Acquisition Cost

### Which of the following is not typically included in the acquisition cost? - [ ] Purchase price of the property - [x] Homeowner's Association (HOA) fees - [ ] Attorney’s fees - [ ] Appraisal costs > **Explanation:** Homeowner's Association (HOA) fees are not typically considered part of the acquisition cost. HOA fees are usually ongoing expenses that are paid regularly after purchase, separate from the initial costs of acquiring the property. ### What does title insurance protect against? - [x] Title defects - [ ] Property damage - [ ] Fire hazard - [ ] Natural disasters > **Explanation:** Title insurance protects the property owner and lender against losses due to property title defects, providing assurance that the property title is clear of issues that could affect ownership rights. ### Why are appraisal costs necessary during property acquisition? - [ ] To determine the environmental quality of the property - [ ] To assess the tax value of the property - [x] To determine the property's market value - [ ] To check for zoning regulations compliance > **Explanation:** Appraisal costs are necessary to determine the property's market value, ensuring that the buyer and lender understand the correct value of the property being purchased. ### What do you refer to when you need to understand the extra costs paid when buying a property? - [x] Closing costs - [ ] Operating costs - [ ] Construction costs - [ ] Investment costs > **Explanation:** Closing costs refer to the additional fees and expenses paid at the closing of a real estate transaction, including administrative and processing fees. ### Can discount points paid during closing lower the interest rate on a property loan? - [x] Yes - [ ] No - [ ] It depends on the property value - [ ] Only for residential properties > **Explanation:** Discount points are fees paid directly to the lender at closing in exchange for a reduced interest rate, which can lead to significant interest savings over the life of the loan. ### When calculating acquisition costs, if you ignore closing costs, what information are you ignoring? - [ ] The property size - [ ] Future property taxes - [x] Additional fees required to complete the “closing” transaction - [ ] Legal restrictions on property use > **Explanation:** Ignoring closing costs means you are not accounting for the additional fees required to complete the transaction, such as legal fees, loan fees, and appraisal costs. ### Which of the following is included in closing costs? - [ ] Down payment - [ ] Mortgage interest - [x] Legal fees - [ ] Property insurance premiums > **Explanation:** Legal fees are often included in closing costs as these are administrative and processing fees associated with the transfer of property ownership. ### True or False: The acquisition cost always equals the purchase price of a property. - [ ] True - [x] False > **Explanation:** The acquisition cost is not just the purchase price; it also includes all additional fees and expenses required to acquire the property, such as closing costs. ### What is another term frequently used to describe additional costs involved in property purchase? - [ ] Price supplements - [ ] Mortgage additions - [ ] Investment increments - [x] Closing costs > **Explanation:** "Closing costs" is the commonly used term to describe the various additional fees and expenses involved in purchasing a property. ### If a property's purchase price is $250,000 and its acquisition costs total $260,000, what amount is attributed to other fees? - [ ] $10,000 - [x] $260,000 - $250,000 - [ ] $15,000 - [ ] $50,000 > **Explanation:** If the acquisition costs ($260,000) are higher than the property's purchase price ($250,000), the difference of $10,000 accounts for the additional fees and closing costs involved in the property acquisition process.