Question Bank 2 Flashcards
Question 501: What is a “time clause” or “72 hour clause”?
(1)It refers to the fact that the offer is only open for a stipulated time.
(2)It refers to the period in which either the seller or buyer can change their mind.
(3)It refers to the length of time that a condition subsequent is in force.
(4)It refers to the length of time the other party has to remove a condition precedent once the clause is invoked.
Answer: 4 Explanation: Option (4) is correct because a “time clause” or “72 hour clause” is a clause contained in a contract for purchase or resale of land which allows a seller to invoke a time period in which a condition precedent must be removed. If invoked, failure to remove the condition precedent within the time period would result in termination of the contract. Option (1) is incorrect because a time clause does not, in and of itself, mean that the offer is only open for a stipulated time period. Rather, the right to invoke a time clause arises only where a seller receives a subsequent offer after entering the original contract of purchase and sale. Option (2) is incorrect because this is a right given to the seller only. Option (3) is incorrect because time clauses relate to conditions precedent, not conditions subsequent.
Question 502: Which of the following statements regarding trespass is TRUE?
(1)Trespass is actionable only upon proof of damage.
(2)Trespass is actionable per se.
(3)Trespass is not actionable.
(4)Trespass is actionable only within 30 days of the trespass.
Answer: 2 Explanation: Option (2) is correct because trespass is actionable per se, meaning that no actual damage needs to be proven in order for an occupier to sue in trespass. Option (1) is incorrect for the same reason. Option (3) is incorrect because trespass is actionable. Option (4) is incorrect because there is no 30 day limit for bringing an action in trespass.
Question 503: The market value of a vacant site can be determined using:
(1)the cost approach of appraisal.
(2)the comparative approach of appraisal.
(3)the accrual approach of appraisal.
(4)the capitalization approach of appraisal.
Answer: 2 Explanation: Option (2) is correct because a vacant site can only be valued using the comparative approach of appraisal. Options (1), (3), and (4) are therefore incorrect.
Question 504: A mortgage was written for $176,000 with an interest rate of j2 = 6.5%, an amortization period of 15 years, and monthly payments. Calculate the outstanding balance owing at the end of five years, rounded to the nearest dollar.
(1)$150,637
(2)$146,984
(3)$141,986
(4)$134,809
Answer: 4 Explanation: Find the outstanding balance of the mortgage. Press Display 6.5 NOM% 6.5 2 P/YR 2 EFF% 6.605625 12 P/YR 12 NOM% 6.413688 176000 PV 176,000 180 N 180 0 FV 0 PMT 1,524.8103 1524.81 +/ PMT 1,524.81 60 INPUT AMORT PER 60-60 = = = 134,808.579554 The outstanding balance after 60 months is $134,809, rounded to the nearest dollar.
Question 505: A “real estate service” under the Real Estate Services Act includes:
(1)finding a party to acquire real estate.
(2)collecting rents or security deposits for the use of real estate.
(3)advising on the appropriate price for real estate.
(4)all of the above.
Answer: 4 Explanation: Option (4) is correct because “real estate services” is defined in the Real Estate Services Act to include: (a) rental property management services; (b) strata management services; and (c) trading services. Finding a party to acquire real estate and advising on the appropriate price for real estate are both “trading services” under the Real Estate Services Act. Collecting rents or security deposits for the use of real estate is a “rental property management service” according to the Real Estate Services Act.
Question 506: A potential borrower with an annual income of $48,000 and property taxes of $2,000.16 per annum has been told by a mortgage lender that the largest loan available will be $177,667. 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% per annum, compounded semi-annually and amortized over 25 years?
(1)25%
(2)27.5%
(3)32%
(4)30%
Answer: 4 Explanation: Find the maximum gross debt service ratio given the mortgage terms. Press Display 5 NOM% 5 2 P/YR 2 EFF% 5.0625 12 P/YR 12 NOM% 4.948699 177667 PV 177,667 300 N 300 0 FV 0 PMT 1,033.320129 The monthly payment is $1,033.32.
Question 507: Mr. Smith has contracted to sell his house to Mr. Jones for $200,000. Mr. Jones has paid a deposit of $15,000, the balance in cash. Conveyancing fees are $350, taxes were prepaid by the seller, totalling $800 net for the period of July 1 to December 31, and the commission is 5%. Completion, adjustment, and possession dates are July 1. As well, Mr. Jones is NOT a foreign entity for property transfer tax purposes. Property transfer tax will be due on completion. The balance due to complete is:
(1)$187,753.29
(2)$187,850.00
(3)$188,950.00
(4)$188,150.00
Answer: 4 Explanation: Buyer’s Statement of Adjustments (Mr. Jones) ITEM DEBIT CREDIT Purchase Price 200,000.00 Deposit 15,000.00 Conveyancing Fees 350.00 Buyer’s Share of Taxes 800.00 Property Transfer Tax 2,000.00 Balance Due to Complete* _________ 188,150.00 203,150.00 203,150.00 *Because the total Debits and Credits must balance, in order to find the Balance Due to Complete, you must first calculate the total Debits ($203,150.00) and then subtract the known Credits. The result is the balance due from the buyer to complete the transaction.
Question 508: Which of the following would be classified as a current asset on the financial statements of a business?
(1)Land
(2)Rents receivable
(3)Real property at its historic cost
(4)Accounts payable
Answer: 2 Explanation: Option (2) is correct because rents receivable is the only account listed that will be classified as a current asset. A current asset is something that the company owns, that will be used up within the next year. The rent receivable account is expected to be collected within the next year. Options (1) and (3) are incorrect because land and real property are classified as fixed- or long-term assets. Option (4) is incorrect because accounts payable is classified as a current liability.
Question 509: Bobby Buyer purchased a home in an area with landslide risks; however, at the time of purchase, Bobby’s licensee did not make any inquiries about landslide risks in the area. Three months after Bobby’s purchase, a landslide occurred three lots away from his property. There is no physical damage to Bobby’s property, but the value of the property decreased significantly. Upon a brief investigation, Bobby discovered that his neighbouring property had previously been the subject of a landslide and that there were public government reports about it. Bobby has started a claim in negligence for economic loss against his licensee for not investigating and alerting him of any landslide risks. Which of the following statements is TRUE?
(1)Bobby will have difficulty proving that his licensee owed him a duty of care because it is not reasonably foreseeable that his licensee’s actions in the course of the sale would affect Bobby.
(2)When assessing the standard of care, a court will need to determine whether a reasonable buyer’s agent would have made inquiries as to the landslide risk relating to the property.
(3)Since the law of negligence only provides for compensation for physical damages, Bobby will not succeed in a negligence claim against his agent.
(4)All of the above statements are true.
Answer: 2 Explanation: Option (2) is correct because the standard of care expected of a licensee is based on what a reasonable licensee ought to have done in all the circumstances. In this situation, a reasonable buyer’s agent would have made inquiries as to the landslide risk relating to the property given that the area was publicly known for landslide risks. Option (1) is incorrect because it is reasonably foreseeable that the actions or inactions of licensees will affect their clients. Option (3) is incorrect because negligence law may also provide compensation for non-physical damages such as economic losses. Option (4) is incorrect because Options (1) and (3) are incorrect.
Question 510: An option to purchase the mortgaged property given by the mortgagor to the mortgagee at the time the mortgage is negotiated is:
(1)enforceable if the mortgagor has independent legal advice.
(2)void.
(3)enforceable in all cases.
(4)called the equity of redemption.
Answer: 2 Explanation: Option (2) is correct because there is a fundamental principle of mortgage law which prohibits “clogging” on “the equity of redemption”. The equity of redemption refers to a borrower’s right to repay the mortgage and, upon doing so, to redeem his or her legal title to the property free of all encumbrances. In other words, a borrower (or the mortgagor) cannot be prevented by the terms of the mortgage from eventually redeeming his or her property free from the conditions contained in the mortgage. An option to purchase a mortgaged property given by the mortgagor (the borrower) to the mortgagee (the lender) at the time the mortgage is negotiated, if exercised, would prevent the mortgagor from redeeming his or her property upon repayment, and is therefore void. Option (1) is incorrect because the prohibition against clogging does not disappear even where the mortgagor has independent legal advice. Option (3) is incorrect because a void option cannot be enforceable in any case. Option (4) is incorrect because the equity of redemption refers to a mortgagor’s right to repay the mortgage, and is not a term for an option to repurchase a mortgaged property.
Question 511: All other things being equal, shortening the contractual term on a constant level payment mortgage always has the effect of:
(1)increasing the size of the periodic payments required to fully amortize the loan.
(2)increasing the size of the outstanding balance payment due at the end of the term.
(3)increasing the interest rate.
(4)increasing the payment frequency.
Answer: 2 Explanation: Option (2) is correct because if the term of a constant level payment mortgage is shortened, the result will be a higher outstanding balance at the end of the term. This occurs because a shorter term has fewer payments that will pay down principal and reduce the outstanding balance with each payment. Option (1) is incorrect because the size of periodic payments is not increased when the contractual term in shortened in a constant level payment mortgage. Option (3) is incorrect because the interest rate is not affected. Option (4) is incorrect because the payment frequency will not change.
Question 512: If you consider that the value shown on your assessment notice is too high, you can make a formal complaint to the:
(1)municipal court.
(2)Court of Appeal.
(3)assessment commissioner.
(4)Property Assessment Review Panel.
Answer: 4 Explanation: Option (4) is correct because any person may, under the Assessment Act, make a complaint against an entry in an assessment roll on the grounds that the property has been valued at too high or too low an amount. Any initial appeal against a real property assessment must be submitted to the Property Assessment Review Panel for initial adjudication. Option (1) is incorrect because there are no “municipal courts” to deal with property assessment complaints. Option (2) is incorrect because the Court of Appeal will not hear formal complaints regarding assessment notices. The Court of Appeal will only review issues of law arising from lower court decisions. Option (3) is incorrect because, while the Property Assessment Appeal Board may order the Assessment Commissioner to carry out a reassessment, formal complaints are not made to the Commissioner.
Question 513: Charlie enters into a fixed term tenancy agreement with Lucy for the rental of a suite during the school year. The agreement is for eight months beginning on September 1, 2018. The agreement does not provide that Charlie must vacate the rental unit when the term expires. In April, Charlie finds a summer job and decides to remain in the suite after the original lease expires. He pays Lucy one month’s rent on May 1, 2019, which she accepts. No new agreement is entered into. Two days later, Lucy learns that her brother, Linus, has been transferred back to Vancouver and is expected to arrive at the end of the month with his new wife, Sally. Linus has indicated that he wishes to live in the suite now occupied by Charlie. Which of the following statements is TRUE?
(1)Under the termination provisions of the Residential Tenancy Act, Lucy can give Charlie notice of the end of the tenancy agreement since she intends, in good faith, for her brother to occupy the premises.
(2)Lucy just has to wait until the end of May, and can evict Charlie at any time after that, since the original fixed term lease has expired and there is no new tenancy agreement.
(3)If Linus decides to purchase the suite, and Lucy provides Charlie with at least two months’ notice and pays an amount equivalent to one months’ rent, Linus must move in within a reasonable time after the effective date of the notice and stay for at least 6 months or else a court may order that Charlie be paid an amount equivalent to 12 months’ rent.
