Question Bank 1 Flashcards
Question 1: Latent defects are defects that are unknown to the buyer and that are:
(1)immediately visible to the eye of the average person.
(2)required to be disclosed by the buyer to the seller.
(3)the responsibility of the licensee to discover.
(4)not discoverable upon a reasonable inspection of the property.
Answer: 4 Explanation: Option (4) is correct because a latent defect is a defect which is not immediately discoverable upon a reasonable inspection of the property. Option (1) is incorrect because a defect immediately visible to the eye is a patent defect. Option (2) is incorrect because a latent defect is required to be disclosed by the seller not the buyer. Option (3) is incorrect because a latent defect is the responsibility of the seller to disclose.
Question 2: Real property is said to be more subject to the effects of externalities than most assets. This vulnerability is principally due to:
(1)the relatively high cost of real property.
(2)the fact that land is fixed in supply.
(3)the immobility of land.
(4)the lack of effective government regulations.
Answer: 3 Explanation: Option (3) is correct because the immobility of land renders real property more subject real property to the effects of externalities than most assets. An owner cannot move his or her real property to a more desirable location with beneficial externalities. Similarly, an owner cannot move his or her property away from a location subject or negative externalities. This characteristic of land has the greatest effect on the value of a real property asset. Options (1), (2), and (4) are therefore incorrect.
Question 3: Which of the following is NOT a “real estate service” under the Real Estate Services Act?
(1)Constructing a commercial office building in Prince George for an owner who lives in British Columbia
(2)Collecting rents from tenants in a residential building in Burnaby for an owner who lives in Singapore
(3)Selling a Penticton property for an owner who lives in Victoria
(4)Assisting in the sale of a condominium unit located in Vancouver but owned by a person who lives in Calgary
Answer: 1 Explanation: Option (1) is correct because construction of a building is not a real estate service under the Real Estate Services Act. Option (2) is incorrect because collecting rents from tenants is defined as “rental property management services” which fall under “real estate services” in the Real Estate Services Act. Options (3) and (4) are incorrect because selling or assisting in the sale of properties is defined as “trading services” which fall under “real estate services” in the Real Estate Services Act.
Question 4: Which of the following statements is TRUE regarding sole proprietorships, partnerships, and corporations?
(1)Only sole proprietors need to report business income on their personal income tax returns.
(2)Only partners of a partnership need to report business income on their personal tax returns.
(3)Sole proprietorships, partnerships, and corporations are identical in terms of taxation of owner’s income.
(4)A corporation is a separate legal entity with its own income tax status.
Answer: 4 Explanation: Option (4) is correct; corporations are subject to income tax as a separate legal entity. Options (1) and (2) are incorrect because both sole proprietors and partners need to report their business income on their personal income tax returns. Option (3) is incorrect because corporations have different tax liability from proprietors and partners in that corporations are taxed as a separate legal entity.
Question 5: Consider a situation in which the principal is the seller and the agent is the listing agent. Which of the following events will terminate the real estate agency relationship?
(1)The principal’s refusal to accept an offer to purchase presented by the agent where the offer exactly complies with the requirements in the listing contract
(2)An act of the principal that is inconsistent with the continuation of the agent’s authority
(3)An offer by the agent to personally purchase the principal’s property
(4)The revocation of an offer to purchase by the offeror before the principal can accept it
Answer: 2 Explanation: Option (2) is correct because a real estate agency relationship depends on mutual consent, and therefore either party can terminate the relationship at will. An agent’s authority can be revoked orally or by conduct, and an act of the principal that is inconsistent with the continuation of authority terminates the relationship. Options (1) and (4) are incorrect because these scenarios do not terminate the agency relationship. They relate to the principal’s duty to pay real estate commission to the agent. Option (3) is incorrect because an agent’s offer to personally purchase the principal’s property is a conflict of interest. While such conflicts should be avoided, they do not terminate the agency relationship.
Question 6: A $170,000 mortgage loan, written at a nominal rate of 7% per annum, compounded annually, has a 2-year contractual term. Payments are made monthly and are based on a 20-year amortization period. Payments are rounded to the next higher dollar. What is the size of the required payments?
(1)$1,307
(2)$1,319
(3)$1,275
(4)$1,297
Answer: 4 Explanation: Find the payments, rounded up to the nearest dollar, based on the terms of the mortgage contract that is given in the question. Press Display 7 NOM% 7 1 P/YR 1 EFF% 7 12 P/YR 12 NOM% 6.784974 170000 PV 170,000 0 FV 0 240 N 240 PMT 1,296.15607
Question 7: Before adopting, amending, or repealing a zoning bylaw, a municipal council as a matter of policy will:
(1)obtain the approval of the federal government.
(2)obtain the approval of the provincial government.
(3)give three months’ written notice to the public.
(4)hold a public hearing.
Answer: 4 Explanation: Option (4) is correct because a municipal council will hold a public hearing before adopting, amending or repealing a bylaw. Options (1) and (2) are incorrect because the power to zone has been delegated to the municipality by the Province, and the Province has not retained the right to decide zoning matters. Option (3) is incorrect because a municipal council typically issues notice of a public hearing to neighbouring properties, but no specified written notice is required.
Question 8: Which of the following might be the subject of a real property appraisal?
(1)Air space rights
(2)A life insurance policy
(3)A diamond
(4)A home owner’s insurance policy
Answer: 1 Explanation: Option (1) is correct because the subject of a real property appraisal is the particular rights of ownership vested in a certain piece of real estate. Air space rights are a legal interest in real property. Options (2), (3), and (4) are incorrect because these do not describe legal interests in real property.
Question 9: When commencing a lawsuit in small claims court, the plaintiff may originate the action in which of the following jurisdictions?
(1)Where either the plaintiff resides or the defendant resides
(2)Where the plaintiff resides only
(3)Where either the cause of action arose or the defendant resides
(4)Where either the cause of action arose or the plaintiff resides
Answer: 3 Explanation: Option (3) is correct because the plaintiff may originate an action either in the jurisdiction where the circumstances giving rise to the claim arose, or in the jurisdiction where the defendant resides or carries on business. Options (1), (2), and (4) are incorrect for this reason.
Question 10: The principle that the person named on a particular certificate of title is entitled to a fee simple interest in that property, free from any condition or encumbrance that is not shown on title, is known as the:
(1)assurance principle.
(2)entitlement principle.
(3)fee simple principle.
(4)indefeasibility principle.
Answer: 4 Explanation: Option (4) is correct and (1), (2), and (3) are incorrect because the principle of indefeasibility means that if a person is named on a certificate of title as the owner of the fee simple estate in land, then that is conclusive proof, as far as the world is concerned, that he or she is entitled to that fee simple estate.
Question 11: In the event that the tenant abandons a commercial premises, the landlord is best advised to notify the tenant that the landlord intends to enter into possession of the premises solely to re-let on the tenant’s account:
(1)or else the doctrine of frustration will be applied to the situation.
(2)to avoid the tenant having grounds for an action in trespass.
(3)so that all of the landlord’s rights against the tenant will be preserved.
(4)because otherwise the landlord will be breaching the covenant of quiet enjoyment.
Answer: 3 Explanation: Option (3) is correct because if the landlord notifies the tenant of entry to re-let the premises, he will not lose his rights against the tenant. Option (1) is incorrect because the doctrine of frustration only applies when events outside of the control of the parties fundamentally change the subject matter of the contract. In this case, an abandonment of commercial premises would not frustrate the contract. Option (2) is incorrect because even if the landlord did not provide notice, the tenant would not have grounds for an action in trespass, as the landlord has a right to enter incidental to the right to levy a distress. Option (4) is incorrect because the covenant of quiet enjoyment protects the tenant’s right to the premises. Here, the tenant has abandoned the premises and the landlord would not be breaching the covenant by entering the premises.
Question 12: Which of the following elements are NOT considered in determining appropriate rates of interest on mortgage loans?
(1)The credit rating of the borrower
(2)The type of property used for security
(3)The amount of administrative attention required on the loan
(4)The amount of property insurance
Answer: 4 Explanation: Option (4) is correct because the amount of property insurance does not affect the risk to the lender, and therefore will not be considered in determining the appropriate rate. Options (1) and (2) are incorrect because the borrower’s credit rating and the type of property affect the risk of the loan to the lender. Option (3) is incorrect because a lender will set an appropriate rate of return based on the risk of lending, as well as the amount of administrative work required.
Question 13: Where a commercial tenancy is expressed as lasting for a period of one year and terminating on a fixed date, how much notice must be given to terminate the tenancy?
(1)No notice is required.
(2)Thirty days’ notice is required.
(3)Six months’ notice is required.
(4)Reasonable notice is required.
Answer: 1 Explanation: Option (1) is correct because a commercial lease for a fixed term terminates at the end of the term, on the specified end date. Options (2), (3), and (4) are incorrect for this reason.
Question 14: Which of the following is NOT a possible meaning of the term “common law”?
(1)The law created by the courts as opposed to statute law
(2)The principles derived from the common law courts in England as opposed to the principles derived from the courts of Chancery
(3)The laws created by the Federal government in accordance with its power under the Constitution
(4)The system of law which relies upon the principle of stare decisis for its development
Answer: 3 Explanation: Option (3) is the correct answer because it is not a possible meaning of the term “common law”. The body of laws created by the Federal government (i.e., by the federal legislature) is referred to as statute law. Option (1) is incorrect because the term “common law” often broadly refers to the law created by the courts, based in either common-law or equitable principles. Option (2) is incorrect because another possible meaning of “common law” is the original set of court-developed principles, which evolved separately from equitable principles, before these two courts merged. Option (4) is incorrect because the doctrine of stare decisis underlies the binding nature of precedent within the common law.
Question 15: On May 3, Mary offered to buy Harvey’s house, and the offer was stated to be open for acceptance until 2:00 p.m. May 4. Which one of the following statements is FALSE?
(1)Mary can revoke her offer prior to 2:00 p.m. on May 4.
(2)Mary’s offer represents an option agreement.
(3)If Harvey makes any changes to the offer, Mary’s original offer is terminated.
(4)If Mary mails a notice of revocation to Harvey, the offer is only revoked if the notice is received by Harvey before he accepts.
Answer: 2 Explanation: Option (2) is the correct answer because it is false. Separate consideration needs to be given to create an option agreement and keep the offer open. Option (1) is incorrect because it is true – revocation of an offer can happen at any time prior to the expiration of the offer. Option (3) is incorrect because any changes that Harvey makes to the offer would be considered a counter-offer. A counter-offer must be accepted by Mary, so it effectively terminates her original offer. Option (4) is incorrect because revocation must actually be communicated to Harvey. There is no “postal acceptance rule” with regards to revocation.
Question 16: Mike bought a house two years ago at which time he arranged a $110,000 mortgage. This loan was written at a nominal rate of 9.5% per annum, compounded semi-annually, with a 10-year term and amortization period, and monthly payments of $1,413. Today Mike has received an offer from Andre to buy his house for $50,000 cash plus assumption of his mortgage. If current mortgage rates for similar mortgages are 12% per annum, compounded semi-annually, what is the market value of Andre’s offer, rounded to the nearest dollar?
(1)$127,146
(2)$137,795
(3)$90,312
(4)$89,792
Answer: 2 Explanation: Find the new PV, given that the payments remain at $1,413, but the market value of the mortgage changes because the new rates are 12% per annum, compounded semi-annually. This rate is higher than the contract rate; therefore, we would expect the PV of the loan to be lower. Also, we only have 8 years, or 96 N, left on the mortgage. Press Display 12 NOM% 12 2 P/YR 2 EFF% 12.36 12 P/YR 12 NOM% 11.710553 96 N 96 1413 +/- PMT 1,413 0 FV 0 PV 87,795.457654 (market value of mortgage) + 50000 = 137,795.457654 (market value of the offer) The market value of the offer is $137,795.
Question 17: Which of the following contractual clauses in a mortgage could apply where the mortgage is otherwise in good standing but the borrower has not paid their property taxes?
(1)A “further charges” clause
(2)A “repayment” clause
(3)An “acceleration” clause
(4)An “omnibus” clause
Answer: 4 Explanation: Option (4) is correct because an omnibus clause allows the mortgagee to pay monies to be paid by the mortgagor (e.g., property taxes or strata charges) if unpaid and such amounts are added to the principal secured. Options (1), (2), and (3) are incorrect as these clauses are not applicable in such a situation.
Question 18: Which of the following items is NOT an example of a technological compatibility issue?
(1)A licensee cannot access a forms software because it is not compatible with her computer’s operating system.
(2)A licensee sends a form to a property seller from a mobile phone, and the seller is able to fill it out from her desktop computer.
(3)A prospective client can view a licensee’s website from his laptop, but the website is difficult to navigate from his smartphone.
(4)A licensee has to enter the same property information into three different programs because the programs are not compatible with one another.
Answer: 2 Explanation: Option (2) is the correct answer because the form is compatible across mobile devices, therefore it is not an example of a technological capability issue. Options (1), (3), and (4) are all examples of technological compatibility issues and are therefore incorrect.
Question 19: A developer is selling a development unit of subdivided land situated in British Columbia and the developer has obtained a written statement from the purchaser acknowledging that the buyer has read the appropriate disclosure statement. If the purchase agreement is then entered into, the buyer:
(1)may serve notice to rescind the contract no later than three days from the date of the contract.
(2)may serve notice to rescind the contract no later than seven days from the date of the contract.
(3)may serve notice to rescind the contract no later than one year from the date of the contract.
(4)may not rescind the contract.
Answer: 2 Explanation: Option (2) is correct because there is a seven day rescission right whereby the purchaser can serve written notice of rescission seven days after giving a written statement that they have read the disclosure statement. Options (1), (3), and (4) are incorrect for this reason.
Question 20: Which of the following statements is TRUE?
(1)Real estate appraisers must be licensed in British Columbia.
(2)With an unusual property or a market with few participants, the margin of error in an appraiser’s estimate of market value is always 5% or lower.
(3)A licensed real estate representative cannot give an appraisal of real property.
(4)The market value of real property as determined by an experienced appraiser may be greater than the ceiling price of the buyer.
Answer: 4 Explanation: Option (4) is true because the ceiling price of a buyer is subjective and could be any value; for example, far above the appraised value. Option (1) is incorrect as there are no licensing requirements for real estate appraisers. Option (2) is incorrect because the recognized margin of error for an appraisal of an usual property or a market with few participants will likely be much higher than 5% to 10%. Option (3) is incorrect as there is no legal requirement for a specific appraisal license or designation that would prevent a qualified licensed real estate representative from performing an appraisal.
Question 21: Alan is Peter’s agent with the express authority to rent Peter’s cottage for the summer months. However, in his capacity as Peter’s agent, Alan accepts an offer to purchase the cottage instead. When Peter discovers the incident, he is so impressed by the price, he calls and tells the buyers that he adopts Alan’s act. Which of the following is the result of these actions at law?
(1)Peter has ratified Alan’s actions, therefore the buyers cannot sue Alan for breach of warranty of authority.
(2)When Peter adopted Alan’s act, he created legal authority by means of revocation.
(3)Peter did not need to adopt Alan’s act because Alan had apparent authority.
(4)None of the above
Answer: 1 Explanation: Option (1) is correct because Peter has ratified the contract, which means he has consented to the unauthorized acts of the agent. Therefore, Peter is bound by the contract just as if Alan had been authorized to make it in the first place. He cannot sue for breach of warranty of authority. Option (2) is incorrect because revocation refers to terminating authority, not creating it. Option (3) is incorrect because apparent authority arises from agency by estoppel. Agency by estoppel is not present here, as there was no representation made by Peter, reliance by a third party and an alteration of the third party’s position based on that reliance. Option (4) is incorrect because Option (1) is true.
Question 22: You have a partially completed appraisal report that you need to fill in. The subject property has 4 bathrooms and an air conditioner. The house next door is similar in all respects except for the number of bathrooms and air conditioner. It sold for $334,000 and was adjusted +$6,700 for bathrooms and +$5,500 for the air conditioner. If the market value of a bathroom is $6,700 and the market value of an air conditioner is $5,500, you can conclude that this comparable has:
(1)5 bathrooms and no air conditioner.
(2)3 bathrooms and an air conditioner.
(3)3 bathrooms and no air conditioner.
(4)4 bathrooms and an air conditioner.
Answer: 3 Explanation: Option (3) is correct because a positive adjustment of $6,700 for bathrooms indicates that the comparable has one less bathroom than the subject property (3 bathrooms), and a positive adjustment of $5,500 for the air conditioner indicates that the comparable does not have an air conditioner. Options (1), (2), and (4) are incorrect for this reason.
Question 23: An appeal from the small claims court is to which of the following?
(1)The British Columbia Supreme Court
(2)The Federal Court of Appeal
(3)The British Columbia Court of Appeal
(4)The Small Claims Court of Appeal
Answer: 1 Explanation: Option (1) is correct because an appeal from small claims court is to the British Columbia Supreme Court. Options (2), (3), and (4) are incorrect for this reason.
Question 24: What will be the maximum loan granted on a commercial building with a lending value of $5,550,000 and yielding a net operating income of $360,000 per year, where the lender requires a debt coverage ratio of 1.35 and a 60% loan-to-value ratio? The loan will be amortized over 20 years with annual payments and the interest rate is 7% per annum, compounded annually. Round your answer to the nearest $1,000.
(1)$2,814,000
(2)$3,330,000
(3)$3,592,000
(4)$2,825,000
Answer: 4 Explanation: The maximum loan granted will be the lower amount of the loan-to-value constraint and the DCR constraint. Using the DCR constraint, calculate the maximum allowable payments.
Question 25: Zelda was in a good mood one day, and she went over to her next door neighbour Herb’s house and cleaned all his gutters. When Herb returned home from work, he was thrilled by what Zelda had done and he said, “Zelda, I am going to give you a case of wine for doing this.” Weeks passed, and finally Zelda asked Herb when she could expect to receive her wine. Herb said that he had changed his mind. Zelda is now furious and wants to sue Herb in small claims court for a breach of contract. Which of the following statements is most relevant to these facts?
(1)An invitation to treat is distinguishable from an offer because it cannot form a binding contract, if accepted.
(2)A voidable contract exists until it is repudiated by the party entitled to do so.
(3)Past consideration is no consideration.
(4)Breach of a condition of a contract entitles the injured party to terminate the contract.
