 (total commission)

$1,600 × 60% (0.60) = $960 (the salesperson’s commission)

Reference: Real Estate Calculations > Settlement/Closing Calculations

Question 50

Q

The appraised value of a property is $52,350. It is assessed at 38% of the appraised value, and the tax rate is 95 mills. What are the quarterly property taxes?

A)
$589.83
B)
$472.45
C)
$1,889.83
D)
$1,998.83

Answer

A

The appraised value of a property is $52,350. It is assessed at 38% of the appraised value, and the tax rate is 95 mills. What are the quarterly property taxes?

A)
$589.83
Incorrect Answer
B)
$472.45
Correct Answer
C)
$1,889.83
Incorrect Answer
D)
$1,998.83
Incorrect Answer
Explanation
Tax rate = 95 ÷ 1,000 = 0.095

Assessed value = $52,350 × 38% (0.38) = $19,893

$19,893 × 0.095 = $1,889.83 annual taxes

$1,889.83 ÷ 4 = $472.45 quarterly taxes

Reference: Real Estate Calculations > Investment

Question 51

Q

Two brokers split the 6% commission equally on the sale of a small commercial tract of land. What was the selling price of the tract if the selling salesperson received $1,074, which was 40% of the portion of the total commission coming to the selling broker?

A)
$89,500
B)
$71,600
C)
$78,750
D)
$44,750

Answer

A

Two brokers split the 6% commission equally on the sale of a small commercial tract of land. What was the selling price of the tract if the selling salesperson received $1,074, which was 40% of the portion of the total commission coming to the selling broker?

A)
$89,500
Correct Answer
B)
$71,600
Incorrect Answer
C)
$78,750
Incorrect Answer
D)
$44,750
Incorrect Answer
Explanation
$1,074 (salesperson’s commission) ÷ 40% (0.40) = $2,685 (total commission) ÷ 3% (0.03) (1/2 of total 6% commission) = $89,500 (the sales price)

Reference: Real Estate Calculations > Settlement/Closing Calculations

Question 52

Q

A rectangular lot measures 200 ft. × 300 ft. Property in the area is selling for $150,000 per acre. If the broker charges 8%, how much is she paid?

A)
$16,529
B)
$19,243
C)
$15,290
D)
$16,730

Answer

A

A rectangular lot measures 200 ft. × 300 ft. Property in the area is selling for $150,000 per acre. If the broker charges 8%, how much is she paid?

A)
$16,529
Correct Answer
B)
$19,243
Incorrect Answer
C)
$15,290
Incorrect Answer
D)
$16,730
Incorrect Answer
Explanation
200 ft. × 300 ft. = 60,000 sq. ft. ÷ 43,560 = 1.3774 acres

1.3774 × $150,000 = $206,610

$206,610 × 8% (0.08) = $16,528.80 round to $16,529

Reference: Real Estate Calculations > Settlement/Closing Calculations

Question 53

Q

A broker sold a residence for $210,000 and received $10,500 as commission in accordance with the terms of the listing contract. What was the broker’s commission rate?

A)
5%
B)
6%
C)
8%
D)
7.5%

Answer

A

A broker sold a residence for $210,000 and received $10,500 as commission in accordance with the terms of the listing contract. What was the broker’s commission rate?

A)
5%
Correct Answer
B)
6%
Incorrect Answer
C)
8%
Incorrect Answer
D)
7.5%
Incorrect Answer
Explanation
To find the commission rate, divide the commission amount by the selling price: $10,500 ÷ $210,000 = 0.05 (5%).

Reference: Real Estate Calculations > Settlement/Closing Calculations

Question 54

Q

Ann listed her property with XYZ Realty, which charges a flat fee of $2,995 to list the property. If a sales associate within XYZ sells the property, the total commission paid is $2,995. However, if a sales associate from another company brings the buyer that purchases the property, the owner agreed to pay that company an additional 3% commission. A sales associate from ABC Realty presented an offer of $425,000. If the offer is accepted, the total commission that the owner will pay is

A)
$10,500.
B)
$11,250.
C)
$12,750.
D)
$15,745.

Answer

A

Ann listed her property with XYZ Realty, which charges a flat fee of $2,995 to list the property. If a sales associate within XYZ sells the property, the total commission paid is $2,995. However, if a sales associate from another company brings the buyer that purchases the property, the owner agreed to pay that company an additional 3% commission. A sales associate from ABC Realty presented an offer of $425,000. If the offer is accepted, the total commission that the owner will pay is

A)
$10,500.
Incorrect Answer
B)
$11,250.
Incorrect Answer
C)
$12,750.
Incorrect Answer
D)
$15,745.
Correct Answer
Explanation
$425,000 × 3% (0.03) = $12,750

$12,750 + 2,995 = $15,745

Reference: Real Estate Calculations > Settlement/Closing Calculations

Question 55

Q

The buyer had a 20% down payment on a property she purchased for $89,500. She also must pay a 1% origination fee, $350 for title insurance, and one discount point. How much money will the buyer owe at the closing?

A)
$20,350
B)
$17,423
C)
$19,682
D)
$18,966

Answer

A

The buyer had a 20% down payment on a property she purchased for $89,500. She also must pay a 1% origination fee, $350 for title insurance, and one discount point. How much money will the buyer owe at the closing?

A)
$20,350
Incorrect Answer
B)
$17,423
Incorrect Answer
C)
$19,682
Correct Answer
D)
$18,966
Incorrect Answer
Explanation
Step 1, determine the loan amount: $89,500 × 80% (0.80) = $71,600. Step 2, determine the down payment: $89,500 – 71,600 = $17,900. Determine the points and origination fee. $71,600 × 1% (0.01) = $716. Total as shown below:

+ $17,900 down payment
$716 discount points
$716 origination fee
$350 insurance
$19,682 total due at closing
Reference: Real Estate Calculations > Settlement/Closing Calculations

Question 56

Q

A homeowner has a property valued at $125,000 that is assessed at 35% of its value. If the local tax rate is 6,400 mills per $100 of the assessed value, what are the monthly taxes?

A)
$480
B)
$280.00
C)
$140.33
D)
$233.33

Answer

A

A homeowner has a property valued at $125,000 that is assessed at 35% of its value. If the local tax rate is 6,400 mills per $100 of the assessed value, what are the monthly taxes?

A)
$480
Incorrect Answer
B)
$280.00
Incorrect Answer
C)
$140.33
Incorrect Answer
D)
$233.33
Correct Answer
Explanation
Tax rate = 6,400 mills ÷ 1,000 = 6.40 ÷ 100 = 0.064

Assessed value = $125,000 × 35% (0.35) = $43,750

$43,750 × 0.064 = $2,800 annual tax

$2,800 ÷ 12 = $233.33 monthly tax

Reference: Real Estate Calculations > Investment

Question 57

Q

A homeowner sold his property for $99,500. He paid a real estate commission of 6%, paid an attorney $250, paid a transfer tax of $99.50, paid his existing mortgage of $50,140, and agreed to a purchase money mortgage of $10,000. What were his net proceeds at the closing?