(4)If Linus decides to purchase the suite and plans to move in right away, Lucy can give at least one month notice to end the tenancy.
Answer: 3 Explanation: Option (3) is correct because under the Residential Tenancy Act, when a fixed term residential tenancy expires and the agreement does not provide that the tenant will vacate the rental unit when the term expires, the landlord and the tenant are presumed to have renewed the original agreement as a month-to-month tenancy. Section 49 of the Residential Tenancy Act allows a landlord to terminate a tenancy agreement where the landlord enters into a good faith agreement to sell the rental unit and the purchaser intends to occupy that unit, provided that each of the conditions laid out in Option (3) are met. If the purchaser does not occupy the unit as intended for at least six months, the purchaser must pay the tenant an amount equivalent to 12 months’ rent. Option (1) is incorrect because a landlord cannot terminate a tenancy agreement to allow his or her sibling to occupy the rental unit without further justification. There is a provision for a “close family member” but siblings do not fall under that category. Option (2) is incorrect because, as previously mentioned, Lucy and Linus are presumed to have renewed the original agreement as a month-to-month tenancy. In order to end the tenancy, Lucy must be able to rely on a provision in the Residential Tenancy Act which allows her to do so. Unfortunately, in Lucy’s situation, Charlie is her brother and not a “close family member”. Even if Charlie was a “close family member”, Lucy would need to provide two months’ notice. Option (4) is incorrect because Lucy would need to provide at least two months’ notice to end the tenancy.
Question 514: When can an appeal be made to the Supreme Court of British Columbia regarding a real property assessment value?
(1)When a property owner receives their assessment notice
(2)After receipt of the Property Assessment Appeal Board decision, and then only on a point of law
(3)Never
(4)After receiving notification of the decision of the Property Assessment Review Panel
Answer: 2 Explanation: Option (2) is correct because an appeal against a real property assessment must be submitted to the Property Assessment Panel for initial adjudication. Subsequently, an appeal may be made to the Property Assessment Appeal Board. An appeal can then be made from the Property Assessment Appeal Board to the Supreme Court of British Columbia, only if it is based on a point of law. Option (1) is incorrect because an appeal must first be submitted to the Property Assessment Panel. Option (3) is incorrect because an appeal may reach the Supreme Court of British Columbia. Option (4) is incorrect because an appeal following a decision of the Property Assessment Review Panel must first be submitted to the Property Assessment Appeal Board.
Question 515: If an offer is made by mail and the acceptance is mailed, when is the acceptance effective?
(1)When it is received by the offeree
(2)When it is received by the offeror
(3)When it is posted
(4)From the date and time of the postmark on the envelope
Answer: 3 Explanation: Option (3) is correct because the “postal acceptance rule” provides that where an offer is made by mail, or other non-instantaneous means, acceptance is effective when it is posted. Option (1) is incorrect because the offeree is the party accepting the offer. Option (2) is incorrect because, if an offer is made by mail, acceptance need not be received by the offeror to be effective. Option (4) is incorrect because, in some cases, a document may not be postmarked the very day it is posted.
Question 516: Where a borrower believes that the amount of interest being charged is excessive, under which statute might relief be granted?
(1)The Interest Act
(2)The Business Practices and Consumer Protection Act
(3)The Land Titles Act
(4)All of the above
Answer: 2 Explanation: Option (2) is correct because, in British Columbia, the Business Practices and Consumer Protection Act gives courts the power to grant relief where a mortgage transaction is deemed inequitable, or where the cost of a loan is excessive and the transaction is harsh and unconscionable. Option (1) in incorrect because the federal Interest Act does not impose a limit on the rate of interest which can be charged in a mortgage transaction. Option (3) is incorrect because the Land Title Act does not provide for relief for excessive mortgage interest rates. Option (4) is incorrect because Options (1) and (3) are incorrect.
Question 517: The Annual Percentage Rate (APR) is:
(1)a requirement under the federal Interest Act.
(2)also known as the stated interest rate.
(3)the borrower’s contractual interest rate plus any non-interest finance charges.
(4)an interest rate that must be expressed with semi-annual compounding.
Answer: 3 Explanation: Option (3) is correct because the APR is the borrower’s contractual interest rate plus any non-interest financing charges such as and bonuses or fees. Option (1) is incorrect because the APR is not a requirement under the Federal Interest Act. Option (2) is incorrect because the APR includes non-interest financing charges, and thus may differ from the stated interest rate. Option (4) is incorrect because the APR is not expressed with semi-annual compounding.
Question 518: Which one of the following lists accurately describes the correct criteria, as agreed upon by negotiation experts, for a successful negotiation?
(1)Efficiency, a zero-sum game, minimal wasted resources, preservation of the relationship
(2)Efficiency, satisfaction of both parties, distributive results, minimal wasted resources
(3)Efficiency, satisfaction of both parties, minimal wasted resources, preservation of the relationship
(4)Efficiency, a zero-sum game, satisfaction of both parties, preservation of the relationship
Answer: 3 Explanation: Option (3) is correct because these criteria characterize successful negotiations which are most likely to render optimal outcomes for both parties. Options (1) and (4) are incorrect because negotiation need not be a zero-sum game where the only solution is a compromise down the middle. Option (2) is incorrect because a “distributive perspective”, viewing negotiation as a conflict with one winner and one loser, can inhibit creative problem solving and makes it difficult to reach optimal results.
Question 519: As a marketing incentive to speed up the sale of newly completed but unsold condominiums, a developer agrees to provide the buyers with first mortgages written at 8% rather than the going market rate of 13%, if they pay the $45,000 asking price. Under these circumstances, the developer would likely be equally satisfied (in cash equivalent terms) with an “all cash” offer:
(1)less than $45,000.
(2)more than $45,000.
(3)equal to $45,000.
(4)that includes an additional bonus in order to purchase the unit.
Answer: 1 Explanation: Option (1) is correct. Since the market rate is higher than the contract rate, the market value of the mortgage is less than the face value of $45,000. The cash-equivalent value of the mortgage at 8% will be less than a $45,000 mortgage at 13%. Options (2), (3), and (4) are therefore incorrect.
Question 520: Garfield, a licensee, was representing a seller, Madison, in the sale of his house to Tyler. After the sale completed, Tyler discovered that the main and lower floors of the house sloped. Garfield, Madison, and Tyler had not noticed this before, although the defect was discoverable using ordinary diligence. Based on the above, which of the following statements is TRUE?
(1)Garfield had a duty to inspect the premises for soundness and structural defects before advertising it for sale.
(2)The sloping floor is a patent defect that should have been brought to Tyler’s attention.
(3)Neither Garfield nor Madison are liable to Tyler for failing to bring the defect to Tyler’s attention.
(4)Both (1) and (2) are true statements.
Answer: 3 Explanation: Option (3) is correct because the sloped floors were a defect that could have been discovered during the course of a reasonable inspection. Therefore, the sloped floors were a patent defect. The general rule regarding patent defects is that the buyer assumes the risk (caveat emptor), meaning that the seller and the listing licensee are not required to disclose discoverable defects. Option (1) is incorrect because, while it can be prudent to do so, neither the seller nor the seller’s agent has a duty to inspect the premises prior to advertising it for sale. Option (2) is incorrect because a vendor is not required to disclose patent defects. Option (4) is incorrect because Options (1) and (2) are both incorrect.
Question 521: Which of the following is considered to be an advantage of the mobile office environment?
(1)It is easier to establish a sense of community within the brokerage in a mobile office environment.
(2)The mobile office environment reduces certain inefficiencies, such as commuting, allowing licensees to focus their time on more productive tasks.
(3)The mobile environment makes it easier for a licensee to feel connected to the brokerage, strengthening the sense of loyalty.
(4)All of the above
Answer: 2 Explanation: Option (2) is correct because the mobile office environment permits representatives to work from home, out in the field, or from other locations that the traditional offices. An advantage of this is that it eliminates certain inefficiencies, such as time spent commuting to and from the office, which allows representatives more time to focus on more productive, income-generating tasks. Option (1) is incorrect because due to decentralization, it is more difficult, not easier, to establish a sense of community within the brokerage in a mobile office environment. Option (3) is incorrect because representatives may feel disconnected from the brokerage when they are less physically present, resulting in a weaker sense of loyalty. Since Options (1) and (3) are incorrect, Option (4) is also incorrect.
Question 522: The principle of good faith includes:
(1)the duty of parties to a contract to fulfil their contractual obligations to the best of their ability.
(2)the duty of a mortgagee not to commence foreclosure proceedings without giving the mortgagor ample time to cure the default.
(3)the duty to not make false representations when negotiating a contract.
(4)the duty of parties to a contract to act honestly in the performance of their contractual obligations.
Answer: 4 Explanation: Option (4) is correct because the principle of good faith includes the duty of honest performance, where parties to a contract are under a duty to act honestly in the performance of their contractual obligations. Options (1), (2), and (3) are incorrect because these are not duties included in the general organizing principle of good faith.
Question 523: Which one of the following accurately describes the law with respect to security deposits on a commercial tenancy?
(1)Security deposits must not exceed 50% of the monthly rental.
(2)There is no limit on the amount of security deposit that may be charged.
(3)Security deposits are not permitted.
(4)Security deposits cannot exceed one month’s rent.
Answer: 2 Explanation: Option (2) is correct because, as far as commercial tenancies are concerned, there are no legal restrictions regarding security deposits. Options (1), (3), and (4) are incorrect for the same reason.
Question 524: A trading services licensee who is not licensed to provide property management services CAN:
(1)collect rent from tenants.
(2)supervise contractors hired by the owner.
(3)negotiate a lease document.
(4)negotiate contractors on the owner’s behalf other than the lease.
Answer: 3 Explanation: Option (3) is correct because the definitions of “trading services” and a “trade in real estate” in the Real Estate Services Act permit trading services licensees to negotiate lease terms. The remaining options are incorrect because they describe activities that do not fall within the definition of trading services.
Question 525: Julie is acting as the listing licensee for a property owned by her client, George. Julie also represents a client, Ahmed, whom she is helping find a suitable property to buy. Ahmed becomes interested in purchasing George’s property. Julie would like to continue to represent George as a client in the sale of his property, while releasing Ahmed as a client. To do this, Julie must enter into an Agreement Regarding Conflict of Interest Between Clients with:
(1)George, the continuing client, only
(2)Ahmed, the released client, only
(3)Both George and Ahmed
(4)Neither George nor Ahmed, as the Agreement Regarding Conflict of Interest Between Clients must only be agreed to by Julie’s managing broker
Answer: 3 Explanation: Option (3) is correct because when a licensee is faced with a conflict of interest between multiple clients, the licensee must enter into an Agreement Regarding Conflict of Interest Between Clients with all clients. Options (1), (2), and (4) are incorrect for this reason.
Question 526: Which one of the following statutes affects the real property taxation system in British Columbia?
(1)Real Estate Services Act
(2)School Act
(3)Arbitration Act
(4)Land Transfer Form Act
Answer: 2 Explanation: Option (2) is correct because the School Act is one of seven statutes which form the foundation of the real property tax system in British Columbia. The School Act provides for real property taxation to fund public
Question 527: Martha, who has been George’s landlord for the past three months, has seized George’s furniture from his rented premises and threatens to sell the furniture in order to pay George’s arrears of rent. Which one of the following statements is FALSE?
