Red Real Estate Dynamics Chapter 5

Front 1

chap 5 ques 1
The federal lead based paint law requires the owners of property with improvements built prior to 1978 to do all the following except:
A: disclose any known lead based paint
B: give buyers copies of reports dealing with lead based paint
C: give buyers federally approved lead based paint pamphlet
D: Remove all lead based paint from the property

Back 1

D: remove all lead based paint from the property

Front 2

chap 5 ques 2
Which of the following statements regarding building permits is true?
A: If a lot owner is building his own house, he does not need a building permit
B: The demolition of a building does not require a permit
C: A building permit must be aquired before new construction is completed
D: Before a new building can be occupied you must have a certificate of occupancy

Back 2

D: Before a building can be occupied, you must have a certificate of occupancy

Front 3

chap 5 ques 3
A white family is looking at homes and happens to notice some black children playing in a nearby park. They ask you what percentage of the people in the neighborhood are black. Your response might be:
A: that is something we never discuss
B: there are not enough to matter
C: I think it is around ten percent
D: the local public school system could probably give you that information

Back 3

D: The local public school could give you that information

Front 4

chap 5 ques 4
The law that requires business locations to reserve a certain number of handicapped parking spaces is:
A: the federal fair housing law
B: local zoning ordinances
C: state health organizations
D: the Americans with Disabilities Act

Back 4

D: The Americans with Disabilities Act.

Front 5

chap 5 ques 5
Which of the following would provide the most desirable buffer zone between a residential community and an industrial land use zone
A: A rapid transit rail
B: A six lane hwy
C: a well landscaped park
D: a government jurisdiction boundary line

Back 5

C: a well landscaped park

Front 6

chap 5 ques 6
The fair housing law of 1968 does which of the following?
A: Builds equal housing for all people
B: Guarantees separate but equal housing for everyone in the US
C: Provides fair housing opportunity for everyone in the US
D: Guarantees elimination of prejudices in the US

Back 6

C: Provides fair housing opportunities for everyone in the US.

Front 7

chap 5 ques 7
In developing a master plan for a community, all of the following might be "land use districts" except:
A: Industrial
B: Multi family
C: conservation
D: Recreation

Back 7

C: Conservation

Front 8

chap 5 ques 8
In making the listing presentation the salesperson is advised by the owner that the property is not to be shown to minorities. The licensee should:
A: Persuade the seller that no minorities are likely to call
B: advise the seller that the marketing in this fashion would be a violation of the law
C: take the listing and do what the seller requests
D: take the listing and discourage minorities from viewing the property if asked

Back 8

B: advise the seller that marketing in this fashion is against the law

Front 9

chap 5 ques 9
Recent changes in the fair housing laws add protection for people who are discriminated against because of:
A: age or marital status
B: handicap or familial status
C: religion or children
D: country of origin or handicap

Back 9

B: Handicap or familial status
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these were the last two protected classes added in 1988

Front 10

chap 5 ques 10
Ad valorem taxes are:
A: Levied equally against property owners
B: Based on the value of the property
C: determined by the benefit of services recieved
D: paid only upon property transfer

Back 10

B: based on the value of the property

Front 11

Chap 5 Ques 11
Floor area ratios are used:
A: Building Density
B: by tax assessors to estimate value
C: to estimate the amount of fire insurance needed
D: appraised value

Back 11

A: to determine building density

Front 12

Floor Area Ratio (as used in Zoning)

Back 12

The floor area ratio of a property is calculated by adding together the square footage of each story of a building or buildings, and dividing by the square footage of the land
A 10 story building is 50 ft by 60 ft. The lot is 100 ft by 110 ft.
floor area ratio =
(50ft X 60ft)X10 stories = ttl sq ft of floor area
110 ft X 100 ft = sq ft of land
(50*60)*10 = 30,000 sq ft flr
----------------
110*100 = 11,000 sq ft land
= 2.7273 FAR

Front 13

Chap 5 Ques 12
A licensee is acting as a rental agent for a broker who has a contract with the owner to manage an apartment complex. Which of the following would represent an illegal basis for refusing to rent an apartment?
A: The prospect has a poor credit rating
B:The prospect has a 2 year old child
C: the prospect has pets
D: the prospect is a transvestite

Back 13

B: the prospect has a two year old child

Front 14

In 1988 the Fair housing Act was ammended to include what two new categories of protected classes

Back 14

Handicapped and familial status

Front 15

Handicapped according to the fair housing act amendment of 1988

Back 15

Anyone who:
- has a mental or physical ailment that substantially limits one or more major life activities (walking, talking, seeing, hearing, learning, etc);
- has a record of impairment, though not presently impaired or is regarded as having such impairment, rightly or wrongly.

