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Texas Principles of Real Estate II – Questions & Proper Answers
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Texas Principles of Real Estate II – Questions & Proper Answers
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Texas Principles of Real Estate II – Questions & ProperAnswers
Would it be a fair legal decision that the seller might be forced to pay a
commission to an agent who had a buyer that purchased one week after the
expiration of the listing agreement but was shown the property prior to the
end of the listing agreement if the listing agreement had a sixty-day protection
(safety) period? Right Ans - Yes, if the broker provided the buyers' name to
the seller when the listing ended and the seller had not listed with another
real estate broker.
Assuming the dates mentioned in the scenario are accurate, who was the
procuring cause in this deal? Right Ans - Mr. Kaye
Does a court of law favor an attorney at law or a licensed real estate broker?
Right Ans - Neither, the court does not favor any specific group or person.
Should the decision to agree to such a short-listing agreement period work for
or against the plaintiff (Mr. Kaye) in this case? Right Ans - It works neither
for nor against the plaintiff
What does the denominator show? Right Ans - The denominator tells how
many total parts there are.
What should you do to convert fractions to decimals? Right Ans - To
convert fractions to decimals, divide the numerator by the denominator
Landlords base rents on what criteria? Right Ans - Landlords decide what
their rents will be, based on the rental market, type of property and the
geographic location.
The formula for calculating simple interest is: Right Ans - Interest =
principal x rate x time
Make sure that if the percent is 5.5 the you round backwards and add a zero
infront of it to make it a percent. .055
The formula for calculating the add-on interest is: Right Ans - Add-on
interest = loan amount x interest rate x number of payments.
,David and his wife are getting a $175,000 loan at 8 percent and will pay 4
discount points. What will the effective interest rate be? Right Ans - 8.5%
Points are paid at closing and are equal to what? Right Ans - 1% of the loan
amount
Which of the following methods do lenders use to compute the interest on the
total amount of the loan for the entire loan term ? Right Ans - Lenders use
the add-on rate to compute the interest on the total amount of the loan for the
entire loan term
If a lender charges two (2) origination points on a $75,000 loan, how much
would that cost the buyer? Right Ans - Points are paid at closing and are
usually equal to 1 percent of the loan amount. The correct answer is $1,500.
We got $,1500 by multiplying 1 % (.01) of $75,000 and then times 2 (2
points).
John is getting a $95,000 loan at 7.25 percent and will pay 4 discount points.
What will the effective interest rate be? Right Ans - The rule of thumb is the
yield is increased by 1/8 percent for each discount point. Therefore a charge
of 4 points would increase a 7.25 percent mortgage to a 7.75 percent yield.
4 points x 1/8 percent = 4/8 = .50 percent
7.25 + .50 = 7.75 percent
What is the purpose of Discount Points? Right Ans - Discount Points are
designed to offset any losses the lender might suffer when selling the loan to
the secondary mortgage market.
What is the total simple interest due on the following loan amount, $12,500 at
5.5% for one year? Right Ans - $12,500 x .055 x 1 = 687.50
What is the ratio between borrowed funds and the market value of the
property being financed? Right Ans - Loan-to-value
What ratio is calculated based on all of the monthly obligations the borrower
has outstanding? Right Ans - Debt Ratio
,Which of the following procedures are used to compute the area of an
irregular parcel or room? Right Ans - The procedure used to compute the
area of an irregular parcel or room, is to divide the shape into regular
rectangles, squares, or triangles; compute the area for each figure; then add
the areas together to get the total area for the parcel.
How many square feet in an acre? Right Ans - 43,560
When closing on rental property, to do the monthly proration, rents are
always paid when? Right Ans - in advance
A parcel of property is 609,840 square feet, how many acres are in the parcel?
Right Ans - 14 acres
A mixed number has both a fraction and a: Right Ans - whole number
Which of the following must be prorated or divided proportionately between
the buyer and the seller? Right Ans - all of the above
What is the first step in the appraisal process? Right Ans - Define the
problem and the scope of work
What does an appraiser do after he or she decides which value approaches to
use? Right Ans - Determines the type of data needed and the sources to be
consulted, and then collects the data
What is the definition of highest and best use? Right Ans - The definition of
highest and best use is use that is
Legally permissible
Physically possible
Financially feasible
Maximally productive
What does allocation mean? Right Ans - Allocation is a typical ratio of land
value to total value derived from comparable properties and applied to the
subject.
, The cost approach would be most reliable for which type of property?
Right Ans - Special-use properties such as public or governmental structures
(for example, county courthouses, marinas, unique properties)
The income approach is more specifically used for appraising what type of
property? Right Ans - Commercial and investment properties
What forms can appraisal reports take? Right Ans - Short- or long-form
narrative reports
Form reports
Letter or oral reports
Exchange value. Right Ans - The value that results from comparing the
property to other similar properties on the open market. This is the type of
value that real estate agents are concerned with.
Use value. Right Ans - The value the property holds for the owner. (Also
called value-in-use.)
Several factors contribute to this value.
Income. Property can produce income through leases. This is important to
value because investors will pay for the income flow that ownership brings
them.
Appreciation. Property generally increases in value over time. This is another
investment benefit for an owner.
The specific use of a property (for example, residential, agricultural,
commercial, or recreational) determines its value and its benefits.
Tax benefits. Property ownership could yield benefits in capital gains, tax
losses, tax deferrals, and depreciation for an owner.
Insured value. Right Ans - The face amount a casualty or hazard insurance
policy will pay in case a property is deemed unusable.
Reproduction value. Right Ans - The value based on the cost of constructing
a precise duplicate of the subject property's improvements, assuming current
construction costs
Replacement value. Right Ans - The value based on the cost of constructing
a functional equivalent of the subject property's improvements, assuming
current construction costs.
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