Answer: 3 Explanation: Option (3) is relevant and therefore correct because although Herb offered a case of wine as present consideration, the cleaning of the gutters was past consideration. Since past consideration is no consideration, no contract formed between Herb and Zelda. Option (1) is incorrect because an invitation to treat is typically an advertisement or other statement from one party inviting another party to make a legal offer. No invitation to treat appears in this scenario. Option (2) is incorrect because there is no voidable contract to be repudiated on the facts. Option (4) is not relevant because the issue is whether there was consideration to give rise to a valid contract in the first place.
Question 26: Which one of the following is the generally accepted accounting principle that determines what amount will be recorded on the company’s balance sheet as the value of a building at the time of purchase?
(1)The objectivity principle
(2)The consistency principle
(3)The revenue recognition principle
(4)The cost principle
Answer: 4 Explanation: Option (4) is correct because the cost principle states that a company must record the value of an asset as the price paid at the time of acquisition. Option (1) is incorrect because the objectivity principle states that all values must be objective and verifiable. Option (2) is incorrect because the consistency principle states that once a company adopts a certain accounting policy, they should continue to use that same policy. Option (3) is incorrect because the revenue recognition principle states that revenue must be recorded when it is earned, not when cash is received.
Question 27: In order for a trading services representative to be liable for a negligent misrepresentation, certain facts must be proven. Which of the following is NOT a requirement for establishing a claim based upon negligent misrepresentation?
(1)A contractual relationship must exist between the representative and the person to whom the representation is made.
(2)The statement may be either one of fact or an opinion given by the representative.
(3)The statement must be reasonably relied upon by the person to whom it was made, and damage must result from that reliance.
(4)The representative must make no clear disclaimer of liability for the accuracy of the statement.
Answer: 1 Explanation: Option (1) is correct because a contractual relationship does not need to exist between the parties when a negligent misrepresentation is made. For example, a licensee acting for a seller could be held liable for negligent misrepresentation for a statement made to a buyer despite having no contractual relationship with the buyer. Option (2) is incorrect because the statement made may be fact or opinion as the representative is a skilled person and the other party may reasonably rely on it. Option (3) is incorrect because there is a requirement of reliance on the statement and resulting damage from that reliance to establish a claim of negligent misrepresentation. Option (4) is incorrect because a representative can make a clear disclaimer that they will not be liable for the accuracy of the statement.
Question 28: Sally, an appraiser, has been asked to provide an estimate of the market value of a farmhouse and the surrounding property. Which one of the following would NOT affect her estimate of market value?
(1)One of the pastures on the property has been leased for two years to the owner of a racehorse.
(2)The owner of the farmhouse is anxious to move and would like to sell as soon as possible.
(3)The farmhouse and its surrounding property are located between the main road and the next door neighbour’s property. Therefore, the neighbour gets the benefit of access to his house by means of a road that runs through the farmhouse property.
(4)Homehold Finance Company recently loaned some money, at a below-market interest rate, to the owner of the farmhouse and secured the debt with a mortgage on the farmhouse. This mortgage is assumable.
Answer: 2 Explanation: Option (2) is the correct answer as it is the only option listed that does not affect the legal rights of ownership of the property. Options (1), (3), and (4) represent legal interests or charges that will affect the appraiser’s estimate of market value.
Question 29: The book value of an asset can be BEST defined as which of the following?
(1)The purchase price of that asset less any depreciation taken to date
(2)The price for which a similar asset could currently be purchased in the market
(3)The price at which the asset could be sold
(4)A value that is subjectively arrived at by an appraiser
Answer: 1 Explanation: Option (1) is correct because the book value of an asset is calculated as the purchase price of the asset, less all of the accumulated depreciation to date. Options (2) and (3) are incorrect as they both refer to the market value of the asset, and Option (4) is incorrect as it refers to the appraised value of an asset.
Question 30: In the situation where a residential tenant under a fixed term tenancy abandons the premises prior to the end of the term, the obligation imposed on the landlord to try to re-rent the premises as quickly as possible is referred to as:
(1)the duty to mitigate damages.
(2)the covenant of quiet enjoyment.
(3)derogation from the grant.
(4)the doctrine of interesse termini.
Answer: 1 Explanation: Option (1) is correct because the duty to mitigate damages means that the innocent party must try to reduce the loss suffered as a result of the breach. In this case, reducing the loss of income from the rent would occur by re-renting the premises as soon as possible. Options (2), (3), and (4) are incorrect as they refer to other legal principles.
Question 31: Scrambling credit card information into an unreadable format is BEST known as which of the following?
(1)Cryptomizing
(2)Digitizing
(3)Encrypting
(4)Instilling
Answer: 3 Explanation: Option (3) is correct because cryptomizing information protects it by encrypting it into an unreadable format. Only those with a secret key or code can decipher the information. Options (1), (2), and (4) are incorrect for this reason.
Question 32: Which of the following most correctly completes the phrase: “A mortgage is …”?
(1)a contract, evidence of a loan, and required to be registered to be effective between the parties.
(2)a contract, evidence of a loan, and security for a loan.
(3)a contract, and a loan.
(4)a contract, evidence of a loan, security for a loan, and required to be registered to be effective between the parties.
Answer: 2 Explanation: Option (2) is correct as it describes a mortgage. Options (1) and (4) are incorrect because a mortgage does not necessarily need to be registered to be effective between the parties. This principle is embodied in section 20(1) of the Land Title Act. Option (3) is incorrect because a mortgage is not a loan. It is an interest in land created by contract as security for a loan made by a lender to the borrower.
Question 33: Which of the following statements is FALSE?
(1)An appraisal mistake of $3,000 on a $276,000 house is beyond the margin of allowable error.
(2)Form reports often meet the needs of financial institutions, insurance companies, and government agencies.
(3)The burden of proof is on the appraiser to explain an apparent over-valuation of a property.
(4)An appraiser may be responsible to any party who reasonably relies on the appraisal report for the purpose it was conducted.
Answer: 1 Explanation: Option (1) is false and therefore correct, because the allowable margin of error is 10%, and the $3,000 error falls within this margin. Options (2), (3), and (4) are incorrect because these statements are all true.
Question 34: An investment corporation purchased an apartment building on March 31, 2011 for $2,800,000. Of that $2,800,000, $1,700,000 was attributed to the building and $1,100,000 to the land. Depreciation was to be claimed at $50,000 per year for the life of the building. The building component of the property was valued on March 31, 2021, to be $2,400,000. What would be the net amount of the building appearing on the corporation’s Statement of Assets and Liabilities as at March 31, 2021?
(1)$1,700,000
(2)$1,200,000
(3)$2,400,000
(4)$1,900,000
Answer: 2 Explanation: Option (2) is correct. Land is not considered to be a depreciable asset and thus, depreciation expense is never taken on land. Depreciation expense is only taken on the building.
Question 35: Chadwick is the listing licensee for a house. According to the Real Estate Services Rules, Chadwick does NOT need to provide his client, the seller, with a Disclosure of Interest in Trade form if the party making the offer to purchase the house is:
(1)a corporation in which Chadwick holds 20% of the shares.
(2)Chadwick’s wife.
(3)Chadwick himself.
(4)Chadwick’s friend and tennis partner.
Answer: 4 Explanation: Option (4) is correct because a licensee is required to provide a Disclosure of Interest in Trade form when there is an offer by the licensee to directly or indirectly acquire real estate. An offer by Chad’s friend is neither of these. Option (1) is incorrect because an offer by a corporation in which Chad owns over 5% of the shares is an offer to indirectly acquire real estate. Option (2) is incorrect because an offer by Chad’s wife is also an offer to indirectly acquire real estate. Option (3) is incorrect because it is a direct offer to acquire real estate. In these three situations, Chad must provide a Disclosure of Interest in Trade form.
Question 36: An investor plans to pay $200,000 for a vacant lot that the investor feels will sell at the end of 3 years for $280,985.60. What yield, expressed as anannual rate with semi-annual compounding, will the investor earn? (Assume that these are the only cashflows for this investment.)
(1)11.66%
(2)11.39%
(3)12.00%
(4)10.00%
Answer: 1 Explanation: Find the nominal rate per year based on the given PV and FV. Press Display 2 P/YR 2 200000 +/ PV 200,000 0 PMT 0 6 N 6 280985.6 FV 280,985.6 I/YR 11.660105
Question 37: A revocation of an offer is effective when:
(1)a notice of revocation is mailed.
(2)it is communicated to the offeree.
(3)it is reduced to writing.
(4)a notice of revocation is filed.
Answer: 2 Explanation: Option (2) is correct and Options (1), (3), and (4) are incorrect because a revocation of an offer is only effective when it is communicated to the offeree.
Question 38: Which of the following falls within the category of law called “public law”?
(1)Breach of contract
(2)Trespass
(3)Constitutional law
(4)None of the above
Answer: 3 Explanation: Option (3) is correct because “public law” deals with the Constitution and matters between private individuals and the state. Options (1) and (2) are incorrect because these fall under the category of “private law”.
Question 39: Which of the following is NOT required in a notice of the end of the tenancy agreement by a tenant under the Residential Tenancy Act?
(1)Written notice signed by the tenant
(2)The address of the premises for which the notice is given
(3)The occupations of the parties
(4)The date of termination of the tenancy
Answer: 3 Explanation: Option (3) is correct because the occupation of the parties is not required in a notice of the end of the tenancy agreement by a tenant. Options (1), (2), and (4) are incorrect they are all required in a notice of the end of the tenancy agreement.
Question 40: Which one of the following is NOT an appraisal approach/method?
(1)The residual method
(2)The cost approach
(3)The income approach
(4)The depreciation approach
Answer: 4 Explanation: Option (4) is the correct answer as the depreciation approach is not a method of appraisal. Options (1), (2), and (3) all represent valid appraisal approaches and are therefore incorrect.
Question 41: Adel is a trading services licensee acting for a developer who is purchasing large blocks of land in Vancouver for a large development. Adel purchases some lots in the area for himself and discloses his identity to the sellers as required by the Real Estate Services Act on those purchases. He does not mention the purchases to his principal, the developer. Shortly thereafter, Adel makes a profit on the resale of his lots due to the effects of his principal’s development on the real estate market. What is this an example of?
(1)A good business deal that is perfectly acceptable at law
(2)A use of information that will always, even with disclosure to the principal, be prohibited
(3)A profit for which Adel must account to his principal
(4)Adel’s activities are examples of both (2) and (3)
Answer: 3 Explanation: Option (3) is correct because there is a duty on the real estate licensee to tell his or her client everything relevant to the transaction within the agent’s knowledge. In this case, because the licensee has a personal interest in the transaction, he must disclose it to the client, but the transaction is not automatically prohibited. Options (1), (2), and (4) are therefore incorrect.
Question 42: Which of the following statements about the principles that apply to all strata developments in British Columbia is TRUE?
(1)The Strata Property Act generally does not apply on First Nation reserve land, subject to some exceptions.
(2)The strata division of the Civil Resolution Tribunal conducts random audits to verify the compliance of strata corporations with strata legislation.
(3)Residential strata developments that consist of 3 or fewer units are not required to hold annual general meetings.
(4)Commercial and industrial strata developments are subject to a separate and enhanced subset of compliance requirements under the Strata Property Act.
Answer: 1 Explanation: Option (1) is correct because First Nation reserve land constitutes an exclusively federal undertaking under the Constitution Act, 1867, and therefore, provincial legislation such as the Strata Property Act (“SPA”) generally does not apply on such lands, subject to the leasehold landlord provisions in the SPA. Option (2) is incorrect because while the owners may apply to the Civil Resolution Tribunal (CRT) to make binding decisions when a dispute arises, the CRT’s role does not involve proactive efforts such as random audits to ensure compliance. Option (3) is incorrect because all strata corporations are required to hold annual general meetings to comply with the SPA, regardless of their size. There are, however, options for strata corporations to waive the requirement to hold an annual general meeting. Option (4) is incorrect because the same fundamental legal principles apply to all strata developments, and commercial and industrial strata developments are not subject to enhanced compliance requirements under the SPA.
Question 43: In the context of appraisal, which one of the following properties is MOST likely to possess latent value?
(1)A three-storey condominium development that has recently been completed, all units having been sold before completion of construction
(2)A single-family residence that is the only house on the block not yet converted to the commercial use that is permitted by zoning
(3)A large shopping mall/office tower complex that occupies a location at the intersection of two main streets in a British Columbia municipality
(4)A sports store that is built on land zoned for commercial use
Answer: 2 Explanation: A property possesses latent value if its current state does not represent its highest and best use. Option (2) possesses latent value as the property would have more value if the single-family home was removed and a commercial use building was developed. Options (1), (3), and (4) are incorrect, as these properties are currently being utilized at their highest and best use.
Question 44: Which of the following statements about the criminal offence of misleading advertising in section 52 of the Competition Act is FALSE?
(1)The offence involves the making of a representation to the public that is false or misleading in a material respect, for the purpose of promoting any business interest.
(2)To escape liability, one must show that they honestly believed that the representations were not false or misleading and exercised due diligence in making sure that was the case.
(3)A “representation” to the public includes print and digital representations, but not oral representations.
(4)The requirement that the representation be false in a material respect refers to the whether the representation would have a real effect on an ordinary consumer’s buying decision.
Answer: 3 Explanation: Option (3) is false and therefore correct, because the representations covered by section 52 can be by “any means whatsoever” and can include oral representations. They are not limited to just print and digital representations. Options (1), (2), and (4) are true statements and are therefore incorrect.
Question 45: Which of the following is TRUE? In a strata plan, the term “unit entitlement” refers to:
(1)the value of each condominium unit relative to other units.
(2)the share of the value upon demolition owned by each condominium unit owner.
(3)the share of real property taxes payable by each condominium unit owner.
(4)the number used to calculate a strata owner’s contribution to the common expenses of the strata corporation.
Answer: 4 Explanation: Option (4) is correct as it describes the term “unit entitlement”. Options (1), (2), and (3) are false because unit entitlement refers to determining each owner’s proportionate, undivided ownership share of the common property in the strata plan. It is used to determine the share of the strata corporation’s expenses and liabilities for which each strata lot owner is responsible.
Question 46: A revocation of an offer is effective when which of the following occurs?
(1)A notice of revocation is mailed
(2)It is communicated to the offeree
(3)It is reduced to writing
(4)A notice of revocation is filed
Answer: 2 Explanation: LTV = 80% Lending Value = $270,000 Maximum loan under lender’s LTV criteria = 0.80 $270,000 = $216,000
Question 47: Brad Jones, a prospective home buyer, has applied for a mortgage loan to finance the purchase of a townhouse listed at $276,000. The market value of the townhouse is $275,000 and the lender has assigned a $270,000 lending value to it. Assume that the monthly payments on Mr. Jones’ loan are agreed to be $1,120 and annual property taxes are $2,500. Calculate the minimum level of the borrower’s annual income necessary to support these monthly payments, if the lender’s gross debt service ratio is 32%.
(1)$50,000.00
(2)$75,000.00
(3)$49,812.50
(4)$63,467.20
Answer: 3 Explanation: Find the minimum borrower’s income necessary given the monthly payments of $1,120 and annual property taxes of $2,500.
Question 48: The British Columbia Financial Services Authority does NOT have to:
(1)cancel a licensee’s licence.
(2)use funds from administrative penalties for non-educational purposes.
(3)order unlicensed individuals to pay a monetary penalty for providing real estate services without a licence.
(4)apply to court to appoint a receiver over the property of a licensee.
Answer: 2 Explanation: Option (2) is correct because the BC Financial Services Authority (BCFSA) may only use funds from administrative penalties for educational purposes, and specifically, to educate the public, licensees, and other participants in the real estate industry about the operation and regulation of the industry and issues related to real estate and real estate services. The remaining options are incorrect because BCFSA has authority to exercise those powers.
Question 49: Johnny Collins tried to design and build his new home to be as energy efficient in heating as possible throughout the cold winter months. Which one of the following decisions was a mistake?
(1)Using metal framed windows with a thermal break
(2)Including an air to heat exchanger to warm incoming cold exterior air
(3)Following R-2000 standards
(4)Installing sliding glass doors to a north-facing patio
Answer: 4 Explanation: Option (4) is correct because it is an example of an inefficient use in heating. Large windows and doors facing south are desirable to make a home as energy efficient as possible. Options (1), (2), and (3) represent characteristics of an energy efficient home and are therefore incorrect.
Question 50: In British Columbia, a lender who holds a mortgage registered as a charge on an otherwise clear title to a borrower’s land has:
(1)the equitable right to redeem the mortgage.
(2)an interest in land created by contract.
(3)priority over every other subsequent creditor and lienholder in respect of the mortgaged land.
(4)the right to retain the mortgagor’s duplicate certificate of title to the mortgaged land until the loan is repaid in full.
Answer: 2 Explanation: Option (2) is correct because it describes a mortgage. A mortgage is not a loan itself; it is an interest in land that provides security for the loan. Option (1) is incorrect because the first registered mortgage provides the lender with a legal (rather than an equitable) right of redemption. This is subject to the borrower’s equity of redemption, which allows the borrower to repay the mortgage after the contractual date for payment. Option (3) is incorrect because a mortgage lender can lose its priority over certain charges even though the mortgage was registered first. Examples of these include builders liens, Strata Property Act judgments, property tax liens, wage claim certificates and workers compensation claims. Option (4) is incorrect because retaining the mortgagor’s duplicate certificate of title to the land creates an equitable mortgage. The lender cannot register this equitable mortgage as a charge at the land title office.
Question 51: When a mortgagor grants a mortgage after having a registered first mortgage on title, the mortgagor has created:
(1)an equitable mortgage.
(2)a legal mortgage.
(3)an assignment of the first mortgage.
(4)a vendor take-back mortgage.
Answer: 1 Explanation: Option (1) is correct. The first registered mortgage is a legal mortgage, while any subsequent registered mortgage will be an equitable mortgage charging the borrower’s equity of redemption. Option (2) is therefore incorrect. Option (3) is incorrect because an assignment of a first mortgage is done by the lender to a third party, who is then entitled to enforce the lender’s rights directly against the borrower. Option (4) is incorrect because a vendor take-back mortgage occurs only where a purchaser of property grants a mortgage interest to the vendor of that property.
Question 52: Which of the following statements about fee simple estate is TRUE?
(1)Fee simple is a type of leasehold estate.
(2)If a fee simple owner dies without a will, the property will escheat to the crown.
(3)The term fee simple indicates an estate that can be inherited without qualification.
(4)The fee simple estate was created by the Torrens system of registration.
Answer: 3 Explanation: Option (3) is correct because originally, the word “fee” meant that the estate could be inherited, and the word “simple” meant that there was no qualification on the type of heir that could inherit. Option (1) is incorrect because a fee simple estate is a greater interest in land than a leasehold estate, which time-limited. Option (2) is incorrect because if the owner of the estate in fee simple does not dispose of a property by will, the owner’s heirs will inherit the estate in fee simple. Option (4) is incorrect because the concept of fee simple was created before the Torrens system of registration.