A)
$33,050.40
B)
$53,040.50
C)
$43,050.40
D)
$33,040.50

Answer

A

A homeowner sold his property for $99,500. He paid a real estate commission of 6%, paid an attorney $250, paid a transfer tax of $99.50, paid his existing mortgage of $50,140, and agreed to a purchase money mortgage of $10,000. What were his net proceeds at the closing?

A)
$33,050.40
Incorrect Answer
B)
$53,040.50
Incorrect Answer
C)
$43,050.40
Incorrect Answer
D)
$33,040.50
Correct Answer
Explanation
$99,500 × 6% (0.06) = $5,970

Debits Credits
$5,970.00 $99.500
$250
$99.50
$50,140
$10,000
$66,459.50
$99,500 $99,500
-$66,459.50 $33,040.50
Reference: Real Estate Calculations > Settlement/Closing Calculations

Question 58

Q

If an interest payment of $1,500 is made every 3 months on a $50,000 loan, what is the interest rate?

A)
3%
B)
12%
C)
6%
D)
9%

Answer

A

If an interest payment of $1,500 is made every 3 months on a $50,000 loan, what is the interest rate?

A)
3%
Incorrect Answer
B)
12%
Correct Answer
C)
6%
Incorrect Answer
D)
9%
Incorrect Answer
Explanation
$1,500 × 4 (every 3 months is ¼ of a year) = $6,000 (the annual interest). $6,000 ÷ $50,000 (the loan amount) = 12% (0.12)

Reference: Real Estate Calculations > Finance

Question 59

Q

If the quarterly interest at 10.5% is $3,150, the principal amount of a loan is

A)
$30,000.
B)
$60,000.
C)
$120,000.
D)
$90,000.

Answer

A

If the quarterly interest at 10.5% is $3,150, the principal amount of a loan is

A)
$30,000.
Incorrect Answer
B)
$60,000.
Incorrect Answer
C)
$120,000.
Correct Answer
D)
$90,000.
Incorrect Answer
Explanation
To find the principal, divide the annual interest by the percent of interest. In this problem, to find the annual interest multiply the quarterly amount by 4:

4 × $3,150 = $12,500 (annual interest)

$12,600 ÷ 10.5% (0.105) = $120,000 (principal amount)

Reference: Real Estate Calculations > Finance

Question 60

Q

A buyer offer of $295,000 was accepted, and a loan was negotiated for 80% at 7% for 25 years. The closing took place on January 5, and the buyer’s first PITI payment is due March 1. Using a 365-day year, with the seller having the day of closing, how much interest would the buyer be debited on the closing statement?

A)
$1,652
B)
$1,276.67
C)
$1,176.77
D)
$226.30

Answer

A

A buyer offer of $295,000 was accepted, and a loan was negotiated for 80% at 7% for 25 years. The closing took place on January 5, and the buyer’s first PITI payment is due March 1. Using a 365-day year, with the seller having the day of closing, how much interest would the buyer be debited on the closing statement?

A)
$1,652
Incorrect Answer
B)
$1,276.67
Incorrect Answer
C)
$1,176.77
Correct Answer
D)
$226.30
Incorrect Answer
Explanation
Step 1, determine the loan amount: $295,000 × 0.80 = $236,000. Step 2, determine the interest: $236,000 × 7% (0.07) $16,520. Step 3, determine what the buyer owes. The buyer will owe 26 days for January (31 – 5 = 26 days) and none for February because the March payment will pay the interest in arrears for February. Total amount due ÷ total days × days owed. $16,520 ÷ 365 × 26 = $1,176.77.

Reference: Real Estate Calculations > Settlement/Closing Calculations

Question 61

Q

The owners live in a county were taxes are paid in arrears and 360 days are used to compute the property tax bill. The house closed on April 13, with the seller owning the day of closing. If the annual tax bill is $3,355, how much will be credited to the buyer on the settlement statement for taxes for this year?

A)
$946.57
B)
$2,441.84
C)
$959.90
D)
$2,407.78

Answer

A

The owners live in a county were taxes are paid in arrears and 360 days are used to compute the property tax bill. The house closed on April 13, with the seller owning the day of closing. If the annual tax bill is $3,355, how much will be credited to the buyer on the settlement statement for taxes for this year?

A)
$946.57
Incorrect Answer
B)
$2,441.84
Incorrect Answer
C)
$959.90
Correct Answer
D)
$2,407.78
Incorrect Answer
Explanation
The taxes were paid in arrears, and the buyer will pay the bill next year. The seller will owe the buyer for the time the seller owns the house—January 1 to April 13. Total owed ÷ total days × days owed = amount due $3,355 ÷ 360 × 103= 959.90.

Reference: Real Estate Calculations > Settlement/Closing Calculations

Question 62

Q

A charge of three discount points on a $120,000 loan equals

A)
$450.
B)
$4,500.
C)
$3,600.
D)
$1,164.

Answer

A

A charge of three discount points on a $120,000 loan equals

A)
$450.
Incorrect Answer
B)
$4,500.
Incorrect Answer
C)
$3,600.
Correct Answer
D)
$1,164.
Incorrect Answer
Explanation
A discount point is 1% of the amount borrowed (the loan amount). Three points would be 3% of the loan amount of $120,000. 3% (0.03) × $120,000 = $3,600

Reference: Real Estate Calculations > Finance

Question 63

Q

Five years ago, a homeowner bought a home for $250,000. Home values in her area have improved, and the current market value of the house has increased by 15%. If she has $95,875 left to pay on her mortgage loan, what is the current equity in her home?

A)
$154,125
B)
$191,625
C)
$138,712
D)
$250,000

Answer

A

Five years ago, a homeowner bought a home for $250,000. Home values in her area have improved, and the current market value of the house has increased by 15%. If she has $95,875 left to pay on her mortgage loan, what is the current equity in her home?

A)
$154,125
Incorrect Answer
B)
$191,625
Correct Answer
C)
$138,712
Incorrect Answer
D)
$250,000
Incorrect Answer
Explanation
The homeowner’s equity is the difference between the market value of her property and the debt that encumbers it. Original cost ($250,000) + increase in value ($250,000 × 15% (0.15) = $37,500) = Current market value ($287,500). Current market value ($287,500) – mortgage debt ($95,875) = the homeowner’s equity ($191,625).

Reference: Real Estate Calculations > Finance

Question 64

Q

If the interest rate on an FHA-insured mortgage loan is 5.5% and the monthly payment is $1,012, the principal sum would be

A)
$192,000.
B)
$184,000.
C)
$220,800.
D)
$667,920.

