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# Community spokesperson : After a recent surge of

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Manager
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Community spokesperson : After a recent surge of [#permalink]

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29 Oct 2011, 22:12
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70% (01:19) correct 30% (02:55) wrong based on 105 sessions

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Community spokesperson: After a recent surge of foreclosures, many homes in our community are vacant and falling into disrepair. Property values are already falling, and, if action is not taken quickly, will fall even further when panicked residents begin to leave. Clearly the only way to prevent a snowball effect is to make it easy to purchase these vacant homes by offering potential buyers special mortgages with a low interest rate for the first two years.

Which of the following, if true, represents the most significant potential problem with the plan to attract buyers through special mortgage offers?

A) Interest rates in the area are already at a 5-year low, and it would be foolish of lenders to lower them even more.
B) Crime rates in the area have risen by 1% in the last year, making it less likely that potential buyers will be interested in moving to the area.
C) Most residents have lived in the area for over 20 years and do not want to leave their homes.
D) Low interests rates will likely attract buyers who will be unable to make payments when the interest rate goes up after the first two years.
E) There are few mortgage brokers in the area, making it unlikely that there will be enough personnel to assist a rush of potential home buyers.

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30 Oct 2011, 09:36
2
KUDOS
IMO D
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29 Oct 2011, 22:49
If E is true, then the plan will not work. I pick E.

OA?

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29 Oct 2011, 23:25
DexDee wrote:
If E is true, then the plan will not work. I pick E.

OA?

I will post the OA after few more discussions. But the OA is not E.

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30 Oct 2011, 10:58
Initially I thought E.

If E is not the OA then it could be D
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Last edited by g106 on 01 Nov 2011, 10:15, edited 1 time in total.

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30 Oct 2011, 11:13
D looks the best choice
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30 Oct 2011, 20:26
Folks please try to explain your answers (like reason for selection and rejection of certain option) as this is a discussion forum.
BTW the OA is D

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31 Oct 2011, 09:02
D

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31 Oct 2011, 15:14
IMO-D.
As per the plan the buyers would be given special mortgages with a low interest rate for the first two years.Hence the scheme could fail if the buyers are unable to pay after interest rates are increased after 2 yrs.

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01 Nov 2011, 00:12
+1 for D.

The only other contender was C, but most does not mean all. Hence D wins.

Crick

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01 Nov 2011, 09:52
Sudhanshuacharya wrote:
Community spokesperson: After a recent surge of foreclosures, many homes in our community are vacant and falling into disrepair. Property values are already falling, and, if action is not taken quickly, will fall even further when panicked residents begin to leave. Clearly the only way to prevent a snowball effect is to make it easy to purchase these vacant homes by offering potential buyers special mortgages with a low interest rate for the first two years.

Which of the following, if true, represents the most significant potential problem with the plan to attract buyers through special mortgage offers?
According to the stem by decreasing interest rates for first two years will help to prevent snowball effect. We have to find something which represents potential problem with the plan

A) Interest rates in the area are already at a 5-year low, and it would be foolish of lenders to lower them even more.
Reducing interest rates will hamper lenders but has nothing to do with plan
B) Crime rates in the area have risen by 1% in the last year, making it less likely that potential buyers will be interested in moving to the area.
Off track and has nothing to do with proposed plan
C) Most residents have lived in the area for over 20 years and do not want to leave their homes.
Off track and has nothing to do with proposed plan
D) Low interests rates will likely attract buyers who will be unable to make payments when the interest rate goes up after the first two years.
This correlates proposed plan, potential buyers and drawback of reducing interest rates.
E) There are few mortgage brokers in the area, making it unlikely that there will be enough personnel to assist a rush of potential home buyers.
Off track and has nothing to do with proposed plan

Ans: 'D'
Time: 1.5 Mins
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01 Nov 2011, 12:13
I don't think it's D. The plan is to attract potential buyers. Who cares if they can't pay anymore after 2 years? The question doesnt ask or state anything about long-term effects. They'd be able to sell those houses today and thats all that matters for the question.