Question 53: In British Columbia, there are three basic requirements for an easement. Which one of the following is a requirement?
(1)The easement must be negative in nature.
(2)The easement must accommodate the servient tenement.
(3)The dominant and servient tenements must be owned by different parties.
(4)The easement must be capable of forming the subject matter of a grant.
Answer: 4 Explanation: Option (4) is correct. The form the subject matter of a grant, the easement must be capable of reasonably exact definition, and the party who grants and whose land benefits from the easement must have the necessary capacity to be grantor and grantee. Option (1) is incorrect because an easement can be either positive or negative in nature (in comparison to a restrictive covenant, which must be negative in nature). Option (2) is incorrect because the easement must accommodate the dominant tenement, not the servient tenement. Option (3) is incorrect because one party can own both the dominant and servient tenement provided that they are two different parcels of land.
Question 54: A pre-approved mortgage for a residential property:
(1)will always guarantee the borrower’s interest rate for 365 days.
(2)calculates the minimum loan that the borrower qualifies for.
(3)is based on the borrower’s current financial situation and a satisfactory credit review.
(4)is based on a formula provided by the Fair Isaac Corporation.
Answer: 3 Explanation: Option (3) is correct because mortgage lenders may pre-approve a potential borrower for a mortgage based on his or her current financial situation and a satisfactory credit review. Options (1), (2) and (4) are incorrect.
Question 55: Which appraisal approach/method would be MOST suitable to appraise a new pulp mill in Squamish?
(1)Market comparison
(2)Residual
(3)Income
(4)Cost
Answer: 4 Explanation: Option (4) is correct because a pulp mill in Squamish is likely very unique without any comparable properties, so the cost approach must be used. Options (1), (2), and (3) are incorrect because these are likely inappropriate methods to appraise such a property, given its unique character.
Question 56: The court will not normally grant the remedy of specific performance where:
(1)the plaintiff is a limited company.
(2)the defendant is without means.
(3)damages are considered to be an adequate remedy.
(4)the contract has already been partially performed.
Answer: 3 Explanation: Option (3) is correct because the overriding principle of specific performance is that it will not be exercised when damages are an adequate remedy. Options (1), (2), and (4) are incorrect because they are irrelevant to the determination of an award of specific performance.
Question 57: Coralee asked Tim to sell her car and her mountain bike for her while she was away on holiday. She gave Tim the keys to the car and told him to accept any price in excess of $1,700 for the car and $300 for the bike. Which of the following is an example of implied authority?
(1)Tim sold the car to Cherise for $1,750.
(2)Before Cherise was willing to purchase the car, she insisted that she test drive the car and have it checked by the automobile association, which Tim allowed her to do.
(3)When Cherise was viewing the car, she noticed a small roof rack sitting in Coralee’s garage. She said that she would like to buy the rack to carry her camping gear on Coralee’s car. Tim said that he would include the rack in the sale for an additional $75, to which Cherise agreed. When Coralee returned, she told Tim that she was pleased that he had sold the rack, since she had no more use for it.
(4)After advertising the bike for sale at $300 in vain, Tim sold the bike to Sandra, the only person to make an offer, for $260. Coralee accepted the money when she returned, although she was disappointed not to get the full price.
Answer: 2 Explanation: Option (2) is correct because the act of test driving the car and having it inspected is necessary in order to enable Tim to carry out the express authority and is incidental to that authority. It is therefore an example of implied authority. Option (1) is incorrect because it is an example of express authority. Option (3) and (4) are incorrect because they are examples of acts that Tim does not have actual or apparent authority to do. Therefore, authority cannot be implied for these acts.
Question 58: In order to advertise to a wider audience, a licensee has decided to create his own website. Based on the information in the Knowledge Base Guidelines for Internet/Social Media Advertising, which of the following is a general guideline that the licensee should follow?
(1)The name of the brokerage can be excluded in online advertising.
(2)He can advertise another licensee’s listings directly on his own website without permission from the listing brokerage in order to increase business.
(3)If the licensee is a member of a team, the team name must be included on the licensee’s website but not in social media advertising.
(4)If linking to an outside database of available properties, it should be clear to consumers which listings are his and which are not.
Answer: 4 Explanation: Option (4) is the correct answer because consumers should clearly be able to differentiate a licensee’s own listings from other available properties. Option (1) is incorrect because the name of the brokerage must appear in a prominent and easily readable form on all internet and social media advertising vehicles. Option (2) is incorrect because licensees should NOT advertise other licensees’ listings directly on their own website without the approval of the listing licensee. Option (3) is incorrect because if a licensee is a member of a team, the team name has to be included in social media advertising as well as on the licensee’s website.
Question 59: Common property in a strata title development is:
(1)owned equally by all members of the strata corporation.
(2)owned by the strata corporation.
(3)owned jointly by the strata corporation and the strata council.
(4)any property not designated as strata lots on a strata plan.
Answer: 4 Explanation: Option (4) is correct because section 1 of the Strata Property Act defines common property as any property not designated as strata lots on a strata plan. Options (1), (2), and (3) are incorrect because common property is owned by the members of the strata corporation, each in the proportion set out in the Schedule of Unit Entitlement.
Question 60: Which of the following is/are included in the residential borrower qualification process?
(1)Collecting information about the borrower and the property
(2)Evaluating the applicants’ ability to meet the terms of a mortgage and the amount of their income
(3)Analyzing the real property pledged as security for the loan and the applicant’s credit report
(4)All of the above
Answer: 4 Explanation: Option (4) is the correct answer; Options (1), (2), and (3) are all included in the residential borrower qualification process. Lenders engage in many types of analysis to qualify a borrower to reduce the risk of lending.
Question 61: Which of the following accurately summarizes the “requirement of writing” contained in section 59 of the Law and Equity Act?
(1)A contract respecting land must be in writing or it is void.
(2)A contract respecting land can never be enforced against a party who has not signed it.
(3)A contract for the sale of land must be contained in one written document.
(4)None of the above three statements accurately summarizes the requirement of writing.
Answer: 4 Explanation: Option (4) is correct because none of the other statements accurately describe the requirement of writing. Option (1) is incorrect because an unwritten contract or disposition of land can be enforced against a party who has done or acquiesced in an act that indicates that contract or disposition has been made. It can also be enforced if the person alleging the contract or disposition has changed his position in reliance on such an act and it would be inequitable not to enforce the contract or disposition. Given this, Option (2) is also incorrect. Option (3) is incorrect because there is no requirement that a contract for the sale of land be contained in one written document.
Question 62: Which of the following is TRUE? The “possession date” in a standard form contract of purchase and sale is:
(1)the date on which adjustments are made between the parties for property taxes, etc.
(2)the date on which the buyer takes vacant possession of the property, subject to any existing tenancy agreements.
(3)always the same day as the completion date.
(4)the date on which the buyer must assume responsibility for risk of loss or damage to the property.
Answer: 2 Explanation: Option (2) is correct. Option (1) is false as the date on which adjustments are made between the parties for property taxes, interest, rent and other appropriate items is known as the adjustment date. Option (3) is false because the possession date is not always the same date as the completion date. Registration (performed on the completion date) takes some time to effect, so to set the possession date on the same date as the completion date may not be ideal. Option (4) is false because the buyer assumes responsibility for risk of loss or damage to the property on the completion date, when the buyer is registered on title at the Land Title Office.
Question 63: The “term” of a mortgage ALWAYS:
(1)necessitates the payment of an outstanding balance payment.
(2)specifies the duration of the contractual relationship.
(3)is equal to the amortization period.
(4)is shorter than the amortization period.
Answer: 2 Explanation: Option (2) is correct because the term of a mortgage is the contractual period for which a borrower will make constant payments to the lender. Option (1) is incorrect because a partially amortized mortgage would not require payment of an outstanding balance at the end of the term. This is only required in the instance where a mortgage is fully amortized and the term length equals the amortization period. Option (3) is incorrect because incorrect because the term length of a partially amortized mortgage would be less than the amortization period. Option (4) is incorrect because the term length of a fully amortized mortgage would be equal to the amortization period.
Question 64: Which of the following options BEST describes a building scheme?
(1)It is a special example of a group of easements attaching to two or more lots in a development.
(2)It is a set of restrictions on a development used to maintain uniformity.
(3)It is used by developers to protect the buyer’s rights to build according to their own tastes.
(4)It is a document filed with the disclosure statement on a conversion of an existing building to a condominium.
Answer: 2 Explanation: Option (2) is correct because a building scheme is defined in the Land Title Act as a set of restrictive covenants imposed on two or more lots within a particular subdivision, generally used to maintain uniformity of the lots to protect their value. Option (1) is incorrect because building schemes are used to impose restrictions on all owners of the affected properties, while easements are granted to confer rights to the dominant tenement. Option (3) is incorrect because the restrictive covenants in a building scheme will disallow the buyer from building to their own tastes if these contravene the covenants. Option (4) is incorrect because a building scheme is registered by a Declaration of Creation of a Building Scheme which is separate from any required disclosure statement.
Question 65: A mortgage broker is arranging a fully amortized mortgage loan with a face value of $240,000. The loan contract is to be written at 8% per annum, compounded semi-annually. The repayment of the loan is to take place over 15 years with monthly payments. The borrower is to receive $228,400 as a result of a broker’s commission of $8,000, a survey fee of $2,000, an appraisal fee of $600, and legal fees of $1,000, all of which are to be deducted from the face value. Calculate the cost of funds advanced to the borrower, expressed as an effective annual interest rate (j1).
(1)9.683451%
(2)8.996794%
(3)10.556801%
(4)9.051965%
Answer: 4 Explanation: Calculate the required payments according to the loan contract, then calculate the cost of funds advanced using a present value that is net of commission, appraisal, survey, and legal fees. Press Display 8 NOM% 8 2 P/YR 2 EFF% 8.16 12 P/YR 12 NOM% 7.869836 240000 PV 240,000 180 N 180 0 FV 0 PMT 2,275.567074 2275.57 +/ PMT 2,275.57 228400 PV 228,400 ($240,000 $8,000 $2,000 $600 $1,000) I/YR 8.696795 (j12) EFF% 9.051965 (j1)
Question 66: A owes B $1,000. B assigns the debt to C. For this to be a statutory assignment, three requirements are necessary. Which one of the following is NOT one of them?
(1)The assignment from B to C must be for the entire amount.
(2)The assignment from B to C must be in writing.
(3)The notification from C to A must be in writing.
(4)The notification from A to B must be in writing.
Answer: 4 Explanation: Option (4) is correct and Options (1), (2), and (3) are incorrect because the three requirements for a statutory assignment are that it is in writing, it is absolute and unconditional, and notice of the assignment is given to the original promissor.
Question 67: You have a partially completed appraisal report that you need to fill in. The subject property has 4 bedrooms and 5 bathrooms. The house next door is similar in all respects except for the number of bedrooms and bathrooms. It sold for $321,000 and has 3 bedrooms and 4 bathrooms. If the market value of a bedroom is $3,200 and the market value of a bathroom is $5,700, this comparable will have to be adjusted for bedrooms and bathrooms by:
(1)+$3,200 and –$5,700 respectively.
(2)+$3,200 and +$5,700 respectively.
(3)$0 and –$6,400 respectively.
(4)–$3,200 and +$6,400 respectively.
Answer: 2 Explanation: Option (2) is correct because in the comparable property has 1 fewer bedroom and 1 fewer bathroom. Therefore, in relation to the subject property, this comparable will need an adjustment of +$3,200 for 1 bedroom and +$5,700 for 1 bathroom. Options (1), (3), and (4) are incorrect for this reason.
Question 68: Ally has recently received an interest only loan for $75,000 to operate a food cart in downtown Vancouver. The loan has an interest rate of 6% per annum, compounded monthly, and requires interest only payments every month. How much are the monthly interest only payments that Ally makes if the duration of the loan is two years?
(1)$750
(2)$500
(3)$375
(4)$1,000
Answer: 3 Explanation: Press Display 6 I/YR 6 12 P/YR 12 75000 PV 75,000 75000 +/FV 75,000 1 N 1 PMT 375 Alternative Solution Press Display 6 ÷ 12 = 0.5 % 0.005 75000 = 375
Question 69: In answer to the ringing of her doorbell, Kim opened the front door of her house to find a door-to-door vacuum salesperson on her doorstep. The salesperson walked into Kim’s house uninvited. Before Kim could stop him, he dumped some dirt onto her carpet for use in a demonstration of the vacuum cleaner he was selling. The dirt stained Kim’s carpet. Her lawyer correctly advises Kim that:
(1)the salesperson may be liable in negligence for the damage he caused to the carpet.
(2)the salesperson may be liable to Kim under British Columbia’s Occupiers Liability Act.
(3)Kim will not recover any damages in a lawsuit against the salesperson because he was a trespasser.
(4)she will probably succeed in a lawsuit based on the tort of private nuisance.
Answer: 1 Explanation: Option (1) is correct because the salesperson likely has a duty of care towards Kim when coming onto her property and demonstrating something to her. He may be found to have breached the standard of care by failing to take reasonable precautions not to damage her property. Option (2) is incorrect because the salesperson is not an occupier, and the Occupiers Liability Act deals only with liability to an occupier. Option (3) is incorrect because the fact that the salesperson is a trespasser does not bar Kim from recovering damages stemming from his conduct on her property. Option (4) is incorrect because the salesperson’s actions are more akin to trespass than private nuisance. The fact that the salesperson entered onto Kim’s land and placed something upon it and that it was an isolated occurrence point towards trespass rather than private nuisance.
Question 70: A property is listed for $133,333 but the market value, as estimated in a recent appraisal, is $127,500. The property’s lending value is estimated to be $120,000. Jay and Joan purchase the home for $128,500 subject to a mortgage of $84,000. What loan-to-value ratio was applied by the lender with whom Jay and Joan negotiated the mortgage? (Assume that the loan-to-value ratio was the binding constraint on the loan size.)
(1)67.5%
(2)70%
(3)72%
(4)75%
Answer: 2 Explanation: Find the property’s loan-to-value ratio using the value of the mortgage and the property’s lending value.
Question 71: Which of the following statements is TRUE pertaining to the purposes of assessment and taxation?
(1)The strata development is assessed as a whole and each strata lot owner pays taxes in proportion to their value on destruction.
(2)Each strata lot is assessed and taxed separately from the common areas, which are assessed and taxed to the strata corporation.
(3)The strata development is assessed as a whole and each strata lot owner pays taxes in accordance with their unit entitlement.
(4)Each strata lot, together with the owner’s share in the common property, is deemed to be a separate parcel of land and improvement.
Answer: 4 Explanation: Option (4) is correct and Options (1), (2), and (3) are incorrect because each strata lot, together with the strata lot owner’s share in the common property, is deemed to be a separate parcel of land and is assessed and taxed individually.
Question 72: Flower Garden Company wants to borrow money to build a head office building in Victoria. The company plans to occupy one floor of the building and rent out the rest. They project that the building’s net operating income for the next five years will be $600,000 per year. Current mortgage terms on office building projects are j1 = 5.5%, amortized over 20 years with quarterly payments. Orca Bank feels that Flower Garden Company is optimistic in their net operating income projections and has therefore set the required debt coverage ratio at 1.4. What is Flower Garden’s maximum allowable loan, rounded to the nearest $1,000?
(1)$7,218,000
(2)$5,226,000
(3)$4,043,000
(4)$10,243,000
Answer: 2 Explanation: NOIDCR =PMTNOI $600,000PMT = = = $428,571.43(annual payment)DCR 1.4 This loan calls for quarterly payments: $428,571.43 ÷ 4 = $107,142.86 Press Display 5.5 NOM% 5.5 1 P/YR 1 EFF% 5.5 4 P/YR 4 NOM% 5.39007 107142.86 +/ PMT 107,142.86 20 4 = N 80 0 FV 0 PV 5,226,047.27465 The amount that would be borrowed is $5,226,000, rounded to the nearest $1,000.
Question 73: The position a product or service holds within its consumers’ minds is BEST known as which of the following options?
(1)Product positioning
(2)Product mapping
(3)Product assessment
(4)Product differentiation
Answer: 1 Explanation: Option (1) is correct because product positioning refers to the position a product or service holds within the minds of its consumers. Options (2), (3), and (4) are incorrect for this reason.
Question 74: Using the cost approach of appraisal, what will be the market value of a property with a 50,000 square foot building if construction costs new are $48 per square foot, land value is $900,000, and total depreciation on the structure to date is estimated to be 10%?
(1)$3,105,000
(2)$3,060,000
(3)$3,000,000
(4)$3,300,000
Answer: 2 Explanation: Find the market value using the cost method of appraisal. Site Value: $900,000 + Cost of Improvements = $48 50,000 = $2,400,000 Depreciation $2,400,000 0.10 = $240,000 Market value = $900,000 + $2,400,000 $240,000 = $3,060,000
Question 75: Which of the following statements is TRUE when calculating income taxes payable for a corporation?
(1)Depreciation expense cannot be treated as a deductible expense.
(2)Capital cost allowance cannot be treated as a deductible expense.
(3)The computation of taxable income is irrelevant.
(4)It is necessary to know what the amount of declared dividends will be.
Answer: 1 Explanation: Option (1) is correct because depreciation expense cannot be deducted from taxable income. Instead, the Income Tax Act permits a capital cost allowance deduction from taxable income. Option (2) is therefore incorrect. Option (3) is incorrect because taxable income is used to calculate income taxes payable. Option (4) is incorrect because any declared dividends are important for taxation, as corporations receive special tax treatment for declaring and paying cash dividends.
Question 76: Gheeta was out walking and saw a “For Sale” sign on the lawn of a house called Green Acres. She decided to ask the owners about the price of the property. Unknown to Gheeta, the owners of Green Acres were away on a long vacation in Jamaica. As Gheeta was walking across the lawn of Green Acres, a long branch from an old tree that grew in a neighbouring yard fell down and hit her. As a result, Gheeta broke her leg and could not return to work for two months. Which of the following statements is TRUE?
(1)The owners of Green Acres will be held liable to Gheeta for her lost wages only if she can prove they knew of the hazard presented by the old tree.
(2)The owners of Green Acres will not be held liable to Gheeta because they were not home at the time of the accident.
(3)Only the owners of the tree are liable to Gheeta for her lost wages.
(4)The owners of Green Acres may be liable to Gheeta even though they were not home at the time of the accident.
