Unit 3

Question 1

Apartment Complex

Answer 1

groups of apartments or apartment buildings

Question 2

Condo

Answer 2

Residents own individual unit without maintenance demands. Usually have common areas which owners share and pay monthly assessments

Question 3

*Cooperative (Coop)

Answer 3

Similar to condo but owner owns shares of stock in corporation that holds title to the building

Question 4

Highrise Developments (MUDS)

Answer 4

Mixed use buildings - usually 1 building; built up

Question 5

Planned Unit Developments (PUDS)

Answer 5

Diverse land uses – Developments with a combination of different land uses. Owners don’t own the common areas

Question 6

Retirement Community

Answer 6

Individuals over certain age and usually structured under PUD zoning ordinances; shopping, recreational sites within community; built out

Question 7

Converted Use Property

Answer 7

Structures that were once non-residential converted to residential use; old warehouse

Question 8

Manufactured Housing

Answer 8

Completed on site; mobile homes

Question 9

Time Shares

Answer 9

Multiple purchasers buy a single piece of real estate

Question 10

Modular Homes

Answer 10

Majority of home assembled at factory

Question 11

PITI

Answer 11

Costs associated with mortgage

• Principal
• Interest
• Taxes
• Insurance

Question 12

Housing Ratio/Front End Ratio

Answer 12

Traditional loan can’t be more than 28% of income

FHA as high as 36%

Question 13

Back End Ratio

Answer 13

Debts/payments (revolving and installment) can’t be more than 36% of gross income for traditional loan
No more than 41% for FHA

Question 14

Tax Benefits

Answer 14

Capital gains exclusions (principal residences); Write Offs (Tax Deductions see below)

Question 15

Exchanges

Answer 15

Investors can defer taxation on capital gains by making exchanges (1031 tax exchange); equal value

Question 16

Boot

Answer 16

Any additional capital or personal property included in the transaction to even out the value of the exchange

Question 17

**Tax Deductions

Answer 17

Real estate taxes
Mortgage interest 
Certain loan origination fees
Loan discount points
Loan prepayment penalties

Question 18

Homeowners Insurance

Answer 18

Lenders usually require when a debt is secured by the property

Question 19

Types of Homeowners Insurance Policies

Answer 19

**Basic form - most common
fire and lightning,
glass breakage,
windstorm and hail,
explosion,
riot and civil commotion,
damage by aircraft,
damage from vehicles,
damage from smoke,
vandalism and malicious mischief,
theft, and
loss of property removed from the premises when it is endangered by fire or other perils.

**Broad form
falling objects;
damage due to the weight of ice, snow, or sleet;
collapse of all or part of the building;
bursting, cracking, burning, or bulging of a steam or hot water heating system or of appliances used to heat water;
accidental discharge, leakage, or overflow of water or steam from within a plumbing, heating, or air-conditioning system;
freezing of plumbing, heating, and air-conditioning systems and domestic appliances; and
injury to electrical appliances, devices, fixtures, and wiring from short circuits or other accidentally generated currents.

Question 20

Subrogation

Answer 20

3rd Party acquires right to collect any legal damages

Question 21

Coinsurance Clause

Answer 21

Owner must maintain insurance quire to a specific percentage (usually 80%) of the replacement cost

Question 22

Comprehensive Loss Underwriting Exchange (CLUE)

Answer 22

database of consumer claim history

Question 23

Flood Insurance

Answer 23

Required by lender if in a flood zone; Federal emergency flood assistance even if you don’t have flood insurance