For the lack of other reasonable choices I'd choose E. I don't really like it because in my opinion, they could still sell the houses and it'd just take a little longer if the brokers are busy, but again i think that's the most reasonable one.

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06 Nov 2011, 18:57
I totalt agree! The main question is are we looking for a long term benefit or a short one? I believe a short one is asked for. E is a really bad choice but it's better since it gives explanations to the specific question? Anybody know how to distinguise between reason and specific wording in the question?

Posted from my mobile device

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Re: Community spokesperson : After a recent surge of [#permalink]

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08 Nov 2011, 06:35
According to the question "Which of the following, if true, represents the most significant potential problem with the plan to attract buyers through special mortgage offers?". E is better choice than D

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Re: Community spokesperson : After a recent surge of [#permalink]

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08 Nov 2011, 07:47
Sudhanshuacharya wrote:
Community spokesperson: After a recent surge of foreclosures, many homes in our community are vacant and falling into disrepair. Property values are already falling, and, if action is not taken quickly, will fall even further when panicked residents begin to leave. Clearly the only way to prevent a snowball effect is to make it easy to purchase these vacant homes by offering potential buyers special mortgages with a low interest rate for the first two years.

Which of the following, if true, represents the most significant potential problem with the plan to attract buyers through special mortgage offers?

A) Interest rates in the area are already at a 5-year low, and it would be foolish of lenders to lower them even more.
B) Crime rates in the area have risen by 1% in the last year, making it less likely that potential buyers will be interested in moving to the area.
C) Most residents have lived in the area for over 20 years and do not want to leave their homes.
D) Low interests rates will likely attract buyers who will be unable to make payments when the interest rate goes up after the first two years.
E) There are few mortgage brokers in the area, making it unlikely that there will be enough personnel to assist a rush of potential home buyers.

The scope of this CR question is the potential problem of the special mortgage offer. During my first read, I can eliminate choices A, B, and C.

Only D and E left, and I took D. I think not having enough personnel may not be the potential problem of the plan. Choice D, on the other hand, can result in raising the default rate when the number of buyers who won't be able to repay increases. So, that can be considered the potential issue of the plan.
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Re: Community spokesperson : After a recent surge of [#permalink]

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09 Nov 2011, 16:11
The problem is the wording of the question! There is no potential problem with attracting the buyers with low interests rates, they will be attracted! The problems come later but are not associated with selling houses!

Posted from GMAT ToolKit

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Re: Community spokesperson : After a recent surge of [#permalink]

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13 Nov 2011, 09:42
+ 1 for D
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Re: Community spokesperson : After a recent surge of [#permalink]

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13 Nov 2011, 10:16
+1 D
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Re: Community spokesperson : After a recent surge of [#permalink]

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13 Nov 2011, 14:49
I go for D because:

A) Interest rates in the area are already at a 5-year low, and it would be foolish of lenders to lower them even more.
foolish is not a word we can rely on because it might not foolish as it has positive effect since it would increase the purchases.
B) Crime rates in the area have risen by 1% in the last year, making it less likely that potential buyers will be interested in moving to the area.
we can't trust percents in CR, we dont know how big the number is with 1% or how low. it is not representative.
C) Most residents have lived in the area for over 20 years and do not want to leave their homes.
this is irrelevant and there is an assurance word that we can't trust "DO NOT WANT".
D) Low interests rates will likely attract buyers who will be unable to make payments when the interest rate goes up after the first two years.
this answer serves best as it indicates a direct problem with the plan or conclusion that people would not be able to make payments.
E) There are few mortgage brokers in the area, making it unlikely that there will be enough personnel to assist a rush of potential home buyers.
totally irrelevant and out of scope

hope that helps good luck
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Re: Community spokesperson : After a recent surge of [#permalink]

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26 Mar 2015, 03:34
Am I the only one who chose answer B? If people are afraid of crime rates and will not buy homes for that reason then it doesn't matter whether mortgages are with low interest rates or not. People won't buy them in any case, so the plan won't work.

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Re: Community spokesperson : After a recent surge of   [#permalink] 26 Mar 2015, 03:34

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