TEXAS REAL ESTATE UPDATED EVALUATION EXAM
QUESTIONS AND ANSWERS SURE A+
✔✔Specific Requirements (The Taxpayer Relief Act of 1997) - ✔✔A married couple
jointly filing may exclude up to $500,000 in capital gains, upon the sale of the asset.
An individual may exclude up to $250,000 in capital gains, upon the sale of the asset.
The two-year requirement translates to two years of the previous five, not necessarily
continuously, and once the two years are fulfilled, the homeowner can be living
elsewhere at the time of the capital gain. (A principal residence may be a house,
houseboat, mobile home, cooperative apartment, or condominium.)
If a homeowner fails to meet the two-year rule because of an employment change,
health, death, natural or man-made disaster, an act of war or terrorist attack, divorce or
a legal separation, or other unforeseen circumstances, they are able to exclude the
fraction of the $500,000 or $250,000, whichever the taxpayer is eligible for, that is equal
to the fraction of two years that are not met.
If persons are filing jointly but not sharing the residence, an exclusion of $250,000 is
available on a qualifying sale or exchange of the principal residence of one of the
spouses.
If a person who is eligible for an exclusion marries someone who has used their
exclusion in the last two years, the newly married person who qualifies will only be
eligible for $250,000.
✔✔Estate Tax Exemption - ✔✔is the amount an individual can leave to their heirs
without having to pay tax.
✔✔Homeowners Insurance - ✔✔Dwelling, Personal property, Other structures, Loss of
use, Personal liability, Medical payments
✔✔Policy Dollar Limits - ✔✔are the maximum amounts your insurance company is
required to pay if your house is destroyed. The Declarations Page at the front of your
policy shows your policy's dollar limits. To receive full payment (minus your deductible)
for a partial loss (such as a hail-damaged roof) most companies require you to insure
your house for at least 80 percent of its replacement cost. Some companies might
require you to insure your house for 100 percent of its replacement cost.
✔✔Coverage for Your Personal Property - ✔✔coverage for your personal property
(such as furniture, clothing, and household electronics) as a percentage of the amount
of your dwelling coverage limits.
✔✔Texas has three standardized policy forms: - ✔✔HO-A, HO-B, and HO-C.
✔✔HO-A - ✔✔is a named peril policy and provides limited actual cash value coverage
of the home and its contents. Only the specific types of damage listed in the policy are
covered.
fire and lightning
,sudden and accidental damage from smoke
windstorm, hurricane, and hail
explosion
aircraft and vehicles
vandalism and malicious mischief
riot and civil commotion
theft
This type of coverage offers no water damage coverage at all, unless specifically added
through endorsement.
✔✔HO-B - ✔✔is the most common homeowners policy, providing replacement cost
coverage for most types of damage to the real property --except claims specifically
excluded in the policy language. These policies provide actual cash value coverage for
personal property unless endorsed to provide replacement cost coverage. These
policies cover all risks as well as the named perils.
✔✔HO-C - ✔✔are the most expensive types of homeowners policies, and also, not
surprisingly, provide the most extensive coverage of all of the policies.
✔✔Endorsements - ✔✔is essentially any change that a homeowner would make to their
policy. Further coverages to any of the previous policies may be provided through
endorsement(s), which allow for modifications on policies.
✔✔C.L.U.E. Report - ✔✔is the Comprehensive Loss Underwriting Exchange which is a
claims-information report generated by Lexis-Nexis® , which provides a consumer
reporting service. This report contains up to seven years (usually five) of a property's
claims history, and is a basis for underwriting for homeowners' insurance. The report
shows the dates of any claims, the loss types, and the amounts paid for losses. The
report will also tell if a claim was denied by the carrier.
✔✔Flood Insurance - ✔✔is the most common natural hazard to damage or destroy
homes and other structures. According to U.S. Government figures, 90% of natural
disasters involve floods. Despite this, flood damage historically has been (and still is)
routinely excluded from private homeowners' insurance and commercial insurance
policies.
✔✔NFIP - ✔✔National Flood Insurance Program
Its stated goal is to "reduce the impact of flooding on private and public structures." To
this end, the NFIP provides affordable insurance to property owners, renters, and
business owners, and encourages communities to adopt and enforce floodplain
management regulations. The federal agency which administers the NFIP is the Federal
Emergency Management Agency (FEMA).
✔✔The NFIP has 4 components: - ✔✔-Risk identification/assessment: Mapping of flood
prone areas.
,-Risk mitigation: Regulations that communities must adopt and enforce before high-risk
areas can participate in the NFIP.
-Insurance: Federally-supported flood insurance in communities that have joined the
program.