Answer

A

If the interest rate on an FHA-insured mortgage loan is 5.5% and the monthly payment is $1,012, the principal sum would be

A)
$192,000.
Incorrect Answer
B)
$184,000.
Incorrect Answer
C)
$220,800.
Correct Answer
D)
$667,920.
Incorrect Answer
Explanation
To find the principal sum, multiply the monthly payment by 12 (12 months in a year) and divide that amount by the interest rate.

$1,012 × 12 = $12,144 (annual payments)

$12,144 ÷ 5.5% (0.055) (interest rate) = $220,800 (the principal amount)

Reference: Real Estate Calculations > Finance

Answer 65

A

How many acres are in a lot that is 1/4 of a mile wide by 1/4 of a mile long?

A)
40 acres
Correct Answer
B)
10 acres
Incorrect Answer
C)
80 acres
Incorrect Answer
D)
120 acres
Incorrect Answer
Explanation
1,320 ft. (1/4 [0.25] of 5,280 ft. [1 mi.]) × 1,320 ft. = 1,742,400 sq. ft. ÷ 43,560 (sq. ft. in an acre) = 40 acres.

Reference: Real Estate Calculations > Measurement

Answer 66

A

An apartment building has 20 units and a vacancy rate of 5%. The monthly rent is $1,000. The property manager was paid 5% of the gross monthly rents. How much did the property manager earn for the prior month?

A)
$1,950
Incorrect Answer
B)
$2,000
Incorrect Answer
C)
$1,000
Incorrect Answer
D)
$950
Correct Answer
Explanation
The property manager was paid $950:

A 20-unit apartment building with a 5% vacancy rate = 19 occupied units (20 × 5% = 19 occupied units)

19 × $1,000 = $19,000 gross monthly rents

$19,000 × 5% = $950

Reference: Real Estate Calculations > Property Management Calculations

Answer 67

A

If a seller needs to net $50,000 after the sale, how much must he sell his home for if the selling costs include a 7% commission and $1,200 in other expenses?

A)
$55,054
Correct Answer
B)
$54,700
Incorrect Answer
C)
$54,963
Incorrect Answer
D)
$55,633
Incorrect Answer
Explanation
$50,000 + $1,200 = $51,200

$51,200 ÷ 93% = $55,053.76

$55,054 (rounded)

Reference: Real Estate Calculations > Property Valuation

Answer 68

A

The semiannual interest paid on a loan was $4,387.50. If the interest rate is 6.5%, what was the loan amount?

A)
$135,000
Correct Answer
B)
$67,500
Incorrect Answer
C)
$270,000
Incorrect Answer
D)
$540,000
Incorrect Answer
Explanation
$4,387.50 × 2 = $8,775 annual interest

$8,775 ÷ 6.5% (0.065)= $135,000

Reference: Real Estate Calculations > Finance

Answer 69

A

This month’s interest payment is $585.70. If the buyer secured a 90% loan at an 8.75% annual rate of interest, what was the sale price?

A)
$80,325
Incorrect Answer
B)
$89,500
Incorrect Answer
C)
$89,250
Correct Answer
D)
$80,235
Incorrect Answer
Explanation
$585.75 × 12 = $7,028.40 annual interest

$7,028.40 ÷ 8.75% (0.0875) = $80,324.57 loan amount

$80,324.57 ÷ 90% (0.90) = $89,249.52, round to $89,250

Reference: Real Estate Calculations > Finance

Answer 70

A

An offer was made for 90% of the $120,900 list price of a property. The offer was accepted, and the lender agreed to negotiate an 80% loan at 8% interest for 30 years. The buyer had placed a $5,000 earnest money deposit in escrow. Additional expenses the buyer would need to pay through escrow included: $350 for title expenses, $250 for attorney fees, and other expenses of $749. How much money does the buyer need to close on the property?

A)
$15,159
Incorrect Answer
B)
$23,111
Incorrect Answer
C)
$18,111
Correct Answer
D)
$10,159
Incorrect Answer
Explanation
$108,810 (sales price) × 90% (0.90) = $120,900 (list price)

$87,048 (loan amount) × 80% (0.80) = $108,810

Debits Credits
$108,810 $87,048
$350 $5,000
$250
$749
$110,159 $92,048
$110,159 $92,048 = $18,111
Reference: Real Estate Calculations > Settlement/Closing Calculations

Answer 71

A

When the owners sold their property, they paid a 6% commission. Their check after the commission was paid was $470,000. What was the selling price of the property?

A)
$783,333
Incorrect Answer
B)
$800,000
Incorrect Answer
C)
$900,000
Incorrect Answer
D)
$500,000
Correct Answer
Explanation
100% – 6% = 94% seller’s percentage

$470,000 ÷ 94% (0.94)= $500,000

Reference: Real Estate Calculations > Settlement/Closing Calculations

Answer 72

A

An owner sold his condo and paid 6% commission to the selling broker. If his net was $200,000, what was the sale price?

A)
$229,879.39
Incorrect Answer
B)
$225,349.59
Incorrect Answer
C)
$205,698.49
Incorrect Answer
D)
$212,765.95
Correct Answer
Explanation
100% – 6% = 94% seller’s percentage

$200,000 ÷ 94% (0.94) = $212,765.95

Reference: Real Estate Calculations > Property Valuation

Answer 73

A

What is the estimated replacement cost of a 65ft. × 30 ft. building at an estimated cost of $128.50 per square foot?

A)
$25,057.50
Incorrect Answer
B)
$55,575
Incorrect Answer
C)
$250,575
Correct Answer
D)
$125,000
Incorrect Answer
Explanation
65 ft. × 30 ft. = 1,950 sq. ft. × $128.50 per sq. ft. = $250,575. Square footage is found by multiplying the length by the width of the building: 65 ft. × 30 ft.

Reference: Real Estate Calculations > Property Valuation

Answer 74

A

How many acres are in a parcel described as the NW¼ of the SE¼ and the S½ of the SW¼ of the NE¼ of Section 4?

A)
60 acres
Correct Answer
B)
40 acres
Incorrect Answer
C)
80 acres
Incorrect Answer
D)
50 acres
Incorrect Answer
Explanation
To calculate acres in a survey system legal description, multiply all the denominators and divide that number into 640 acres. In this problem, multiply denominators for the first part: 4 × 4 = 16; 640 acres ÷ 16 = 40 acres. Multiply denominators for the second part: 2 × 4 × 4 = 32; 640 ÷ 32 = 20 acres. Then add 40 acres + 20 acres = 60 acres.

Reference: Real Estate Calculations > Measurement

Answer 75

A

A salesperson received a $2,800 commission on his 35% share of the total commission on the sale of a property that sold for $160,000. What was the commission rate?