(1)Martha has chosen an illegal remedy against George if the rented premises is George’s personal residence.
(2)Martha has chosen a remedy called “distress” or “distraint”.
(3)Martha has chosen the most effective remedy against George if the rented premises is a warehouse.
(4)Martha has taken an action that can be described as a classic example of a private nuisance.
Answer: 4 Explanation: Option (4) is correct because private nuisance typically occurs where 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 section 26(3) of the Residential Tenancy Act abolishes the remedy of distress in residential tenancies. Option (2) is incorrect because “distraint” or “distress” means a seizure and sale of the tenant’s personal property to recover arrears of rent. Option (3) is incorrect because a commercial landlord can exercise the remedy of distress, which is often the most effective remedy available to the landlord.
Question 528: Which of the following statements about the trial process in British Columbia is FALSE?
(1)Our common law system is based on an adversarial process in which each of the two opposing parties presents its point of view to an impartial trier of fact whose decision is binding on both parties.
(2)A plaintiff commences an action by filing a notice of civil claim in the court registry; once served with the notice of civil claim, the defendant can answer by denying some or all of the claims set out in the plaintiff’s notice of civil claim by filing a response to civil claim.
(3)One of the major reasons why most claims are settled out of court is that the discovery process allows the parties to see more plainly the strengths and weaknesses of their positions.
(4)The plaintiff and defendant alternate in calling their witnesses.
Answer: 4 Explanation: Option (4) is correct because, in British Columbia, the plaintiff calls each of its witnesses first. Once the defendant’s lawyer has had the opportunity to cross-examine each witness called by the plaintiff, the defendant then calls each of its own witnesses. Options (1), (2), and (3) are incorrect because each statement accurately describes the trial process in British Columbia.
Question 529: Which of the following people may NOT require an appraisal of real property?
(1)The executor of an estate
(2)A property assessment appellant
(3)A mortgage lender
(4)A strata council
Answer: 4 Explanation: Option (4) is correct as a strata council is the only party listed that is not likely to require an appraisal. Options (1), (2), and (3) are incorrect because each of these parties are likely to require an appraisal.
Question 530: When preparing a market value appraisal of a single-family residence, which of the following is LEAST likely to be an acceptable valuation practice?
(1)Rely on the owner’s information as to the type of water supply piping in the property provided that you note in the appraisal report the source of your information, and that it has not been verified.
(2)Ignore above-average quality of construction if the buyers and sellers in the neighbourhood do not consider high quality materials important.
(3)Disregard the recent sale of a house with same floor plan that is within the same subdivision as the subject property if it was sold privately.
(4)Rely upon the income approach as the primary method of appraisal.
Answer: 4 Explanation: The correct answer is Option (4) since the income approach is more likely a primary method of appraisal for a commercial property valuation with income and expense data, rather than a single-family residence. Options (1) and (2) are incorrect because they describe warranted valuation practices. Option (3) is considered warranted, because although the two houses have similar floor plans and are in the same neighborhood, a sale without sufficient advertising may signal a non-arm’s length sale and would not be considered reliable.
Question 531: Which one of the following is NOT a depreciable asset?
(1)A septic tank system
(2)50 acres of land
(3)Carpeting
(4)A concrete patio
Answer: 2 Explanation: Land does not depreciate; therefore Option (2) is correct. Options (1), (3), and (4) are depreciable assets.
Question 532: Value in exchange is:
(1)commonly referred to as value to the owner.
(2)the sale price.
(3)the owner’s minimum price, called the floor price.
(4)a range of mutual profit.
Answer: 2 Explanation: Option (2) is correct because the value in exchange is the sale price of the home. Options (1), (3), and (4) are therefore incorrect.
Question 533: Which of the following is NOT a characteristic of a fee simple estate?
(1)It is held subject to the Crown’s land use regulations.
(2)It may be expropriated by the Crown.
(3)It is a leasehold interest.
(4)Its owner has it only for as long as they have heirs.
Answer: 3 Explanation: Option (3) is correct because a leasehold interest is of a fixed duration, whereas a fee simple estate confers the right to possess and use land for an indefinite period of time. Option (1) is incorrect because, while the fee simple estate is the greatest estate in land in Canadian law, the Crown retains underlying title to all land. Therefore, fee simple estates remain subject to the Crown’s land use regulations. Option (2) is incorrect because, though rarely exercised, the Crown retains the prerogative power to expropriate land held in fee simple. Option (4) is incorrect because land held in fee simple will escheat (or, revert) back to the Crown if the owner of the estate dies without providing for the transfer of his or her property by way of will and has no known heirs.
Question 534: Yang was the owner of an office building in downtown Vancouver. She recently sold the building to Ashley for $100 million. Ashley did not pay the GST on the sale and Yang has just received an assessment for the GST due on the sale of the property from the Canada Revenue Agency (“CRA”) worth $5 million. Which of the following statements is FALSE?
(1)The $5 million is collectible immediately by the CRA.
(2)Yang will have 90 days from the date of the assessment to file an objection with the CRA if she wishes to dispute it.
(3)If Yang files an objection and it is affirmed by an appeals officer at the CRA, Yang has exhausted her options in terms of appealing the assessment.
(4)Yang may pursue Ashley for the uncollected GST that she has been assessed for.
Answer: 3 Explanation: Option (3) is correct (false) because if Yang files an objection and an appeals officer at the CRA confirms the assessment, Yang would have 90 days to appeal to the Tax Court of Canada. She could also potentially appeal the decision to the Federal Court of Appeal and then possibly to the Supreme Court of Canada. Options (1), (2), and (4) are incorrect because they are all true statements.
Question 535: An offer to purchase real estate:
(1)must have the words “or nominee” or “or assignee” if the buyer wishes to assign the contract.
(2)must by default have standard terms relating to contract assignments unless the buyer instructs otherwise.
(3)always provides either party with the option to assign the contract.
(4)cannot be assigned.
Answer: 2 Explanation: Option (2) is correct because unless the buyer instructs otherwise, an offer to purchase real estate must have standard terms relating to contract assignment. Option (1) is incorrect because the Knowledge Base, “Assignment Guidelines”, states that these words should not be used to describe the buyer. Option (3) is incorrect because assignments are permissible only as long as the Standard Assignment Terms are included in the contract of purchase and sale of real estate, and provided that the assignment does not prejudice the rights of the seller and the contract does not prohibit assignment. Option (4) is incorrect because a contract of purchase and sale can be assigned if certain requirements are met.
Question 536: Which of the following is an example of an action that a criminal may take during the placement stage of the money-laundering process?
(1)Arranging for multiple people to deposit small amounts of cash at different financial institutions
(2)Transferring money through a succession of bank accounts in different jurisdictions
(3)Selling real estate that was originally purchased using illicit cash to an unsuspecting buyer
(4)Frequently transferring ownership of a particular property between multiple acquaintances
Answer: 1 Explanation: Option (1) is correct because it is an action taken during the placement stage, meant to avoid drawing the attention of financial institutions which would take note of unusually large cash deposits. Options (2) and (4) are incorrect because they are actions taken during the layering stage of the money-laundering process, meant to increase complexity and conceal the criminal origins of the proceeds. Option (3) is incorrect because it is an action taken during the integration stage. The sale of real estate will provide proceeds which appear to have been legally earned from investment.
Question 537: Using the cost approach, determine the market value of a property with a 37,000 square foot building if construction costs new are $62 per square foot, land value is estimated to be $1,200,000, and total depreciation on the building to date is estimated to be 8%.
(1)$2,294,000
(2)$3,310,480
(3)$3,494,000
(4)$3,214,480
Answer: 2 Explanation: The formula for this question is the costs of improvements plus the site value minus depreciation. Cost of Improvements $2,294,000 ($62 37,000) + Site Value + 1,200,000 $3,494,000 Depreciation 183,520 (0.08 $2,294,000) Market Value $3,310,480
Question 538: Which of the following is defined as a marketing initiative that involves face-to-face communication with a potential consumer?
(1)Telemarketing
(2)Emotional appeal
(3)Brand marketing
(4)Personal selling
Answer: 4 Explanation: Option (4) is correct because personal selling involves interactive, face-to-face communication with a potential customer. Option (1) is incorrect because telemarketing uses telephone or fax technology in place of face-to-face communication. Option (2) is incorrect because emotional appeal refers to a communications strategy that aims to stir up positive or negative emotions in an audience in order to generate a desired response. Option (3) is incorrect because brand marketing refers to a marketing initiative based on the theme of a business, which encompasses a variety of attributes that distinguish the business from its competitors.
Question 539: There is a large Olympic-sized pool in the backyard of the home Margaret owns in Coquitlam. Each week in the summer, a worker from a pool maintenance company comes in and cleans the pool. Usually when he is cleaning the pool, the backwash runs over and chlorinated water leaks down on the garden of the neighbour below, killing the flowers. Both Margaret and the worker from the pool company are aware of what is happening. This would be considered which of the following?
(1)A breach of the duty of care under the BC Occupiers Liability Act
(2)A private nuisance
(3)A patent defect
(4)Occupiers liability
Answer: 2 Explanation: Option (2) 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. Private nuisance typically occurs when an owner or occupier wrongfully allows the escape of injurious things (in this case, chlorinated water) onto another person’s land. Options (1) and (4) are incorrect because occupiers liability and the British Columbia Occupiers Liability Act concern the liability of an occupier for injury suffered by visitors entering their own premises, not for losses occurring on someone else’s property. Option (3) is incorrect because a patent defect is a defect in property that can be discovered during the course of a reasonable inspection. On the facts of this question, there is no indication that the leak was caused by any defect in the property of either Margaret or the neighbour.
Question 540: The income approach is NOT usually used for the valuation of:
(1)single-family residences.
(2)warehouses.
(3)leasehold interests in real property.
(4)single-storey retail complexes.
Answer: 1 Explanation: Option (1) is correct because the income approach would not usually be used for the valuation of single-family residences. Options (2), (3) and (4) are incorrect because this 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 541: On March 7, Allan contracts, in writing, to sell his home to Bob for the price of $100,000. The sale is to complete on March 31. On March 8, the house is destroyed. Accordingly, there has been:
(1)a mutual mistake.
(2)a frustration of the contract.
(3)a common mistake.
(4)a rescission of the contract.
Answer: 2 Explanation: Option (2) is correct because, after a contract has been made, but before it has been performed, it will be frustrated if events outside of the control of the parties destroy the subject matter of the contract. Options (1) and (3) are incorrect because, on the facts of this question, neither Allan nor Bob made a mistake relating to the contract. Option (4) is incorrect because the effect of frustration is the termination of the contract. In other words, the contract is ended at the point of frustration, and future rights and liabilities no longer apply. Termination is distinct from rescission in that rescission operates to “unmake” a contract, attempting to return the parties back to the position they were in prior to entering the contract.
Question 542: Which of the following statements regarding mortgagees is FALSE?
(1)A mortgagee may require the addition of a guarantor to provide a separate personal covenant as a third party in addition to the borrower’s personal covenant to pay.
(2)Where the property secured is a condominium, a mortgagee may require the borrower to grant to the mortgagee the right to vote at meetings of the strata corporation on various matters affecting the security of the mortgage.
(3)Although a number of remedies are usually available to a mortgagee in the event of borrower default, the lender usually has complete discretion in deciding the most suitable remedy to use in the circumstances.
