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%?

Rationale

The buyer will pay $6,420 for one year's property taxes.

To calculate the property taxes, we need to apply the tax rate of 3% to the assessed value of the home, which is $214,000. The calculation is straightforward: 3% of $214,000 equals $6,420, which represents the annual property tax amount.

A ($6,000) YOUR ANSWER

This option represents a calculation based on a lower tax rate or an incorrect assessed value. To arrive at this figure, one might mistakenly apply 3% to a different number, but it does not accurately reflect the assessed value of $214,000.

B ($4,800) YOUR ANSWER

To reach this amount, one would have to apply a significantly lower tax rate than 3% or use an incorrect assessed value. Specifically, $4,800 would suggest a tax rate of approximately 2.24% on the assessed value, which does not align with the given information.

C ($6,420) CORRECT

This is the accurate calculation based on the assessed value of the home. By taking 3% of $214,000, the resulting annual property tax is correctly computed as $6,420.

D ($6,510) YOUR ANSWER

This figure suggests a calculation error, possibly from incorrectly applying the tax rate to an inflated assessed value. The correct application of 3% to the assessed value of $214,000 does not yield this amount.

Conclusion

The annual property tax for the buyer is derived from the assessed value of the home multiplied by the tax rate. With the assessed value at $214,000 and the tax rate at 3%, the correct annual property tax comes to $6,420. Options A, B, and D reflect miscalculations or incorrect assumptions, highlighting the importance of accurate values in tax computation.

The buyer will pay $6,420 for one year's property taxes.

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