A)
4.5%
Incorrect Answer
B)
10%
Incorrect Answer
C)
5%
Correct Answer
D)
7%
Incorrect Answer
Explanation
$2,800 (agent’s commission) ÷ 35% (0.35)(agent’s percentage) = $8,000 (total commission)

$8,000 ÷ $160,000 (sales price) = 5% (commission rate)

Reference: Real Estate Calculations > Settlement/Closing Calculations

Answer 76

A

A broker and sales associate split commissions on a 60-40 basis. How much commission will the sales associate earn if he sells a property for $125,000, and a 6% commission is paid?

A)
$7,500
Incorrect Answer
B)
$3,500
Incorrect Answer
C)
$4,500
Incorrect Answer
D)
$3,000
Correct Answer
Explanation
$125,000 × 6% (0.06) = $7,500

$7,500 × 40% (0.40) = $3,000

Reference: Real Estate Calculations > Settlement/Closing Calculations

Answer 77

A

Which of these would be included in a property manager’s accounting as gross profit generated from income-producing rental property?

A)
All of these
Correct Answer
B)
Money generated from an on-site laundry
Incorrect Answer
C)
Rent
Incorrect Answer
D)
Change from an on-site vending machine
Incorrect Answer
Explanation
The money generated from all of these would typically be included as gross profit generated from an income-producing property.

Reference: Real Estate Calculations > Property Management Calculations

Answer 78

A

Buyers negotiated a $75,000 loan at 8% interest for 30 years, with the first payment due in arrears on April 1. If the closing takes place on February 24 and using a 360-day year, how much interest must the buyers pay on the day of closing?

A)
$125.00
Incorrect Answer
B)
$116.67
Correct Answer
C)
$115.38
Incorrect Answer
D)
$100.00
Incorrect Answer
Explanation
The buyers will owe interest for the portion of the month they own the home.

Total amount due ÷ total days × days owed. The buyers will own the house for 7 days in February (February 24, 25, 26, 27, 28, 29, 30) $75,000 × 8% (0.08) = $6,000 interest for the year. $6,000 ÷ 360 × 7 = $116.67.

Reference: Real Estate Calculations > Settlement/Closing Calculations

Answer 79

A

A seller wants to net a profit of $20,000 and agrees to pay a 7% commission. He also has closing expenses of $400 and a mortgage of $32,250. What is the minimum offer he could accept for the property?

A)
$59,545
Incorrect Answer
B)
$59,656
Incorrect Answer
C)
$56,613
Correct Answer
D)
$58,565
Incorrect Answer
Explanation
$20,000 (profit) + $32,250 (mortgage) + $400 (closing) = $52,650 (before commissions)

100% – 7% =93%

$52,650 ÷ 93%(0.93) = $56,612.90 round to $56,613

Reference: Real Estate Calculations > Property Valuation

Answer 80

A

A couple is applying for a home loan. One spouse has an annual gross income of $102,000, and the other spouse makes $72,000 a year. They have monthly car payments of $875, monthly credit card payments of $620, and their monthly grocery expenses come to $1,200. If the lender uses debt ratios of 28% and 36% to qualify them, what is the maximum monthly housing expense they will qualify for?

A)
$4,060
Incorrect Answer
B)
$3,725
Correct Answer
C)
$5,220
Incorrect Answer
D)
$2,525
Incorrect Answer
Explanation
$102,000 + $72,000 = $174,000 ÷ 12 = $14,500 monthly

$14,500 × 28% (0.28) = $4,060

$14,500 × 36% (0.36) = $5,220

$5,220 − $1,495 ($875 + $620) = $3,725 other recurring debt

Reference: Real Estate Calculations > Finance

Answer 81

A

A salesperson sells a $150,000 home listed with another brokerage. The listing commission is 6.5% of the selling price, with 35% going to the listing broker, and 60% belonging to the cooperating broker. The salesperson and his broker agreed that she would receive 55% of any commission that she generated for the brokerage firm. For this transaction, the salesperson is entitled to receive

A)
$5,850.
Incorrect Answer
B)
$3,217.50.
Correct Answer
C)
$2,632.50.
Incorrect Answer
D)
$3,412.50.
Incorrect Answer
Explanation
$150,000 (sales price) × 6.5% (0.065) = $9,750 (listing commission)

$9,750 × 60% (0.60) = $5,850 (cooperating broker’s commission)

$5,850 × 55% (0.55) = $3,217.50 (the salesperson’s commission)

Reference: Real Estate Calculations > Settlement/Closing Calculations

Answer 82

A

A seller wants to net a 12% profit after paying the brokerage firm a 6.5% commission. If the original purchase price was $104,500, what is the minimum offer they can accept?

A)
$124,647
Incorrect Answer
B)
$117,040
Incorrect Answer
C)
$125,176
Correct Answer
D)
$125,716
Incorrect Answer
Explanation
$104,500 + 12% = $117,040

100% – 6.5% = 93.5%

$117,040 ÷ 93.5% (0.935) = $125,176.47 round to $125,176

Reference: Real Estate Calculations > Property Valuation

Answer 83

A

A lot contains 9/10 of an acre. What is the depth of the lot if the front measures 150 feet?

A)
323.67 ft.
Incorrect Answer
B)
216.36 ft.
Incorrect Answer
C)
322.67 ft.
Incorrect Answer
D)
261.36 ft.
Correct Answer
Explanation
9 ÷ 10 = 90%

43,560 × 90% (0.90) = 39,204

39,204 ÷ 150 = 261.36 ft.

Reference: Real Estate Calculations > Measurement

Answer 84

A

If a lender agrees to make a loan based on an 80% loan-to-value (LTV) ratio, what is the amount of the loan if the property appraises for $114,500 and the sales price is $116,900?

A)
$83,200
Incorrect Answer
B)
$91,600
Correct Answer
C)
$92,900
Incorrect Answer
D)
$91,300
Incorrect Answer
Explanation
The LTV ratio will be based on the relationship of the loan to either the appraisal or the purchase price, whichever is less. In this case, the appraisal is less. Therefore, the loan will be 80% of $114,500, which equals $91,600. $114,500 × 80% (0.80) = $91,600

Reference: Real Estate Calculations > Finance

Answer 85

A

What is the rate of interest if the mortgagor makes quarterly interest payments of $1,340.63 on a $65,000 loan?

A)
8.3%
Correct Answer
B)
2.06%
Incorrect Answer
C)
9.3%
Incorrect Answer
D)
7.8%
Incorrect Answer
Explanation
Step 1, find the total interest paid annually: $1,340.63 × 4 = $5,362.52. Step 2, divide the interest by the principal to determine the rate: $5,362.52 ÷ $65,000 = 8.3% (0.083).

Reference: Real Estate Calculations > Finance

Answer 86

A

Which of the following properties would a property manager recommend an investor purchase?