(4)Once the mortgage terms have been agreed to by the mortgagor and the mortgagee, the mortgagee is bound to advance the total amount of the funds when requested by the borrower, regardless of the terms of the mortgage.
Answer: 4 Explanation: Option (4) is correct because most mortgages contain a term which states that the mortgagee (the lender) shall not be bound for any reason whatsoever to advance any part of the money to the mortgagor (the borrower). If, for example, a builder’s lien is filed against the property, the lender may require the removal of the lien before advancing funds. Option (1) is incorrect because a lender may require a guarantor as a form of additional security for the loan. Option (2) is incorrect because the Strata Property Act provides that a lender can obtain the right to vote at meetings of the strata corporation on matters relating to insurance, maintenance, finance or other matters affecting the security of the mortgage. Option (3) is incorrect because lenders are generally given complete discretion to select from the available remedies. This ensures that lenders are given the greatest possible chance to recover their losses resulting from a borrower default.
Question 543: Conditions precedent are usually included in contracts of purchase and sale to protect the buyer. However, since conditions precedent can also be abused by buyers, a seller must be protected when a condition precedent is being included in a contract of purchase and sale. Which of the following additions to the contract of purchase and sale is NOT a valid method of protecting a seller’s interests?
(1)A specific time within which the condition must be removed can be included in the contract of purchase and sale.
(2)A clause requiring a Property Disclosure Statement to be filled out can be included in the contract of purchase and sale.
(3)A covenant can be inserted stating that the buyer will use their best efforts to satisfy the specific condition.
(4)A time clause can be included, which gives the seller the right to demand that the buyer remove the condition precedent within 72 hours.
Answer: 2 Explanation: Option (2) is correct because it is in the buyer’s (not the seller’s) best interests to incorporate a Property Disclosure Statement (PDS) into the contract of purchase and sale. Doing so incorporates the warranties made by the seller in the PDS into the contract of purchase and sale, which allows the buyer to sue the seller for breach of contract if such warranties are breached. Option (1) is incorrect because it allows the seller to review the buyer’s progress with regards to the fulfilment of the condition and decide whether or not to extend the time limit or to terminate the agreement. Option (3) is incorrect because if such a covenant is inserted into the contract of purchase and sale, and the buyer does not use his or her best efforts to satisfy the specific condition, the seller can sue the buyer for breach of contract. Option (4) is incorrect because a including a 72-hour “time clause” allows the seller to demand that the buyer remove the condition precedent within 72 hours in the event that the seller receives another offer. If the buyer fails to do so, then the seller can accept the other offer.
Question 544: Which one of the following is TRUE where a comparable property is sold subject to a vendor supplied mortgage at an interest rate lower than the current market rate?
(1)The comparable property may never be used as evidence of market value.
(2)The comparable sale price must be adjusted upward.
(3)The comparable sale price may only be used as evidence of market value.
(4)The comparable sale price must be adjusted downward.
Answer: 4 Explanation: Option (4) is correct because when a comparable property is sold subject to a low interest rate, the comparable sale price must be adjusted downward. Option (1) is false because the comparable property can be used as evidence of market value, as long as an adjustment is made for the “cheap” financing provided by the vendor. Option (2) is false because the comparable sale price must be adjusted downward to compensate for the benefit provided by the below-market interest rate on the mortgage. Option (3) is false because the price of the comparable property needs to be adjusted to its cash-equivalent price.
Question 545: An appraiser has located a comparable where the sale price was $220,000, comprised of $105,000 cash and a $115,000 vendor take-back mortgage written at 3.5% per annum, compounded semi-annually, with monthly payments sufficient to fully amortize the loan over 20 years. Assuming that the market rate for similar financing is 5% per annum, compounded semi-annually, what should the appraiser regard as the sale price of the house? (Round answer to the nearest $100).
(1)$101,300
(2)$220,000
(3)$206,300
(4)$192,000
Answer: 3 Explanation: Calculate the payments according to the contract, then value the payments according to the market rate. Add the cash down payment to the market value of the mortgage to find the sale price. Press Display 3.5 NOM% 3.5 2 P/YR 2 EFF% 3.530625 12 P/YR 12 NOM% 3.474749 115000 PV 115,000 240 N 240 0 FV 0 PMT 665.46245 665.46 +/ PMT 665.46 5 NOM% 5 2 P/YR 2 EFF% 5.0625 12 P/YR 12 NOM% 4.948699 PV 101,268.399094 (market value of the mortgage) + 105000 = 206,268.399094 (market value of the offer) The sale price of the house is $206,300 rounded to the nearest $100.
Question 546: Allison wants to put aside some money into a savings account to accumulate enough money to go on a trip to Australia. If she can afford to deposit $250 at the end of every month, and the savings account earns interest at j12 = 4%, how much money will have accumulated in the savings account by the end of the third year?
(1)$8,467.69
(2)$9,545.39
(3)$7,223.68
(4)$8,993.21
Answer: 2 Explanation: Press Display 4 I/YR 4 12 P/YR 12 250 +/ PMT 250 3 × 12 = N 36 0 PV 0 FV 9,545.390589 If Allison deposits $250 per month for 36 months, she will have $9,545.39 in the account at the end of three years.
Question 547: Norm Abrahm has offered $231,000 for a house, providing he is able to obtain acceptable financing. The house lists for $242,000, but the lender has appraised the house at $238,000. The lender requires a loan-to-value ratio of 80% and a gross debt service ratio of 28%. Property taxes are $1,750 per year and Mr. Abrahm’s annual gross income is $85,000. If the interest rate is 12% per annum, compounded annually, the amortization period is 15 years, and payments are made monthly, what is the maximum amount this lender will advance, rounded to the nearest $10?
(1)$149,910
(2)$178,500
(3)$158,270
(4)$190,400
Answer: 3 Explanation: To answer this question, calculate the maximum amount of money that can be lent out given the two constraints: the loan-to-value amount and the gross debt service ratio amount. Calculate the loan amount for the loan-to-value constraint and then calculate the loan amount for the GDSR constraint. In order to determine the maximum amount that the lender will advance, choose the lesser of the two results. LTV = 80%
Question 548: Which of the following clauses contained in a mortgage would constitute a clog on the equity of redemption and therefore be void?
(1)Collateral advantage clause
(2)Option to purchase clause
(3)Indemnity clause
(4)Acceleration clause
Answer: 2 Explanation: Option (2) is correct because an option to purchase clause, if exercised, would deny the borrower his or her right to redeem title to the property upon repayment of the loan. In other words, if the bank exercised the option and chose to purchase the property, then the borrower would necessarily be unable to redeem title upon repayment. Option (1) is incorrect because collateral advantage clauses are no longer considered clogs on the borrower’s equity of redemption, even if they extend beyond the term of the mortgage. Option (3) is incorrect because indemnity clauses do not constitute clogs on the equity of redemption, and are instead rendered unenforceable by section 8(1) of the federal Interest Act. Option (4) is incorrect because an acceleration clause is a term in the mortgage contract which makes the outstanding balance of the loan immediately due and payable if the borrower defaults. Acceleration clauses do not interfere with the borrower’s right to redeem title upon repayment, since they operate in situations where the borrower has defaulted.
Question 549: The MOST effective remedy available to a landlord when a tenant does not pay the rent in a commercial tenancy is:
(1)an injunction.
(2)a garnishing order.
(3)distress.
(4)a demand letter.
Answer: 3 Explanation: Option (3) is correct because the remedy of distress allows a commercial landlord to seize and sell a tenant’s personal property in order to satisfy a claim for rent owing. This is the most effective remedy because it immediately gives the landlord tangible assets which can be sold to recover the debt. Option (1) is incorrect because a tenant may choose to disobey an injunction, which would require that the landlord take additional legal action against them. Option (2) is incorrect because the third party to whom the garnishing order is served may still disobey the garnishing order. There are also additional limitations to this remedy, including a limit on the percentage that may be garnished from an employee’s wages. Option (4) is incorrect because a demand letter may be ignored by the tenant, in which case the landlord would be required to pursue additional action.
Question 550: Where an agent with authority enters into a contract with a third party and does not disclose that they are acting as an agent:
(1)the third party may sue either the agent or the principal to enforce the contract.
(2)the principal may sue the agent to enforce the contract.
(3)only the agent may sue the third party to enforce the contract.
(4)there is no contract in existence because there is no disclosure.
Answer: 1 Explanation: Option (1) is correct because, at common law, where an agent does not disclose to a third party that he or she is acting as an agent, the agent may be held liable as a principal. This rule is justified because the third party was led to believe that it was making a contract with the agent personally, and might not have chosen to enter a contract with the principal had they been aware of the principal’s existence and/or identity. Option (2) is incorrect because the contract is not between the agent and the principal, but is instead between the principal and the third party (though the agent may be held liable as a principal, as mentioned previously). Option (3) is incorrect because the contract remains between the principal and the third party, and therefore, the principal may sue the third party to enforce it. Option (4) is incorrect because an agent’s failure to disclose their status as an agent does not render a contract void.
Question 551: In mortgage financing, a constant payment mortgage is one where:
(1)each payment is identical to the preceding one.
(2)the payments are comprised of a constant amount of principal plus interest due.
(3)the payments decrease in size during the term of the loan.
(4)principal and interest are the same amount for each payment.
Answer: 1 Explanation: Option (1) is correct because a constant payment mortgage has identical periodic payments. Options (2) and (3) describe a straight line principal reduction loan. Option (4) is incorrect because the constant payment is apportioned to varying levels of principal and interest.
Question 552: A trading services representative must never promise to sell real estate belonging to a prospective client, as an inducement to enter into a listing agreement with the licensee’s brokerage:
(1)unless at the time of making the promise, a signed statement setting forth the details of the promise is given to the person to whom the promise has been made.
(2)unless at the time of making the promise, the representative has in fact lined up a buyer for the property.
(3)unless they have been authorized to make such a promise.
(4)unless the buyer is also a licensee.
Answer: 1 Explanation: Option (1) is correct because the Real Estate Services Rules prohibit a licensee from making inducement promises of this nature unless the licensee gives a signed statement containing the details of the promise to the person to whom the promise is made. A licensee who breaches this prohibition may be suspended by the British Columbia Financial Services Authority. Options (2), (3), and (4) are incorrect because none of these scenarios alleviate the licensee’s obligation to give a signed statement, setting forth the details of the promise, to the person to whom the promise is being made.
Question 553: A property owner is making an application to the municipal council to amend a zoning bylaw. Which of the following steps is NOT a part of the rezoning process?
(1)The municipal council must vote in favour of the amendment on four different occasions (readings).
(2)According to the Local Government Act, the municipal council must wait at least six months before approving the amendment.
(3)The applicant may be required to donate a portion of their land to the municipality to be used as a park or pay to widen an existing road.
(4)The applicant may be required to give a presentation about the amendment and answer questions from the municipal council at a public hearing.
Answer: 2 Explanation: Option (2) is correct because the municipal council is not required to wait at least six months before approving an amendment to a zoning bylaw. Option (1) is incorrect because any rezoning bylaw must be given four readings by the municipal council, meaning that the council must vote in favour of the bylaw four separate times. Option (3) is incorrect because subdivision bylaws, made under the Local Government Act, may require that an owner dedicate up to five percent of his or her land for park purposes. In addition, sometimes an applicant will be required to pay for the widening of roads. Option (4) is incorrect because after a proposed rezoning bylaw receives a favourable first (or sometimes second) reading, a public hearing is usually held. At the hearing, the applicant may be required to give a short presentation, and will be asked questions about the proposal by the municipal council.
