Wisconsin Real Estate License Valuing and Financing Property Questions and Answers

Question 1

An appraiser is valuing a 15-year-old, single-family home in a well-established suburban neighborhood in Wisconsin. Which approach to value would the appraiser most likely give the most weight to?

Accepted Answer

Sales Comparison Approach

Answer

The Sales Comparison Approach (also known as the market data approach) is the most reliable method for appraising single-family homes. It compares the subject property to similar, recently sold properties in the same area. The Cost Approach is best for new construction or unique properties like schools, and the Income Approach is used for income-generating properties like apartment buildings.

Question 2

A home in Green Bay, Wisconsin sells for $350,750. What is the amount of the Wisconsin Real Estate Transfer Fee (RETF) that must be paid at closing?

Accepted Answer

$1,053.00

Answer

The Wisconsin Real Estate Transfer Fee is calculated at a rate of $3.00 for every $1,000 of value. The value is rounded up to the next nearest $100. In this case, $350,750 is rounded up to $350,800. The calculation is ($350,800 / $1,000) * $3.00 = $1,052.40. An easier way to calculate is to round the value up to the next $100 and multiply by 0.003. So, $350,800 * 0.003 = $1,052.40.

Question 3

A buyer is purchasing a home for $400,000 and obtains a mortgage for $320,000. What is the loan-to-value (LTV) ratio, and what will the lender likely require as a result?

Accepted Answer

80% LTV; the lender will not require private mortgage insurance (PMI).

Answer

The Loan-to-Value (LTV) ratio is calculated by dividing the loan amount by the property's value ($320,000 / $400,000 = 0.80, or 80%). Lenders typically require Private Mortgage Insurance (PMI) when the LTV is above 80%. Since the LTV is exactly 80%, PMI would not be required.

Question 4

When an assessor in Wisconsin is determining the value of a property for tax purposes, which of the following is considered the BEST evidence of the property's value according to state guidelines?

Accepted Answer

A recent, arm's-length sale of the property itself.

Answer

Wisconsin statutes and the Wisconsin Property Assessment Manual state that a recent, arm's-length sale of the subject property is the best indicator of its full market value. If such a sale hasn't occurred, the next best information is recent arm's-length sales of reasonably comparable properties. Other methods are used only when sales data is insufficient.

Question 5

Which of the following is a key difference between the mortgage insurance required for an FHA loan (MIP) and a conventional loan (PMI) for a borrower with a low down payment?

Accepted Answer

FHA MIP typically remains for the life of the loan, while conventional PMI can be cancelled at 80% LTV.

Answer

A significant difference is the cancellation policy. For conventional loans, Private Mortgage Insurance (PMI) can be requested for removal once the loan-to-value ratio reaches 80% and must be automatically terminated at 78%. For most FHA loans originated today, the Mortgage Insurance Premium (MIP) must be paid for the entire loan term, unless the borrower made a down payment of 10% or more, in which case it lasts for 11 years.

Wisconsin Real Estate License Practice Test

Wisconsin Real Estate License Practice Test

Wisconsin Real Estate License Valuing and Financing Property Questions and Answers