Answer: 4 Explanation: Option (4) is correct because the owners of Green Acres, as “occupiers”, owe a duty to take reasonable care to ensure that persons entering their property will be reasonably safe. Despite being away on vacation, the owners of Green Acres are “occupiers” for the purposes of the Occupiers Liability Act because they maintain responsibility for, and control over, their property even while physically absent. Ensuring the safety of persons entering onto their property may have required the owners of Green Acres to take steps to address the hazard posed by the old, overhanging tree branch. If this is the case, the owners will be liable to Gheeta for her injury. Option (1) is incorrect because the risk of the tree hurting someone who comes onto the property only needs to be reasonably foreseeable, not known by the owners of Green Acres. Option (2) is incorrect because it is irrelevant whether the owners of Green Acres were home or not at the time of the injury. Option (3) is incorrect because Gheeta was injured on Green Acres and those who fall under the definition of an “occupier” of Green Acres under the Occupiers Liability Act, such as the owners of Green Acres, may also be liable to Gheeta for damages.
Question 77: When a bidder’s ceiling price for a lot is $30,500 and the owner’s floor price is $32,500:
(1)the parties could negotiate and produce a sale.
(2)a sale cannot take place.
(3)the sale price of the lot will be $31,500.
(4)neither party is behaving reasonably.
Answer: 2 Explanation: Option (2) is correct because if a bidder’s ceiling price is $30,500, then this is the highest he will bid — he’s hit the ceiling. If an owner’s floor price is $32,500, then this is the lowest the owner will go. Therefore, a sale cannot take place because there is no price the bidder is willing pay that the owner will accept. Option (1) is incorrect because the ceiling and floor prices are the highest and lowest that the parties will go, respectively. A sale price cannot be negotiated outside of each party’s price range. Option (3) is incorrect for this reason. Option (4) is incorrect because there is no indication that the parties are behaving unreasonably.
Question 78: Which one of the following is NOT a requirement to establish misrepresentation in contract law?
(1)There must be an assertion of fact.
(2)The assertion must be false.
(3)The assertion must have been material to the formation of the contract.
(4)The assertion must be in writing.
Answer: 4 Explanation: Option (4) is correct because a misrepresentation is not required to be in writing. Options (1), (2), and (3) are incorrect because the requirements to establish misrepresentation in contract law are that it must be an assertion of fact, it must be false, and it must have been material to the formation of the contract (i.e., it must have reasonably induced the other party to enter into the contract).
Question 79: Which of the following statements pertaining to SEO is TRUE?
(1)SEO refers to how easily a website can be found in paid results on search engines.
(2)A website that is incompatible with mobile devices may be penalized in search engine results that originate from mobile devices.
(3)SEO stands for System Efficiency Operations.
(4)All of the above statements are true.
Answer: 2 Explanation: Option (2) is correct because a website that is not compatible with mobile devices may be penalized in search engine results that originate from mobile devices. Option (1) is incorrect because SEO refers to how easily a website can be found in unpaid (NOT paid) search results. Option (3) is incorrect because SEO stands for Search Engine Optimization. Since Options (1) and (3) are false, Option (4) is incorrect.
Question 80: A life tenancy has been granted to Avon “without impeachment for waste”. For which of the following actions would Avon be liable?
(1)Putting new shingles on the garage roof
(2)Allowing the tool shed to deteriorate and collapse
(3)Cutting down some trees on the property
(4)Avon would not be liable in any of the above situations.
Answer: 4 Explanation: Option (4) is correct because Avon would not be liable in any of the previous scenarios. Option (1) is incorrect because it is an example of ameliorating waste. Avon is not liable for ameliorating waste because his life tenancy has been granted “without impeachment for waste.” Option (2) is also incorrect for this reason, as it is an example of permissive waste. Option (3) is incorrect because it is an example of voluntary waste.
Question 81: The principle of substitution in the comparative approach of appraisal states that:
(1)“market value” equals “value to owner”.
(2)similar properties that have recently sold are comparable.
(3)properties have to be identical in order to be comparable.
(4)the market value of land plus the cost of a newly constructed building equals the market value of a property.
Answer: 2 Explanation: Option (2) is correct because the principal of substitution in the comparative approach of appraisal states that a property’s value should not exceed the cost of purchasing an alternate property that can provide similar utility. Therefore, similar properties that have recently sold are comparable. Option (1) is incorrect because the value to owner is highly subjective and likely differs from market value. Option (3) is incorrect because it is impossible to find identical properties; however, it is usually possible to find lots with enough common characteristics to regard them as similar for the purpose of appraisal. Option (4) is incorrect because it describes the cost approach, not the comparative approach of appraisal.
Question 82: A strata lot in British Columbia in an exclusively residential complex is owned by two persons as joint tenants. At every meeting of the strata corporation, the owners are:
(1)entitled to a total of one vote.
(2)entitled to the number of votes that is calculated in proportion to their unit entitlement.
(3)individually entitled to one vote each.
(4)entitled to a total of one vote where the matter involves a special resolution, but individually entitled to one vote on all other matters.
Answer: 1 Explanation: Option (1) is correct because each strata lot gets one vote. If two or more persons share one vote because they own the strata lot together, only one of them may vote on a given matter. Option (2) is incorrect because votes are allocated one per strata lot, not by unit entitlement. Option (3) is incorrect because votes are allocated one per strata lot, not by individual owner. Option (4) is incorrect because the strata lot is entitled to one vote, regardless of the type of resolution being made.
Question 83: Which of the following is NOT an example of a breach of contract?
(1)Don contracted with Toni to buy his car. The night before Don was supposed to pay the price and take the car, the vehicle was struck by lightning in Toni’s driveway and destroyed.
(2)After Babs contracted with Quin in May to rent his motorhome for one week in July, Quin telephoned Babs and told her that he was going to be using the home himself that week, and that she would not be able to rent it.
(3)Fred contracted with Jordan to sell Jordan his collection of hockey cards. One day later, Fred sold them to Andrew, who paid him $15 more than the amount Jordan had agreed to pay.
(4)Adrian contracted to paint Woodie’s house starting on September 1 for a price of $500. On September 1, Adrian failed to appear and did not reply to any of the messages that Woodie left on Adrian’s answering machine.
Answer: 1 Explanation: Option (1) is correct because it is an example of frustration, rather than a breach of contract. Option (2) is incorrect because it is an example of a breach of contract. After the contract was agreed to, Quin did not fulfil his promise under the contract. Option (3) is incorrect because after the contract was agreed to, Fred did not fulfil his promise under the contract. Option (4) is incorrect because after the contract was agreed to, Adrian did not fulfil his promise under the contract.
Question 84: Which one of the following would NOT be included in the operating expenses of a commercial property for purposes of determining its market value?
(1)Reserve for replacement of equipment
(2)Interest on the mortgage
(3)Property taxes
(4)Advertising of vacant suites
Answer: 2 Explanation: Option (2) is correct because interest paid on a mortgage is not considered an operating expense. Options (1), (3), and (4) are incorrect because these are all included in operating expenses, which are paid by the landlord.
Question 85: Diana leased an apartment from Horst for 12 months commencing January 1. On April 1, Horst conveyed the building to Bing. On April 15, Bing gave Diana a notice of end of the tenancy agreement effective May 15. The reason for the termination was that Bing wanted the apartment for his daughter, who had recently been married. Under the Residential Tenancy Act, what is the earliest date by which Bing can require Diana to leave?
(1)May 31
(2)May 15
(3)December 31
(4)June 30
Answer: 3 Explanation: Option (3) is correct because a fixed term tenancy cannot be terminated by the landlord before the end of the fixed term (i.e., December 31). The earliest that Bing can require Diana to leave is December 31, by serving Diana with a Two Month Notice to End Tenancy for Landlord’s Use of Property on October 31. Options (1), (2), and (4) are incorrect for this reason.
Question 86: Which one of the following items is NOT likely to be available to an appraiser valuing a commercial property?
(1)Current lease conditions at the time of sale of the property
(2)The amount of any registered mortgages
(3)The buyer’s expected rent and expense forecasts
(4)Physical characteristics of the building
Answer: 3 Explanation: Option (3) is correct because an appraiser will not be able to obtain the buyer’s expected rent and expense forecasts, as this is not publicly-accessible data. Options (1), (2), and (4) are incorrect because an appraiser valuing a commercial property can obtain documents, filings, and market data outlining things such as current lease conditions at the time of sale of the property, the amount of any registered mortgages, and the physical characteristics of the building.
Question 87: A board of variance is:
(1)a provincial board charged with the responsibility of seeing that actions by municipalities comply with the Local Government Act.
(2)a board established by municipalities with the power to amend property assessments.
(3)a board established by municipalities to determine whether a zoning bylaw creates undue hardships on property owners.
(4)a board established by municipalities to settle boundary line disputes between private parties.
Answer: 3 Explanation: Option (3) is correct because a board of variance is a local government board that determines whether a zoning bylaw creates undue hardships on property owners. It can grant a minor variance, provided it does not conflict with the local government’s policies. Option (1) is incorrect because a board of variance is not a provincial board. Option (2) is incorrect because a board of variance does not have the power to amend property assessments. Option (4) is incorrect because while a board of variance may grant minor variances to zoning bylaws, it does not settle property line disputes between private parties.
Question 88: If Jeff applies for a mortgage loan with gross income of $3,000 per month, property taxes are estimated at $200 per month, and the lender’s permitted gross debt service ratio is 30%, what can Jeff afford to pay for monthly principal and interest?
(1)$840
(2)$750
(3)$700
(4)$620
Answer: 3 Explanation: Find his monthly principal and interest payment given Jeff’s income, taxes, and his gross debt service ratio of 30%.
Question 89: Which one of the following statements regarding appraisal is TRUE?
(1)In order to appraise real property, one needs a minimum of a real estate trading services licence.
(2)The complexity of real estate as a product requires the involvement of an expert appraiser.
(3)Real estate can be classified as a homogeneous commodity.
(4)Due to the low turnover of real estate, it is easy to collect information regarding recent transactions.
Answer: 2 Explanation: Option (2) is correct because real estate as a product is generally unique and complex, requiring expert skills and knowledge for an accurate appraisal. Option (1) is incorrect because no license is required to conduct an appraisal. Option (3) is incorrect because real estate is unique, and therefore cannot be classified as a homogenous commodity. Option (4) is incorrect because the low turnover of real estate makes it difficult to collect information regarding recent sales.
Question 90: Mary and John own a piece of real property as joint tenants. Which of the following is FALSE?
(1)Mary could sever the joint tenancy without John’s knowledge.
(2)Mary and John each have an undivided interest in the property.
(3)Mary and John each have a right of survivorship.
(4)Mary and John can have different interests in the property.
Answer: 4 Explanation: Option (4) is false and is therefore the correct answer. The unity of interest requires that all joint tenants have the same estate or interest in land; the extent, nature, and duration must be identical. Option (1) is incorrect in certain scenarios, a joint tenancy can be severed by one of the joint tenants even if the other joint tenant(s) is unaware of the action of the joint tenant severing the joint tenancy. Option (2) is incorrect because in a joint tenancy, the co-owners each have an undivided share in the property. By definition, joint tenants are co-owners of the same interest, whatever that interest may be. Finally, Option (3) is incorrect because a defining feature of joint tenancy is the right of survivorship. This means that when one joint tenant dies, that joint tenant’s estate automatically vests in the surviving joint tenant(s).
Question 91: Which of the following options is a disadvantage of using a central, gas-fired, forced air heating system?
(1)A lack of air filtration
(2)A slow response time to temperature changes
(3)It requires ductwork under the main floor
(4)Heat transmission is by radiation, which is ineffective
Answer: 3 Explanation: Option (3) is correct because central, gas-fired, forced air heating systems require ductwork under the floor, which makes it difficult and expensive to install after the house is already built. Options (1) and (2) are incorrect because these types of heating systems are advantageous in that they also provide air filtration and have a fast response time to temperature changes. Option (4) is incorrect because these types of heating systems transmit heat through convection.
Question 92: Which of the following statements is TRUE?
(1)A listing contract is not a specialized form of agency contract.
(2)Under the Designated Agency system, while the brokerage contracts with the seller or buyer, an individual licensee is appointed to act as the sole agent of that seller or buyer.
(3)Real estate brokerages always work on behalf of the seller in respect of a real estate transaction.
(4)An agent’s authority to bind their principal depends entirely on the express authority given by the principal, and not upon implied, usual, or customary authority.
Answer: 2 Explanation: Option (2) is correct because it is true. Option (1) is false because a listing contract is a specialized form of agency contract. It is a contract between the seller and a real estate brokerage. The brokerage promises to try to find a buyer and the seller promises to pay a stated amount of commission if the brokerage is successful. Option (2) is true. Designated Agency eliminates the conflict that previously arose when two licensees in the same brokerage represented both the seller and the buyer in a transaction. Option (3) is false because real estate brokerages can work on behalf of a seller or a buyer on a real estate transaction. Option (4) is false because an agent’s authority to bind his or her principal can arise: (1) expressly; (2) by implication; (3) as a result of the doctrine of estoppel; or, (4) by ratification by the principal of the agent’s acts done on the principal’s behalf.
Question 93: An amendment to a contract of purchase and sale:
(1)is generally not legally binding on the seller and buyer until finalized in writing and signed by all parties to the original contract.
(2)must be signed by at least the seller and selling licensee who negotiated the original contract.
(3)automatically terminates the contract of purchase and sale.
(4)can be made only before a buyer’s offer is accepted by a seller.
Answer: 1 Explanation: Option (1) is correct and Option (2) is incorrect because under section 59 of the Law and Equity Act, a contract for the sale of land must generally be in writing and signed by all parties to the contract. Option (3) is incorrect because an amendment to a contract of purchase and sale will state that it does not terminate the existing contract. Option (4) is incorrect because if a change is made to the contract of purchase and sale before the buyer’s offer is accepted, then there is no contract of purchase and sale. It is simply an amendment to the offer (i.e., a counter-offer).
Question 94: A mortgage contract with a face value of $175,000 requires monthly payments of $1,103.21 over a 20-year amortization period. However, the mortgage broker advances only $171,000 after deducting a commission of $2,500, legal fees of $1,000, and an appraisal fee of $500. Calculate the cost of funds advanced for the borrower, expressed as an effective annual rate (j1).
(1)4.730370%
(2)4.777233%
(3)3.972254%
(4)4.834288%
Answer: 4 Explanation: Option 4 is correct. $175,000 is the face value, the amount that the contract is written for. However, there are legal fees, commissions, and appraisal fees that are deducted; therefore, the actual amount that is applied to the loan is $171,000 (present value). Press Display 12 P/YR 12 171000 PV 171,000 1103.21 +/ PMT 1,103.21 240 N 240 0 FV 0 I/YR 4.73037 EFF% 4.834288
Question 95: The transfer by the borrower of the equity of redemption to a subsequent buyer does not always relieve the borrower of the covenant to repay the debt. However, there are circumstances where the borrower may be relieved of liability on the personal covenant. Which one of the following events would NOT relieve the borrower from this liability?
(1)The borrower has received a release from the lender.
(2)The borrower has sold the property with the knowledge of the lender.
(3)The Property Law Act releases the borrower.
(4)The original contract between the lender and the vendor is replaced by a new contract between a lender and the purchaser.
Answer: 2 Explanation: Option (2) is correct because the lender’s knowledge that the property has been sold will not relieve the borrower from liability on his or her personal covenant. Options (1), (3), and (4) are incorrect because these events will relieve the borrower from this liability.
Question 96: Veronica has agreed to sell her home to Patty for $75,900. The completion and adjustment date is set at November 14. Veronica paid the current year’s property taxes on the date they were due in the amount of $896. It is NOT a leap year. Patty’s share of the year’s property taxes will appear on the seller’s statement of adjustments as a:
(1)debit of $115.38.
(2)credit of $115.38.
(3)debit of $41.73.
(4)credit of $117.83.
Answer: 4 Explanation: Option (4) is correct because when taxes are previously paid by the seller, the buyer should reimburse the seller for the portion of the year from the adjustment date onward. The reimbursement will appear as a credit on the seller’s statement and a debit on the buyer’s statement. Patty’s share of the year’s property taxes (Nov. 14 B Dec. 31 = 48 days) is calculated in the following manner: 48/365 × $896 = $117.83. Options (1), (2), and (3) are therefore incorrect.
Question 97: Vince has agreed to sell his home to Pedro for $75,900. To assist in the purchase, Pedro is borrowing $65,000 from his uncle as a first mortgage loan. Pedro’s loan from his uncle will appear:
(1)as a debit on Pedro’s statement and a credit on Vince’s statement.
(2)as a credit on Pedro’s statement and a debit on Vince’s statement.
(3)only on Pedro’s statement.
(4)only on Vince’s statement.
Answer: 3 Explanation: Option (3) is correct because when a new loan is received by the buyer from a mortgage company or third party, the amount appears only as a credit on the buyer’s statement of adjustments, as a new loan does not affect the seller’s cash proceeds of sale. The $65,000 loan will only appear on Pedro’s statement, as a credit. Options (1), (2), and (4) are therefore incorrect.
Question 98: Victor has agreed to sell his home to Pamela for $75,900. The completion and adjustment date is set at November 14. The real estate commission payable by Victor is 7% of the selling price. Pamela has made a deposit of $2,000, which the real estate brokerage has passed to Pamela’s lawyer to be deposited in a trust account until the completion date. Victor has agreed to accept Pamela’s diamond ring as part payment equal to $7,500. Pamela is borrowing $65,000 from the Bank of Dad as a first mortgage loan. Victor paid the current year’s property taxes on the date they were due in the amount of $896. Pamela’s lawyer will charge $600 to cover both legal and registration fees. Victor will be paying out a judgment registered against the title to his house in the amount of $6,225 and the legal fee to remove it will be $85. Victor is relying on Pamela’s lawyer to handle this transaction for him. As no exemptions apply to this transaction, property transfer tax will be payable upon completion. It is NOT a leap year. As well, Pamela is NOT a foreign entity for property transfer tax purposes. The balance due to complete required from Pamela is:
(1)$2,876.83
(2)$56,894.83
(3)$3,112.49
(4)$2,117.83
Answer: 1 Explanation: Buyer’s Statement of Adjustments (Pamela) ITEM DEBIT CREDIT Purchase Price 75,900.00 Deposit to Lawyer* 2,000.00 Ring 7,500.00 1st Mortgage 65,000.00 Buyer’s Share of Taxes** 117.83 Lawyer’s Fee 600.00 Property Transfer Tax 759.00 Balance Due to Complete** ________ 2,876.83 77,376.83 77,376.83 * Since the deposit is being paid to the lawyer in trust, the amount will not appear on the Seller’s statement of adjustments. ** (Nov. 14-Dec. 31 = 48 days) 48/365 $896 = $117.83 ** Because the total Debits and Credits must balance, in order to find the Balance Due to Complete, you must first calculate the total Debits ($77,376.83) and then subtract the known Credits. The result is the balance due from the buyer to complete the transaction.
