Texas Real Estate Finance Final Exam Questions And Answers 100% Correct!!

Why do lenders collect reserve funds at the property closing? A) To get a higher yield in their investment B) To be sure money will be available for tax and insurance purposes C) To have extra money that will accrue interest D) To hedge against increases in taxes or insurance premiums - ANSWERSB) To be sure money will be available for tax and insurance payments The cost recovery period for land improvements is how long? A) 15 years B) 25 years C) 27.5 years D) 30 years - ANSWERSA) 15 years Which of these statements is TRUE about financing large apartment complexes? A) Loan terms are not longer than 20 years. B) When determining a loan amount, lenders ignore debt service as a criterion. C) As the size of the building increases, the loan ratio is generally reduced. D) Loan fees for large buildings are usually lower than for single-family residences. - ANSWERSC) As the size of the building increases, the loan ratio is generally reduced. Which statement about syndication is FALSE? A) Most investors belonging to syndicates invest a lot of their own money. B) Syndication offers small investors the opportunity to invest in real estate ventures that would otherwise be outside their financial means. C) A typical real estate syndicate combines the money of individual investors with the management of a sponsor. D) A syndicate is able to acquire real estate that could not be purchased by an individual alone. - ANSWERSA) Most investors belonging to syndicates invest a lot of their own money. What is a disadvantage of a graduated-payment loan? A) The borrower has no control over the payment increases. B) This plan could result in negative amortization. C) Graduated payment loans cannot be refinanced. D) A borrower cannot sell the property until the loan is converted. - ANSWERSB) This plan could result in negative amortization. Al purchases a factory as an investment. He installs sprinklers in the building. What risk control technique is he practicing? A) Avoiding B) Limiting C) Reducing D) Accepting - ANSWERSC) Reducing Mary is getting a $120,000 loan at 6.5 percent and will pay 3 discount points. What will the effective interest rate be? A) 0.0665 B) 0.0675 C) 0.06875 D) 0.0695 - ANSWERSC) 0.06875 Investor Pete specializes in obtaining properties from investors in financial difficulty. What investment strategy does Pete practice? A) Arbitrage B) Special situation C) Opportunistic D) Development - ANSWERSC) Opportunistic What is the term used to describe a loan that is not government-backed? A) Standard B) Conventional C) Normal D) Junior - ANSWERSB) Conventional What is the maximum annual amount a single taxpayer can give to a person without incurring a gift tax liability? A) $10,000.00 B) $12,000.00 C) $15,000.00 D) $26,000.00 - ANSWERSC) $15,000.00 Bill bought a property for $270,000. The value of the building on the property is $220,000. If the building has an economic life of 50 years, what is the depreciated value of the building after 5 years? A) $22,000.00 B) $176,000.00 C) $198,000.00 D) $220,000.00 - ANSWERSC) $198,000.00 What does the term "mixed-use development" mean? A) A subdivision with common areas for all residents B) More than one use for a single building C) An apartment complex attached to a city park D) An industrial park in a farming community - ANSWERSB) More than one use for a single building What percent of the REIT's assets must be made up of cash, real estate, mortgage notes, or government securities? A) 30 B) 50 C) 75 D) 95 - ANSWERSC) 75 Which of the following is typically not a short-term mortgage loan? A) Single-family home loan B) Construction loan C) Home improvement loan D) Manufactured home loan - ANSWERSA) Single-family home loan Which Texas agency licenses, regulates, and examines the trust- and insurance-funded prepaid funeral contract sellers? A) Office of Consumer Credit Commissioner (OCCC) B) Texas Department of Banking C) Department of Savings and Mortgage Lending D) Texas Department of Insurance - ANSWERSB) Texas Department of Banking Who is the person who grants approval for the loan, rejects the loan, or in some cases, agrees to approve the loan if certain conditions are met? A) Lender B) Seller C) Processor D) Underwriter - ANSWERSD) Underwriter In Texas, what is the maximum late payment penalty allowed? A) 10% B) 5% C) 15% D) no restrictions - ANSWERSD) no restrictions The entity holding title to a property during the term of a deed of trust is called what? A) Trustee B) Trustor C) Beneficiary D) Title company - ANSWERSA) Trustee The successful bidder at a judicial foreclosure sale receives which of these documents? A) Deed in Lieu of Foreclosure B) Certificate of Sale C) Trustee's Deed D) Warranty Deed - ANSWERSB) Certificate of Sale Com