PA Real Estate U Practice pt.2 Flashcards
The responsibility of the broker to an independent contractor salesperson
Supervision, reporting salesperson’s commission to the IRS, providing salesperson with independent contractor agreement
Terry has just sold a $900,000 home for their client. The listing agreement state that Terry would recieve a 6% commission. Terry agreed to do a 50/50 split with the buyer’s broker. What is the final broker’s commission that Terry will recieve after the split with the buyer’s broker?
900,000 * .06 = 54,000 / 2 = 27,000
Process by which all the parties to a real estate transaction conclude the details of a sale or mortgage. The process includes the signing and transfer of documents and distribution of funds.
Closing
A property recently sold for $480,000. What is the commission owed if the seller agreed to a 4% commission rate?
480,000 * .04 = 19,200
First-time home buyers want to buy a house they can afford. They have no idea what they might qualify for, and their agent said they should get pre-qualified before they begin looking at houses. Who do they need to talk to?
A mortgage broker or banker
As a means to exercising precaution, an agent should have a prospective buyer do this before viewing a property
Obtain a pre-approval from a lender
the supply of willing and able consumers, which can be few or numerous.
Demand
Lays out both the obligations of the broker and the duties of the salesperson
independent contractor agreements
What type of property is a factory considered?
Industrial
What form of payment does the IRS allow a broker to pay their salespeople?
A percentage of commission received from a transaction the salesperson has worked on.
Where should an agent meet with a prospective buyer prior to showing any properties?
At the agent’s office.
What factors can affect the definition of zoning definitions?
The community, county, or state the property is in.
The amount of a certain good or service that is available in the market is known as what?
Supply
For real estate agents, liability insurance is written on a ___ basis
by-claim
A history of conveyances and encumbrances affecting the title from the time the original patent was granted, or as far back as records are available, used to determine how title came to be vested in current owner.
Chain of title
A summary of all transfers, conveyances, legal proceedings, and any other facts relied on as evidence of title, showing continuity of ownership, together with any other elements of record which may impai title.
Abstract of Title
A title which a reasonable purchaser, informed as to the facts and their legal importance and acting with reasonable care, would be willing and ought to accept
Marketable Title
An attorney’s written evaluation of the condition of the title to a parcel of land after examination of the abstract of title
Opinion of Title
Insurance to protect a real property owner or lender up to a specified amount against certain types of loss, e.g. defective or unmarketable title.
Title Insurance
Lauren has just acted as salesperson for the seller on a $450,000 home, with a 6% commission. The buyer’s broker on the sale had agreed to a 50/50 split, and Lauren has a 50/50 split with her broker. How much money will Lauren receive from this transaction?
450,000 * .06 = 27,000 *.05 = 13,500 * .05 = 6,750
A person or organization acting as the agent for others in negotiating the purchase and sale of real property for a fee is known as:
Real estate broker
A salesperson and their sponsoring broker agree to a 50/50 commission split. If a property sells for $520,000 with a 6% commission, how will the salesperson earn on the deal if the broker also splits the comission with the buyer’s broker at 50%?
520,000 * .06 = 31,200 *.50 = 15,600 * .50 = 7,800
An agreement between members of a trade to exclude other members from fair participation in the trade.
Group Boycott
Conspiring to establish fixed fees or prices for services or products
Price fixing
An agreement between members of a trade to refrain from competition in specific market areas
Market allocation
Federal legislation including the imposition of civil and punitive damages for anti-trust activities.
Sherman Anti-Trust Act
A contract where one transaction depends upon another
Tie-in Arrangement
The practice on the part of unscrupulous speculators or real estate agents of including panic selling of homes at prices below market value, especially by exploiting the prejudices of property owners in neighborhoods in which the racial make-up is changing or appears to be on the verge of changing.
Blockbusting
An illegal lending policy of denying real estate loans on properties in older, changing urban areas, usually with large minority populations, because of alleged higher lending risks without due consideration being given by the lending institution to the credit worthiness of the individual loan applicant.
Redlining
A federal law requiring the disclosure to borrowers of settlement (closing) procedures and costs by means of a pamphlet and forms prescribed by the United States Department of Housing and Urban Development
Real Estate Settlement Procedures Act (RESPA)
The practice in which real estate brokers guide prospective home buyers towards or away from certain neighborhoods based on their race. This practice is highly illegal.