Question 554: You have a partially completed appraisal report that you need to fill in. The subject property has 4 bedrooms and 4 bathrooms. The house next door is similar in all respects except for the number of bedrooms and bathrooms. It sold for $225,500 and has 3 bedrooms and 3 bathrooms. If the market value of a bedroom is $4,000 and the market value of a bathroom is $5,700, this comparable will have to be adjusted for bedrooms and bathrooms by:
(1)–$4,000 and –$5,700 respectively.
(2)+$6,400 and +$5,700 respectively.
(3)+$4,000 and +$5,700 respectively.
(4)+$5,700 and +$4,000 respectively.
Answer: 3 Explanation: Option (3) is correct because in relation to the subject property, this comparable requires an adjustment of +$4,000 for 1 bedroom and +$5,700 for 1 bathroom. Options (1), (2), and (4) are therefore incorrect.
Question 555: In order for a person to make a successful claim against the Assurance Fund in British Columbia, they must prove three of the following. Indicate the EXCEPTION.
(1)They have lost an interest or estate in land.
(2)They cannot recover that interest or estate by court action.
(3)The person who deprived the injured party of their interest or estate in land has resold the interest to a bona fide purchaser for valuable consideration.
(4)If the Land Title Act had not been passed, they would have recovered the interest in land by a court action.
Answer: 3 Explanation: Option (3) is correct because, in addition to compensating victims of fraud, the Assurance Fund also provides compensation to individuals who have suffered loss or damages caused, solely or partially, by an omission, mistake or misfeasance of the registrar or employees of the Land Title Office. Options (1), (2), and (4) are incorrect because a claimant must prove the following to successfully claim against the Assurance Fund in British Columbia: (a) that the claimant has lost an interest in land as a result of the registration of a person other than the claimant as owner; (b) that the claimant cannot recover that estate or interest (or compensation for it) by a court action; and (c) that, if the Land Title Act had not been passed, the claimant would have recovered the estate or interest at common law by a court action.
Question 556: Using the comparative approach of appraisal to value properties with redevelopment potential, it is NOT necessary that the comparables and the subject property:
(1)have a similar highest and best use after redevelopment.
(2)have a similar current use.
(3)have a market value of zero in their current use.
(4)expect to undergo redevelopment at a similar point in time.
Answer: 3 Explanation: Option (3) is correct because when using the comparative approach of appraisal to value properties with redevelopment potential, it is not necessary that the comparables and the subject property have a market value of zero in their current use. Options (1), (2), and (4) are incorrect because it is necessary that they have a similar highest and best use after redevelopment, have a similar current use, and expect to undergo redevelopment at a similar point in time.
Question 557: A seller refuses to acknowledge the waiver of a condition precedent from a contract of purchase and sale. Assuming that the condition was made exclusively for the benefit of the buyer and the waiver was made prior to the expiry of the condition precedent, the agreement is:
(1)one that is not binding on either party.
(2)voidable at the option of the seller.
(3)binding.
(4)voidable at the option of the buyer.
Answer: 3 Explanation: Option (3) is correct because section 54 of the Law and Equity Act provides that where a condition precedent is for the sole benefit of the buyer, the buyer is allowed to unilaterally waive the condition prior to its expiration. Section 54 overrides the common law rule preventing the unilateral waiver of a true condition precedent. Option (1) is incorrect because the agreement remains valid and enforceable in this situation. Options (2) and (4) are incorrect because, in this situation, the agreement does not become voidable at either the option of the seller or the buyer.
Question 558: When, with respect to commercial tenancies, there is said to be an implied covenant of quiet enjoyment, it means:
(1)that the landlord will refrain and will cause others to refrain from entering into competition with the tenant’s business.
(2)that the tenant will conduct their affairs in such a manner as not to violate local noise bylaws and that, if they do, they will be liable for any fines or penalties levied.
(3)that the landlord provides assurance to the tenant against the consequence of a defective title involving the landlord or those lawfully claiming under them.
(4)that the landlord will ensure that all tenants conduct their affairs in such a manner as not to violate local noise bylaws.
Answer: 3 Explanation: Option (3) is correct because, with respect to commercial tenancies, the implied covenant of quiet enjoyment does not simply refer to freedom from noise; rather, it is an assurance to the tenant against the consequences of defective title. This means that if the landlord, or anyone who claims to have received rights from the landlord, attacks the tenant’s right to the premises, it would breach this covenant. Option (1) is incorrect because the implied covenant of quiet enjoyment does not concern competition with the tenant’s business. Option (2) is incorrect because the implied covenant of quiet enjoyment is an implied promise given by the landlord to the tenant, and does not restrict the tenant’s own conduct on the property. Option (4) is incorrect because the implied covenant of quiet enjoyment does not constitute a guarantee by the landlord that other tenants will comply with local noise bylaws.
Question 559: A private investor expects to receive $281.72 per month for a period of 17 years as a result of a mortgage loan she has just advanced. Calculate the investor’s expected yield (expressed as a nominal rate with semi-annual compounding) on her investment if the loan was for $23,250.
(1)13.61433%
(2)12.79841%
(3)13.68893%
(4)13.25002%
Answer: 4 Explanation: Press Display 12 P/YR 12 23250 +/ PV 23,250 281.72 PMT 281.72 204 N 204 0 FV 0 I/YR 12.89841 (j12) EFF% 13.688927 (j1) 2 P/YR 2 NOM% 13.25002 (j2)
Question 560: Which of the following statements about restrictive covenants is FALSE?
(1)A restrictive covenant must be negative in nature.
(2)Both the benefited and burdened land must be precisely identified in the agreement or document creating the restrictive covenant.
(3)The burden of the restriction must have been intended by the parties to bind the land.
(4)The covenantor must retain the restricted property, as any subsequent buyer will not be a party to the original contract.
Answer: 4 Explanation: Option (4) is correct because a restrictive covenant is an interest in land which can be registered at the Land Title Office. Once a valid restrictive covenant has been registered, it binds subsequent owners of the property (i.e., it “runs with the land”). Therefore, the covenantor (the person who agrees to be bound by the restriction) need not retain the restricted property for the restrictive covenant to remain valid. Option (1) is incorrect because, in order to be a valid restrictive covenant, an owner must be able to comply with the covenant by not doing something. If a covenant requires action it is a “positive” covenant, and does not run with the land. Options (2) and (3) are both incorrect because each statement is one of the five essential requirements of a valid restrictive covenant.
Question 561: An agent’s duty to the principal not to make a secret profit means that an agent must keep the principal fully informed about which of the following?
(1)All of the agent’s personal business dealings
(2)The agent’s annual tax return
(3)All of the actual benefits and prospective benefits accruing to the agent as a result of the agency relationship
(4)Only the actual profits received by the agent
Answer: 3 Explanation: Option (3) is correct because an agent owes a duty of loyalty to the principal, which requires them to disclose to the principal all facts relevant to the transaction within the agent’s knowledge. The complete disclosure requirement prohibits an agent from making a “secret” profit, meaning that the agent must disclose all of the benefits and prospective benefits received by the agent as a result of, or in the course of, performing duties on behalf of the principal. Option (1) is incorrect because the agent is not required to disclose all of their personal business dealings to the principal if those dealings do not affect the interests of the principal. Option (2) is incorrect because the agent is not required to inform the principal of their own annual tax return, as this information does not affect the interests of the principal. Option (4) is incorrect because an agent has a duty to disclose all relevant facts that could influence the conduct of the principal. This duty is not limited to situations where the agent is receiving actual profits, and extends to situations where the agent will suffer a loss.
Question 562: In appraising an income-producing property using the income approach, gross potential rents must be estimated. How are gross potential rents BEST determined?
(1)Based on long-term vacancy rates in the area in which the subject property is located
(2)Based on published surveys of relevant real estate trends
(3)Based on the relationship between money actually received and units actually rented
(4)Based on current market rents of similar properties
Answer: 4 Explanation: Option (4) is correct because gross potential revenue is estimated using current market rents paid on similar properties. Even when the subject or comparable property is fully rented, the rents used in determining the property’s net operating income should be compared to current rental prices. Therefore, Options (1), (2), and (3) are incorrect.
Question 563: When a strata corporation grants an owner or tenant of a strata lot the permission to exclusively use common property as a short term exclusive use:
(1)the permission requires approval by a ¾ vote at a general meeting of the strata corporation, unless the short term exclusive use is to endure for less than six months.
(2)the permission may be granted by a majority vote of the strata council if the permission does not involve a significant change in the use or appearance of the common property.
(3)the permission is identical to the designation of limited common property for the benefit of a strata lot owner.
(4)the strata corporation must not grant the permission for more than one month.
Answer: 2 Explanation: Option (2) is correct because the Strata Property Act gives strata corporations the ability to grant an owner or tenant permission to exclusively use common property for a period of less than one year. If the permission does not involve a significant change in the use or appearance of the common property, then the permission can be granted by a majority vote of the strata council. Option (1) is incorrect because approval by a ¾ vote, rather than a simple majority vote, at a general meeting of the strata corporation is only required where the permission or privilege granted involves a significant change in the use or appearance of the property. Option (3) is incorrect because permission to exclusively use common property may only be granted for less than one year, whereas the designation of limited common property has no fixed duration and need not be renewed. Therefore, the permission to exclusively use common property cannot be identical to the designation of limited common property. Option (4) is incorrect because the strata corporation may grant the permission for up to one year.
Question 564: Which one of the following is NOT an activity of a Board of Variance?
(1)To permit a structural alteration to a building used for a non-conforming use
(2)To hear an appeal where the enforcement of a zoning bylaw will cause undue hardship
(3)To amend a zoning bylaw
(4)To establish a time limit within which construction of a minor variance must be completed
Answer: 3 Explanation: Option (3) is correct because a Board of Variance does not have the jurisdiction to amend zoning bylaws. Instead, the function of a Board of Variance is to permit minor exceptions, or “variances”, to existing bylaws, without altering the bylaws themselves. Amending zoning bylaws is the responsibility of municipal councils and regional districts. Options (1), (2), and (4) are incorrect because a Board of Variance is given the authority to hear appeals in situations where the enforcement of a bylaw would cause undue hardship. To achieve this purpose, the Board may permit a structural alteration to a building used for a non-conforming use, and may establish time limits within which construction of a variance must be completed.
Question 565: The REALTOR® Code of Ethics is enforced by the:
(1)Canadian Real Estate Association.
(2)local real estate boards.
(3)British Columbia Real Estate Association.
(4)British Columbia Financial Services Authority.
Answer: 2 Explanation: Option (2) is correct because the REALTOR® Code of Ethics is enforced by the local real estate boards in British Columbia. Option (1) is incorrect because, while the Canadian Real Estate Association establishes the REALTOR® Code of Ethics, enforcement occurs at the local board level. Option (3) is incorrect because the British Columbia Real Estate Association is responsible for representing the interests of local real estate boards, and their members on provincial matters, and does not directly enforce the REALTOR® Code of Ethics. Option (4) is incorrect because the British Columbia Financial Services Authority (“BCFSA”) is a statutory body tasked with administering the Real Estate Services Act (RESA) and related regulations, and rules. The REALTOR® Code of Ethics is set by the Canadian Real Estate Association, which is a professional trade organization that is separate from BCFSA.
