77. The purchase price for a new home was $250,000. 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 $268,000 and the assessed value was $263,000. What will the buyer pay for one year property taxes if the tax rate is 2%?
Answer: C
The buyer will pay $5,260 for one year of property taxes.
To calculate the annual property taxes, we use the assessed value of the home, which is $263,000, and apply the tax rate of 2%. This results in a total property tax of $5,260 for the year.
A) $5,000
This option is incorrect because it underestimates the property tax. If the assessed value was $250,000, then a 2% tax would yield $5,000; however, the assessed value is $263,000, leading to a higher tax amount.
B) $4,000
This option is incorrect as it significantly undervalues the property tax. A tax rate of 2% on the assessed value of $263,000 results in a tax amount of $5,260, which is much greater than $4,000.
C) $5,260
This option is correct because it accurately reflects the annual property tax calculation based on the assessed value of $263,000 at a 2% tax rate. The calculation is straightforward: $263,000 multiplied by 0.02 equals $5,260.
D) $5,360
This option is incorrect as it slightly overestimates the property tax. The calculated property tax based on the assessed value of $263,000 at a 2% rate is $5,260, not $5,360.
Conclusion
The correct answer of $5,260 is derived directly from applying the tax rate to the assessed value of the property. Other options either underestimate or overestimate this tax amount, demonstrating a misunderstanding of how property taxes are calculated based on assessed value and tax rates.