-Subsidization (and attrition): New properties would be insured at actuarial levels set by
the industry because these can account for the newly adopted standards
✔✔Biggert-Waters Flood Insurance Reform Act - ✔✔In July 2012, Congress passed the
bipartisan, (named for co-sponsors Judy Biggert, R-Illinois and Maxine Waters, D-
California) by a wide margin. The law instituted profound changes during the five-year
period it would be in effect. Structures outside high-risk zones were unaffected but
those within the zones were almost all affected.
✔✔Homeowner Flood Insurance Affordability Act (HFIAA) - ✔✔This law repeals some
provisions of the Biggert-Waters Flood Insurance Reform Act (BW-12) and modifies
others. The seven areas that comprise the overall legislation are:
Recalculation of premiums for subsidized policies;
Refunds for many who recently paid increased rates;
A surcharge on all NFIP policies;
Liberalized grandfathering provisions;
A new protocol for creation of Flood Insurance Rate Maps;
Creation of a flood insurance advocate program; and
Affordability measures.
✔✔Premium rates for subsidized policies (HFIAA) - ✔✔The new law requires gradual
rate increases (minimum 5%, maximum 18%) to properties now receiving artificially low
(or subsidized) rates instead of immediate increases to full-risk rates required under
BW-12.
✔✔Refunds (HFIAA) - ✔✔The new law mandates refunds of excess premiums some
policyholders were charged pursuant to BW-12. Policyholders in high-risk areas who
were required to pay their full-risk rate (if it's higher than previously set subsidized rates)
after purchasing a new flood insurance policy on or after July 6, 2012 or policyholders
who renewed their policy after the Homeowner Flood Insurance Affordability Act was
enacted on March 21, 2014 and whose premium increased more than 18% will receive
prompt refunds.
✔✔Surcharge (HFIAA) - ✔✔In order to offset the losses from repealing parts of BW-12
and to ensure solvency of the NFIP, all policies (regardless of assessed flood risk) will
be assessed a $25 annual surcharge for a primary residence and a $250 surcharge for
other properties. The surcharge will be eliminated once annual increases on high-risk
properties eliminate all subsidized rates.
✔✔Affordability (HFIAA) - ✔✔The new law requires FEMA to prepare a draft
affordability framework, which is due to Congress 18 months after completion of the
, affordability study being conducted by the National Academies of Sciences (begun as a
part of BW-12).
In developing the affordability framework, FEMA must consider:
Accurate communication to customers of the flood risk;
Targeted assistance based on financial ability to pay;
Individual and community actions to mitigate flood risk or lower cost of flood insurance;
The impact of increases in premium rates on participation in NFIP; and
The impact of the mapping update on affordability of flood insurance.
✔✔Housing Cooperatives - ✔✔is a type of cooperative (often incorporated) that owns
real property, usually residential buildings. Members, by virtue of owning shares in the
cooperative, are granted the right to occupy one of the units in the building. Since the
resources of each member are pooled, the buying power of the organization leverages
which lowers the cost to members for services and products associated with home
ownership. Members can also control who can occupy units in a cooperative owned
building.
✔✔The Condominium Concept - ✔✔With the introduction of the concept of the
condominium, it became possible for an individual to own airspace. Specifically, the
individual is purchasing ownership of the space described by the boundary of a set of
walls. The walls, themselves, may or may not be included in the individual's ownership,
depending upon the terms of the condominium agreement.
This is the second key characteristic that distinguishes the condominium from other
forms of property ownership: The owner of a unit also owns an undivided interest with
other unit owners in the "common elements," and that interest cannot be separated from
the unit.
✔✔Napoleonic Code of 1804 - ✔✔This statute allowed individual ownership of
individual floors within a building, and imposed joint responsibility for maintenance and
repair of common parts of the building (exterior walls, gardens, etc.) on all individual
owners collectively.
✔✔Common Law Basis for the Condominium Concept - ✔✔"The fundamental basis for
the sharing, management, and maintenance of property for the benefit of all concerned
lies within basic real property doctrines such as covenants running with the land and
equitable servitudes." (William P. Sklar, Esq., Concept of Condominium Ownership,
1995).
✔✔Covenants that Run with the Land - ✔✔A covenant is a binding agreement generally
attached to a property, such as a restrictive covenant. These are very common in
housing developments and condominium communities. Homeowners Associations
(HOAs) also generally include what are called "CC&Rs", which stands for Covenants,
Conditions, and Restrictions.
