Unit 3: Concepts and Responsibilities of Home Ownership

Question 1

capital gains

Answer 1

income earned from the sale of an asset

Question 2

coinsurance clause

Answer 2

a provision in insurance policies covering real property that requires the policyholder to maintain coverage generally equal to at least 80% of the property’s actual replacement cost

Question 3

common elements

Answer 3

areas of a condominium building that are shared and maintained by all unit owners

Question 4

condominium

Answer 4

absolute ownership of an apartment or unit (generally in a multiunit building) based on a legal description of the airspace the unit actually occupies, plus an undivided interest in the ownership of the common elements, which are owned jointly with the other condominium unit owners.

Question 5

cooperative

Answer 5

a residential multiunit building whose title is held by a corporation that is owned and operated for the benefit of the persons living within the building, who are stockholders of the corporation, each possessing a proprietary lease.

Question 6

deductible clause

Answer 6

a clause in an insurance policy that limits exposure to loss for an insured homeowner

Question 7

endorsement

Answer 7

1. an additional document attached to an original insurance policy that amends the original
2. writing one’s name, with or without additional words, on a negotiable instrument

Question 8

equity

Answer 8

the current market value of a property minus any loans

Question 9

Federal Emergency Management Agency (FEMA)

Answer 9

government agency that sets program standards for flood insurance

Question 10

homeowners insurance policy

Answer 10

a standardized package insurance policy that covers a residential real estate owner against financial loss on a dwelling and its contents and includes liability coverage and loss of use.

a Texas homeowners policy combines five different types of coverage:
1. dwelling—pays for damage to the house and any outbuildings, such as detached garages and storage sheds
2. personal property—pays when household items, including furniture, clothing, and appliances, are damaged, stolen, or destroyed
3. liability—provides $25,000 in coverage if homeowner is sued and found legally responsible for someone else’s injury or property damage
4. medical payments—pays medical bills for people hurt on the homeowners’ property; a basic homeowners’ policy pays $500 in medical bills
5. loss of use—pays expenses if a home is too damaged to live in during repairs (if the damaged was due to a covered loss)

Question 11

investment

Answer 11

money directed toward the purchase, improvement, and development of an asset in expectation of income or profits

Question 12

manufactured home

Answer 12

single-family home constructed entirely in a controlled factory environment, built to the federal Manufactured Home Construction and Safety Standards (better known as the HUD code).

Question 13

mixed use development

Answer 13

property that accommodates more than one use, such as commercial and residential use

Question 14

modular homes

Answer 14

homes constructed with large wall and roof components in a factory and then trucked to the building site and put in place by a crane

Question 15

planned unit development (PUD)

Answer 15

a planned combination of diverse land uses, such as housing, recreation, and shopping, in one contained development or subdivision

Question 16

time-share

Answer 16

a form of ownership where permission to use certain property for certain intervals of time; may be fee simple title or merely a right to use (license)

Question 17

factors for location desirability

Answer 17

1. employment opportunities
2. cultural advantages
3. governmental structure
4. social services
5. transportation

Question 18

types of tax benefits for homeowners

Answer 18

capital gains tax rates, income tax deductions, first-time homebuyers, estate tax exemption

Question 19

what most homeowner’s insurance policies cover losses caused by:

Answer 19

• fire and lighting
• aircraft and vehicles
• vandalism and malicious mischief
• theft
• explosion
• riot and civil commotion
• smoke
• windstorm, hurricane, and hail (except property on the Gulf Coast)
• sudden and accidental water damage

Question 20

what most homeowner’s insurance policies do not cover losses caused by:

Answer 20

• flooding
• earthquakes
• termites
• insects, rats, or mice
• freezing pipes while the house is unoccupied (unless the water was turned off or the building was heated)
• wind or hail damage to trees and shrubs
• losses if the house is vacant for 60 days or more
• wear and tear or maintenance

Question 21

Comprehensive Loss Underwriting Exchange (CLUE

Answer 21

lists property insurance claims by houses and individuals for the preceding five years