Texas Real Estate Finance Final Exam Questions With solved Answers

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 - ANSWER-B) 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 - ANSWER-A) 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. - ANSWER-C) 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. - ANSWER-A) Most investors belonging to syndicates invest a lot of their own money.