Texas Real Estate Finance Final Exam Questions Correct and Verified Answers Graded A

• | P a g e

Texas Real Estate Finance Final Exam Questions Correct and Verified Answers Graded A

• Investor Pete specializes in obtaining properties from investors in financial

difficulty. What investment strategy does Pete practice?

• Arbitrage
• Special situation
• Opportunistic
• Development

Correct Answer: C) Opportunistic

• What is the term used to describe a loan that is not government-backed?
• Standard
• Conventional
• Normal
• Junior

Correct Answer: B) Conventional

• Al purchases a factory as an investment. He installs sprinklers in the building. What

risk control technique is he practicing?

• Avoiding
• Limiting
• Reducing
• Accepting

Correct Answer: C) Reducing

• Which statement about syndication is FALSE?
• Most investors belonging to syndicates invest a lot of their own money.

• | P a g e

• Syndication offers small investors the opportunity to invest in real estate ventures that

would otherwise be outside their financial means.

• A typical real estate syndicate combines the money of individual investors with the

management of a sponsor.

• 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.

• The cost recovery period for land improvements is how long?
• 15 years
• 25 years
• 27.5 years
• 30 years

Correct Answer: A) 15 years

• 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

Correct Answer: C) $15,000.00

• Why do lenders collect reserve funds at the property closing?
• To get a higher yield in their investment
• To be sure money will be available for tax and insurance purposes
• To have extra money that will accrue interest
• To hedge against increases in taxes or insurance premiums

Correct Answer: B) To be sure money will be available for tax and insurance purposes

• | P a g e

• What is a disadvantage of a graduated-payment loan?
• The borrower has no control over the payment increases.
• This plan could result in negative amortization.
• Graduated payment loans cannot be refinanced.
• A borrower cannot sell the property until the loan is converted.

Correct Answer: B) This plan could result in negative amortization.

• Which of these statements is TRUE about financing large apartment complexes?
• Loan terms are not longer than 20 years.
• When determining a loan amount, lenders ignore debt service as a criterion.
• As the size of the building increases, the loan ratio is generally reduced.
• 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.

• 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

• 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

• | P a g e

Correct Answer: C) $198,000.00

• What does the term "mixed-use development" mean?
• A subdivision with common areas for all residents
• More than one use for a single building
• An apartment complex attached to a city park
• An industrial park in a farming community

Correct Answer: B) 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?

• 30
• 50
• 75
• 95

Correct Answer: C) 75

• Which of the following is typically not a short-term mortgage loan?
• Single-family home loan
• Construction loan
• Home improvement loan
• Manufactured home loan

Correct Answer: A) Single-family home loan

• Which Texas agency licenses, regulates, and examines the trust- and insurance-

funded prepaid funeral contract sellers?

• Office of Consumer Credit Commissioner (OCCC)
• Texas Department of Banking
• Department of Savings and Mortgage Lending
• Texas Department of Insurance

Correct Answer: B) Texas Department of Banking