Steering
Volunteers from state or private agencies who enforce fair housing by claiming to be home seekers, thereby finding out of brokers deal fairly with all clients/customers
Testers
Houses in Bellvue have a history of selling for over $200,000, but the market has hit a slump recently. Over the last 12 months, the average sale price has dropped to under $150,000. A group of real estate agents get together and decid that none of them will sell a Bellvue home for less than $200,000. This is considered what type of illegal activity?
Price Fixing
Under the Fair Housing Act, it is illegal to deny entry into what?
the MLS
If a lender refuses to lend money to purchase a home in a specific area based only on the demographic makeup of the neighborhood, they could be accused of what?
Redlining
The Fair Housing Amendments Act of 1974 made it illegal to discriminate on the basis of what?
Sex
A bookkeeping entry on the right side of an account, recording the reduction or elimination of an asset or an expense, or the creating of or addition to a liability or item of equity or revenue.
Credit
Adjustments of interest, taxes, and insurance, etc., on a pro rata basis as of the closing or agreed upon date.
Proration
Penalties for violating an anti-trust law include:
Up to three years in jail, up to a $1M fine for a business, or up to a $100,000 fine for an individual
In order to be exempt from the FHA, a single family homeowner can sell or rent one home in how many years?
2 years
These 4 types of property are not covered by the FHA
-Owner-occupied buildings with 4 or fewer units.
-Single-family homes sold or rented directly by owner if they own no more than 3 such homes
-Housing operated by religious org or private clubs
-Certain senior housing meeting specific criteria
The Pennsylvania Human Relations Act is administered and enforced by:
Pennsylvania Human Relations Commission
Created to help enforce the Sherman and Clayton Anti-Trust Laws
The Federal Trade Commission Act
A neighborhood in a city has suddenly become very popular. The area had previously been primarily served by two established real estate agencies, but the surge in popularity has brought more agents wishing to do business in the area. The two established agencies agree to only share listings with each other, and not with any of the newer agencies that have come to the neighborhood. What are the two agencies guilty of?
Group Boycott
The practice of panic selling of homes at prices below market value, especialy by exploiting the prejudices of property owners in neighborhoods in which the racial make-up is changing or appears to be on the verge of changing.
Blockbusting
According to RELRA, how old must one be to become a real estate broker?
21
An illegal lending policy of denying real estate loans on properties in older, changing urban areas, usually with large minority populations, because of alleged higher lending risks without due consideration being given by the lending institution to the credit worthiness of the individual loan applicant
Redlining
The exemption under the FHA that applies to buildings with four or fewer units in which the owner lives in one of the unit us often referred to as:
The Mrs. Murphy exemption
Housing for Older Persons Act (HOPA) defined housing for older people who are what age?
55 and up
A change to a building or facility that affects or could affect the usability of the building or facility or portion thereof. Include, but are not limited to, remodeling, renovation, rehabilitation, reconstraction, historic restoration, resurfacing of circulation paths or vehicle ways, changes or rearrangement of the structural parts or elements, the plan configuration of walls or full-height partitions.
Alteration
Guidelines drafted by the Access Board that describe the minimum requirements that a building should exhibit in order to be accessible
Americans with Disabilities Act Accessibility Guidelines (ADAAG)
Federal agency designated to enforce the Fair Housing Act (FHA)
Department of Housing and Urban Development (HUD)
Federal agency that has the authority to enforce all provisions of the Americans with Disabilities Act (ADA), but focuses primarily on ADA Title II: public services by State and local government) and ADA Title III: public accomodations
Department of Justice (DOJ)
A physical or mental impairment that substantially limits one or more major life activities, a record of such an impairment, or being regarded as having such an impairment:
Disability
A continuous, unobstructed way of pedestrian passage by means of which the altered area may be approached, entered, and exited, and which connect the altered area with an exterior approach (including sidewalks, streets, and parking areas), an entrance to the facility, and other parts of the facility
Path of travel
Areas housing the major activities for which a facility was intended. Areas include, but are not limited to: the customer services lobby of a bank, the dining area of a cafeteria, the meeting rooms in a conference center, etc.
