Tennessee Real Estate License Exam Practice Question
The purchase price for a new home was $200,000. The buyer put down 20% and the balance was a mortgage for 80% of the purchase price. The appraised value at the time of closing was $217,000 and the assessed value was $214,000. What will the buyer pay for one year's property taxes if the tax rate is 3%?
Correct Answer: C
Rationale: To determine the property taxes, the assessed value of the home is used, which is $214,000. The tax rate is 3%, so the calculation for annual property taxes is as follows:
Property Taxes = Assessed Value × Tax Rate
Property Taxes = $214,000 × 0.03 = $6,420.
Option A ($6,000) is incorrect as it underestimates the taxes based on the assessed value. Option B ($4,800) is also incorrect, as it reflects a much lower tax amount, likely derived from a miscalculation. Option D ($6,510) is incorrect as it suggests an inflated tax amount that does not align with the assessed value and tax rate. Thus, $6,420 accurately reflects the annual property tax based on the assessed value.
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