Front 16

Familial status according to the fair housing act amendment of 1988

Back 16

Familial status means having children under the age of 18, or being in the process of acquiring a child through pregnancy, an adoption or a custody case. Housing for older persons may restrict children from their community in either of two instances:
1 - Housing that is intended for and solely occupied by persons over 62 years of age; or
2 - A community in which at least 80% of the units have at least one occupant who is over 55 years old and one which publishes and adheres to policies demonstrating an intent to be housing for older persons; and a community that complies to HUD rules for verification of occupancy

Front 17

chap 5 ques 13
The interstate land sales full disclosure act applies to:
a: residential subdivisions of fifty or more lots offered for sale through interstate commerce
B: cemetary sale
C: lots with houses already built
D: lots that are at least 50 years old

Back 17

a: residential subdivisions of fifty or more lots offered for sale through interstate commerce

Front 18

Chap 5 ques 13
A special assessment is:
A: a reevaluation of a property's value made upon the request from an arbitration board
b: tax based upon benefit recieved
c: a tax levied equally against each property owner in the city or county
d: a tax levied only if the ad valorem tax is insufficient to fund the proposed budget

Back 18

B a tax levied based on benefit recieved

Front 19

Improvement zone

Back 19

When a local improvement such as the installation of street lights, sidewalks, sewers, etc. will benefit only the neighborhood is classified as an improvement zone. A special assessment of tax is levied against the property in the zone to pay for the improvements

Front 20

special assessment

Back 20

A tax levied against all the properties recieving benefit from the improvements paid for by the tax. The neighborhood is designated an improvement zone.Since a special assessment is a property tax, failure to pay the tax can result in a voluntary (statutory) specific lien being placed against the property

Front 21

chap 5 ques 15:
Zoning designed to control population growth in a particular area is called:
a: directive zoning
b: incentive zoning
c: aesthetic zoning
d: bulk zoning

Back 21

b: bulk zoning

Front 22

Explain Zoning

Back 22

Within the scope of the master plan, zoning ordinances regulate how each parcel of land my be used. They also regulate the density, the height and bulk of buildings and in some cases the architectural styles and other aesthetic considerations

Front 23

What is spot zoning

Back 23

Spot zoning permits a small area to have use that is inconsistant with the surrounding area, such as allowing a small convenience store to operate in a residential area

Front 24

Name and describe the special types of zoning

Back 24

a: Aesthetic zoning - specifies that architectural styles must be compatible
b: bulk zoning - designed to limit population growth and density in certain areas. Floor ratio areas are used to assess density
c: directive zoning - designed to encourage the highest and best use of the land
d: Incentive zoning - requires that the street level floors of office building be used for commercial space.
e: Exclusionary zoning - the terms applied to laws which require such large lots and houses that low income families are effectively barred.

Front 25

chap 5 ques 16:
A salesperson might be in violation of the fair housing laws in all of the following circumstances except:
a: when asked to show property to a minority family, the salesperson refers them to another salesperson of their race
b: when asked to list the house belonging to a minority owner, the salesperson refuses on the grounds that it is outside of the area with which he/she is familiar
c: the salesperson tells the minority prospect that a certain property will require 20% down when in fact the property could be had for 10% down.
d: the salesperson fails to use his or her best efforts to close the sale of a minority purchaser

Back 25

b: when asked to list the house belonging to a minority owner, the salesperson refuses on the grounds that it is outside of the area with which he/she is familiar

Front 26

Chap 5 ques 17
Which of the following permits land use because zoning is not retroactive:
A: Variance
B: spot zoning
c: nonconforming use
d: bulk zoning

Back 26

c: nonconforming use

Front 27

Explaining non-conforming use zoning

Back 27

Once zoning law has been adopted, all new structures and land must conform with it. However, zoning is not retroactive amd therefore if a store was in business before a new zoning law identified the parcel of land it occupies as residential, the store can remain as long as it stays in business. Non-conforming use is also known as grandfathered property.

Front 28

chap 5 ques 18
When a licensee is making a listing presentation and the seller is questioning the rate of commision he wants to charge, federal anti-trust law indicates that the best reply would be:
a: "It's the going rate in this city."
b: "This is my companies policy."
c: "Our board of realtors recommends this rate
d: "Other brokers won't cooperate with anyone who charges less.