Primary function areas
Private entities that own, operate, lease or lease to places of public accomodation. Places include: restaurants, hotels, theaters, convention centers, retail stores, shopping centers, dry cleaners, etc.
Public accommodations
A walking surface that has a running slope steeper than 1:20
ramp
Easily accomplished and able to be carried out without much difficulty or expense
Readily achievable
A unit intended to be used as a residence, and that is primarily long-term in nature.
Residential Dwelling Unit
An approach to the design of products, places, policies, and services that can meet the needs of as many people as possible throughout their lifetime, regardless of age, ability, or station. AKA: ‘inclusive design’ or ‘design for all’
Universal Design (UD)
Covered by Title I of the ADA
Employment
Covered by Title II of the ADA
Public Services: State and Local Government
Covered by Title III of the ADA
Public Accommodation and Services Operated by Private Entities
What is the length of a ramp that rises 12” and has a slope of 1:12
12’ 0”
A handicap parking space is required when more than how many parking spaces are provided in total?
more than 1 space
What is the minimum clear floor space required for a handicapped individual?
30”x48”
What is the minimum width of a handicapped van parking space?
132”
What is the minimum clear width of a handicap ramp?
36”
John needs to install an handicap ramp to make his building ADA compliant. What is the maximum allowable slope of a ramp?
1:12
Mark would like to install an ADA compliant entrance door to his building. What is the required push-side clearance Mark must provide at tthe entrance door?
12”
What year was the ADA signed into law?
1990
What year was the ADA Amendments Act signed into law?
2008
New construction or alterations that began construction on or after March 15th, 2012 must comply with what ADA document?
2010 ADA Standards for Accessible Design
According to ADA, what is the maximum tread depth of a stair?
11”
What is the minimum clear width of a walking surface?
36”
What is the minimum ‘pull-side’ clearance at an accessible door?
18”
What is the maximum slope of a curb ramp?
1:12
What must be provided within residential units of buildings containing four or more units?
Accessible routes
Your client would like to install a new ADA compliant lavatory in their bathroom. What is the maximum rim or countertop height of the lavatory?
34”
What type of law is the ADA considered to be?
Civil Rights
This document outlines the minimum requirements for newly designed and constructed or altered State and Local government facilities, public accommodations, and commercial facilities to be readily accessible to and useable by individuals with disabilities
2010 ADA Standards for Accessible Design
The Americans with Disabilities Act affords similar protections against discrimination to americans with disabilities as what other set of laws?
Civil Rights Act of 1964
What type of buildings are exempt from complying with ADA site requirements?
Utility buildings not open to the general public
Accessible bathtubs must be installed with what kind of seat?
Permanent or removable seat
What are required in bathrooms to help handicapped individuals maneuver in and out of a wheelchair?
Grab bars
A handicap ramp is comprised of what two components?
the landing and the ramp run
What are required for ramps that rise greater than 6”?
Handrails
What is the maximum kitchen counter height in an accessible kitchen?
34”
Why does the pull-side clearance at an accessible door require more space than the push-side?
More space is needed to open the door and maneuver backwards
ADA Title that covers Telecommunications
Title IV
What is the minimum width of an accessible pass-through kitchen?
40”
Your client would like to install an ADA compliant toilet in their bathroom. What is the required seat height above the finished floor?
17” - 19”
The Civil Rights Act of 1968 expanded the law of 1866 but still did not include the following:
Family Status
If a claim is made accusing a person or entity of violating the Civil Rights Act, it goes directly to which organization?
Federal Court
The Fair Housing Amendments Act of 1974 made it illegal to discriminate on the basis of:
Sex
Recently, agents in a town have noticed that the commissions they have been able to negotiate with potential sellers have gotten lower and lower. A 6% commission has become impossible to negotiate, and many ar resorting to going below 3% to get listings. The three largest agencies in the town agree to not take any listinging for below 4% so that they can bring the average commission back up. What are they guilty of?
Price-fixing
Under Megan’s Law, agents should provide the following information to buyers:
The Megan’s Law disclosure
If an agent is found distributing fliers in a neighborhood, which encourages homeowners to sell their home due to a new religious group moving in, the agent would be accused of what activity?