A)
A property where the gross monthly rental income was 3% of the purchase price
Correct Answer
B)
A property where the gross monthly rental income was 1% of the purchase price
Incorrect Answer
C)
Insufficient evidence was provided to answer the question

Incorrect Answer
D)
A property where the gross monthly rental income was 2% of the purchase price
Incorrect Answer
Explanation
A property manager would recommend an investor purchase the property where the gross monthly rental income was 3% of the purchase price. The higher the percentage number (i.e., the higher the income), the better. This is sometimes referred to as the 1% rule, meaning that the income-producing rental property should produce income that is at least 1% of purchase price.

Reference: Real Estate Calculations > Property Management Calculations

Answer 87

A

The owners pay $137.81 in monthly property taxes. If the tax rate is $3.50 per $100 and the assessment rate is 35%, what is the value of the property?

A)
$166,532.72
Incorrect Answer
B)
$153,998.69
Incorrect Answer
C)
$134,997.54
Correct Answer
D)
$143,997.45
Incorrect Answer
Explanation
Tax rate= $3.50 ÷ 100 = 0.035

$137.81 × 12 = $1,653.72 annual tax

$1,653.72 ÷ 0.035 = $47,249.14 assessed value

$47,249.14 ÷ 35% (0.35) = $134,997.54

Reference: Real Estate Calculations > Investment

Answer 88

A

A two-story house measures 25 ft. × 50 ft. A one-story family room was added that measures 20 ft. × 20 ft. At a cost of $9.95 per square yard for carpet and $2.50 per square yard for installation, how much will it cost to carpet the house and the family room?

A)
$36,105
Incorrect Answer
B)
$2,282.50
Incorrect Answer
C)
$20,542.50
Incorrect Answer
D)
$4,011.67
Correct Answer
Explanation
Step 1, determine the square feet of the house: A = 25 ft. × 50 ft. = 1,250 sq. ft. × 2 = 2,500 total sq. ft. for the two-story house. Step 2, determine the square feet of the addition 20 ft. × 20 ft. = 400 sq. ft. Step 3, determine the total square footage 2,500 + 400= 2,900. Step 4, determine the cost of carpet:

Total cost of carpet and install = $12.45 ($9.95 + $2.50)

2,900 ÷ 9 = 322.222 sq. yds.

322.222 × $12.45 = $4,011.67

Reference: Real Estate Calculations > Measurement

Answer 89

A

An agent who works for XYZ Realty referred a buyer to a broker, who works for ABC Realty. The referring agent is to receive 25% of the buyer’s agent’s share of the commission when the transaction closes. The buyer purchased a $350,000 home, and the 7% commission was split as follows: listing brokerage, 2%; listing agent, 2%; buyer’s brokerage, 1.5%; buyer’s agent, 1.5%. How much was the referring agent paid?

A)
$5,250.50
Incorrect Answer
B)
$1,312.50
Correct Answer
C)
$7,000
Incorrect Answer
D)
$24,500
Incorrect Answer
Explanation
$350,000 × 1.5% (0.015) = $5,250

$5,250 × 25% (0.25) = $1,312.50

Reference: Real Estate Calculations > Settlement/Closing Calculations

Answer 90

A

A lender agreed to a 90% loan-to-value (LTV) ratio with an interest rate of 7%. If the annual interest is $17,640, what was the loan amount?

A)
$280,000
Incorrect Answer
B)
$290,000
Incorrect Answer
C)
$252,000
Correct Answer
D)
$176,400
Incorrect Answer
Explanation
$17,640 ÷ 7% (0.07) = $252,000

Reference: Real Estate Calculations > Finance

Answer 91

A

A seller wants to net $65,000 on the sale of his house after paying the broker a fee of 6%. How much must the gross selling price be?

A)
$67,035
Incorrect Answer
B)
$69,149
Correct Answer
C)
$68,093
Incorrect Answer
D)
$66,091
Incorrect Answer
Explanation
$65,000 (net price) ÷ 94% (0.94) (100% – 6% (0.06) commission) = $69,148.936 round to $69,149 (sales price rounded up).

Reference: Real Estate Calculations > Property Valuation

Answer 92

A

Using the dimensions in the following diagram, what is the approximate cost to purchase at $4,000 per acre?

A)
$12,856
Incorrect Answer
B)
$6,428
Correct Answer
C)
$9,213
Incorrect Answer
D)
$3,214
Incorrect Answer
Explanation
[(300 ft. + 400 ft.) ÷ 2)] × 200 ft.

350 ft. (700 ft. ÷ 2) × 200 ft. = 70,000 sq. ft.

70,000 ÷ 43,560 = 1.6070 acres

1.6070 × $4,000 = $6,427.91, round to $6,428

Reference: Real Estate Calculations > Measurement

Answer 93

A

A broker and sales associate split commissions on a 60/40 basis. If the broker’s share of the commission was $3,500, and the sale price was $83,333, what was the commission rate?

A)
7%
Correct Answer
B)
7.5%
Incorrect Answer
C)
10.5%
Incorrect Answer
D)
6%
Incorrect Answer
Explanation
$3,500 ÷ 60% (0.60) = $5,833.33

$5,833.33 ÷ $83,333 = 7% (0.07)

Reference: Real Estate Calculations > Settlement/Closing Calculations

Answer 94

A

The area of a rectangle that is 50 ft. × 170 ft. is

A)
2,200 linear ft.
Incorrect Answer
B)
4,400 sq. ft.
Incorrect Answer
C)
440 linear ft.
Incorrect Answer
D)
8,500 sq. ft.
Correct Answer
Explanation
50 ft. × 170 ft. = 8,500 sq. ft. The area of a rectangle is length × width.

Reference: Real Estate Calculations > Measurement

Answer 95

A

The owners received a semiannual tax bill of $984.38. Property in the jurisdiction is assessed at one-fourth the market value. If the tax rate is $4.50 per $100, what is the estimated market value of the property?

A)
$175,000
Correct Answer
B)
$53,750
Incorrect Answer
C)
$43,750
Incorrect Answer
D)
$195,000
Incorrect Answer
Explanation
Tax rate= $4.50 ÷ 100 = 0.045

$984.38 × 2 = $1,968.76 Annual taxes

$1,968.76 ÷ 0.045 = $43,750 Assessed value

$43,750 ÷ 25% (0.25) = $175,000

Reference: Real Estate Calculations > Property Valuation

Answer 96

A

The following legal description contains how many acres: the S½ of the SE¼ of the NW¼ of the NE¼ of Section 7?

A)
20 acres
Incorrect Answer
B)
2.5 acres
Incorrect Answer
C)
10 acres
Incorrect Answer
D)
5 acres
Correct Answer
Explanation
To calculate acres in a survey system legal description, multiply all the denominators and divide that number into 640 acres. In this problem, multiply all denominators: 2 × 4 × 4 × 4 = 128. Then divide 640 by 128: 640 (acres in a section) ÷ 128 = 5 acres.