Question 566: Which of the following information is NOT necessary for a brokerage to keep in the real estate trade record sheet?
(1)The date of the MLS® listing
(2)The sale price or other consideration for the trade in real estate
(3)The nature of the trade in real estate
(4)The names and addresses of all parties to the trade in real estate
Answer: 1 Explanation: Option (1) is correct because a real estate trade record sheet is required for each transaction in which the brokerage or a related licensee holds or receives money. Since listing a property on the MLS® listing occurs prior to such a transaction, this information does not need to be included in the record sheet. Options (2), (3), and (4) are incorrect because each contains information that is necessary to accurately describe and record real estate transactions.
Question 567: Sections 15 and 18(1) of the Manufactured Home Act provide that no person shall move a manufactured home UNLESS:
(1)the manufactured home is registered in the land titles office.
(2)the manufactured home is registered in the manufactured homes registry, and a transport permit has been obtained from the registrar.
(3)the manufactured home is free of any security interests registered against it in the personal property registry.
(4)they are the registered owner of the manufactured home.
Answer: 2 Explanation: Option (2) is correct because section 15 of the Manufactured Home Act provides that no person may move a manufactured home unless it is registered in the manufactured homes registry. Additionally, section 18(1) requires that a transport permit be obtained from the registrar to authorize the movement of the home to a specific location. Option (1) is incorrect because the ownership, transfer and granting of charges of manufactured homes are not registered in the land title office. Option (3) is incorrect because a manufactured home with a security interest registered against it in the personal property registry can still be moved. The secured party remains protected because registrar is required to notify the secured party when an application for a transport permit is made. Option (4) is incorrect because, in certain cases, a landlord, a secured party, or any other person acting under a court order may obtain a transport permit authorizing them to move a manufactured home.
Question 568: Bert and Ernie owned, as joint tenants, a revenue producing property, which was leased to Oscar. Ernie died, leaving a will, which gave his interest in the property to Grover. Grover is now demanding one-half of the rent paid by Oscar. Bert refuses this request. Which of the following statements is TRUE?
(1)Bert and Grover now own the revenue producing property as joint tenants.
(2)Bert and Grover now own the revenue producing property as tenants in common.
(3)No interest in the property could be transferred to Grover via Ernie’s will because the entire estate passed to Bert when Ernie died.
(4)Ernie severed the joint tenancy by bequeathing his interest in the property to Grover. Therefore, Grover is entitled to a one-half interest in the property.
Answer: 3 Explanation: Option (3) in correct because joint tenants enjoy the right of survivorship, meaning that when one joint tenant dies, the entire estate automatically vests in the surviving joint tenant(s). Bert, therefore, became the sole owner of the revenue producing property immediately upon Ernie’s death and Ernie had no interest to dispose of in his will. Options (1) and (2) are incorrect because no interest in the property passed to Grover. Option (4) is incorrect because a joint tenant cannot sever a joint tenancy merely by bequeathing their interest in the property to a third party in their will. To sever the joint tenancy Ernie would have had to (a) destroy one of the four “unities” required for a joint tenancy to exist (e.g., by selling or mortgaging his estate); (b) partition the property via a mutual agreement with Bert; or (c) obtain a court order for partition.
Question 569: There are three common types of void deeds. Which one is considered NOT to be a void deed?
(1)An unregistered deed
(2)A forged deed
(3)A deed given for illegal consideration
(4)A deed signed in circumstances where the party can plead non est factum
Answer: 1 Explanation: Option (1) is correct because section 20(1) of the Land Title Act provides that “except as against the person making it”, an unregistered transfer deed is inoperative. This section indicates that an unregistered deed remains operative between the transferor and the transferee. Option (2) is incorrect because it is a long standing common law rule that a forged deed is void from the beginning. Option (3) is incorrect because, where the consideration given exchange for a deed amounts to an illegal act or thing, the transfer deed is void. Option (4) is incorrect because where a party can successfully plead non est factum (“that is not my deed”) the deed in question will be rendered void for reason of unilateral mistake.
Question 570: Which one of the following is FALSE with respect to the proprietorship form of business?
(1)A proprietorship is terminated upon the death of the owner.
(2)A proprietor must pay tax on their business income at personal tax rates.
(3)The proprietor is liable for all debts of their business to the extent of their capital investment in the business only.
(4)There is no legal separation of the assets of the business and the other assets of its owner.
Answer: 3 Explanation: Option (3) is correct because, since a sole proprietorship is a business enterprise owned by a single individual, the owner of a proprietorship is personally liable for all the debts incurred by the proprietorship. This means that, if the proprietorship is unable to pay its debts, the proprietorship’s creditors may collect from the personal assets of the owner. Option (1) is incorrect because, since a proprietorship is not regarded as a separate legal entity from the owner, it is terminated upon the death of the owner. Option (2) is incorrect because the profits of a proprietorship accrue to the owner and are taxed as part of his or her personal income. Option (4) is incorrect because, as stated previously, a proprietorship is not regarded as a separate legal entity from the owner, and the owner has unlimited liability.
Question 571: Hurston, the Head of Production at XYZ Preservatives Ltd., has been ordered by the company’s president, in Toronto, to vent some gasses that have been stored in a pressure chamber at the Vancouver plant. Although the president knows that the gas is highly toxic, Hurston has been assured by the president that the gas is totally harmless and will quickly dissipate when released. Unfortunately, having escaped from the pressure chamber, the gas drifts in a dense cloud over Ralph’s neighbouring apple orchard and destroys the apple crop. Which one of the following is TRUE?
(1)Ralph will be successful in a claim against XYZ’s president under the doctrine of trespass.
(2)Ralph will probably succeed in a claim against XYZ based on negligence.
(3)Ralph will be successful in his claim against XYZ based on XYZ breaching its fiduciary duty towards Ralph.
(4)Ralph would probably have a successful claim against XYZ based on the provisions of the Occupiers Liability Act.
Answer: 2 Explanation: Option (2) is correct because Ralph will likely be able to establish the three elements required for a successful negligence claim: (1) that XYZ, a company storing highly toxic gasses, owed him a duty of care as his neighbour; (2) that XYZ breached the standard of care by allowing the gas to drift over Ralph’s apple orchard; and (3) that the damage to Ralph’s orchard was reasonably foreseeable (i.e. not too remote). Option (1) is incorrect because trespass is an intentional tort, and consequently must be a direct, voluntary act, as opposed to an indirect result of an act. In this case, there is no indication that Hurston or the President intended to release the gas over Ralph’s apple orchard. Option (3) is incorrect because a fiduciary duty is only owed by a person who holds a legally significant position of trust with respect to someone else, and is obliged, by virtue of that relationship or trust, to act solely for the other person’s benefit. There is no indication, on the facts provided, that XYZ was in such a relationship of trust with Ralph. Option (4) is incorrect because the Occupiers Liability Act would only apply if Ralph had suffered damage while on XYZ’s premises.
Question 572: Under the Residential Tenancy Act, the landlord is entitled to collect a security deposit equal to:
(1)one half of one month’s rent.
(2)one month’s rent.
(3)the first and last month’s rent.
(4)six months’ rent.
Answer: 1 Explanation: Option (1) is correct because the Regulations passed under the Residential Tenancy Act provide that a security deposit for a residential tenancy agreement cannot exceed one half of the monthly rent. Options (2), (3), and (4) are incorrect because each of these amounts exceeds the amount permitted under the Act.
Question 573: Joe Carmichael borrows $11,000 at a periodic interest rate of 0.75% per month. He agrees to repay $335 per month. For how many FULL years will Joe have to make payments?
(1)3
(2)9
(3)27
(4)37
Answer: 1 Explanation: For this question, with a given monthly periodic rate, calculate how many years Joe will make payments. First, express the rate as a j12, then calculate N. Press Display .75 × 12 = I/YR 9 12 P/YR 12 11000 PV 11,000 335 +/ PMT 335 0 FV 0 N 37.837088 (months) ÷ 12 = 3.153091 (years) N is expressed as months; therefore, divide by 12 to express the amortization in years. Joe will have to make payments for three full years.
Question 574: When casual reference is made to the current mortgage lending rate, the common practice is to quote:
(1)effective annual interest rates.
(2)nominal interest rates.
(3)equivalent interest rates.
(4)interest rates per compounding period.
Answer: 2 Explanation: Option (2) is correct because when mortgage interest rates are casually referenced, it is typically a nominal interest rate. Therefore, Options (1), (3), and (4) are incorrect.
Question 575: Charlotte offered to sell her property to Dennis for $180,000 by email. Dennis emailed, “Send lowest cash price – will give $165,000 cash”. Charlotte replied, “Cannot reduce price”. Dennis then accepted the original offer but Charlotte refused to sell claiming that there was no contract. Which of the following statements is TRUE?
(1)There is no contract because Charlotte’s reply was not a renewal of her original offer.
(2)Charlotte’s reply to Dennis’ first wire was, in effect, a counter-offer on the same terms as her original offer.
(3)Charlotte may successfully claim that her initial price of $180,000 was an “invitation to treat” and therefore she was entitled to refuse Dennis’ offer to pay that amount.
(4)Options (1) and (3) are both true.
Answer: 2 Explanation: Option (2) is correct because Charlotte effectively revived her original offer (to sell her property to Dennis for $180,000), which Dennis then accepted. Dennis’ offer of $165,000 was a counter-offer, which therefore terminated the original offer. However, Charlotte made her own counter-offer when she replied, “cannot reduce price”, which effectively renewed her original offer. Option (1) is incorrect because the case of Livingstone v. Evans tells us that the words “cannot reduce price”, uttered in this context, renew the original offer. Dennis was therefore entitled to accept the renewed offer. Option (3) is incorrect because Charlotte’s initial email contained the necessary terms (the property and the price) to constitute an offer capable of being accepted, and therefore was more than a mere invitation to treat. Option (4) is incorrect because Options (1) and (3) are both incorrect.
Question 576: “A contract respecting land or a disposition of land is not enforceable unless there is, in writing signed by the party to be charged or by his agent, both an indication that it has been made and a reasonable indication of the subject matter…” The preceding is an extract from which statute?
(1)Real Estate Services Act
(2)Statute of Frauds
(3)Land Title Act
(4)Law and Equity Act
Answer: 4 Explanation: Option (4) is correct because this extract is taken from section 59(3)(a) of the Law and Equity Act. Therefore, Options (1), (2), and (3) are incorrect.
Question 577: Anna is interested in purchasing Elizabeth’s house. In an attempt to save money, instead of hiring a licensed home inspector, Anna thoroughly inspects Elizabeth’s house herself and does not find any defects or deficiencies. After the sale completes, Anna discovers a major issue with the foundation of the house that will cost $55,000 to fix. As a result, Anna sues Elizabeth for failing to disclose the issue with the foundation. Which of the following is TRUE?
(1)Because the deficiency in the foundation is a major issue, Elizabeth is liable to Anna, even if she did not know about the defect.
(2)Elizabeth would only be required to disclose this defect if Anna specifically asked about the foundation.