Blockbusting
A new start-up comes to a city and offers real estate services that make heavy use of technology and an app that has become popular that use the MLS service. The start-up offers potential clients the opportunity to sell their homes for just a 1.5% commission. The other brokerages in the city decide to pull all their listings from the MLS and create their own listing database. They are guilty of:
Group boycotts
the Serman Anti-Trust Act was enacted in 1890 in order to:
to stop practices that restrain trade and to encourage competition in the marketplace
This act supplemented the Sheman Anti-trust Act to prevent anti-competitive practices
The Clayton Anti-trust Act
The relationship between a principal and the principal’s agent, which arises out of a contract, either expressed or implied, written or oral, wherein the agent is employed by the principal to do certain acts dealing with a third party,
Agency
One who acts for and with authority from another called the principal
Agent
A person upon whom the powers of an agent have been conferred, not by the principal, but by an agent as authorized by the agent’s principal
subagent
An agency relationship in which the agent acts concurrently for both of the principals in a transaction
Dual Agency
An agent with full authority over real property of the principal, for example: a property manager.
General Agent
An agent who works only for the buyer or the seller
Single Agent
An agent with limited authority to act on behalf of the principal, such as created by a listing contract
Special Agent
The agent who has complete authority over any activity of the principal, for example: power of attorney
Universal agent
An agency relationship created by oral or written agreement between the principal and the agent
Express Agency
Agency that exists as a result of the actions of the parties
Implied Agency
A person who has been given the appearance of being an employee or acting (agent) for another (principal), which would make anyone dealing with the ostensible agent reasonably believes they were an employee or agent
Ostensible Agency
A person in a position of trust and confidence, as between principal and broker; broker as such owes a certin loyalty which cannot be breached under the rules of agency
Fiduciary
That duty owed by an agent to act in the highest good faith toward the principal and not to obtain any advantage over the latter by the slightest misrepresentation, concealment, duress, or pressure
Fiduciary Duty
An agent’s duty to place the client’s interest above those of all others, including the agent’s own self-interest
Loyalty
This fiduciary relationship obligates the agent to act in the good faith at all times, obeying the client’s instructions in accordance with the contract.
Obedience
The degree of caution and concern for the safety of themselves and others an ordinarily prudent and rational person would use in the circumstances. This is a subjective test of determining if a person is negligent
Reasonable Care
OLD CAR
Obedience, Loyalty, Disclosure, Confidentiality, Accountability, Reasonable Care
An agent’s compensation for performing the duties of an agncy, in real estate practice, a percentage of the selling price of property, percentage of rentals, etc. A fee for services
Commission
Sydney’s brother Lawrence is a real estate salesperson in a prestigious brokerage that is a member of several active MLS services. Sydney wants to sell her condo, and she wants to negotiate a listing agreement with her brother that will allow him to make 100% of the commission. What should she do?
Sydney should negotiate a listing agreement with Lawrence’s broker. It’s very unlikely she’ll be able to get 100% for Lawrence, but she may be able to negotiate a listing agreement that gives Lawrence a significant split of any commissison as a subagent.
Franz has been so helpful for Frank and Pat in finding the house of their dreams. He’s shown them houses that are on the MLS listed with other agencies as well as listings he has in his office. When Frank and Pat talk about how stressful the search is, Franz says “don’t worry, i’ve got your back” Frank and Pat believe Franz is working for them, but they’ve never discussed it directly. What is this an example of?
Implied Agency
Leila is representing buyers, Steven and Angie. The buyer wants to place an offer on a home that is listed at $800,000. It’s been on the market for over a year and the seller’s broker mentioned that the owner would gladly take any offer that was over $700,000. Steve and Angie love the house and are worried that if they don’t bid correctly, they might lose out. They think they should offer above asking price, and suggest putting in an offer of $825,000. What is Leila’s responsibility to her clients?
It is Leila’s responsibility to let Steve and Angie know that a much lower offer would very likely be accepted. She should mention how long the house has been on the market and the likelihood that an offer significantly below the asking price will likely be accepted.
The broker is the ___, the subagent is the ___, and the principal is the ___
agent, salesperson, client
You are required to protect your principal’s secrets, unless it is unlawful to do so. If you know anything that can compromise your client’s bargaining position, you have to keep ti to yourself and not share it with the other party to the transaction. This describes which duty to your client?