Reference: Real Estate Calculations > Measurement

Answer 97

A

On January 1, the seller paid the $2,345 in taxes for the current year. If he sold the property on June 23 of that same year, with the seller having the day of closing, how much would he be credited at closing? (Use a 360-day year.)

A)
$1,772.50

Incorrect Answer
B)
$1,218.10
Correct Answer
C)
$1,293.53

Incorrect Answer
D)
$1,158.78

Incorrect Answer
Explanation
Because the taxes were paid in advance, the buyer will owe the seller for the time the buyer owns the house, June 24 to December 30, because this is a 360 year. Total owed ÷ total days × days owed = amount due. $2,345 ÷ 360 × 187 = 1,218.097, round to $1,218.10.

Reference: Real Estate Calculations > Settlement/Closing Calculations

Answer 98

A

A property was listed for $450,000. A buyer’s offer of 95% of the list price was accepted. He had a 20% down payment and secured a 30-year fixed-rate loan at 6.75% interest. How much interest will he pay the first month of the loan?

A)
$1,923.75
Correct Answer
B)
$3,847.50
Incorrect Answer
C)
$7,695
Incorrect Answer
D)
$23,085
Incorrect Answer
Explanation
Step 1, determine the sales price: $450,000 × 95% (0.95) = $427,500. Step 2, determine the loan amount: $427,500 × 0.80 = $342,000. Step 3, determine the annual interest: $342,000 × 6.75% (0.0675) = $23,085 ÷ 12 = $1,923.75 monthly interest.

Reference: Real Estate Calculations > Finance

Answer 99

A

The listing price of a property was $135,000. The buyer made an offer of 90% of the listing price, which was accepted by the sellers. The property appraised for the offer price, and the buyers secured an 85% loan at 9% interest for 30 years. How much interest will be paid in the first payment?

A)
$839.24
Incorrect Answer
B)
$774.56
Correct Answer
C)
$860.62
Incorrect Answer
D)
$747.56
Incorrect Answer
Explanation
$135,000 × 90% (0.90) = $121,500 sales price

$121,500 × 85% (0.85) = $103,275 loan amount

$103,275 × 9% (0.09) = $9,294.75 annual interest

$9,294.75 ÷ 12 = $774.56

Reference: Real Estate Calculations > Finance

Answer 100

A

A purchaser borrowed $85,000, to be repaid in monthly installments of $530.20 at 7% annual interest. How much of the borrower’s first month’s payment was applied to reducing the principal amount of the loan?

A)
$34.37
Correct Answer
B)
$49.58
Incorrect Answer
C)
$40
Incorrect Answer
D)
$53.02
Incorrect Answer
Explanation
There are three steps to solving this problem: (1) find the amount of interest in the first monthly payment by multiplying the annual interest rate by the original amount of the loan (rate × principal = interest) 7% (0.07) × $85,000 = $5,950, (2) divide the annual interest by 12 (12 months in a year) to find the first month’s interest $5,950 ÷ 12 = $495.83, and (3) subtract that interest amount from the amount of the regular monthly payment to find the amount available to apply to the principal $530.20 ‒ $495.83 = $34.37.

Reference: Real Estate Calculations > Finance

Answer 101

A

On January 1, the seller paid the $2,345 in taxes for the current year. If he sold the property on June 23 of that same year with the seller having the day of closing, how much would he be credited at closing? (Use a 360-day year.)

A)
$1,293.53
Incorrect Answer
B)
$1,158.78
Incorrect Answer
C)
$1,218.10
Correct Answer
D)
$1,772.50
Incorrect Answer
Explanation
Because the taxes were paid in advance, the buyer will owe the seller for the time the buyer owns the house: June 24 to December 30, because this is a 360-day year. Total owed ÷ total days × days owed = amount due. $2,345 ÷ 360 × 187 = 1,218.097, round to $1,218.10

Reference: Real Estate Calculations > Settlement/Closing Calculations

Answer 102

A

What is the two discount points fee on a $180,000 U.S. Department of Veterans Affairs (VA)-guaranteed loan?

A)
$900
Incorrect Answer
B)
$2,700
Incorrect Answer
C)
$1,800
Incorrect Answer
D)
$3,600
Correct Answer
Explanation
$180,000 loan × 2% (0.02) = $3,600 (discount point fee). A point is equal to 1% of the total loan amount. 1% (0.01) × $180,000 = $1,800 × 2 (2 points) = $3,600.

Reference: Real Estate Calculations > Finance

Answer 103

A

A sales associate was paid $2,500, which was half of the 7% that the brokerage collected. What was the sale price of the property?

A)
$35,417
Incorrect Answer
B)
$35,714
Incorrect Answer
C)
$71,248
Incorrect Answer
D)
$71,429
Correct Answer
Explanation
$2,500 × 2 = $5,000

$5,000 ÷ 7% (0.07) = $71,428.57 round to $71, 429

Reference: Real Estate Calculations > Settlement/Closing Calculations

Answer 104

A

At closing, the seller paid the broker $21,000, which was equivalent to 7% of the selling price. What was the selling price of the property?

A)
$300,000
Correct Answer
B)
$147,000
Incorrect Answer
C)
$400,000
Incorrect Answer
D)
$210,000
Incorrect Answer
Explanation
Commission divided by rate = sales price. $21,000 ÷ 7% (0.07) = $300,000.

Reference: Real Estate Calculations > Settlement/Closing Calculations

Answer 105

A

A property sold for $235,000, and the selling broker’s half of the commission was $8,225. What was the commission rate?

A)
6%
Incorrect Answer
B)
5%
Incorrect Answer
C)
4%
Incorrect Answer
D)
7%
Correct Answer
Explanation
$8,225 × 2 = $16,450 total commission paid

$16,450 ÷ $235,000 = 7% (0.07)

Reference: Real Estate Calculations > Settlement/Closing Calculations

Answer 106

A

The lender negotiated a $55,000 loan and charged three discount points. What was the cash outflow of the lender?

A)
$56,560
Incorrect Answer
B)
$53,350
Correct Answer
C)
$53,530
Incorrect Answer
D)
$56,650
Incorrect Answer
Explanation
$55,000 ‒ $1,650 (3%) = $53,350

Reference: Real Estate Calculations > Finance

Answer 107

A

A building sold for $157,000. The broker charged a 6% commission and gave 10% to the salesperson who took the listing. What was the listing salesperson’s commission?

A)
$1,570
Incorrect Answer
B)
$239
Incorrect Answer
C)
$4,239
Incorrect Answer
D)
$942
Correct Answer
Explanation
$157,000 (sales price) × 6% (0.06) = $9,420;(listing commission)

$9,420 × 10% (0.10) commission percentage) = $942 (listingsalesperson’s commission)

Reference: Real Estate Calculations > Settlement/Closing Calculations

Answer 108

A

If the market value of a property is $169,000 and it is assessed at 35%, with a tax rate of $4.25 per $100, what are the monthly property taxes?