Question 99: Valerie has agreed to sell her home to Phil for $75,900. The real estate commission payable by Valerie is 7% of the selling price. The real estate commission will appear:
(1)as a debit on Phil’s statement and a credit on Valerie’s statement.
(2)on Valerie’s statement only.
(3)as a debit on Phil’s statement.
(4)as a credit on Phil’s statement and a debit on Valerie’s statement.
Answer: 2 Explanation: Option (2) is correct because the real estate commission is payable by Valerie and would appear as a debit only on her statement. Options (1), (3), and (4) are incorrect as it does not affect Phil’s balance due to complete.
Question 100: A fee simple owner in British Columbia who is the victim of a fraudulent conveyance of their land will lose the right to have the transfer set aside when:
(1)the transfer of the property to the dishonest person has been registered in the land title office.
(2)the title to the property has been transferred to a good faith purchaser for valuable consideration.
(3)the guilty party has been convicted of fraud by a court.
(4)they notify the registrar of land titles that fraud has occurred.
Answer: 2 Explanation: Option (2) is correct and Options (1), (3), and (4) are incorrect because the only way a victim of a fraudulent conveyance of his or her land will lose the right to have the transfer set aside is when the title to the property has been transferred to a good faith purchaser for valuable consideration.
Question 101: The flow of information concerning real property is limited and difficult to collect because:
(1)the turnover rate for real property is high.
(2)every parcel of real property is homogeneous.
(3)real property is short-lived and quick to respond to market pressures.
(4)real property markets are local, with real estate fixed in location.
Answer: 4 Explanation: Option (4) is correct because it is true. Option (1) is incorrect because the turnover rate for real property is low, meaning there are limited data sources and information available upon which to base an opinion of an value. Option (2) is incorrect because every parcel of real property is distinct, unique, and heterogenous, meaning property values cannot be easily standardized or generalized. Option (3) is incorrect because real property is durable and long-lasting, meaning it may not be quick to respond to market pressures.
Question 102: In Canada, the power to make laws is divided between the federal and provincial levels of government. Which of the following has NOT been assigned to the federal government?
(1)Jurisdiction over harbours
(2)Jurisdiction over matters affecting private property and the power to delegate some provincial authority to a third level of government
(3)Jurisdiction over postal services
(4)Jurisdiction over the regulations to protect fisheries
Answer: 2 Explanation: Option (2) is correct because these powers have been assigned to the provincial government under the Constitution Act, 1867. Options (1), (3), and (4) are incorrect because these have been assigned to the federal government under the Constitution Act, 1867.
Question 103: Which one of the following is NOT a course of action that the British Columbia Financial Services Authority can take following a disciplinary hearing?
(1)Reprimand the licensee
(2)Order the cancellation of the licensee’s licence
(3)Suspend the licensee from participation in the Multiple Listing Service®
(4)Order the licensee to enroll in and complete a course of studies or training
Answer: 3 Explanation: Option (3) is correct because the British Columbia Financial Services Authority (“BCFSA”) cannot suspend the licensee from participation in the Multiple Listing Service (MLS) following a disciplinary hearing. Only a local real estate board can suspend a licensee from participation in the MLS. Options (1), (2), and (4) are all examples of actions that BCFSA can take following a disciplinary hearing, under section 43 of the Real Estate Services Act.
Question 104: To qualify for a managing broker’s licence in British Columbia, a person must meet which of the following requirements?
(1)Submit personal financial statements for each licensee they intend to hire
(2)Have provided real estate services within a Canadian province or the Yukon for two out of the five years preceding the application
(3)Have three years’ licensed experience in British Columbia
(4)Be at least 29 years of age
Answer: 2 Explanation: Option (2) is correct because in order to qualify for a managing broker’s licence in British Columbia, an applicant must have been providing real estate services as a licensee for at least two years during the five years before the date of the application in British Columbia, or in an equivalent jurisdiction. Option (1) is incorrect because to qualify for a managing broker’s licence, a person is not required to submit personal financial statements of each licensee they intend to hire. Option (3) is incorrect because to qualify for a managing broker’s licence in British Columbia, a person is required to have at least two years’ experience in a Canadian province or Yukon. Option (4) is incorrect because a minimum of 19 years of age is required.
Question 105: A mortgage loan with a face value of $150,000 is arranged through a mortgage broker. A commission of $4,000, appraisal fees of $450, as well as survey and legal fees totalling $700 will be deducted from the face value before the funds are advanced to the borrower. Calculate the cost of funds advanced to the borrower, expressed as an effective annual interest rate (j1), if the loan is written at 6.75% per annum, compounded semi-annually, with monthly payments over a 20-year amortization period and a 5-year term.
(1)7.803344%
(2)7.537423%
(3)9.581225%
(4)8.540452%
Answer: 1 Explanation: Calculate the required payments, according to the loan contract, then calculate the cost of funds advanced using a face value that is net of commission fees. Press Display 6.75 NOM% 6.75 2 P/YR 2 EFF% 6.863906 12 P/YR 12 NOM% 6.65699 150000 PV 150,000 240 N 240 0 FV 0 PMT 1,132.26645 1132.27 +/ PMT 1,132.27 60 INPUT AMORT PER 60-60 = = = 128,701.364204 128701.36 +/ FV 128,701.36 144850 PV 144,850 ($150,000 $4,000 $450 $700) 60 N 60 I/YR 7.537423 (j12) EFF% 7.803344 (j1)
Question 106: Jacob hires Choo Choo Contracting (“Choo Choo”), a general contractor, to renovate his living room to better display his model train collection. Choo Choo subcontracts Jennifer, an electrician, to install the specialized electrical connections. After Jennifer completes the work, but before she has been paid, Choo Choo suddenly goes out of business. Which of the following statements about what Jennifer might do is TRUE?
(1)Jennifer has 45 days to file a builders lien after the project is substantially completed, ended, or abandoned.
(2)If Jacob sells his property before Jennifer files a builders lien, then any lien she files will affect Jacob, but will not affect the interests of the purchaser.
(3)Jennifer cannot file a builders lien because subcontractors who were not hired directly by the owner of a property cannot file builders liens, they can only pursue the general contractor directly.
(4)If Jacob had held back 7% of the total price that he agreed to pay Choo Choo for the work, then he will be liable to Jennifer for a maximum of the 7% holdback, regardless of how much Jennifer has claimed on the builders lien.
Answer: 1 Explanation: Option (1) is correct because a builders lien must be filed within 45 days after the project is substantially completed, ended, or abandoned. Option (2) is incorrect because liens may still be filed after ownership of a
Question 107: Which one of the following actions would constitute trespass to land?
(1)The crossing of another person’s property by mistake
(2)The deliberate crossing of another person’s property
(3)The throwing of an item upon another person’s property
(4)All of the above
Answer: 4 Explanation: Option (4) is correct because all of the options are examples of trespass. Trespass consists of wrongfully entering, remaining on, or placing something on another’s land. Trespass requires both a voluntary and a direct action. Option (1) is an example of trespass because even though entering the other property was a mistake, it was still intentional since the person had control over where they were walking. Option (2) is an example of trespass because deliberately crossing another person’s property is both voluntary and direct. Option (3) is an example of trespass because even though the person did not personally step on another person’s land, they intentionally threw the item. The item ended up on the other person’s property as a result of the direct act of the trespasser.
Question 108: Which of the following BEST describes the main difference between a lease and a licence?
(1)Licences are governed by the ordinary law of contract and confer no interest in land, whereas leases convey an interest in land.
(2)Licences are oral contracts, whereas leases must be in writing pursuant to the Law and Equity Act.
(3)The terminology used to describe the parties (i.e., landlord and; tenant/licensor and; licensee).
(4)Licences provide exclusive possession, whereas leases only give the rights described in the lease document.
Answer: 1 Explanation: Option (1) is correct because a lease is an estate in land, while a license is a contractual right that contains no estate in land. Option (2) is incorrect because a contract for a license may be in writing. Option (3) is incorrect because the terminology is not the most significant difference between a lease and a license, since they contain different rights. Option (4) is incorrect because leases provide exclusive possession, while licenses give the rights described in the license agreement.
Question 109: A borrower is arranging a mortgage with Nicety Finance Company. The loan amount is $175,000, the interest rate is 4.5% per annum, compounded semi-annually, the amortization period is 20 years, and the contractual term is 2 years. If payments are made monthly and rounded up to the next higher $10, calculate the outstanding balance at the end of the loan term.
(1)$144,157.84
(2)$157,323.50
(3)$163,479.73
(4)$151,232.96
Answer: 3 Explanation: Find the outstanding balance. Press Display 4.5 NOM% 4.5 2 P/YR 2 EFF% 4.550625 12 P/YR 12 NOM% 4.458383 175000 PV 175,000 240 N 240 0 FV 0 PMT 1,103.209022 1110 +/ PMT 1,110 24 INPUT AMORT PER 24-24 = = = 163,479.729773 The outstanding balance owing at the end of 24 months is $163,479.73.
Question 110: Which one of the following types of organization is a separate taxable entity?
(1)A general partnership
(2)A sole proprietorship
(3)A limited partnership
(4)A corporation
Answer: 4 Explanation: Option (4) is correct because a corporation is a type of organization that is considered a separate legal and taxable entity. Options (1), (2), and (3) are incorrect because sole proprietors and all types of partners must include their business income on their personal income tax returns.
Question 111: Most zoning bylaws include density restrictions. Which of the following is NOT a method of measuring density?
(1)Total floor area of the building in relation to the size of the lot
(2)Floor area ratio
(3)Number of dwelling units per hectare
(4)Prescribing the maximum lot area per dwelling
Answer: 4 Explanation: Option (4) is correct because prescribing the maximum lot area per dwelling is not a method of measuring density. Rather, prescribing the minimum lot area per dwelling is a method of measuring density. Options (1), (2), and (3) are incorrect because total floor area of the building in relation to the size of the lot, floor area ratio, and number of dwelling units per hectare are all methods of measuring density.
Question 112: Which one of the following statements about the revocation of an offer is TRUE?
(1)If an offer has a specified time for expiry, it cannot be revoked prior to that time.
(2)Unless consideration is paid to keep an offer open for a specific time, revocation can be made at any time prior to acceptance.
(3)Revocation can be made prior to or after acceptance.
(4)The method of revocation must be exactly the same as the method used in the offer.
Answer: 2 Explanation: Option (2) is correct because the offer can be revoked without warning, as long as the offer has not been accepted. Option (1) is incorrect because if an offer has a specified time for expiry, it can be revoked prior to the date of expiry (unless consideration has been given to keep the offer open). Option (3) is incorrect because revocation cannot be made after the offer has been accepted. Option (4) is incorrect because the method of revocation does not need to be the same as the method used in the offer. The postal acceptance rule does not apply to revocation.
Question 113: A contract of purchase and sale is:
(1)a contract to make a contract.
(2)evidence of intent to be bound, but not enforceable.
(3)a binding contract if properly drafted.
(4)an invitation to treat.
Answer: 3 Explanation: Option (3) is correct because, if properly drafted, a contract of purchase and sale is a binding contract. Option (1) is incorrect because a contract of purchase and sale is not a contract to make a contract. Option (2) is incorrect because a contract of purchase and sale, if properly drafted, is enforceable. Option (4) is incorrect because a contract of purchase and sale is a contract, not an invitation to treat.
Question 114: Which one of the following is NOT required in a contract of purchase and sale?
(1)The names of the parties
(2)A description of the property being sold
(3)The purchase price
(4)The rate of commission payable
Answer: 4 Explanation: Option (4) is correct because the rate of commission payable is not required in a contract of purchase and sale; rather, it is included in a listing contract. Options (1), (2), and (3) are incorrect because parties, property and price must be included in a contract of purchase and sale.
Question 115: If, under a principal’s instructions, an agent makes certain representations concerning a property that are false to the knowledge of both the principal and the agent, which of the following statements is/are TRUE?
(1)The principal is liable because they explicitly authorized the tort.
(2)The agent cannot escape personal liability by arguing that they were authorized to commit the tort.
(3)The agent will be personally liable for the tort.
(4)All of the above
Answer: 4 Explanation: Option (4) is correct because it is false. An agent can be held liable to a third party for fraudulent statements, regardless of whether their principal knew or authorized the actions. Option (1) is incorrect because a principal is liable both for the actions taken by his or her agent and when they expressly authorize a fraudulent act. Option (2) is incorrect because an agent is personally liable to a third party when the agent has knowingly made false representations. Option (3) is incorrect because an agent cannot escape personal liability for fraud on the basis that the agent was authorized by the principal to commit it.
Question 116: Which one of the following types of authority would NOT provide an agent with sufficient authority to create a binding contract between their principal and a third party?
(1)Implied authority
(2)Apparent authority
(3)Assumed authority
(4)Express authority
Answer: 3 Explanation: Option (3) is correct because assumed authority is not one of the forms of authority that allows an agent to enter into a contract on behalf of their principal. Option (1), (2), and (4) are incorrect because implied authority, apparent authority, and express authority all allow the agent to enter into a contract.
Question 117: Which of the following is characteristic of a mortgage as an investment?
(1)Not “unique”, which makes it easy to trade
(2)Requires a high degree of administrative work
(3)Requires a low initial outlay of capital
(4)Has a short repayment term, which makes it easy to reinvest the periodic payments at good rates
Answer: 2 Explanation: Option (2) is correct because mortgages require a high degree of initial administrative work such as writing contracts and registering a charge on the property, as well as subsequent administration of payments, outstanding balance, and refinancing. Option (1) is incorrect because each mortgage is a unique investment and is difficult to trade. Option (3) is incorrect because mortgage investments require a large capital outlay.
Question 118: A borrower has arranged a $159,900 mortgage at j12 = 12% with a 25-year amortization, 5-year term, and monthly payments. If all payments are paid when due, how much principal was paid off during the 5-year term?
(1)$89,583.15
(2)$6,950.91
(3)$152,949.09
(4)$6,529.15
Answer: 2 Explanation: Find the amount of principal that has been paid off during the 5-year term. Press Display 12 I/YR 12 12 P/YR 12 159900 PV 159,900 25 12 = N 300 0 FV 0 PMT 1,684.105403 1684.11 +/ PMT 1,684.11 1 INPUT 60 AMORT PER 1-60 = 6,950.905596 The amount of principal paid off during the 5-year term is $6,950.91.
Question 119: A mortgage for $200,000 is written at 6% per annum, compounded semi-annually. The mortgage calls for monthly payments rounded up to the next higher dollar, a 5-year term, and a 20-year amortization. The mortgage contract permits the borrower to prepay the full amount of the loan at any time subject to the payment of a three months’ interest penalty. At the time of prepayment, the current comparable interest rate is 4% per annum, compounded semi-annually. If the borrower wishes to prepay this loan at the end of the first year (with the 12th payment), calculate the amount of the three months’ interest penalty.
(1)$969.01
(2)$15,504.15
(3)$5,687.99
(4)$2,883.28
Answer: 4 Explanation: Press Display 6 NOM% 6 2 P/YR 2 EFF% 6.09 12 P/YR 12 NOM% 5.926346 200000 PV 200,000 20 12 = N 240 0 FV 0 PMT 1,424.376884 1425 +/ PMT 1,425 12 INPUT AMORT PER 12-12 = = = 194,607.790694 The monthly payment is $1,425 and the outstanding balance after 12 payments is $194,607.79. The three months’ interest penalty equals: Penalty = OSB12 imo 3 The calculator steps continue as follows: Press Display RCL I/YR ÷ 12 = 0.493862 % 0.00493862 194607.79 3 = 2,883.282957
Question 120: A mortgage loan has a face value of $370,000, an interest rate of j2 = 5.5%, an amortization period of 20 years, a term of 3 years, and an option to make accelerated biweekly payments, rounded up to the next highest dollar. If this option is exercised, what is the outstanding balance owing at the end of the 3-year term?
(1)$232,928.17
(2)$311,500.07
(3)$328,192.44
(4)$317,935.02
Answer: 3 Explanation: To solve for the outstanding balance owing at the end of the term, first determine the monthly payment under the loan. Take 2 of that monthly payment as the accelerated payment. Then change the interest rate to an equivalent j26 rate, and using 2 of the regular monthly payment, solve for the outstanding balance at the end of the term. Press Display 5.5 NOM% 5.5 2 P/YR 2 EFF% 5.575625 12 P/YR 12 NOM% 5.438018 370000 PV 370,000 240 N 240 0 FV 0 PMT 2,532.247768 ÷ 2 = 1,266.123884 1267 +/ PMT 1,267 5.5 NOM% 5.5 2 P/YR 2 EFF% 5.575625 26 P/YR 26 NOM% 5.431399 1 INPUT 78 AMORT PER 1-78 = = = 328,192.437346 The outstanding balance owing at the end of the 3-year term is $328,192.44.
Question 121: After a borrower has given a mortgage of real property, the borrower’s remaining interest is described at law as:
(1)a right of foreclosure.
(2)a common law mortgage.
(3)the equity of redemption.
(4)an equitable mortgage.
Answer: 3 Explanation: Option (3) is correct because a mortgagor (i.e., a borrower) who grants a mortgage of real property to a lender retains an interest described as “the equity of redemption”. The equity of redemption protects the borrower’s right to redeem the property upon payment of the mortgage. Option (1) is incorrect because a right of foreclosure arises in favour of a lender where the borrower defaults on the mortgage. Option (2) is incorrect because a mortgage at common law was a conveyance of both title to land and the possession of the land to a lender, not a right retained by the borrower. Option (4) is incorrect because an equitable mortgage refers to a mortgage which is not (and perhaps cannot be) registered on title as a legal mortgage.
Question 122: A mortgage that is granted, but for procedural reasons is not registrable, is:
(1)unenforceable until it is registered.
(2)recognized as a present equitable mortgage.
(3)only protected by filing a caveat.
(4)still deemed a legal mortgage.