Confidentiality
Bailey is a real estate salesperson working with Lenore who wants to buy a home, and who has signed a buyer’s agreement with Bailey’s office. Bailey shows Lenore a house, which her office has the exclusive listing on, but it will expire in less than a week. Lenore says it’s not exactly what she’s looking for, bt maybe she should just put an offer on it. Bailey saw a new listing on MLS that morning that sounds like it is exactly what Lenore was looking for. What should Bailey do?
Bailey should tell Lenore about the new listing
In a strong rental market, agents are charging the renters for their fees. Justing rents a $2200 apartment and charges 10% of the annual rent as his fee. What commission has he earned on this rental?
$2640
Ideally, what is the best type of agency relationship to enter into?
express agency
A real estate salesperson operates as a ___ agent
Special
A property manager operates as a ____ agent
general
Why is dual agency problematic?
-If both parties are not made aware of it being in effect, then it is always illegal
-It can occur without the agent realizing it
-It makes it difficult for the agent to uphold their fiduciary responsibility to both principals
A branch of the real estate business involving the marketing, operation, maintenance and day-to-day financing of rental properties
Property Management
A person who manages properties for an owner as the owner’s agent
Property Manager
Items generally included in a property management proposal and/or contract for management services
description of the property
length of agreement
management authority
financial reporting
management fee
accounting responsibilities
insurance and risk management
owner’s responsibility and objectives
termination terms
A contract between the owner of a property and someone who agrees to manage it
Management agreement
A document that sets forth the duties of the manager when employed by the owner
Management proposal
Expenditures creating future value. Incurred when a property owner spends money to upgrade a building in an effort to add value and/or extend the useful life of the building.
Capital Expense
Money set aside by a property owner for long-term capital expenditures to a property
Capital Reserve Budget
A maintenance task performed to identify, isolate, and rectify a problem with a property so that the property can be restored to an acceptable condition
Corrective Maintenance
An amount of money set aside by the owner for a specific period for the property manager to manage the property effectively
Operating Budget
Keeping property and equipment in good state of repair so as to minimize the need for more costly repair work or replacement
Preventative Maintenance
An accounting report issued periodically by the property manager to the owner outlining all income and expenditures for that accounting period
Property Management Report
Property expenditures that vary depending on the operations of the property
Variable Expense
Carol is a property manager who works closely with investors who have residential portfolios in a college town. When establishing the length of service terms, she understands that…
Length of service terms are flexible, and she must consider both her income and the owners’ financial goals
Rebecca manages a 300-unit multi-family complex that offers exceptional amenities, but has a less-than-stellar vacancy rate. She decides to host an open house to attract families with small children. The bounce-houses, cotton candy machine rental, door prizes, & food and beverage will cost about $3500. She checks her management authority guidelines to make sure she can spend this amount without owner approval as what kind of expense?
Advertising and Marketing
John is a property manager who runs a large commercial property. What must John have knowledge of to preperly maintain the HVAC and electrical systems?
building systems
A _____ is a group of independent businesses under one roof.
A mall
Who is usually responsible for maintaining common areas like corridors, shared security offices, walkways, and elevators in a mall or shopping center?
The management company
A document that sets forth the duties of the manager when employed by the owner
Management Proposal
Type of expense incurred when a property owner spends money to upgrade a building in an effort to add value and/or extend the useful life of the building?
Capital Expense
Why is it important to screen prospective tenants and to conduct credit and reference checks?
It is the best way to protect the owner’s investment.
What can the property manager legally ask for from a prospective tenant to confim that there are not financial issues that might be problematic?
Employment, previous rental history, credit history
Meeting tenants’ needs and addressing their concerns, resolving disputes fairly, and keeping the property maintained, safe, and desirable so that the owner’s return on investment is as expected.
Tenant Relations
Which fee typically covers basic services, like accounting, reporting, and tenant screening?
The management fee.
What do supervisors need a general working knowledge of to properly maintain HVAC, electrical, and plumbing in a building?
building systems
Property management positions with large firms often require what kind of degree to ensure candidates have a thorough knowledge of general accounting principles (GAO), financial reporting, and basic knowledge about day to day duties of operating a business
BA in Business Administration
A maintenance task performed to identify, isolate, and rectify a problem with a property so that the property can be restored to an acceptable condition.