A)
$2,513.88
Incorrect Answer
B)
$209.49
Correct Answer
C)
$2,531.88
Incorrect Answer
D)
$409.49
Incorrect Answer
Explanation
Tax rate = $4.25 ÷ 100 = 0.0425

Assessed value= $169,000 × 35% (0.35) = $59,150

$59,150 × 0.0425 = $2,513.875 annual taxes

$2,513.875 ÷ 12 = $209.49 monthly taxes

Reference: Real Estate Calculations > Investment

Answer 109

A

All of the following lists contain items typically included in the operating expenses of a rental property EXCEPT

A)
pool service, repairs for normal wear and tear, property taxes.
Incorrect Answer
B)
water and sewer, property taxes, property insurance.
Incorrect Answer
C)
landscaping, debt service, property taxes.
Correct Answer
D)
property taxes, property management, garbage collection.
Incorrect Answer
Explanation
Debt service is considered an ownership expense, not an operating expense. Debt service is the money required to cover repayment of a loan (principal and interest) for a particular period of time. These other answer choices are typical operating expenses for rental property.

Reference: Real Estate Calculations > Property Management Calculations

Answer 110

A

A 20-unit commercial office building had a vacancy rate of 5%. Monthly rent for each unit was $975. The office building earned additional monthly income totaling $2,000 from on-site amenities like vending machines, storage facilities, and reserved parking spaces. The property manager calculated the effective gross income from the commercial office building as

A)
$222,300.
Incorrect Answer
B)
$245,100.
Correct Answer
C)
$258,000.
Incorrect Answer
D)
$246,300.
Incorrect Answer
Explanation
Here is the formula for calculating effective gross income: gross potential rent + other income – vacancies/collection losses = effective gross income.

$975 × 20 = $19,500 × 12 = $234,000 potential gross rent

$2,000 × 12 = $24,000 additional income

$234,000 + $24,000 = $258,000

$258,000 – $12,900 [5% vacancy] = $245,100

Reference: Real Estate Calculations > Property Management Calculations

Answer 111

A

An investor owns an apartment building, and hires a real estate licensee to serve as the property manager. Which of the following activities performed by the property manager during a market analysis is similar to the market data method of appraising real estate?

A)
Analysis of debt service
Incorrect Answer
B)
Finding and signing well-qualified tenants as a general agent of the investor
Incorrect Answer
C)
Analysis of nearby rental properties comparable to the apartment building
Correct Answer
D)
Review of environmental law impacting the rental property
Incorrect Answer
Explanation
An important part of a market analysis is finding properties comparable to the investor’s apartment building to determine how the income-producing subject property is performing in relationship to the other properties. The market data approach to appraisals also relies on comparables to determine the market value of the subject property. While debt service might well be considered by the property manager during a market analysis of the subject property, an appraiser appraises each property as if it were free and clear of liens. Finding and signing well-qualified tenants is one of a property manager’s responsibilities as an agent of the landlord, but is not in any way related to the market data approach of appraising real estate. Finally, review of environmental law that impacts a property would not typically be a major focus of the appraiser using the market data approach.

Reference: Real Estate Calculations > Property Management Calculations

Answer 112

A

A property has an appraised value of $400,000, secured by a $360,000 loan. What is the loan-to-value ratio (LTV)?

A)
80%
Incorrect Answer
B)
70%
Incorrect Answer
C)
75%
Incorrect Answer
D)
90%
Correct Answer
Explanation
To find the LTV, divide the amount of the loan by the appraised value of the property: 360,000 ÷ 400,000 = 90% (0.9).

Reference: Real Estate Calculations > Finance

Answer 113

A

The buyers secured an $82,000 loan at 9.25% interest for 30 years. Their monthly payment is $674.59. How much of their first payment will be applied to the principal balance?

A)
$64.51
Incorrect Answer
B)
$632.08
Incorrect Answer
C)
$785.55
Incorrect Answer
D)
$42.51
Correct Answer
Explanation
$82,000 × 9.25% (0.0925) = $7,585 annual interest

$7,585 ÷ 12 = $632.08 monthly interest

$674.59 – $632.08 = $42.51

Reference: Real Estate Calculations > Finance

Answer 114

A

The market value of a property is $65,000 and is assessed for 45% of its value. If the owner’s semiannual tax bill was $511.88, what was the tax rate per $100?

A)
$1.75

Incorrect Answer
B)
$3.50
Correct Answer
C)
175 mills

Incorrect Answer
D)
350 mills

Incorrect Answer
Explanation
$65,000 × 45% (0.45) = $29,250 assessed value

$511.88 × 2 = $1,023.75 annual taxes

$1,023.75 ÷ $29,250 = 0.035

0.035 × 100 = $3.50

Reference: Real Estate Calculations > Investment

Answer 115

A

A listing agreement states that the broker will receive a 6% commission. The broker produces a buyer who purchases the home for $210,000. What is the net amount that the seller will receive from the sale?

A)
$203,000
Incorrect Answer
B)
$196,000
Incorrect Answer
C)
$197,400
Correct Answer
D)
$147,000
Incorrect Answer
Explanation
To find the seller’s net from the sale, subtract the amount of the broker’s commission from the selling price of the home. First, calculate the amount of the commission: 6% (0.06) × $210,000 (selling price) = $12,600. $210,000 ‒ $12,600 = $197,400. Or take $210,000 × 0.94 = $197,400.

Reference: Real Estate Calculations > Settlement/Closing Calculations

Answer 116

A

A homeowner listed her property for sale at $100,000. If her original cost for the property was 80% of the listing price, what will her profit be when her real estate is sold for the listing price?

A)
$20,000
Correct Answer
B)
$80,000
Incorrect Answer
C)
$40,000
Incorrect Answer
D)
$10,000
Incorrect Answer
Explanation
$100,000 (listing price) × 80% (0.08)(cost) = $80,000

$100,000 ‒ $80,000 = $20,000 (profit)

Reference: Real Estate Calculations > Investment

Answer 117

A

A buyer has an annual income of $82,000 with recurring monthly debt of $500 that does not include housing expenses. If the lender’s qualifying ratios are 28% and 36%, what is the maximum monthly house payment for which he can qualify?

A)
$1,413
Incorrect Answer
B)
$1,960
Incorrect Answer
C)
$1,913
Correct Answer
D)
$2,460
Incorrect Answer
Explanation
$82,000 ÷ 12 = $6,833.33 × 28% (0.28) = $1,913.33, round to $1,913

$6,833.33 × 36% (0.36) = $2,460 − $500 = $1,960

Reference: Real Estate Calculations > Finance

Answer 118

A

A commercial lease calls for a minimum rent of $1,200 per month plus additional annual rent of 4% of the year’s gross business exceeding $150,000. If the total rent paid at the end of one year was $19,200, how much business did the tenant do during the year?

