Deck 6: Practical Real Estate Mathematics

Question 1

When an offer from a potential buyer is presented to the seller, the seller asks if the buyer is a member of a minority race. The broker presenting the offer should correctly respond as follows:
(a) "By law and per my business practice, that information is not relevant."
(b) "I do not know, but I will find out and let you know before you are legally required to sell."
(c) "No, I checked them out per your request."
(d) "Yes, I think so."

Answer 1

A

Question 2

From the agent's perspective, the strongest listing agreement is the
(a) Exclusive Right to Sell Listing
(b) Exclusive Agency Listing
(c) Open Listing
(d) Net Listing

Answer 2

A

Question 3

A person borrowed $18,000 for a period of 180 days using a straight note at 10% interest payable monthly. How much total interest will have been paid in 90 days?
(a) $450
(b) $900
(c) $1,800
(d) $3,600

Answer 3

A

Question 4

Buyer makes a written bonafide offer to purchase, and seller signs the acceptance. A contract is first created:
(a) when buyer receives proper communication of seller's acceptance
(b) immediately upon seller's acceptance
(c) when the buyer and seller sign escrow instructions
(d) when the broker presents the offer to the seller

Question 5

Four separate co-buyers of a parcel of land signed a deposit receipt contract at different times and places. A copy must be:
(a) given to the first signer only
(b) given to each at the time they sign
(c) given to the first and last signers only
(d) sent to each one after the last one signed

Question 6

A person purchased a small condo for $320,000, putting $100,000 down and obtaining a new loan for the balance at 8.4% payable $1,800 per month amortized for 30 years. What will be the loan balance after one payment?
(a) $218,200
(b) $219,740
(c) $221,000
(d) $220,000

Question 7

Two acres are being subdivided into 5 equal lots. Each lot has a front set back of 10 feet and is 198 feet wide. What is the buildable area of each lot?
(a) 18,524 sq. ft.
(b) 17,424 sq. ft.
(c) 15,444 sq. ft.
(d) 14,744 sq. ft.

Question 8

How much would a person need to deposit into a savings account to generate $1,000 per month for one year if annual simple interest rates are 5%?
(a) $200,000
(b) $240,000
(c) $300,000
(d) $360,000

Question 9

Investor purchased 3 lots for a total of $360,000, then resold them for $600,000. Based on cost, what was the percentage of gross profit?
(a) 50%
(b) 66.67%
(c) 33.3%
(d) 25%

Question 10

A duplex rents for $700 per unit per month. Expenses and vacancies run 30% of gross rents. With a capitalization rate of 6%, what is the value?
(a) $196,000
(b) $110,000
(c) $168,000
(d) $174,500

Question 11

When the owner of a piece of leased property gives the lessee an option to buy, the option:
(a) requires the optionee to complete the sale
(b) is a lien on the seller's title
(c) requires no consideration or fee
(d) is not a purchase contract until exercised

Question 12

An owner gives Ace Realty an exclusive right to sell listing for 90 days. Thirty days later the owner finds a buyer and sells the property without the services of Ace Realty. The:
(a) owner owes Ace Realty a commission
(b) owner does not owe a commission
(c) sale is voidable
(d) two of the answers are correct

Question 13

A person purchased an undeveloped piece of land on a country road. The land contains a quarter of a quarter of a quarter of a section and the front bordering the road is 435 ft. Approximately how deep is the parcel?
(a) 2500 ft.
(b) 4000 ft.
(c) 1000 ft.
(d) 835 ft.

Question 14

A 5-unit apartment property rents for $820 per unit per month. Expenses and vacancies average $800 per month. The asking price is $660,000. What is the capitalization rate?
(a) 5%
(b) 6%
(c) 10%
(d) 11%

Question 15

An owner neglected to pay property taxes of $900 for the year 20XX. The owner sold the property and escrow closed December 15, 20XX. Using a 30-day month, what would be the normal proration in escrow?
(a) debit buyer $412.50
(b) debit buyer and credit seller
(c) credit seller $312.50
(d) debit seller $412.50

Question 16

Sales price $298,500, buyer to put $86,500 down and to assume seller's loan of $230,000. The documentary transfer tax is:
(a) $330.15
(b) $328.35
(c) $253
(d) $95.15

Question 17

Sellers should disclose defects in the property
(a) verbally to the buyer
(b) on the Transfer Disclosure Statement
(c) any time prior to close of escrow
(d) only to their agent

Question 18

A real estate agent may legally refuse to show property available for sale to a person of a minority race if the:
(a) agent feels the home was not suited for the people
(b) owners were out of town and had left instructions the home was not to be shown to anyone during their absence
(c) owners had given specific instructions against showing the home to minority buyers
(d) agent felt the buyers would not like the location

Question 19

The law that states real estate contracts must in writing to be enforceable is called the statute of:
(a) frauds
(b) time
(c) contracts
(d) limitations

Question 20

If the seller refuses to sell after signing a valid purchase contract and the buyer wants the property instead of money damages, the buyer will sue for:
(a) specific performance
(b) reversion of title
(c) damages
(d) rescission