(3)Anna’s claim against Elizabeth for failing to disclose the foundation issue will likely fail if it can be shown that any qualified home inspector would have identified the issue.
(4)The foundation issue is known as a property stigma.
Answer: 3 Explanation: Option (3) is correct because if a qualified home inspector would have identified the issue, it would likely be classified as a patent defect, which sellers do not have an obligation to disclose. As a buyer, Anna has a duty to conduct a reasonable inspection and make reasonable inquiries to ensure that there are no patent defects, which typically involves consulting a licensed home inspector. Option (1) is incorrect because, even for major issues, the seller is only required to disclose latent defects that he or she knows or should have reasonably known. Option (2) is incorrect because sellers are required to disclose known latent defects that render the property dangerous or unfit for habitation, even if the buyer did not specifically ask about that defect. Option (4) is incorrect because the defect’s impact on the property can be objectively determined at a value of $55,000 and therefore cannot be classified as a stigma.
Question 578: On June 1, Jem offered to buy Boo’s summer cottage for $230,000, and Boo accepted. Since the cottage was on a secluded island, neither party was aware that on May 30, the cottage was struck by lightning and completely destroyed by fire. Boo has no insurance and is seeking to enforce the contract. Which of the following statements is TRUE?
(1)This is an example of mutual mistake and Jem can rescind the contract.
(2)The doctrine of frustration applies here and both parties are relieved of their future obligations under the contract.
(3)A court will set aside the contract based on “non est factum” (it is not my deed) or unilateral mistake since Jem did not know the nature of the document he was signing and could not have known the cottage was no longer standing.
(4)This is an example of common mistake and the contract is void.
Answer: 4 Explanation: Option (4) is correct because a common mistake occurs when both parties to a contract make the same mistake about a fundamental term of the contract, such as the existence of what is being sold. In this case, the fact that the cottage had been destroyed prior to the formation of the contract was unknown to both parties. The existence of a common mistake such as this renders a contract void. Option (1) is incorrect because a mutual mistake occurs when both parties make a fundamental mistake about the contract but each makes a different mistake. Here, the mistake was the same (the assumption that the cottage still existed). Option (2) is incorrect because frustration occurs where a specific thing that is necessary for the performance of the contract is no longer in existence at the time for performance. In this case, the cottage was destroyed before the contract was entered into, meaning that frustration does not apply. Option (3) is incorrect because (a) there is no indication that Jem did not understand the nature of the contract of sale; and (b) the mistake regarding the existence of the cottage was a common mistake, not a unilateral mistake since both Jem and Boo were mistaken.
Question 579: Which of the following is a FALSE statement regarding the duties licensees owe to their clients under the Real Estate Services Rules?
(1)The duty to act in the client’s best interests does not include taking actions that are unlawful.
(2)The duty to act within the scope of authority given by the client does not include signing agreements for the client unless written permission is received.
(3)The duty of confidentiality is terminated when the relationship between the licensee and the client ends.
(4)The duty of full disclosure can include disclosing information a licensee may see as trivial.
Answer: 3 Explanation: Option (3) is correct because it is false. The duty of confidentiality to a client lasts forever. Option (1) is incorrect because actions that are unlawful would be against the duty of acting in the client’s best interest. Option (2) is incorrect because section 45 of the Real Estate Services Rules requires licensees to obtain written authorization to sign agreements on behalf of their clients. Option (4) is incorrect because full disclosure requires licensees disclose to their clients all known material information, no matter how trivial.
Question 580: At common law and unless the agreement stipulates to the contrary, as soon as a contract is signed for the purchase and sale of real property, the risk of loss or damage suffered between the signing of the contract and the completion falls on:
(1)the buyer.
(2)the seller.
(3)the seller’s insurance company.
(4)no one.
Answer: 1 Explanation: Option (1) is correct because one of the undesirable aspects of the common law pertaining to contracts is that when no mention of the state of title is made in the contract beneficial ownership, and therefore risk of loss or damage, passes to the buyer at the time the contract is signed. The standard form Contract of Purchase and Sale in BC expressly alters this common law presumption. Options (2), (3), and (4) are therefore incorrect.
Question 581: What is the key purpose that is achieved when a licensee fulfills section 54 of the Rules and provides a consumer with a Disclosure of Representation in Trading Services form?
(1)Informed consent
(2)Undivided loyalty
(3)Fiduciary duty
(4)Disclosure of interest in trade
Answer: 1 Explanation: Option (1) is correct because the key purpose of the Disclosure of Representation in Trading Services form is to ensure that consumers understand how trading services can be provided to them, so that they can provide informed consent to the chosen form of relationship with the real estate licensee. Options (2), (3), and (4) are incorrect for this reason.
Question 582: You, as a trading services licensee working in a “hot” market, have recently listed a property for sale at $850,000. An offer of $840,000 was received at 8:30 this morning. At noon, a second offer of $845,000 was received and a third offer of $850,000 at 2:30 in the afternoon. You will be seeing the seller at 7:00 this evening. Which offer is to be presented?
(1)All of the offers
(2)The offer of $840,000
(3)The offer of $845,000
(4)The offer of $850,000
Answer: 1 Explanation: Option (1) is correct because licensees have a duty to present all options to a client (which includes all offers) unless the client has given specific instructions to somehow limit which offers are to be presented. Options (2), (3), and (4) are incorrect because all three offers must be presented to your client.
Question 583: A mortgage of the mortgagor’s equity of redemption is called:
(1)a lien.
(2)an equitable mortgage.
(3)an agreement for sale.
(4)a lease.
Answer: 2 Explanation: Option (2) is correct because a borrower who grants a legal mortgage retains an equitable interest in the property. The borrower is free to mortgage this equitable interest by granting a second, or subsequent, mortgage. These subsequent mortgages are mortgages on the borrower’s equity of redemption (the borrower’s right to repay the mortgage and redeem title to the property). Option (1) is incorrect because, though also a form of security interest, a lien is not a mortgage. Options (3) and (4) are incorrect because agreements for sale and leases are not mortgages.
Question 584: The Court Order usually obtained first in a foreclosure action is an:
(1)order nisi.
(2)order absolute.
(3)order for sale.
(4)order for specific performance.
Answer: 1 Explanation: Option (1) is correct because, at the first court appearance where a claim for foreclosure is brought, a judge will generally grant an order nisi. The order nisi is an important preliminary step because it sets the final redemption period, during which the respondents can redeem the mortgage by paying the amount due and owing. Options (2) and (3) are incorrect because orders absolute and orders for sale may be obtained if payment is not made within the redemption period set by the order nisi. Option (4) is incorrect because an order for specific performance may be available in the case of an agreement for sale, but is not an available remedy for foreclosure actions.
Question 585: Which one of the following is a liability on a financial statement?
(1)Accumulated depreciation
(2)Mortgages payable
(3)Wages paid
(4)Prepaid expense
Answer: 2 Explanation: Option (2) is correct because mortgages payable represents a debt that must be repaid. Option (1) is incorrect because accumulated depreciation is part of the assets section on the balance sheet, and takes away from the value of the depreciable asset(s). Options (3) and (4) are incorrect because wages paid is listed as an expense, and prepaid expenses are listed as a current asset.
Question 586: Which of the following options is inconsistent with generally accepted accounting principles?
(1)Expenses directly associated with particular revenues are recognized at the time they are incurred.
(2)Assets are revalued upwards to account for the effect of inflation.
(3)Fiscal year ends cannot be changed at will.
(4)Revenues are recognized at the time they are earned.
Answer: 2 Explanation: Option (2) is correct because revaluing assets is inconsistent with the cost principle. Option (1) is consistent with the matching principle, Option (3) is consistent with the consistency principle, and Option (4) is consistent with the revenue recognition principle.
Question 587: The secondary mortgage market:
(1)occurs when a borrower receives funds secured by a mortgage from a bank.
(2)is the market in which existing mortgages are bought and sold as financial investments.
(3)has been weakened by the introduction of mortgage-backed securities and Canada mortgage bonds.
(4)is the market in which mortgage loans are initiated.
Answer: 2 Explanation: Option (2) is correct because a secondary mortgage market is the market in which existing mortgages are bought and sold between investors. Options (1), (3), and (4) are incorrect.
Question 588: An investor wants to decide whether to buy a mortgage written for $100,000 at j12 = 3.5% that calls for monthly payments, a 20-year amortization, and a 5-year term. If the investor can earn j12 = 6% with other investments, at what price should the mortgage be purchased?
(1)$80,951.26
(2)$110,669.93
(3)$90,143.73
(4)$89,602.21
Answer: 3 Explanation: If the investor can earn j12 = 6% on other investments, the purchase price of the mortgage should be based on a market value of j12 = 6%. First, calculate the mortgage payment based on the contract rate of j12 = 3.5%. Since this question also has a 5-year term, calculate the outstanding balance at the end of the 5-year term and set this amount equal to the future value with N equal to 60. Press Display 3.5 I/YR 3.5 12 P/YR 12 100000 PV 100,000 240 N 240 0 FV 0 PMT 579.959718 579.96 +/ PMT 579.96 60 INPUT AMORT PER 60-60 = = = 81,126.556103 81126.56 +/ FV 81,126.56 6 I/YR 6 60 N 60 PV 90,143.732174
Question 589: Constant payment repayment schemes developed in response to:
(1)rapid inflation.
(2)the federal government’s desire to stimulate the demand for and supply of housing after World War II.
(3)interest rate risk.
(4)principal risk.
Answer: 4 Explanation: Option (4) is correct because constant payment loans were developed in response to the risk to the lender of default on principal. The constant payment reduces this risk as each periodic payment reduces the amount of principal at risk. Options (1), (2), and (3) are incorrect.
Question 590: The appraisal of condominium units using the market comparison approach has some distinct differences from the appraisal of other types of real property. Which one of the following factors might be applicable to condominiums ONLY?
(1)Location and neighbourhood
(2)Quality of construction
(3)Common area charges
(4)Interest rate on the mortgage
Answer: 3 Explanation: Option (3) is correct because common area charges could be applicable to condominiums only, as condominiums consist of a tenancy in common interest in the common areas of the development, while some other types of real property do not. Options (1), (2), and (4) are incorrect because location and neighbourhood, quality of construction, and the interest rate on the mortgage are applicable to all types of property, not just condominiums.
Question 591: Bona Fide Brokerage Ltd. arranges a mortgage with a face value of $55,000 for Gina Griffiths. Gina is obliged to make monthly payments at j2 = 12% for 15 years in order to fully amortize the loan. The broker deducts legal costs of $450 and a brokerage fee of $1,500 from the face value of the mortgage. Calculate the monthly payment.
(1)$649.89
(2)$567.55
(3)$632.17
(4)$626.85
Answer: 1 Explanation: For this question, calculate the payments based on the contract information. Therefore, do not deduct the legal costs/brokerage fees to calculate the monthly payment. Press Display 12 NOM% 12 2 P/YR 2 EFF% 12.36 12 P/YR 12 NOM% 11.710553 55000 PV 55,000 180 N 180 0 FV 0 PMT 649.885293
Question 592: A mortgage broker has helped you set up a mortgage loan. The loan is for $350,000 at an interest rate of j12 = 4.75% and a 20-year amortization. The loan calls for monthly payments of $2,262 over a 2-year term with $327,975.95 owing at the end of 2 years. If the lender pays the broker a fee of 2% of the funds advanced, what is the yield to lender, expressed as an effective annual rate j1?