Answer: 2 Explanation: Option (2) is correct because a mortgage that is granted, but for procedural reasons is not registrable, is recognized as an equitable mortgage. Option (1) is ncorrect because this type of mortgage is an equitable mortgage, and is enforceable. Option (3) is incorrect because while a lender should file a caveat to protect its position until the mortgage is in proper registrable form and registered on title, a caveat is not the only protection for an equitable mortgage. An equitable mortgage can also be protected by handing over to the lender the duplicate certificate of title as security for the loan. Option (4) is incorrect because this is an equitable mortgage, not a legal mortgage.
Question 123: An offer of $235,000 is accepted, comprised of a cash down payment of $85,000 subject to a vendor-supplied mortgage of $150,000 at 4% per annum, compounded semi-annually. The loan has an amortization period of 25 years, a term of 5 years, and calls for monthly payments rounded up to the next higher dollar. Market rates of interest for equivalent mortgages are currently 9% per annum, compounded semi-annually. The market value of the offer is:
(1)$180,413.24
(2)$122,426.97
(3)$235,000.00
(4)$207,246.79
Answer: 4 Explanation: Find the payment and outstanding balance according to the loan contract, then value these amounts at the market rate. Add the cash down payment to obtain the market value of the offer. In this example, since the market interest rate is higher than the contract rate, the market value of the offer will be less than the stated offer price of $235.000. Press Display 4 NOM% 4 2 P/YR 2 EFF% 4.04 12 P/YR 12 NOM% 3.967068 150000 PV 150,000 300 N 300 0 FV 0 PMT 789.030308 790 +/ PMT 790 60 INPUT AMORT PER 60-60 = = = 130,516.63687 130516.64 +/ FV 130,516.64 9 NOM% 9 2 P/YR 2 EFF% 9.2025 12 P/YR 12 NOM% 8.835748 60 N 60 PV 122,246.785707 (market value of the mortgage) + 85000 = 207,246.785707 (market value of the offer) The market value of the offer is $207,246.79.
Question 124: Given the following information, calculate the minimum annual income a buyer must have in order to qualify for a $42,500 loan. Interest Rate: 11.25% per annum, compounded semi-annually | Term: 5 years | Amortization Period: 25 years | Payments: Monthly | Maximum Gross Debt |Service Ratio: 27% Property Taxes: $600 per annum
(1)$20,728.89
(2)$18,506.67
(3)$19,490.52
(4)$5,596.80
Answer: 1 Explanation: First, convert the nominal interest rate with semi-annual compounding (j2 = 11.25%) to the equivalent nominal interest rate with monthly compounding. Then, calculate the mortgage payments required for a $42,500 loan: Press Display 11.25 NOM% 11.25 2 P/YR 2 EFF% 11.566406 12 P/YR 12 NOM% 10.995046 42500 PV 42,500 300 N 300 0 FV 0 PMT 416.395839 Next, multiply the rounded payment by 12 to get the annual debt service:
Question 125: The Local Government Act permits a council to enact certain bylaws relevant to planning. Which of the following areas is NOT regulated by local government?
(1)Land use zoning
(2)Subdivision regulation
(3)Building regulations
(4)Airports
Answer: 4 Explanation: Option (4) is correct because the federal government has exclusive jurisdiction with respect to the development and operation of airports. Options (1), (2), and (3) are incorrect because land use zoning, subdivision regulation, and building regulations are all regulated by local government.
Question 126: What is an assessment notice?
(1)A demand for payment of a specified amount of property taxes
(2)A notice issued by the municipality stating the date on which the assessor will appraise your property
(3)A notice that informs the property owner of the actual value of their property
(4)A notice of the cost to the property owner of a local improvement project
Answer: 3 Explanation: Option (3) is correct because an assessment notice is a notice informing a property owner of the value of the property as of July 1 of the previous year. Option (1) is incorrect because a separate statement called a “tax notice” is sent to property owners requesting payment of taxes. Option (2) is incorrect because notice is not issued prior to an appraisal. Option (4) is incorrect because an assessment notice does not deal with costs of local improvement projects to property owners.
Question 127: What is the purpose of a zinc strip along the peak of a roof?
(1)For added support and to extend the service period for cedar shakes and shingles
(2)To discourage the growth of moss on roof coverings
(3)To prevent leakage and thus water stains on the ceilings
(4)To prevent the penetration of frost under the roof covering
Answer: 2 Explanation: Option (2) is correct because zinc strips discourage moss growth on a roof. When it rains, the rain carries tiny amounts of zinc down the slope of the roof, which prevents moss from growing in this otherwise damp location. Options (1), (3), and (4) are incorrect as they do not describe the purpose of a zinc strip.
Question 128: In developing a real property appraisal, which of the following statements regarding scope of work determination is FALSE?
(1)An appraiser cannot rely on the client to identify and resolve the problem even though the client is requesting the report.
(2)It is the appraiser/licensee’s responsibility to determine the scope of work and the level of information required to produce credible and reliable results.
(3)A brief appraisal with limited detail may be acceptable if the appraisal is within the client’s requested scope of work, and the limitations are explicitly written in the report.
(4)The appraiser need not know the report’s intended use since the client is the one paying for the report and would know its purpose.
Answer: 4 Explanation: Option (4) is correct because it is false. The appraiser must understand the client’s intended use in order to make the appropriate scope of work decision. Option (1) is incorrect because appraisers do not rely on the client; they use their experience and judgment to establish the information necessary to identify and resolve the problem. Option (2) is incorrect because the appraiser determines the scope of work and level of information necessary to produce a credible appraisal. Option (3) is incorrect because limited detail may be acceptable if it falls within the requested scope of work and limitations are indicated in the report.
Question 129: The principle on which the comparative approach of appraisal is based is:
(1)indefeasibility.
(2)substitution.
(3)capitalization.
(4)accessibility.
Answer: 2 Explanation: Option (2) is correct because the comparative approach is based on the principle of substitution, which asserts that a property’s value should be no more than the cost of purchasing a substitute property that provides similar utility. Options (1), (3), and (4) are incorrect as they do not form the basis of the comparative approach of appraisal.
Question 130: In the comparative approach of appraisal, one method of making final adjustments to price is to use a rating grid. In using a rating grid, it is MOST important that:
(1)the final market value be determined by averaging the comparable sale prices (after adjustments).
(2)the comparable properties have the same lot size as the subject property.
(3)the subject property be the basis of comparison and all comparables be adjusted to it.
(4)the comparable properties have the same cost of improvements as the subject property.
Answer: 3 Explanation: Option (3) is correct because when using a rating grid, the subject property is the standard of comparison and each comparable sale is adjusted to it. The subject property is not adjusted to the comparables nor are the comparables adjusted to each other. Option (1) is incorrect because the correct approach is to determine which comparable is most like the subject property and use that as main evidence for the final market value, not to average the value of the comparable sale prices. Option (2) is incorrect because the comparable properties need not have the same lot size as the subject property. Option (4) is incorrect because the comparable properties do not require the same cost of improvements as the subject property.
Question 131: Where a single-family residence in Vancouver contains a wood burning furnace as its primary heating system, this would be considered an element of:
(1)physical curable depreciation.
(2)functional curable depreciation.
(3)functional incurable depreciation.
(4)physical incurable depreciation.
Answer: 2 Explanation: Option (2) is correct because a wood burning furnace as a property’s primary heating system is an example of functional curable depreciation, which is an outdated feature that can be corrected economically. Options (1), (3), and (4) are incorrect for this reason.
Question 132: A property recently sold for $800,000. The stabilized annual net operating income for the property is $88,000. The yield on this property is:
(1)11%
(2)9%
(3)12%
(4)14%
Answer: 1 Explanation: Find the yield of the property given the NOI and the sale price.
Question 133: Vincent and Pamela signed a standard contract of purchase and sale for the sale of Vincent’s property. Vincent agreed to give title free of encumbrances. Pamela is putting on a new mortgage. Costs are as follows: Legal fees for conveyance: $400.00 Legal fees to discharge an existing mortgage on title: $100.00 Which one of the following statements is correct with respect to the statement of adjustments?
(1)For her share of the above fees, Pamela will have a debit of $500.
(2)Vincent should be credited $100.
(3)Pamela should be debited $400 and Vincent should be debited $100.
(4)Pamela should be debited $400 and credited $100.
Answer: 3 Explanation: Option (3) is correct because legal Fees for conveyance are classified under the “debit” of the purchaser, and legal Fees to discharge an existing mortgage on title is under “debit” of the vendor. Options (1), (2), and (4) are incorrect for this reason.
Question 134: The marketing mix consists of which of the following?
(1)Product, place, price, and preference
(2)People, place, price, and position
(3)Personal selling, publicity, price, and promotion
(4)Product, place, price, and promotion
Answer: 4 Explanation: Option (4) is correct because the marketing mix consists of product, place, price, and promotion. Options (1), (2), and (3) are incorrect for this reason.
Question 135: Which of the following statements regarding strata plans is TRUE?
(1)A strata plan is a plan contained in the disclosure statement filed with the superintendent that shows the developer’s goals for the development.
(2)A strata plan is filed in the land title office and designates which parts of a strata project are strata lots and which are common property.
(3)A strata plan is used for all condominiums or cooperative developments.
(4)A strata plan is only necessary when creating five or more strata lots.
Answer: 2 Explanation: Option (2) is correct because an owner developer creates a strata development by filing a strata plan with the land title office. On the strata plan, the entirety of the building is divided between strata lots and common property. Option (1) is incorrect because a strata plan does not contain the developer’s goals nor does it form part of the disclosure statement. Option (3) is incorrect because cooperative owners possess shares in a non-profit corporation, which in turn holds title to the land. Therefore, there is no need to file a strata plan to divide the property into individual units. Option (4) is incorrect because a strata plan must be filed for any strata development regardless of the number of lots being created.
Question 136: A lender who is foreclosing may ask the court to appoint a receiver where the property being foreclosed is:
(1)a large residential apartment building.
(2)a single-family dwelling with a tenant occupying it.
(3)a single-family dwelling abandoned by the borrower.
(4)any one of the above.
Answer: 4 Explanation: Option (4) is correct because Options (1), (2), and (3) all describe situations in which a lender who is foreclosing may ask the court to appoint a receiver. If a mortgaged property has been abandoned (as described in Option (3)) or contains a commercial operation (as described in Options (1) and (2)), the lender may request that the court appoint a receiver to collect the rents, pay the bills, and generally keep the business going.
Question 137: The “subject of an appraisal” is:
(1)the market value of the physical property.
(2)a fee simple estate on a cash or cash-to-first-mortgage basis.
(3)a subjective measure of value by an experienced appraiser.
(4)the value of the legal rights of ownership vested in a particular piece of real estate.
Answer: 4 Explanation: Option (4) is correct because an appraisal values the legal rights of ownership vested in a particular piece of real estate. Options (1), (2), and (3) are incorrect as they do not describe the subject of an appraisal.
Question 138: Which of the following options BEST completes this sentence: “A private nuisance involves some use of a person’s own property that…”?
(1)endangers the safety or comfort of the public or some major section of the public.
(2)amounts to a trespass.
(3)interferes with the use and enjoyment of, or causes damage to, the property of another.
(4)causes physical damage to the person’s own property.
Answer: 3 Explanation: Option (3) is correct because a private nuisance occurs when an owner or occupier of land unreasonably and substantially interferes with the reasonable use and enjoyment of a neighbouring property. Option (1) is incorrect because private nuisance is concerned with the use and enjoyment of property, not the safety or comfort of the public at large. Option (2) is incorrect because an act constituting private nuisance need not involve a trespass (e.g., the wrongful disturbance of an easement may constitute a private nuisance). Option (4) is incorrect because Option (3) is correct.
Question 139: In British Columbia, before approving a conversion of a rental building to a condominium, the approving authority must consider a number of factors. Which one of the following is NOT a mandatory consideration?
(1)The priority of rental accommodation over private ownership in the area
(2)The proposal to relocate existing tenants
(3)The life expectancy of the building
(4)The potential increase in real property tax revenue
Answer: 4 Explanation: Option (4) is correct because it is not mandatory to consider the potential increase in real property tax revenue to convert a rental building to a condominium. Options (1), (2), and (3) are all factors the approving authority must consider when deciding whether to approve the conversion.
Question 140: Which one of the following does NOT result from the immobility of land?
(1)The need for debt financing
(2)A vulnerability to outside environmental factors
(3)An inability to move a listed property to a better resale market
(4)The necessity for owners to travel in order to take advantage of services provided by different parcels of land
Answer: 1 Explanation: Option (1) is correct because the immobility of land does not affect how a purchase is financed. Options (2), (3), and (4) are incorrect as they result from the immobility of land.
Question 141: Which one of the following terms does NOT describe a type of structural method used in housing construction?
(1)Log
(2)Concrete block
(3)Vaulted ceiling
(4)Post, beam, and plank
Answer: 3 Explanation: Option (3) is correct because a vaulted ceiling is an architectural variation, not a structural method used in housing construction. Options (1), (2), and (4) are incorrect because they describe types of structural methods used in housing construction.
Question 142: On a straight line principal reduction loan, the monthly payment:
(1)is a constant amount each month.
(2)pays interest only.
(3)pays principal only.
(4)declines over time.
Answer: 4 Explanation: Option (4) is correct because the monthly payment on a straight line principal reduction loan declines over time. Options (2) and (3) are incorrect because each monthly payment includes a constant amount of the principal, plus the interest that has accrued for the month. Options (1) is incorrect because as the outstanding balance declines over time, the amount of monthly interest declines; therefore, the total payment declines.
Question 143: Vanessa has agreed to sell her home to Paul for a price of $150,000. Paul has paid a deposit of $15,000 directly to his brokerage. There is a mortgage registered against title that has an outstanding balance of $71,000, which Paul will assume. Paul will also be receiving financing, by way of a second mortgage, for $34,000. Property taxes of $1,095 were not paid by Vanessa by the due date; therefore, a penalty of $105 has been assessed. The outstanding property taxes and penalty will be paid by the conveyancer from the sale proceeds. A real estate commission of 6% of the purchase price is payable. Conveyancing fees for this transaction are $600. The adjustment, completion, and possession date is August 31. It is NOT a leap year and property transfer tax is payable. As well, Paul is NOT a foreign entity for property transfer tax purposes. What are the cash proceeds of sale to Vanessa?
(1)$69,169.00
(2)$69,538.00
(3)$69,204.38
(4)$140,169.00
Answer: 1 Explanation: Seller’s Statement of Adjustments (Vanessa) ITEM DEBIT CREDIT Purchase Price 150,000.00 Assumed 1st Mortgage 71,000.00 Unpaid and Overdue Taxes + Penalty 1,200.00 Buyer’s Share of Taxes* 369.00 Commission 9,000.00 Cash Proceeds of Sale** 69,169.00 _________ 150,369.00 150,369.00 * (Aug. 31-Dec. 31 = 123 days) 123/365 $1,095 = $369 ** Because the total Debits and Credits must balance, in order to find the Proceeds of Sale, you must first calculate the total Credits ($150,369.00) and then subtract the known Debits. The result is the balance of cash that the seller can expect to receive after all outstanding expenses relating to the property have been paid.
Question 144: Violet has agreed to sell her home to Parker for a price of $150,000. Parker has paid a deposit of $15,000 directly to his brokerage. There is a mortgage registered against title that has an outstanding balance of $71,000, which Parker will assume. Parker will also be receiving financing, by way of a second mortgage, for $34,000. Property taxes of $1,095 were not paid by Violet by the due date; therefore, a penalty of $105 has been assessed. The outstanding property taxes and penalty will be paid by the conveyancer from the sale proceeds. A real estate commission of 6% of the purchase price is payable. Conveyancing fees for this transaction are $600. The adjustment, completion, and possession date is August 31. It is NOT a leap year and property transfer tax is payable. As well, Parker is NOT a foreign entity for property transfer tax purposes. What is the amount that Parker requires to complete this sale?
(1)$30,969.00
(2)$31,869.00
(3)$32,469.00
(4)$103,469.00
Answer: 3 Explanation: Buyer’s Statement of Adjustments (Parker) ITEM DEBIT CREDIT Purchase Price 150,000.00 Deposit to Agent 15,000.00 Assumed 1st Mortgage 71,000.00 2nd Mortgage 34,000.00 Buyer’s Share of Taxes* 369.00 Conveyancing Fees 600.00 Property Transfer Tax 1,500.00 Balance Due to Complete** _________ 32,469.00 152,469.00 152,469.00 * (Aug. 31-Dec. 31 = 123 days) 123/365 $1,095 = $369 ** Because the total Debits and Credits must balance, in order to find the Balance Due to Complete, you must first calculate the total Debits ($152,469.00) and then subtract the known Credits. The result is the balance due from the buyer to complete the transaction.
Question 145: Which of the following is NOT a power or duty of the BCFSA?
(1)Receiving licensing applications relating to real estate services
(2)Carrying out investigations and disciplinary functions in relation to licensees
(3)Making orders against unlicensed persons who provide real estate services without a licence
(4)Lobbying the provincial government to protect the interests of real estate professionals
Answer: 4 Explanation: Option (4) is correct because BCFSA is a regulatory agency whose primary objective is protection of the public. BCFSA is not obligated to pursue the best interests of real estate professionals, and must pursue the best interests of the public. Options (1), (2), and (3) each describe a power or duty of BCFSA.
Question 146: An investor has the opportunity to invest in one of four alternative mortgages, each with the same degree of risk. The only distinction between these investments is the rate of interest charged to the borrower. These rates are: Loan A: 13.25% per annum, compounded daily Loan B: 13.50% per annum, compounded quarterly. Loan C: 13.75% per annum, compounded semi-annually Loan D: 14.25% per annum, compounded annually. Assuming that the investor can purchase each mortgage for the same amount of money, which investment will he prefer?
(1)Loan A
(2)Loan B
(3)Loan C
(4)Loan D
Answer: 4 Explanation: Find the effective rates for each of these nominal rates and compare. The investor acts as the lender and will prefer the loan with the highest interest rate. Press Display Loan A: 13.25 NOM% 13.25 365 P/YR 365 EFF% 14.165157 Loan B: 13.5 NOM% 13.5 4 P/YR 4 EFF% 14.198945 Loan C: 13.75 NOM% 13.75 2 P/YR 2 EFF% 14.222656 Loan D: Nominal rate compounded annually is equal to its effective rate: 14.25% Based on the above, Loan D provides the highest rate of return.