A)
$159,800
Incorrect Answer
B)
$250,200
Incorrect Answer
C)
$270,000
Correct Answer
D)
$279,200
Incorrect Answer
Explanation
There are four steps: (1) minimum rental for the year is 12 times the monthly amount: 12 months × $1,200 per month = $14,400, (2) rental above the minimum is found by subtracting the minimum rent from the total rent paid for the year: $19,200 – $14,400 = $4,800, (3) this overage is 4% of the amount of business that exceeded $150,000. The amount of business that exceeded $150,000 is found by dividing $4,800 by 4%: $4,800 ÷ 4% = $120,000, and (4) total business is the sum of the basic $150,000 and the $120,000 overage: $150,000 + $120,000 = $270,000.

Reference: Real Estate Calculations > Property Management Calculations

Answer 119

A

To secure a $100,000 loan, the buyer paid $3,000 in discount points, and the seller paid $2,000 in discount points. How many points were charged?

A)
3
Incorrect Answer
B)
5
Correct Answer
C)
4
Incorrect Answer
D)
2
Incorrect Answer
Explanation
Knowing each point is 1% of the loan amount and with the total amount of $5,000 being paid, it is easy to see 5 points. $5,000 ÷ $100,000 = 5 points (0.05)

Reference: Real Estate Calculations > Finance

Answer 120

A

An investor hired a real estate licensee to serve as property manager for the investor’s two rental properties. These rental properties were both single-family residences within the same general geographic area. The investor told the property manager to find another local single-family residence that would have the same ratio of investment to gross income or better. Here are the properties that the investor currently owns:

$960,000 sales price and $3,000 gross monthly rent
$800,000 sales price and $2,500 gross monthly rent
All other things being equal, which of the following currently listed properties will the property manager recommend the investor purchase?

A)
$1,000,000 list price and $2,000 gross monthly income
Incorrect Answer
B)
$1,000,000 list price and $3,125 gross monthly income
Incorrect Answer
C)
$1,000,000 list price and $4,000 gross monthly income
Correct Answer
D)
$1,000,000 list price and $2,500 gross monthly income
Incorrect Answer
Explanation
All other things being equal with these four listed properties, the property manager will advise the investor to purchase the property with the highest gross monthly income ($4,000). There was no need to do any math with this question. One of the jobs of the property manager is to maximize the investor’s return. Here, because the list price for the four properties is the same, the one with the highest gross income will maximize the investor’s return.

How would the property manager have calculated the listed property with the same rate of investment to gross income as the investor’s two single-family residences? The gross rent multiplier (GRM) is a simple alternative to capitalization math. The GRM is less accurate than capitalization, taking into account income but not expenses. Here is the formula for the GRM: value ÷ gross monthly rent = GRM. Another way of stating this formula is gross rent multiplier × gross monthly rent = value. Because we know the sales price and the gross monthly rent of the investor’s two properties, we can calculate that the GRM of the investor’s two properties is 320. The property listed for $1,000,000 with gross monthly income of $3,125 has a GRM of 320. But, the investor directed the property manager to find another property with the same ratio of investment to gross income or better. The property with $1,000,000 list price and $4,000 monthly income has a better ratio of investment to gross income.

Reference: Real Estate Calculations > Property Management Calculations

Answer 121

A

A buyer purchased two parcels of land. One parcel was 1 mile square and the other contained 10 acres. If the land cost $2,500 an acre, what was the cost of the land?

A)
$1,526,000
Incorrect Answer
B)
$1,625,000
Correct Answer
C)
$1,600,000
Incorrect Answer
D)
$1,425,000
Incorrect Answer
Explanation
One square mile is 640 acres, so the two parcels together contain 650 acres (640 + 10 = 650). To find the cost, multiply the cost per acre by the total acres: 650 × $2,500 = $1,625,000.

Reference: Real Estate Calculations > Measurement

Answer 122

A

An owner wants to receive a net of $82,000 after selling her home. She has an existing mortgage of $32,500 and will have selling expenses of $444. If the broker is to receive a 7% commission, what is the lowest offer that she can accept for the property?

A)
$122,515.08
Incorrect Answer
B)
$123,959.70
Incorrect Answer
C)
$122,990.08
Incorrect Answer
D)
$123,595.70
Correct Answer
Explanation
$82,000 + $32,500 + $444 = $114,944

$114,944 ÷ 93% (0.93) = $123,595.70

Reference: Real Estate Calculations > Property Valuation

Answer 123

A

A property is appraised for $125,000. If the assessment rate is 100% and the tax rate is $1 per $100, what are the annual property taxes?

A)
$1,250
Correct Answer
B)
$1,350
Incorrect Answer
C)
$1,550
Incorrect Answer
D)
$1,520
Incorrect Answer
Explanation
$1 ÷ 100 = 0.01 tax rate

$125,000 × 0.01= $1,250

Reference: Real Estate Calculations > Investment

Answer 124

A

The buyers applied for a U.S. Department of Veterans Affairs (VA) loan to purchase a property for $79,500. The property appraised at $79,000. They agreed to pay a 1% loan origination fee. How much did they pay in origination fees?

A)
$970
Incorrect Answer
B)
$795
Incorrect Answer
C)
$790
Correct Answer
D)
$975
Incorrect Answer
Explanation
$79,000 (100% loan) × 1% (0.01) = $790

Reference: Real Estate Calculations > Finance

Answer 125

A

Two discount points cost a seller $3,300. What is the amount of the loan?

A)
$82,500
Incorrect Answer
B)
$168,367
Incorrect Answer
C)
$165,000
Correct Answer
D)
$33,000
Incorrect Answer
Explanation
A discount point is 1% of the loan amount. $3,300 (costs of 2 discount points) ÷ 2% (0.02) = $165,000 (loan amount)

Reference: Real Estate Calculations > Finance

Answer 126

A

A building measures 30 ft. × 80 ft. × 15 ft.. A buyer made an offer of $35 per square foot on the property. The owner made a counteroffer of $2.75 per cubic foot. How much more will it cost the buyer if he accepts the counteroffer?

A)
$15,000
Correct Answer
B)
$18,000
Incorrect Answer
C)
$16,000
Incorrect Answer
D)
$17,000
Incorrect Answer
Explanation
First offer: 30 ft. × 80 ft. = 2,400 sq. ft. × $35 = $84,000. Counteroffer: 30 ft. × 80 ft. × 15 ft. = 36,000 cu. ft. × $2.75 = $99,000. $99,000 – 84,000 = $15,000.

Reference: Real Estate Calculations > Property Valuation

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