✔✔The Condominium Concept as Applied in the U.S. - ✔✔Prior to adoption of the
condominium concept in the United States, numerous cooperative ventures were
QUESTIONS AND ANSWERS SURE A+
✔✔Specific Requirements (The Taxpayer Relief Act of 1997) - ✔✔A married couple
jointly filing may exclude up to $500,000 in capital gains, upon the sale of the asset.
An individual may exclude up to $250,000 in capital gains, upon the sale of the asset.
The two-year requirement translates to two years of the previous five, not necessarily
continuously, and once the two years are fulfilled, the homeowner can be living
elsewhere at the time of the capital gain. (A principal residence may be a house,
houseboat, mobile home, cooperative apartment, or condominium.)
If a homeowner fails to meet the two-year rule because of an employment change,
health, death, natural or man-made disaster, an act of war or terrorist attack, divorce or
a legal separation, or other unforeseen circumstances, they are able to exclude the
fraction of the $500,000 or $250,000, whichever the taxpayer is eligible for, that is equal
to the fraction of two years that are not met.
If persons are filing jointly but not sharing the residence, an exclusion of $250,000 is
available on a qualifying sale or exchange of the principal residence of one of the
spouses.
If a person who is eligible for an exclusion marries someone who has used their
exclusion in the last two years, the newly married person who qualifies will only be
eligible for $250,000.
✔✔Estate Tax Exemption - ✔✔is the amount an individual can leave to their heirs
without having to pay tax.
✔✔Homeowners Insurance - ✔✔Dwelling, Personal property, Other structures, Loss of
use, Personal liability, Medical payments
✔✔Policy Dollar Limits - ✔✔are the maximum amounts your insurance company is
required to pay if your house is destroyed. The Declarations Page at the front of your
policy shows your policy's dollar limits. To receive full payment (minus your deductible)
for a partial loss (such as a hail-damaged roof) most companies require you to insure
your house for at least 80 percent of its replacement cost. Some companies might
require you to insure your house for 100 percent of its replacement cost.
✔✔Coverage for Your Personal Property - ✔✔coverage for your personal property
(such as furniture, clothing, and household electronics) as a percentage of the amount
of your dwelling coverage limits.
✔✔Texas has three standardized policy forms: - ✔✔HO-A, HO-B, and HO-C.
✔✔HO-A - ✔✔is a named peril policy and provides limited actual cash value coverage
of the home and its contents. Only the specific types of damage listed in the policy are
covered.
fire and lightning
,sudden and accidental damage from smoke
windstorm, hurricane, and hail
explosion
aircraft and vehicles
vandalism and malicious mischief
riot and civil commotion
theft
This type of coverage offers no water damage coverage at all, unless specifically added
through endorsement.
✔✔HO-B - ✔✔is the most common homeowners policy, providing replacement cost
coverage for most types of damage to the real property --except claims specifically
excluded in the policy language. These policies provide actual cash value coverage for
personal property unless endorsed to provide replacement cost coverage. These
policies cover all risks as well as the named perils.
✔✔HO-C - ✔✔are the most expensive types of homeowners policies, and also, not
surprisingly, provide the most extensive coverage of all of the policies.
✔✔Endorsements - ✔✔is essentially any change that a homeowner would make to their
policy. Further coverages to any of the previous policies may be provided through
endorsement(s), which allow for modifications on policies.
✔✔C.L.U.E. Report - ✔✔is the Comprehensive Loss Underwriting Exchange which is a
claims-information report generated by Lexis-Nexis® , which provides a consumer
reporting service. This report contains up to seven years (usually five) of a property's
claims history, and is a basis for underwriting for homeowners' insurance. The report
shows the dates of any claims, the loss types, and the amounts paid for losses. The
report will also tell if a claim was denied by the carrier.
✔✔Flood Insurance - ✔✔is the most common natural hazard to damage or destroy
homes and other structures. According to U.S. Government figures, 90% of natural
disasters involve floods. Despite this, flood damage historically has been (and still is)
routinely excluded from private homeowners' insurance and commercial insurance
policies.
✔✔NFIP - ✔✔National Flood Insurance Program
Its stated goal is to "reduce the impact of flooding on private and public structures." To
this end, the NFIP provides affordable insurance to property owners, renters, and
business owners, and encourages communities to adopt and enforce floodplain
management regulations. The federal agency which administers the NFIP is the Federal
Emergency Management Agency (FEMA).
✔✔The NFIP has 4 components: - ✔✔-Risk identification/assessment: Mapping of flood
prone areas.
,-Risk mitigation: Regulations that communities must adopt and enforce before high-risk
areas can participate in the NFIP.
-Insurance: Federally-supported flood insurance in communities that have joined the
program.