Question 147: A local mortgage broker arranged a mortgage in the amount of $210,000. The borrower has agreed to pay a brokerage fee in the amount of $7,200 that is to be added to the loan amount, giving a face value of $217,200 for the loan. The mortgage bears interest at a contract rate of 4.5% per annum, compounded semi-annually. The mortgage has an amortization period and term of 20 years and calls for monthly payments. If the mortgage is sold to an investor for $225,000 immediately after the loan is initiated, the investor will earn the following nominal interest rate, with semi-annual compounding:
(1)4.083034%
(2)4.162285%
(3)4.018729%
(4)4.124712%
Answer: 1 Explanation: The first step to solving this problem is to find the monthly payments that the borrower has to make. Press Display 4.5 NOM% 4.5 2 P/YR 2 EFF% 4.550625 12 P/YR 12 NOM% 4.458383 217200 PV 217,200 20 12 = N 240 0 FV 0 PMT 1,369.239998 1369.24 +/ PMT 1,369.24 The investor is paying $225,000 for the right to receive the monthly payments of $1,369.24 for 20 years. In order to determine the investor’s rate of return expressed as a nominal interest rate, compounded semi-annually, the calculator steps are as follows: Press Display 225000 PV 225,000 I/YR 4.048729 EFF% 4.124712 2 P/YR 2 NOM% 4.083034
Question 148: What is the result of the doctrine of stare decisis?
(1)Former decisions are used as a basis for later decisions.
(2)The common law system has uniformity.
(3)Decisions by the Supreme Court of Canada are accorded the most weight in our jurisprudence.
(4)All of the above result from the doctrine of stare decisis.
Answer: 4 Explanation: Option (4) is correct because the age of the decision does not determine which decision should govern the subsequent decision. Options (1), (2), and (3) each describe a component of the doctrine of stare decisis.
Question 149: Which of the following statements regarding the income approach of appraisal is TRUE?
(1)Net operating income is a measure of return on the equity portion of a property’s value.
(2)Items specific to an owner or investor are included in the calculation of net operating income.
(3)Net operating income does not consider depreciation, income tax, or debt service.
(4)The income approach is only used for apartment buildings.
Answer: 3 Explanation: Option (3) is correct because it is true. Option (1) is incorrect because the net operating income represents a return on the entire value of the property; it is not a return only on the equity portion of the property’s value. Option (2) is incorrect because items specific to an owner or investor are NOT included in the calculation of net operating income. Option (4) is incorrect because the income approach can be used in appraising most types of property, although it is more appropriate for properties that produce rental income, e.g., apartment buildings, office buildings, industrial space.
Question 150: Karen’s neighbour, Jack, is a gas barbecue enthusiast who cooks two meals a day, seven days a week, on his outdoor gas barbecue. As a result, the smoke and fumes are carried onto Karen’s property. The barbecue smoke has discoloured Karen’s dining room curtains and killed her shrubs. Which of the following statements is TRUE?
(1)Jack may be liable to Karen for private nuisance and Karen may seek an injunction to prevent Jack from continuing the nuisance.
(2)If Karen chooses to sue Jack for negligence, she must prove that he has breached the duty of care owed to her by a reasonable person in Jack’s situation.
(3)This scenario reveals a cause of action for interference with the airspace rights of a fee simple owner.
(4)Karen need not prove that she has suffered any form of damage to succeed in her lawsuit against Jack because her cause of action is considered trespass and “actionable per se” (i.e., without proof of damage).
Answer: 1 Explanation: Option (1) is correct. Karen may have a claim for private nuisance against Jack, as the interference was continuous, the act was done on his land but affected Karen’s land, and it interfered with Karen’s use and enjoyment of her land. An injunction is a possible remedy available under a successful action in private nuisance. Option (2) is false because, if Karen chooses to sue Jack for negligence, she must prove that he has breached the standard of care owed to her by a reasonable person in Jack’s situation, not that he breached the duty of care. Option (3) is false because the interference with airspace rights of a fee simple owner would likely be an action in trespass, and in this case, Jack did not trespass, as the act was done on his land. Option (4) is false because although trespass is actionable per se, Jack did not trespass onto Karen’s property. Trespass requires the direct physical invasion of land by a person or tangible object.
Question 151: Which of the following is NOT a duty that is owed by a principal to their agent?
(1)The duty to indemnify the agent
(2)The duty to remunerate the agent
(3)The duty to comply with the agency agreement
(4)The duty to avoid conflicts of interest with the agent
Answer: 4 Explanation: Option (4) is correct because the agent has a duty to avoid conflicts of interest with his or her principal, but the principal does not owe this duty to his or her agent. Options (1), (2), and (3) are incorrect because they are duties that are owed by a principal to his or her agent.
Question 152: Which one of the following occupiers of real property would NOT be liable, by statute, for the real property taxes?
(1)The registered owner of a life estate
(2)The registered holder of a long-term lease, where the lessor is not a tax exempt organization or a public body
(3)The registered owner of an estate in fee simple
(4)The registered holder of an agreement for sale
Answer: 2 Explanation: Option (2) is correct because in British Columbia the statutory liability to pay real property taxes is on the owner of the property. This applies even in the context of long term-leases where the lessor is not a tax exempt organization or public body. That said, a lease contract can impose on a lessor a contractual liability to pay property taxes. Option (1), (3), and (4) are incorrect because each of these entities would be statutorily liable for property taxes.
Question 153: Larry and Theresa orally agree that Theresa will lease 10 acres of farmland owned by Larry for 5 years. As part of the agreement Larry agrees to build a barn, which he does at a cost, to him, of $10,000. Which one of the following statements is TRUE?
(1)The lease agreement is not enforceable by Larry because it is neither in writing nor signed by Theresa as is required by section 59 of the Law and Equity Act.
(2)Section 59 of the Law and Equity Act does not apply to lease agreements.
(3)The lease agreement may be enforceable by Larry because he has altered his position by spending $10,000 on a new barn in reliance on the lease.
(4)The lease agreement is void because it is not in writing.
Answer: 3 Explanation: Option (3) is correct because Larry may be able to enforce the lease agreement under section 59 of the Law and Equity Act since he has spent $10,000 on a new barn. Generally, contracts respecting land in British Columbia must be in writing to be enforceable, pursuant to section 59 of the Law and Equity Act. However, section 59 allows an exception to this writing requirement in situations where the person seeking to enforce an unwritten contract has changed his or her position such that it would be unfair not to enforce the contract. Option (1) is incorrect because there are exceptions to the writing requirement imposed by section 59. Option (2) is incorrect because section 59 applies to lease agreements for more than 3 years. Option (4) is incorrect because a lease agreement is not automatically void if not in writing (e.g., section 59 does not apply to lease agreements for terms of 3 years or less).
Question 154: Which of the following statements is FALSE under the common law of agency?
(1)An agency relationship is created when two persons agree that one will act on behalf of the other.
(2)Where the agent does not disclose that they are an agent and enters into a contract with a third party, the principal can have no liability for the contract.
(3)An agent who would not have capacity to enter a contract themselves may be able to make a valid contract on their principal’s behalf.
(4)An agency agreement may be either written or oral or partly written and partly oral.
Answer: 2 Explanation: Option (2) is correct because a principal will be bound to a third party by the acts of their agent provided those acts were within the agent’s authority. This means that a principal could be liable to a third party under a contract entered into by their agent where the agent failed to disclose their status as an agent, as long as the agent was acting within their authority. That said, where an agent does not disclose to a third party that he or she is acting as an agent, the agent may also be held liable as a principal. Options (1), (3), and (4) are incorrect because each statement is true of the common law of agency.
Question 155: There are many reasons why a property might sell for a price that is different from its current appraised value. Which of the following could be a reason?
(1)The property is in a state of long-term disrepair.
(2)The property is located beside a fertilizer plant.
(3)The appraisal was done by the cost approach.
(4)The property is located next to a school.
Answer: 3 Explanation: Option (3) is the correct answer as the cost approach is most likely to result in an appraisal value that is significantly different from the price a property might sell for. The reason for this is because the replacement cost of a property may not be representative of the value in the market. Options (1), (2), and (4) are incorrect because these factors would likely be accounted for in the appraised value.
Question 156: Calculate the monthly payment required for the following mortgage: Principal of $40,000; 14% per annum, compounded semi-annually; amortization period of 20 years
(1)$485.47
(2)$486.07
(3)$469.56
(4)$477.41
Answer: 2 Explanation: Find the monthly based on the terms of the contract. Press Display 14 NOM% 14 2 P/YR 2 EFF% 14.49 12 P/YR 12 NOM% 13.608312 40000 PV 40,000 240 N 240 0 FV 0 PMT 486.07037 The monthly payment is $486.07.
Question 157: Jason Buyer offers $345,000 to purchase a house, subject to obtaining an acceptable first mortgage. A lender has appraised the property at $340,000, and requires an 80% loan-to-value ratio and a 28% gross debt service ratio. Property taxes are $2,200 per annum and Mr. Buyer’s gross income is $75,000 per year. What is the maximum amount (rounded to the nearest dollar) this lender will advance if the interest rate is j2 = 5%, the amortization period is 25 years, and payments are made monthly?
(1)$272,000
(2)$269,370
(3)$275,280
(4)$267,420
Answer: 2 Explanation: The maximum loan amount is the lesser of the maximum loan amount using the loan-to-value (LTV) and GDSR constraints:
Question 158: A multiple listing agreement is a type of exclusive listing agreement in which:
(1)the brokerage lists two or more properties for the same seller.
(2)the seller lists the property with two or more brokerages.
(3)the seller pays more than one commission.
(4)the contract requires the listing to be distributed to all members of the real estate board.
Answer: 4 Explanation: Option (4) is correct because a multiple listing agreement is a type of exclusive listing contract which requires that the listing be distributed to all members of the listing licensee’s real estate board. Option (1) is incorrect because the term “multiple” in “multiple listing agreement” does not refer to the number of properties the brokerage lists for the same seller. Options (2) and (3) are incorrect because a multiple listing contract is always an exclusive right to sell, meaning that the property is listed with only one brokerage and the seller pays one commission to that brokerage.
Question 159: The practice of recognizing expenses as they are incurred, rather than when they are paid for, is a characteristic of which generally accepted accounting principle?
(1)The cost principle
(2)The recognition principle
(3)The matching principle
(4)The conservation principle
Answer: 3 Explanation: Option (3) is correct because the matching principle states that expenses must be recorded when they are incurred, not when they are paid. Option (1) is incorrect because the cost principle states that assets must be recorded for the purchase price on the date of acquisition. Option (2) is incorrect because the recognition principle is not an accounting principle, although the revenue recognition principle states that revenues must be recorded when they are earned, not when money is received. Option (4) is incorrect because the conservation principle is not a generally accepted accounting principle.
Question 160: By extending the amortization period of a loan:
(1)the mortgage loan is paid off faster, which reduces the amount of interest paid by the borrower.
(2)the size of the required payment will be larger.
(3)the loan contract period becomes longer and the loan will be classified as a fully amortized loan.
(4)the repayment of principal is spread over a greater number of payments, making each payment smaller.
Answer: 4 Explanation: Option (4) is incorrect because a longer amortization period will mean that repayment is spread out over a longer period of time, and payments will be smaller. Options (1) is incorrect for this reason. Option (2) is incorrect because the size of the required payment will be smaller. Option (3) is incorrect because extending the loan amortization period does not affect its classification.
Question 161: Which one of the following statements regarding digital signatures is TRUE?
(1)Digital signatures are used to authenticate the individual sending the message so as to ensure the integrity of the data.
(2)Digital signatures are codes recorded into software to ensure copy protection and discourage multiple users.
(3)Digital signatures are codes built into modems that notify receivers of where a message is coming from.
(4)Digital signatures are tags in HTML that tell search engines information about a webpage.
Answer: 1 Explanation: Option (1) is correct because digital signatures are codes that are used to authenticate the individual sending the message so as to ensure the integrity of the data. To be effective, digital/e-signatures, such as those used in credit cards, must be unforgeable. Options (2), (3), and (4) are incorrect as they do not describe digital signatures.
Question 162: A property is listed for $133,333 but the market value, as estimated in a recent appraisal, is $125,000. The property’s lending value is estimated to be $120,000. Jay and Joan purchase the home for $128,500 subject to a mortgage of $84,000. What loan-to-value ratio was applied by the lender with whom Jay and Joan negotiated the mortgage? (Assume that the loan-to-value ratio was the binding constraint on the loan size.)
(1)67.5%
(2)70%
(3)72%
(4)75%
Answer: 2 Explanation: Find the loan-to-value ratio based on the property’s lending value and the amount of the mortgage. $84,000 ÷ $120,000 = 70%
Question 163: Where would the commission appear on the statements of adjustments?
(1)It would appear as a credit on the buyer’s statement and as a debit on the seller’s statement.
(2)It would appear as a debit on the buyer’s statement and as a credit on the seller’s statement.
(3)The commission only appears on the seller’s statement.
(4)The commission only appears on the buyer’s statement.
Answer: 3 Explanation: Option (3) is correct because the commission is paid by the seller only. Therefore, it appears as a debit on the seller’s statement of adjustments and does not appear on the buyer’s statement. Options (1), (2), and (4) are incorrect for the same reason.
Question 164: Which one of the following statements is FALSE?
(1)The doctrine of stare decisis provides uniformity to the common law system.
(2)The Supreme Court of Canada is not required to hear all appeals.
(3)The Supreme Court of British Columbia may exercise both common law and equitable jurisdiction.
(4)An appeal by a taxpayer to reduce a tax assessment would fall within the sphere of private law.
Answer: 4 Explanation: Option (4) is correct because tax law falls within the sphere of public law, and is therefore a false statement. Option (1) is incorrect because the doctrine of stare decisis provides uniformity to the common law system by requiring courts to adhere to principles that prior courts have established. Option (2) is incorrect because the Supreme Court of Canada can decide not to hear an appeal. Option (3) is incorrect because courts in Canada can apply both common law and equitable principles in deciding a matter.
Question 165: When a property possesses latent value:
(1)higher value may result through a change of use.
(2)the existing property should undergo renovation for continued similar use.
(3)the buyer should have it rezoned.
(4)it should not be offered for sale.
Answer: 1 Explanation: Option (1) is correct because a property possesses latent value if its current state does not represent its highest and best use. Given this, the latent value of the property may be realized through a change of use. Option (2) is incorrect because a renovation for continued similar use would not realize the property’s latent value. Option (3) is incorrect because a property may possess latent value given its current zoning. Further, rezoning may not be possible. Option (4) is incorrect because a property may be sold at a higher price if it possesses latent value.
Question 166: A potential borrower with an annual income of $58,000 and property taxes of $2,000 per annum has been told by a mortgage lender that the largest loan available will be $190,451. What is the maximum gross debt service ratio allowed by the lender given that the loan has monthly payments and is to be written at 5.5% per annum, compounded semi-annually and amortized over 25 years?
(1)25%
(2)27.5%
(3)28.5%
(4)30%
Answer: 2 Explanation: Find the maximum gross debt service ratio given the mortgage terms. Press Display 5.5 NOM% 5.5 2 P/YR 2 EFF% 5.575625 12 P/YR 12 NOM% 5.438018 190451 PV 190,451 0 FV 0 300 N 300 PMT 1,162.496683 The monthly payment is $1,162.50.
Question 167: Which one of the following is NOT a remedy for breach of contract?
(1)Damages
(2)Specific performance
(3)Injunction
(4)Rectification
Answer: 4 Explanation: Option (4) is correct because rectification is not a remedy for breach of contract. Options (1), (2), and (3) are incorrect because these are all remedies for breach of contract.
Question 168: Which of the following options BEST defines the term “dormer” in residential building construction?
(1)Roof extensions used to provide extra floor area and windows for the upper level
(2)The structural member, usually wood, placed at the top of window openings
(3)A roof style commonly known as a hip roof
(4)A component of a septic waste water system
Answer: 1 Explanation: Option (1) is correct because a dormer is a roof extension that provides extra floor area and windows for the upper level of a home. Options (2), (3), and (4) are incorrect for this reason.
Question 169: The fact that a joint tenant’s interest does not pass to a personal representative on death is referred to as:
(1)an estate in inheritance.
(2)a tenancy in common.
(3)the right of survivorship.
(4)a life estate.
Answer: 3 Explanation: Option (3) is correct and Options (1), (2), and (4) are incorrect because the right of survivorship means that when one joint tenant dies, the entire estate automatically vests in the surviving joint tenants.
Question 170: Meika Jones is being sued for creating a nuisance. Which of the following arguments is a valid defence to the lawsuit?
(1)The activity involved benefits the public.
(2)She has not been negligent in carrying out the activity.
(3)The damage she has created is trifling and of little consequence.
(4)The activity is authorized by statute but could be carried out without creating a nuisance.
Answer: 3 Explanation: Option (3) is correct because an unreasonable and substantial interference with property is required to establish a claim in nuisance. Trifling and inconsequential damages is insufficient. Option (1) is incorrect because it is no defence to say that the act complained of is beneficial to the public. Option (2) is incorrect because the fact that the activity creating the nuisance has not been performed in a negligent way is no defence to an action in nuisance. Option (4) is incorrect because the mere fact that the activity is authorized by statute does not mean the activity is not a nuisance.
Question 171: Brad has recently received an interest only loan for $100,000 to operate a food cart in downtown Vancouver. The loan has an interest rate of 8% per annum, compounded monthly, and requires interest only payments every month. How much are the monthly interest only payments that Brad makes if the duration of the loan is two years?
(1)$1,333.33
(2)$666.67
(3)$500.33
(4)$1,200.67
Answer: 2 Explanation: Press Display 8 I/YR 8 12 P/YR 12 100000 PV 100,000 100000 +/ FV 100,000 1 N 1 PMT 666.666667 Alternative Solution Press Display 8 ÷ 12 = I/YR 0.666667 % 0.00666667 100000 = 666.666667
Question 172: Which of the following is the BEST example of a secure password?
(1)987654321
(2)R$2c
(3)83ej9@!h4C
(4)reale$tate
Answer: 3 Explanation: Option (3) is correct: this password is longer than 8 characters, includes a variety of character types, is not a dictionary word (or combination of dictionary words), and does not include a combination of consecutive keyboard keys. Option (1) is incorrect because it is a sequence of consecutive keyboard combinations. Option (2) incorrect because it is too short. Option (4) is incorrect because it is a combination of dictionary words with an obvious symbol to replace a letter, which can easily be cracked.
Question 173: Prepayment in a mortgage refers to:
(1)the right of lenders to demand full repayment of the outstanding principal if the payments fall into arrears.
(2)the right of the borrower to pay off all (or some) of the outstanding balance during the term of the mortgage.
(3)the lender’s right to demand full payment of the outstanding balance at the end of the term of a partially amortized mortgage.
(4)the payment of a finder’s fee to a mortgage broker (as compensation for arranging a mortgage loan), which is made prior to the advancing of mortgage funds.