Question 21

Owner has a chance to sell 3 lots for a total sum of $96,000. Selling them separately, the owner will ask $2,000 more for Lot A than Lot B and $8,000 more for Lot B than Lot C. What price will be asked for Lot C?
(a) $22,000
(b) $24,000
(c) $26,000
(d) $32,000

Question 22

A $100,000 note is sold to an investor, through a mortgage broker, at a 25% discount. The broker earned a 7.5% commission. What was the dollar amount of the commission?
(a) $7,500
(b) $5,625
(c) $3,475
(d) $1,875

Question 23

To settle the estate of the deceased, a probate sale is held on a mobile home. The first court bid is $30,000. The next minimum bid must be for at least:
(a) $31,000
(b) $32,000
(c) $33,000
(d) $31,750

Question 24

What is the rate of interest on a note for $3,600, due in 180 days, if the total interest to be paid is $400?
(a) 25%
(b) 33%
(c) 22%
(d) 11%

Question 25

An owner decided to list a time share for $87,500. The broker sold the time share for 6% less than the listed price. The commission totaled $6,580. The percentage rate of the commission is:
(a) 5%
(b) 8%
(c) 6%
(d) 4%

Question 26

An investor wants to acquire income property that will generate a 10% cap rate. A 6-unit apartment complex rents for $950 per unit per month. Vacancies are 5% of gross rents and operating expenses total $20,500 per year. What is the maximum the investor should offer for this property? (round to nearest $1,000)
(a) $684,000
(b) $573,000
(c) $445,000
(d) $403,000

Question 27

An owner sold a property for a $100,000 profit. The $100,000 represents a 25% profit on the selling price. What was the selling price?
(a) $250,000
(b) $300,000
(c) $375,000
(d) $400,000

Question 28

A home owner purchased a rural parcel and borrowed 60% of the price using an interest only loan. The loan has an interest rate of 10% and the total interest paid the first year is scheduled to be $5,400. What was the purchase price?
(a) $70,500
(b) $62,000
(c) $90,000
(d) $54,000

Question 29

Two people purchased a home for $360,000. They added a $30,000 pool and patio complex. Five years later, they sold the home for $500,000. What was their annual average rate of appreciation above their cost?
(a) 5.6%
(b) 14.4%
(c) 7.2%
(d) 4.4%

Question 30

If an investor purchases a mountain ski cabin for $120,000 cash and the monthly net rental income is $600, what is the rate of return on the investment?
(a) 11%
(b) 15%
(c) 6%
(d) 4.5%

Question 31

Seller is guaranteed a $300,000 net. Seller's closing cost and existing loan total $130,000. If a broker wishes to earn a 10% commission, what must be the selling price?
(a) $430,000
(b) $447,095
(c) $451,873
(d) $477,778

Question 32

Surveyors have determined that a tract of desert land contains 364,480 square feet. One portion of 80 feet by 200 feet is owned by the government. The private portion of the tract is offered for $1,380 per acre. What is the asking price for the private parcel?
(a) $12,040
(b) $11,950
(c) $11,040
(d) $12,540

Question 33

A modular home is 47 x 31 feet; the garage is 20 x 24 feet. The land is valued at $80,000. Homes like this are selling for $75 per sq. ft., while garages are selling at $20 per sq. ft., excluding land. What is the estimated value of the property? (round to nearest $1,000)
(a) $126,000
(b) $158,000
(c) $199,000
(d) $206,000

Question 34

A builder constructed a home for a cost of $200,000 and wishes to sell it for a profit equal to 20% of the selling price. What is the dollar amount of the profit?
(a) $50,000
(b) $40,000
(c) $16,000
(d) $ 8,000

Question 35

How much interest will there be in the second payment on a fully amortized loan of $240,000 at 8% interest payable $1,800 per month?
(a) $1,440.67
(b) $1,598.67
(c) $1,600
(d) $1,723.47

Question 36

Real estate broker José, lists a property for $300,000. A six percent commission is agreed upon. Another agent brings an offer for $280,000. The seller then asks Jose to reduce his side if the commission to two and a half percent. José agrees. What is the difference between the reduction in commission and the original commission that Jose will receive?
(a) $18,000
(b) $2,000
(c) $7,000
(d) $9,000

Question 37

A lot is sold for $180,000, making a 20% profit over cost. What was the cost?
(a) $136,000
(b) $144,000
(c) $148,000
(d) $150,000

Question 38

A 1/4 acre lot sold for $6 per square foot. The commission was 10%. How much did the broker make?
(a) $6,534
(b) $4,356
(c) $3,794
(d) $3,026

Question 39

An owner sold a mobile home and received $23,500 from escrow. This was the net after paying $240 in expenses plus a 7% commission. What was the selling price?
(a) $26,500
(b) $24,527
(c) $15,530
(d) $25,527

Question 40

Investor X owns a studio condo that rents for $637.50 per month net after expenses and has a market value of $127,500. Investor Y has a similar condo that rents for a net of $700 per month. Using Investor X's home as a guide, what is the estimated value of Investor Y's condo? (round to nearest $1,000)
(a) $127,500
(b) $135,000
(c) $140,000
(d) $145,500