Corrective maintenance
An amount of money set aside by the owner for a specific period for the property manager to manage the property effectively
Operating Budget
The operational duties that include collecting, depositing and disbursing rent, and detailing expenses on operating statements
Manager accounting responsibilities
Mall managers may offer special pricing and incentives to these types of stores because they attract more consumers with brand recognition
Anchor stores
Three weeks after Justin signed a management agreement with a local property management company, a tornado ripped through the area, totally destroying the building. He should be able to get out of the contract if the agreement included what clause?
Early termination clause that requires the property to be habitable
An estate in real property wherein there is an undivided interest in common in a portion of real property coupled with a separate interest in space called a unit, the boundaries of which are described on a recorded final map, parcel map, or condominium plan
Condominium
An apartment building, owned by a corporation and in which tenancy in an apartment unit is obtained by purchase of shares of stock of the corporation and where the owner of such shares is entitled to occupy a specific apartment in the building.
Cooperative
A structure transportable in one or more sections, designed and equipped to contain not more than two dwelling units to be used with or without a foundation system.
Mobile Home
A system for the construction of dwellings and other improvement to real property through the on-site assembly of component parts (modules) that have been mass-produced away from the building site
Modular
A form of sub-division of real property into rights to the recurrent, exclusive use or occupancy of a lot, parcel, unit, or segment of real proerty, on an annual or some other periodic basis, for a specified period of time.
Time-Share
Monetary gain resulting from the increase in the market value of an investment, excluding additions of capital. For example, a house which sold five years after it was purchased for 50% more than the purchase price.
Appreciation
At resale of a capital item, the amount by which the net sale proceeds exceed the adjusted cost basis (book value). Used for income tax compuations & are called “short” or “long” based upon the length of the holding period after acquisition. Usually taxed at a lower rate than ordinary income.
Capital gains
A method of depreciation under which improvements are depreciated at a constant rate throughout the estimated useful life of the improvement.
Straight Line Depreciation
The trade or exchange of one real property for another without the need to pay income taxes on the gain at the time of trade.
Tax-Deferred Exchange
Types of closing costs that are tax deductible are _____ & _____, while _____ are not tax deductible.
Discount Points & Loan Origination Fees / Origination Points
Include charges for property inspections, a title search, lawyer fees, notary public services and other add-ons, all of which are not tax deductible items
Origination points
Types of points that qualify as depreciation expenses, which can be amortized along with certain other expenses of buying, building, or improving real estate holdings over the life of the real property
Discount points and origination points
Type of insurance coverage usually only required on conventional loans with a down payment less than 20% or a refinance with less than 20% equity.
Private Mortgage Insurance (PMI)
What type of loan offers a low down payment option for home buyers?
FHA insured loan
What happens if there is a tax for the city and the school district?
The tax rate is equal to the city tax plus the school tax
Patty is working with a commercial real estate investor. While touring an older manufacturing property, the client mentions that much of the equipment will have to be updated in a few years because it is fast becoming obsolete. Which depreciation method did Patty most likely bring up during this discussion because it depreciates assets based on wear and tear, obsolescece, and damage?
Alternative Depreciation System
Why do property buyers need to worry about tax liens?
They may be responsible for paying the lien after taking ownership of the property
What types of properties are not subject to property taxes?
Government buildings, educational buildings, and nonprofit buildings
Who is responsible for updating the assessed value of a property?
The local tax assessor
What can a homeowner do if they feel their property is over assessed?
Protest the assessment
George has done some research about insurance policies online. He is planning to add more rental properties to his portfolio this summer and asks his agent if she knows whether he will qualify for replacement value cost (RVC) NFIP coverage. How will the agent respond?
No, because in order to qualify for RVC coverage, George must live in a home 80% of the time.
While explaining the differences in insurance options, Kelly tells a potential buyer that she has a homewners policy that covers the total loss up to a maximum value. So, if her home is covered, what will the insurance company do?
Reimburse her (or the morgage company) the maximum amount listed in her policy, regardless of repair costs.
What type of tax statement includes assessments from a variety of agencies such as school taxes, water district taxes, road and bridge fees, and both city and county property taxes?
An annual combined appraisal district tax statement
What type of tax statement includes assessments from a variety of agencies such as school taxes, water district taxes, road and bridge fees, and both city and county property taxes?
