You own a house that you acquired four years ago. The maintenance expenses on th
ID: 2674892 • Letter: Y
Question
You own a house that you acquired four years ago. The maintenance expenses on the house average $200 a month. The house cost $219,000 when you purchased it. A recent appraisal on the house valued it at $239,000. If you sell the house you will incur $18,000 in real estate fees. The annual property taxes are $4,000. You are deciding whether to sell the house or convert it for your own use as a professional office. What value should you place on this house when analyzing the option of using it as a professional office?Answer
$211,800
$221,000
$225,000
$235,000
$239,000
Explanation / Answer
You own a house that you acquired four years ago. The maintenance expenses on the house average $200 a month. The house cost $219,000 when you purchased it. A recent appraisal on the house valued it at $239,000. If you sell the house you will incur $18,000 in real estate fees. The annual property taxes are $4,000. You are deciding whether to sell the house or convert it for your own use as a professional office. What value should you place on this house when analyzing the option of using it as a professional office?
Answer
$211,800
$221,000
$225,000
$235,000
$239,000
Opportunity cost = $239,000 - $14,000 = $225,000
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