Answer: 2 Explanation: Option (2) is correct because individual borrowers have the right, under the terms of the Interest Act, to prepay all of the outstanding debt (with additional three months’ interest as a penalty in lieu of notice) at any time after five years from the initiation date of the mortgage. In some instances, mortgage contracts allow for partial or complete prepayment to occur at any point in the contractual term. Options (1), (3), and (4) are incorrect because they do not describe prepayment in a mortgage.
Question 174: For which one of the following properties would an appraiser be MOST justified in employing the cost approach to determine market value?
(1)A 40-year-old bungalow that represents the highest and best use
(2)A newly-constructed church of contemporary design
(3)A vacant lot that possesses latent value
(4)A high rise office tower located in an outer suburb
Answer: 2 Explanation: Option (2) is correct. An appraiser who is asked to find the market value of a newly-constructed church would not be able to use the comparative or investment approaches due to the lack of data and would be justified in relying upon the cost approach. In addition, the appraiser can effectively determine the cost of constructing the improvements since the church is newly constructed and has not experienced any depreciation. Option (1) is incorrect because a 40-year old bungalow should be appraised using the direct comparison approach, Option (3) is incorrect because a vacant lot with latent value should be appraised using the residual method. Option (4) is incorrect because a high rise office tower in an outer suburb should be appraised using the income approach.
Question 175: Which of the following statements regarding profits à prendre is TRUE?
(1)A profit à prendre must accompany a dominant tenement.
(2)The right to fish on another’s land is an example of a profit à prendre.
(3)A profit à prendre is always granted for a definite period of time.
(4)An owner who wishes to impose restrictions consistent with a general scheme of development would likely charge the land with a profit à prendre.
Answer: 2 Explanation: Option (2) is correct because a profit à prendre is a right to enter onto the land of another person and to take some profit from the land, such as profits from fishing. Options (1) and (3) are incorrect because unlike easements, profits à prendre need not accompany a dominant tenement. They also need not be granted for an indefinite period of time. Option (4) is incorrect because an owner who wishes to impose restrictions consistent with a general scheme of development would likely charge the land with a building scheme.
Question 176: A commercial “periodic” tenancy is:
(1)a term lease.
(2)a lease for a certain period of time.
(3)a tenancy that automatically renews itself on the last day of the term for a further term of the same length until it is terminated by either party upon proper notice.
(4)a tenancy that is created in a commercial context after the entering of the lease and prior to the entering of possession by the tenant.
Answer: 3 Explanation: Option (3) is correct because a periodic tenancy automatically renews itself on the last day of the term for a further term of the same duration until terminated by either party. Options (1), (2), and (4) are incorrect because these statements do not describe features of periodic tenancies.
Question 177: Victor is selling his house to Paula with an adjustment date and a possession date of August 16, and a completion date of August 14. He is concerned about the fact that he just filled his oil tank. Which one of the following is TRUE?
(1)The conveyancer will give Victor a debit on the statement of adjustments for the oil in the tank.
(2)Victor will lose the cost of his oil. He should not have filled the tank.
(3)Victor could arrange to have a reading done on the adjustment date and make an adjustment privately with Paula for the cost of the oil remaining in the tank on that date.
(4)The cost of oil remaining in the tank must be calculated as at the completion date and Paula must reimburse Victor for that amount.
Answer: 3 Explanation: Option (3) is correct because oil left in the storage tank is an item usually settled between the parties outside of the statements of adjustments. Options (1), (2), and (4) are incorrect for the same reason.
Question 178: Lenders who are attempting to ration mortgage funds could:
(1)decrease their gross debt service ratio.
(2)decrease their interest rate on mortgage loans.
(3)increase their maximum loan-to-value ratio.
(4)increase the maximum amortization period available on mortgage loans.
Answer: 1 Explanation: Option (1) is correct because rationing mortgage funds means to reduce the amount given out to mortgage loans. By reducing the gross debt service ratio (PIT/Gross Income), the lender decreases the amount of the loan for a given gross income. Option (2) is incorrect because decreasing their interest rates doesn’t decrease the amount lent out; it just creates a greater demand for loans. Option (3) is incorrect because increasing the maximum loan to-value ratio means for a given market value of the property, the lender is willing to advance a greater amount of a loan. Option (4) is incorrect because increasing the maximum amortization period, all other factors constant, means the present value of the loans will decrease, since borrowers are given more time to pay off the loan.
Question 179: With fully amortized constant payment mortgages, when payments are rounded up to the next higher cent, the final payment necessary to repay the loan amount will be:
(1)smaller than the regular payments.
(2)larger than the regular payments.
(3)the same as the regular payments.
(4)impossible to determine.
Answer: 1 Explanation: Option (1) is correct because if the payment is rounded up to the next higher cent, the final payment of a fully amortized mortgage will be smaller than regular payments, because the borrower is “overpaying” a slight amount each period. Options (2), (3), and (4) are incorrect for this reason.
Question 180: A brokerage must maintain at least one account in a bank, trust company, or credit union designated as a trust account into which the brokerage must put, upon receipt, all monies received for or on behalf of a client. The Real Estate Services Act only permits the brokerage to withdraw money from such an account under certain circumstances. Which one of the following is NOT one of them?
(1)Money paid to or in accordance with the instructions of the principal to whose credit the money was deposited
(2)Money intended as remuneration for a licensee and that has been earned in accordance with the Rules
(3)Money paid into the trust account by mistake
(4)Money required for payment of a brokerage’s business expenses
Answer: 4 Explanation: Option (4) is correct because a brokerage is not permitted to withdraw money from the trust account to pay business expenses. Options (1), (2), and (3) are incorrect because the Real Estate Services Act allows a brokerage to withdraw money from the trust account in those circumstances.
Question 181: You have a partially completed appraisal report that you need to fill in. The 2,600 square foot subject property has 4 bathrooms. The house next door is similar in all respects except for the number of bathrooms and square footage. It sold for $234,000 and was adjusted +$5,700 for bathrooms and –$10,000 for square footage. If the market value of a bathroom is $5,700 and above a 1,900 sq. ft. benchmark, each 100 sq. ft. is worth $5,000, it can be concluded that this comparable has:
(1)3 bathrooms and 2,800 square feet.
(2)5 bathrooms and 2,400 square feet.
(3)4 bathrooms and 2,400 square feet.
(4)3 bathrooms and 2,600 square feet.
Answer: 1 Explanation: Option (1) is correct because in relation to the subject property, this comparable has three bathrooms (one less bathroom) and 2,800 square feet. The square footage adjustment is -$10,000; therefore, since the square footage adjustment is $5,000 per 100 square feet, there is a 200 square foot difference between the comparable and the subject. Since the adjustment is negative, the comparable property is larger (by 200 square feet) than the subject (2,600 + 200). Options (2), (3), and (4) are therefore incorrect.
Question 182: An option to purchase the mortgaged property given by the borrower to the lender at the time the mortgage is negotiated is:
(1)enforceable if the borrower has independent legal advice.
(2)void.
(3)enforceable in all cases.
(4)a collateral advantage.
Answer: 2 Explanation: Option (2) is correct and Options (1), (3), and (4) are incorrect because an option to purchase the property provided by the borrower to the lender is considered a clog on the equity of redemption, and is void.
Question 183: A mortgage contract with a face value of $170,000 requires monthly payments of $1,117.12 over a 20-year period. However, the mortgage broker advances only $166,000 after deducting a commission of $2,500, legal fees of $1,000, and an appraisal fee of $500. Calculate the cost of funds advanced for the borrower, expressed as an effective annual rate (j1).
(1)6.078157%
(2)5.234236%
(3)5.291647%
(4)5.361651%
Answer: 4 Explanation: Calculate the cost of funds advanced. Press Display 12 P/YR 12 166000 PV 166,000 1117.12 +/ PMT 1,117.12 240 N 240 0 FV 0 I/YR 5.234236 (j12) EFF% 5.361651 (j1)
Question 184: After an order nisi of foreclosure is granted to a petitioner and the respondent borrower fails to pay the amount due as required by the order, the petitioner may apply for:
(1)an order absolute of foreclosure.
(2)a judicial sale.
(3)an equitable charging order.
(4)either (1) or (2).
Answer: 4 Explanation: Option (4) is correct because the petitioner may apply for either an absolute of foreclosure or a judicial sale after an order nisi is granted and the respondent borrower fails to pay the amount due as required by the order. Options (1) and (2) are incorrect for the same reason. Option (3) is incorrect because an equitable charging order is not an option for petitioners to apply for after the respondent borrower fails to pay the amount due as required by an order nisi.
Question 185: Which one of the following is NOT a rationale for government regulation of land use?
(1)Protection of property values
(2)Public health and safety
(3)Limiting the power of land developers
(4)Conservation of natural resources
Answer: 3 Explanation: Option (3) is correct because limiting the power of land developers is not a rationale for government regulation of land use. Options (1), (2), and (4) are correct because they are all rationales for government regulation of land use.
Question 186: What will be the maximum loan granted on a commercial building with a lending value of $3,500,000 and yielding a net operating income of $360,000 per year, where the lender requires a debt coverage ratio of 1.25 and an 80% loan-to-value ratio? The loan will be amortized over 20 years with annual payments and the interest rate is 7.5% per annum, compounded annually. Round your answer to the nearest $1,000.
(1)$2,936,000
(2)$2,800,000
(3)$3,036,000
(4)$2,590,000
Answer: 2 Explanation: The maximum loan granted will be the lower amount of the loan-to-value constraint and the DCR constraint. Using DCR constraint, calculate maximum allowable payments.
Question 187: Which one of the following statements is correct?
(1)Contracts of purchase and sale can always be assigned.
(2)Contracts of purchase and sale can never be assigned.
(3)Contracts of purchase and sale can only be assigned with the permission of the buyer in writing.
(4)Contracts of purchase and sale can be assigned if the contract includes the standard assignment terms, the assignment does not prejudice the seller, and the contract does not prohibit assignment.
Answer: 4 Explanation: Option (4) is correct because section 8.2 of the Real Estate Services Act requires licensees to include the standard assignment terms in the contract of purchase and sale (unless they have been advised otherwise by their client). If the requirements of section 8.2 are met, assignments are permissible provided that they do not prejudice the rights of the seller and the contract does not prohibit assignment. Option (1) is incorrect because contracts of purchase and sale can only be assigned if certain conditions are met. Option (2) is incorrect because contracts of purchase and sale can be assigned in some circumstances. Option (3) is incorrect because under the standard assignment terms, contracts of purchase and sale can be assigned with the written consent of the seller, not the buyer.
Question 188: With respect to an insured mortgage loan, which one of the following statements is FALSE?
(1)Default insurance is paid for by the borrower.
(2)The borrower can add the premium to the mortgage amount.
(3)If the borrower defaults, the insurance company will guarantee that the lender will recover all capital invested.
(4)The lender has only the personal covenant of the borrower and the value of the property for security.
Answer: 4 Explanation: Option (4) is correct because it is false. With an insured mortgage loan, the lender has not only the borrower’s personal covenant, but also the insurance as fallback security in the case the borrower defaults on payments. Options (1), (2), and (3) are true statements and are therefore incorrect.
Question 189: A seller is willing to sell his house, by way of a take-back mortgage, for $90,000. The seller demands 24 monthly payments, and payment of the outstanding balance in the amount of $75,000 with the 24th payment. The seller wishes to earn an effective annual rate of 15% on his money. What is the monthly payment required?
(1)$1,664.80
(2)$7,048.03
(3)$1,599.22
(4)$720.60
Answer: 3 Explanation: Find the monthly based on the terms of the contract. Press Display 15 NOM% 15 1 P/YR 1 EFF% 15 12 P/YR 12 NOM% 14.0579 90000 PV 90,000 75000 +/ FV 75,000 24 N 24 PMT 1,599.22238 The monthly payment is $1,599.22.
Question 190: A person whom an agent represents is known in law as the:
(1)buyer.
(2)principal.
(3)client.
(4)seller.
Answer: 2 Explanation: Option (2) is correct because the principal is the person for whom an agent has contracted to act for, and for whose benefit the agent is required to perform and make decisions. Options (1) and (4) are incorrect because while an agent may represent a buyer or seller, the question is asking for the general term for the person that an agent represents, regardless of the side of the transaction. Option (3) is incorrect because “client” is not the legal term for the person whom an agent represents.
Question 191: In applying the income approach, depreciation is excluded from operating expenses in the calculation of net operating income. Which one of the following statements is an explanation for why depreciation is excluded?
(1)Depreciation measures a loss in value that occurs despite regular repairs and maintenance.
(2)Depreciation affects only the building component of the property.
(3)Depreciation expense is excluded from calculations for income tax purposes.
(4)The life of a building is primarily determined by economic factors rather than physical condition.
Answer: 4 Explanation: Option (4) is correct because depreciation is excluded in net operating income calculations because the life of a building depends on its economic durability, not its physical durability. The economic life of many buildings is so long that the amount of depreciation taken each year is not an important element in the estimation of value. Option (1), (2), and (3) are incorrect because they do not describe reasons for excluding depreciation from net operating income.
Question 192: If a property owner considers that the actual value assessment of their property is too high, they must first submit their complaint to:
(1)a Property Assessment Review Panel.
(2)the Board of Variance.
(3)the Municipal Finance Authority.
(4)the Property Assessment Appeal Board.
Answer: 1 Explanation: Option (1) is the correct answer. A Property Assessment Review Panel is the first level of appeal from a property assessment. Option (2) is incorrect because the Board of Variance deals with exceptions to zoning bylaws. Option (3) is incorrect because the Municipal Finance Authority levies property tax, but does not deal with assessments. Option (4) is incorrect because the Property Assessment Appeal Board is the second level of appeal (i.e., it hears appeals from the Property Assessment Review Panel).
Question 193: Which one of the following is NOT essential in order to constitute a restrictive covenant in law?
(1)It must be positive in nature.
(2)It must be negative in nature.
(3)At least two parcels of property must be involved.
(4)The burden of the restriction must have been intended by the parties to bind the land.
Answer: 1 Explanation: Option (1) is correct because a restrictive covenant must be negative, not positive. Options (2), (3), and (4) are incorrect because being negative in nature, involving two parcels of property and having intention to bind the land are all essential elements of a restrictive covenant.
Question 194: If payments are rounded up to the next higher dollar, the MOST likely result is:
(1)an increase in the cost to the borrower.
(2)a higher yield to the lender.
(3)a lower final payment.
(4)an increase in the number of payments.
Answer: 3 Explanation: Option (3) is correct because if payments are rounded up to the next higher dollar, the final payment will likely be smaller because the borrower is “overpaying” a small amount each period. Options (1) and (2) are incorrect because rounding will not increase the cost to the borrower or the yield to the lender. Option (4) is incorrect because the number of payments will remain the same.
Question 195: There are two ways to surrender a lease under a commercial tenancy. One is by an act of the parties; the other is:
(1)by operation of law.
(2)by the order of an arbitrator.
(3)by the order of the Public Trustee.
(4)by an order of the Residential Tenancy Board.
Answer: 1 Explanation: Option (1) is correct because surrender of a commercial lease can arise by operation of law where the landlord does some act which is inconsistent with the continuation of the tenancy. Options (2), (3), and (4) are incorrect because an arbitrator, Public Trustee and the Residential Tenancy Board cannot grant orders amounting to surrender of a commercial lease.
Question 196: A potential buyer is aware of the asking price for a particular house listed for sale. Which of the following statements is normally FALSE?
(1)The probable sale price will be equal to or above the floor price.
(2)The probable sale price will be equal to or above the seller’s “value to owner”.
(3)The ceiling price will be equal to or below the asking price.
(4)The seller is likely to know the buyer’s ceiling price.
Answer: 4 Explanation: Option (4) is the false statement as it is unlikely that the seller knows the buyer’s ceiling price. Options (1), (2), and (3) are all true statements.
Question 197: How much should an investor be willing to pay for a property that is expected to sell for $60,000 in three years if the investor desires a yield of not less than j2 = 14%?
(1)$40,498.29
(2)$36,648.83
(3)$39,980.53
(4)$48,977.87
Answer: 3 Explanation: Find the PV for a future cash flow of $60,000 given the investor’s requirements. Press Display 14 I/YR 14 2 P/YR 2 0 PMT 0 6 N 6 60000 FV 60,000 PV 39,980.533429 The investor would be willing to pay $39,980.53.
Question 198: At the end of a profitable year, a business’s ownership has decided to leave all these profits in the business. Which one of the following BEST describes the effect that profitable operations have on the balance sheet of a business?
(1)Owner’s equity is increased
(2)Assets are increased
(3)Cash is increased
(4)Liabilities are decreased
Answer: 1 Explanation: Option (1) is correct because When a company generates a profit (positive net income), the result is an increase in the owner’s or shareholder’s equity. Option (2) is incorrect because assets may increase or decrease depending on the company’s cash flow and asset purchase/sale activity. Option (3) is incorrect because cash may increase or decrease depending on the company’s cash flow activities. Option (4) is incorrect because liabilities may increase or decrease depending on the company’s borrowing and repayment activities.
Question 199: John makes the following offer to Mary. “I will pay you $500 to put a new rose bed in my garden.” If Mary accepts, what is the result?
(1)There is no contract because there is no consideration.
(2)The promise to pay is past consideration and therefore no contract exists.
(3)An enforceable contract has been formed if an intention to create a legal relationship exists.
(4)There is no contract because the contract is not in writing.
Answer: 3 Explanation: Option (3) is correct because assuming John and Mary intend to enter into a legal relationship, the other essentials of a contract are met – offer, acceptance, and consideration. There is no evidence that one of the parties lacks capacity or is lacking genuine consent. Option (1) is incorrect because $500 is valid consideration. Option (2) is incorrect because the promise to pay is future consideration, not past, as Mary does not yet have the money. Option (4) is incorrect because the contract is not required to be in writing.
Question 200: Under the Environmental Management Act, a mortgage lender may be liable for the remediation of a contaminated site if the lender:
(1)participates only in purely financial matters related to the site.
(2)insists on environmental conditions within a security agreement.
(3)becomes the registered owner of the site.
(4)appoints a person to inspect a contaminated site to determine future actions to take.
Answer: 3 Explanation: Option (3) is correct because a mortgage lender may attract liability for remediation of a contaminated site if they become the registered owner of the property, for example, as the result of foreclosure. Options (1), (2), and (4) are incorrect because the Environmental Management Act specifically provides that a lender is not liable if they participate only in financial matters, impose requirements that will not cause or increase contamination, or appoint a person to investigate the site.
