Texas Real Estate Finance Final Exam
Questions With Correct Answers
Why do lenders collect reserve funds at the property closing?
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A) To get a higher yield in their investment
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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 - CORRECT
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ANSWER✔✔-B) To be sure money will be available for tax and insurance
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payments
The cost recovery period for land improvements is how long?
| | | | | | | | |
A) 15 years
| |
B) 25 years
| |
C) 27.5 years
| |
D) 30 years - CORRECT ANSWER✔✔-A) 15 years
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Which of these statements is TRUE about financing large apartment complexes?
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A) Loan terms are not longer than 20 years.
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B) When determining a loan amount, lenders ignore debt service as a criterion.
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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. - CORRECT ANSWER✔✔-C) As the size of the building increases, the
| | | | | | | | | | | |
loan ratio is generally reduced.
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Which statement about syndication is FALSE?
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A) Most investors belonging to syndicates invest a lot of their own money.
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B) Syndication offers small investors the opportunity to invest in real estate
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ventures that would otherwise be outside their financial means.
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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. - CORRECT ANSWER✔✔-A) Most investors belonging to
| | | | | | | | |
syndicates invest a lot of their own money.
| | | | | | |
What is a disadvantage of a graduated-payment loan?
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A) The borrower has no control over the payment increases.
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B) This plan could result in negative amortization.
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C) Graduated payment loans cannot be refinanced.
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D) A borrower cannot sell the property until the loan is converted. - CORRECT
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ANSWER✔✔-B) This plan could result in negative amortization.
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Al purchases a factory as an investment. He installs sprinklers in the building.
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What risk control technique is he practicing?
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, A) Avoiding
|
B) Limiting
|
C) Reducing
|
D) Accepting - CORRECT ANSWER✔✔-C) Reducing
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Mary is getting a $120,000 loan at 6.5 percent and will pay 3 discount points.
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What will the effective interest rate be?
| | | | | |
A) 0.0665
|
B) 0.0675
|
C) 0.06875
|
D) 0.0695 - CORRECT ANSWER✔✔-C) 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 - CORRECT ANSWER✔✔-C) Opportunistic
| | | | |
What is the term used to describe a loan that is not government-backed?
| | | | | | | | | | | |
A) Standard
|
B) Conventional
|
Questions With Correct 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 - CORRECT
| | | | | | | | | | | |
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 - CORRECT 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. - CORRECT 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. - CORRECT ANSWER✔✔-A) 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. - CORRECT
| | | | | | | | | | | | | |
ANSWER✔✔-B) 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 - CORRECT ANSWER✔✔-C) 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 - CORRECT ANSWER✔✔-C) 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 - CORRECT ANSWER✔✔-C) Opportunistic
| | | | |
What is the term used to describe a loan that is not government-backed?
| | | | | | | | | | | |
A) Standard
|
B) Conventional
|