An annual combined appraisal district tax statement
An investor has several multi-family buildings he wants to sell in the next year. His real estate agent tells him that he can force the appraised value to rise by doing what?
Adding amenity packages based on trends in the local area.
A seller has accepted an offer from John. John wants to remodel and add an outdoor pool when he has enough equity built up to cover the project. Which loan arrangement will help him build equity faster than the others?
Making a 40% down payment upfront
Don is a real estate agent working with a retired Marine who plans to purchase her first home. His client admits she doesn’t have a large nest egg for a down payment but has an exceptional credit history and earns an above-average salary in a civilian job. Why would Don recommend a VA loan over an FHA loan?
The VA offers 100% financing
What does 10 mills equal?
1 percent of the assessed value of the property
What is the major difference between a mobile home and a modular home?
Modular homes are built on-site
When should a property owner challenge an assessed value?
When they can back up the value of the home in another way
What things can change the tax rate from year to year?
the budget needs of the local taxing jurisdiction.
A list of the three most common homeowner policy coverage areas:
-Buildings
-Building contents
-Medical coverage for people who are hurt in the property
Candice wants to buy a new home. She doesn’t have a lengthy credit bureau file and s looking for a loan vehicle that will not require a large down payment. She is surprised to learn that the _____ considers non-borrower income and nontraditional credit sources when reviewing mortgage applications.
Fannie Mae HomeReady mortgage program
Carolyn found a home that she can afford. It is not in a known flood plain, and she doesn’t want to buy flood insurance since her mortgage lender doesn’t require it. What reasons would her agent recommend purchasing flood insurance anyway?
-Policies are lower in low-risk areas
-Coverage is minimal compared to the average residential claim related to flood damage
-The price of the average flood insurance policy through NFIP is only $700/yr
While talking to a client about non-federal tax liabilities, Dana mentioned local property taxes. She told her client that tax assessments are based on _____, but every district offers discounts to certain groups, such as people over 65 and permanently disabled individuals
Market Value
What is a designated special assessment district?
An area responsible for paying a special tax assessment.
A buyer is looking for a multi-family option that includes common area maintenace and will allow him to take advantage of tax incentives for homeowners. Why might his agent recommend he choose a condo over a co-op?
Cooperatives are never fully owned, you only purchase the exclusive right to use
Peggy does not have any savings other than $126,000 in a 401k. what IRS rules will affect whether she can use any, or all, of her retirement fund to purchase a home?
-She can withdraw up to $50,000 to spend on a home purchase
-She can use 401k savings for a down payment or to buy down points
-She will avoid taxes and fees as long as she makes all payments on time, including interest
Brenda has lived in her home for ten years. Her job is transferring her to another state, and she can’t decide whether to convert her home to a rental property or sell it outright. Her real estate agent reminds her that if she sells her property, she can deduct mortgage origination points when reporting _____ on her federal taxes.
Capital Gains or Losses
What is the millage rate?
It is the same thing as the tax rate
The IBC classifies any structure with occupied living space higher than 75 feet above _____ as a high-rise building.
the lowest level of fire department access
What types of property taxes are homeowners likely to pay?
Local government, county, and school district related taxes
Most homeowners insurance policies cover specific events that fall into what two different categories?
Perils and non-perils
How much can sellers offer in concessions for VA loans?
up to 4%
David is talking to a prospective buyer about estimating how much money he will have to gather up prior to closing on a $312,000 home with a $250,000 loan. Assuming the PMI is 1%, how much should he add to cover the full PMI coverage?
250,000 * 0.01 = $2500
Lisa is a real estate agent who also helps clients lease single-family homes. She advises every potential tenant to purchase HO-4, aka _____, because it is a perils content policy
Tenant Coverage
A lien imposed by law upon a property to secure the payment of taxes
Tax Lien
An assessment made against a property to pay for a public improvement by which the assessed property is supposed to be especially benefited
Special Assessment
A geographic area in which the market value of real etate is enhanced due to the influence of a public improvement and in which a tax is apportioned to recover the costs of public improvement
Special Assessment Districts
A horizontal structural element. Joists, trusses, and girders are examples of these
Beam
A vertical structural element
Column
A block of hardened concrete, with or without hollow cores, designed to be laid in the same manner as the brick or stone. Commonly used in load-bearing exterior walls
Concrete Masonry Unit (CMU)