-Subsidization (and attrition): New properties would be insured at actuarial levels set by
the industry because these can account for the newly adopted standards
✔✔Biggert-Waters Flood Insurance Reform Act - ✔✔In July 2012, Congress passed the
bipartisan, (named for co-sponsors Judy Biggert, R-Illinois and Maxine Waters, D-
California) by a wide margin. The law instituted profound changes during the five-year
period it would be in effect. Structures outside high-risk zones were unaffected but
those within the zones were almost all affected.
✔✔Homeowner Flood Insurance Affordability Act (HFIAA) - ✔✔This law repeals some
provisions of the Biggert-Waters Flood Insurance Reform Act (BW-12) and modifies
others. The seven areas that comprise the overall legislation are:
Recalculation of premiums for subsidized policies;
Refunds for many who recently paid increased rates;
A surcharge on all NFIP policies;
Liberalized grandfathering provisions;
A new protocol for creation of Flood Insurance Rate Maps;
Creation of a flood insurance advocate program; and
Affordability measures.
✔✔Premium rates for subsidized policies (HFIAA) - ✔✔The new law requires gradual
rate increases (minimum 5%, maximum 18%) to properties now receiving artificially low
(or subsidized) rates instead of immediate increases to full-risk rates required under
BW-12.
✔✔Refunds (HFIAA) - ✔✔The new law mandates refunds of excess premiums some
policyholders were charged pursuant to BW-12. Policyholders in high-risk areas who
were required to pay their full-risk rate (if it's higher than previously set subsidized rates)
after purchasing a new flood insurance policy on or after July 6, 2012 or policyholders
who renewed their policy after the Homeowner Flood Insurance Affordability Act was
enacted on March 21, 2014 and whose premium increased more than 18% will receive
prompt refunds.
✔✔Surcharge (HFIAA) - ✔✔In order to offset the losses from repealing parts of BW-12
and to ensure solvency of the NFIP, all policies (regardless of assessed flood risk) will
be assessed a $25 annual surcharge for a primary residence and a $250 surcharge for
other properties. The surcharge will be eliminated once annual increases on high-risk
properties eliminate all subsidized rates.
✔✔Affordability (HFIAA) - ✔✔The new law requires FEMA to prepare a draft
affordability framework, which is due to Congress 18 months after completion of the
, affordability study being conducted by the National Academies of Sciences (begun as a
part of BW-12).
In developing the affordability framework, FEMA must consider:
Accurate communication to customers of the flood risk;
Targeted assistance based on financial ability to pay;
Individual and community actions to mitigate flood risk or lower cost of flood insurance;
The impact of increases in premium rates on participation in NFIP; and
The impact of the mapping update on affordability of flood insurance.
✔✔Housing Cooperatives - ✔✔is a type of cooperative (often incorporated) that owns
real property, usually residential buildings. Members, by virtue of owning shares in the
cooperative, are granted the right to occupy one of the units in the building. Since the
resources of each member are pooled, the buying power of the organization leverages
which lowers the cost to members for services and products associated with home
ownership. Members can also control who can occupy units in a cooperative owned
building.
✔✔The Condominium Concept - ✔✔With the introduction of the concept of the
condominium, it became possible for an individual to own airspace. Specifically, the
individual is purchasing ownership of the space described by the boundary of a set of
walls. The walls, themselves, may or may not be included in the individual's ownership,
depending upon the terms of the condominium agreement.
This is the second key characteristic that distinguishes the condominium from other
forms of property ownership: The owner of a unit also owns an undivided interest with
other unit owners in the "common elements," and that interest cannot be separated from
the unit.
✔✔Napoleonic Code of 1804 - ✔✔This statute allowed individual ownership of
individual floors within a building, and imposed joint responsibility for maintenance and
repair of common parts of the building (exterior walls, gardens, etc.) on all individual
owners collectively.
✔✔Common Law Basis for the Condominium Concept - ✔✔"The fundamental basis for
the sharing, management, and maintenance of property for the benefit of all concerned
lies within basic real property doctrines such as covenants running with the land and
equitable servitudes." (William P. Sklar, Esq., Concept of Condominium Ownership,
1995).
✔✔Covenants that Run with the Land - ✔✔A covenant is a binding agreement generally
attached to a property, such as a restrictive covenant. These are very common in
housing developments and condominium communities. Homeowners Associations
(HOAs) also generally include what are called "CC&Rs", which stands for Covenants,
Conditions, and Restrictions.
✔✔The Condominium Concept as Applied in the U.S. - ✔✔Prior to adoption of the
condominium concept in the United States, numerous cooperative ventures were