Back 28

B: It is my companies policy

Front 29

chap 5 ques 19
If a deed restriction prohibits a use permitted by zoning, then:
a: zoning controls
b: the deed restriction controls
c: neither will prevail until adjusted
d: the nature of the use is always the controlling factor

Back 29

B: the deed restrictions control

Front 30

chap 5 ques 20:
The tax rate of 34.7 mills is equivalent to:
a: $34.700 per $100 of assessed value
b: $00.3470 per $100 of assessed value
c: 03.4700 per $100 of assessed value
d. $00.0347 per $100 of assessed value

Back 30

c: $03.4700 per $100 of assessed value
====================
mill rate - per 100 - per 1000
50 mills - $5.00 - $50.00

mills / 10 = per 100
mills/ 1 = per 1000

Front 31

How are property tax rates determined.

Back 31

The ad valorem tax is calculated by dividing the amount of money to be raised (the budget) by the assessed value of all the property in the tax district.
budget/ttl assessed value
example:
A city has a budget of $7,500,000 and the assessed value of all properties in the city is $550,000,000
$7500,000/550,000,000 = .0136 or 1.36% or $13.60 per thousand or $1.36 per 100

Front 32

chap 5 ques 21
A home having a market value of $23,000 is assessed as at 30% of such value. Of the total general real estate taxes on the property, the school tax represents $4.70 per $100 of the assessed value. What is the dollar amount allotted for school taxes?
a: $32.43
b: $690.00
c: $6.90
d: $324.30

Back 32

d: $324.30
==========
formula
Prop tax = assessed value * tax rate
PT = (23000*30%)*(4.70/100)
PT=(6900*0.047)
PT = $324.30)

Front 33

chap 5 ques 22:
In calculating the cap gain one can deduct from the sale price of a home all of the following except:
a: the basis
b: closing costs
c: fixer-upper costs
d: depreciation

Back 33

d: depreciation

Front 34

Explain capital gain and how it is calculated

Back 34

A capital gain is the profit an investor makes when selling an assest for more that was invested.
The capital gain is calculated by subtracting the property's basis from the sales price. The adjusted sale price recieved for the property, minus allowable costs of sale. The basis is what was paid for the property originally, plus allowable closing costs paid at the time, plus the cost of any capital improvements made (NOT maintenance costs), and minus depreciation taken (investment properties only - one cannot depreciate a principal residence
=======
example John purchased his res for $100,000 in 1988. Closing costs were $2000. In 1992 he built a garage for 12,000. Total basis is $114,000 ($100,00+2000+12000). In 1998 John sold the property for $200,000. He paid allowable closing costs of $3000 The adjusted sales price is $197,000 (John's capital gain is $197,000-$114,000) = $83,000

Front 35

chap 5 ques 23
The Whitacres sold there house for $184,000 and paid a commision of $11,000. They had owned and occupied the home since it was built 3 years ago. It had originally cost $155,000.00. Which statement is true?
a: The basis of the old house was $144,000.00
b: the Whitacres must add $18,000 to thier income for calculating purposes.
c: The gain is excluded from their taxes
d: The gain is $29,000.00

Back 35

c: the gain is excluded from their taxes
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the owner must live in the residence at least two out of the last 5 years according to the 1997 tax act

Front 36

chap 5 question 24
A property owner who feels the amount of an ad valorem tax is unfair should appeal to the:
a: tax assessor
b: the board of arbitration
c: the courts
d: the state board of equalization

Back 36

b: the board of arbitration

Front 37

What is the process of assessing, and collecting ad valorem taxes?

Back 37

1 Budget - the taxing authority (city, county, school district, etc) must prepare an annual budget, estimating needed income for expenses to be made in the coming fiscal year
2. Appropriation - after the budget is approved the legislative body formalizes how the money is to be aquired
3: Levy - the taxing authority now determines how the taxes will be imposed
4: Assessment - The tax assessor, using standard appraisal methods, determines the market value of each parcel.
Appeal - If the property owner feels the assessment is unfair, there is a review board or board of arbitration to which an appeal is made
6: Equalization - In some cases local tax assessment figures are used in levying some state taxes. To assure fair treatment for taxpayers from all local jurisdictions, the state board of equalization establishes equalization factors.
7. Tax Rate - The assessors records showing the total assessed value of all of the properties in the jurisdiction are called the assessment roll, and the total assessed value is called the tax base. To determine a tax rate, the taxing authority divides the total amount of budget money needed, minus the other sources of revenue, by the total assessed values
8. Tax Bill calculations - market value X assessment rate X tax rate
9. tax exemptions - certain properties are exempt such as churches, schools, libraries. also other exemptions are granted.
10. tax collection - real property taxes are normally collected on a statutory due date.

Front 38

chap 5 ques 25
A licensee would be in violation of the fair housing laws if he/she refused to show property to a family because of:
a: the fact they cannot qualify for price levels in the area
b: the fact the computer shows nothing available that meets their needs
c: the fact they have seven children
d: the fact the property is already under contract and the owner has a stated no back-up contracts

Back 38

C; the fact they have seven kids