California Real Estate Practice Exam

A buyer recently purchased a property for $150,000. If the cost to sell the property would be 9% of sale price, how much must the property appreciate in value in order for the owner to sell and get his $150,000 out of the sale?

1. $13,500

2. $14,835

3. 9%

4. 109%

The correct answer is: $13,500

To determine how much the property must appreciate in value for the owner to sell it and receive the $150,000, it’s important to first understand the selling costs involved. The cost to sell the property is 9% of the sale price. This means that if we denote the required sale price as "P," the seller will have to pay 9% of that sale price in costs. The seller needs to net $150,000 after deducting this 9%. Therefore, the relationship can be set up as follows: Net proceeds = Sale price - Selling costs $150,000 = P - (0.09 * P) Here, the selling costs can also be expressed in terms of "P": Selling costs = 0.09P, which gives: $150,000 = P - 0.09P $150,000 = 0.91P Next, to find "P," the required sale price: P = $150,000 / 0.91 P ≈ $164,835.16 Now, to find out how much the property must appreciate in value: Appreciation = Required Sale Price - Original Purchase Price Appreciation = $164,835.