(1)3.742599%
(2)6.002862%
(3)4.749999%
(4)5.251251%
Answer: 1 Explanation: Press Display 12 P/YR 12 357000 PV 357,000 2262 +/ PMT 2,262 327975.95 +/ FV 327,975.95 24 N 24 I/YR 3.679894 EFF% 3.742599 The yield to the lender is below the loan’s interest rates (j12 = 4.75%), which is the expected result given the payments are sufficient to pay off a $350,000 loan, but the lender is actually advancing $357,000 (2%× $350,000 + $350,000). Therefore, the lender is being slightly underpaid with each payment. Given the inverse relationship between interest rates and present value; if the present value rises, then the interest rate drops.
Question 593: Given the following information, calculate the minimum annual income a buyer must have in order to qualify for a $42,500 loan. | Interest Rate: 11.75% per annum, compounded semi-annually | Term: 5 years | Amortization Period: 25 years | Payments: Monthly | Maximum Gross Debt Service Ratio: 28% | Property Taxes: $600 per annum
(1)$21,728.89
(2)$20,620.29
(3)$16,939.56
(4)$19,161.78
Answer: 2 Explanation: The first step for this question is to calculate the monthly payments. The second step is to use the payments in the GDSR formula to calculate the minimum annual income. Press Display 11.75 NOM% 11.75 2 P/YR 2 EFF% 12.095156 12 P/YR 12 NOM% 11.472285 42500 PV 42,500 300 N 300 0 FV 0 PMT 431.138315 431.14 × 12 = 5,173.68 First multiply the payments by 12 in order to find the yearly payment amount (equal to $5,173.68). Then use the GDSR formula to calculate the minimum income:
Question 594: Jim Dickson is interested in purchasing Josephine Topanga’s condominium for the listed price of $250,000. Jim proposes to pay $80,000 in cash and he wants Josephine to take back a mortgage for the balance. The rate on the suggested mortgage is j2 = 5% and the loan is to be fully amortized with monthly payments over 20 years. The market rate for similar mortgages is j2 = 8%. What is the market value of Jim’s offer, rounded to the nearest $10?
(1)$214,860
(2)$146,060
(3)$226,060
(4)$139,860
Answer: 1 Explanation: For this question, calculate the mortgage payments, based on the original contract rate. Then, calculate the market value of the mortgage and add it to the down payment to calculate the market value of offer. Press Display 5 NOM% 5 2 P/YR 2 EFF% 5.0625 12 P/YR 12 NOM% 4.948699 250000 – 80000 = PV 170,000 240 N 240 0 FV 0 PMT 1,117.112554 1117.11 +/ PMT 1,117.11 8 NOM% 8 2 P/YR 2 EFF% 8.16 12 P/YR 12 NOM% 7.869836 PV 134,858.442629 (market value of the mortgage) + 80000 = 214,858.442629 (market value of the offer) The market value of the offer is $214,860, rounded to the nearest $10.
Question 595: A mortgage broker initiates a mortgage in the amount of $100,000 at j2 = 5%, with an amortization period of 20 years, a term of 5 years, and monthly payments. The broker deducts a brokerage fee of $2,500 in addition to appraisal and legal fees totalling $750. Calculate the cost of funds advanced to the borrower, expressed as an effective annual rate (j1).
(1)6.404727%
(2)6.361028%
(3)5.512096%
(4)5.912962%
Answer: 4 Explanation: The first step in answering this question is to calculate the payments based on the terms of the contract. The second step is to calculate the disclosure rate, which requires you to use the present value equal to the face value minus fees ($96,750). Press Display 5 NOM% 5 2 P/YR 2 EFF% 5.0625 12 P/YR 12 NOM% 4.948699 100000 PV 100,000 240 N 240 0 FV 0 PMT 657.125032 657.13 +/ PMT 657.13 60 INPUT AMORT PER 60-60 = = = 83,378.06418 83378.06 +/ FV 83,378.06 96750 PV 96,750 ($100,000 $2,500 $750) 60 N 60 I/YR 5.758519 (j12) EFF% 5.912962 (j1)
Question 596: The risk to a mortgagee can be reduced by:
(1)increasing the amortization period.
(2)reducing the monthly payments.
(3)reducing the loan-to-value ratio.
(4)reducing the debt coverage ratio.
Answer: 3 Explanation: Option (3) is correct because reducing the loan-to-value ratio is the only option listed that the mortgagee can ensure there is sufficient security against the loan. Options (1), (2), and (4) are incorrect because a longer amortization period, smaller monthly payment, or lower debt coverage ratio will not guarantee sufficient security against the loan or that the borrowers are in a financial position that will enable them to make the necessary payments.
Question 597: Jake wants to purchase a house that is listed for $276,000. The bank’s appraiser estimates that the lending value of the property is $275,000. Jake’s gross annual income is $50,000 per year. The bank applies an 80% loan-to-value ratio and a gross debt service ratio of 32%. Property taxes amount to $1,800 per year. Assume that the lender demands a 25-year amortization period and monthly payments at a contract rate of j2 = 4.2%. The government-specified qualifying rate is 5.25% per annum, compounded semi-annually. How much can Jake borrow, given the stress test borrower qualification rules for uninsured mortgages? Round your answer to the nearest $10.
(1)$220,000
(2)$175,600
(3)$206,360
(4)$181,560
Answer: 4 Explanation: To calculate the maximum loan amount, calculate the loan amounts based on both the constraint of the loan-to-value ratio and the gross debt service ratio. The loan-to-value is calculated based on the bank’s appraisal of the property. In this case, the amount the bank appraises the property at is $275,000. Once the payments from the GDSR are calculated, the PV of the loan is calculated, taking into consideration the stress test qualification rules. The loan amount that satisfies both constraints (the smaller amount) will be the maximum loan amount. LTV = 80%
Question 598: An investor plans to pay $200,000 for a vacant lot that he feels will sell at the end of 3 years for $280,985.60. What is the monthly interest rate the investor will earn? (Ignore real property taxes)
(1)0.948879%
(2)1.404928%
(3)12%
(4)2.873734%
Answer: 1 Explanation: For this question, calculate the monthly interest rate (imo). Press Display 12 P/YR 12 200000 +/– PV –200,000 0 PMT 0 36 N 36 280985.6 FV 280,985.6 I/YR 11.386552 ÷12 = 0.948879
Question 599: Jennifer Joseph has lived alone in an apartment since the death of her husband 10 years ago. She has just turned 60 years of age, retired from her job as a bus driver, and wants to begin gardening as a hobby to fill in her retirement years. She has found a small house that is selling at a price she can afford because it is the only residential property in an area of commercial development. The present owners, who are anxious to sell, have lived in the house for about 20 years and have developed a magnificent garden, which appeals very much to Mrs. Joseph; however, she is worried about having enough retirement income to meet the mortgage payments and the property tax payments if she uses all of her savings as a down payment. Which one of the following statements is TRUE?
(1)Mrs. Joseph should apply for a reverse annuity mortgage (RAM) because a RAM will require lower mortgage payments than a conventional mortgage.
(2)After Mrs. Joseph’s purchase, the property will continue to have an assessed value for real property tax purposes, which is based on its value as a residential property.
(3)Mrs. Joseph may make application to defer payment of the net property tax under the regular program for as many years as she owns and resides in the house.
(4)If Mrs. Joseph becomes an owner-occupier, the home owner grants will allow reduction of her taxes to no more than $350.
Answer: 3 Explanation: Option (3) is correct because British Columbia’s regular tax deferral program will allow Mrs. Joseph to make an application to defer up to 100% of the net property taxes payable on the property, since it will be here principal place of residence. Assuming that Mrs. Joseph is either a Canadian citizen or a permanent resident, and that she would have a minimum equity of 25% in the property if she purchased it, she would likely qualify for the regular program given that she is both 55 and a widow. Option (1) is incorrect because a reverse annuity mortgage is a type of mortgage that can function to supplement the income of aged persons who already own their home, not as a way to reduce mortgage payments where a new home is being purchased. Option (2) is incorrect because the property is the only residential property in an area of commercial development. While section 19(8) of the Assessment Act permits certain residential properties to be assessed according to the value based solely on their current residential use, Mrs. Joseph would not qualify for this special assessment because she has not lived continuously in the residence for ten years. Option (4) is incorrect because Mrs. Joseph would only qualify for the basic home owner grant, which cannot be used to reduce total property taxes below $350.00.
Question 600: If the metric building module is increased from 100 mm to 150 mm, this would be considered as which of the following?
(1)A hard change to the metric standard of measurement
(2)A soft change to the metric standard of measurement
(3)A switch to the imperial standard of measurement
(4)A continuation of the current imperial standard of measurement
Answer: 1 Explanation: Option (1) is the correct answer as a hard change is the establishment of a new metric standard size, such as 150mm. Options (2), (3), and (4) are incorrect.
Question 601: A central gas fired, forced hot water heating system with room baseboard units provides MOST of its heat transfer in which one of the following ways?
(1)Convection
(2)Combustion
(3)Collection
(4)Radiation
Answer: 1 Explanation: Option (1) is correct because convection heat transfer occurs when the baseboard heating unit warms the air in the room. As the air around the baseboard unit warms, the warmer air rises and cooler air falls, creating a convective current in the room. Options (2), (3), and (4) are incorrect as they do not describe the principal way that such a heating system provides most of its heat transfer.
Question 602: A mortgage loan has a face value of $350,000, 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. What is the amount of the accelerated biweekly payment rounded up to the next highest dollar?
(1)$1,325
(2)$2,533
(3)$1,198
(4)$2,649
Answer: 3 Explanation: The accelerated bi-weekly payment is ½ of the regular monthly payment. Press Display 5.5 NOM% 5.5 2 P/YR 2 EFF% 5.575625 12 P/YR 12 NOM% 5.438018 350000 PV 350,000 240 N 240 0 FV 0 PMT 2,395.36951 ÷ 2 = –1,197.684755 The accelerated bi-weekly payment is $1,198, rounded up to the next higher dollar.
Question 603: You have a partially completed appraisal report that you need to fill in. The 2,400 square foot subject property has 4 bedrooms. The house next door is similar in all respects except for the number of bedrooms and square footage. The 2,500 square foot comparable sold for $225,800 and has 3 bedrooms. If the market value of a bedroom is $3,200 and above an 1,800 sq. ft. benchmark, each 100 sq. ft. is worth $6,000, it can be concluded that the adjusted sale price of this comparable is:
(1)$228,600
(2)$216,600
(3)$223,000
(4)$235,000
Answer: 3 Explanation: To find the adjusted sale price of the comparable, take the sum of the listed sale price with its adjustments to the subject property. In this case, the subject property and the comparable are identical except that the subject property has 1 additional bedroom and 100 square feet less. The adjusted sale price is: $225,800 + $3,200 –$6,000 = $223,000.
Question 604: In the comparative approach, it is MOST important that the subject building and the comparable buildings be:
(1)recently constructed of average quality construction.
(2)of the same general architectural style.
(3)similar with respect to factors judged important by buyers and sellers.
(4)inclusive of similar types and quality of fixtures.
Answer: 3 Explanation: Option (3) is correct because in the comparative approach of appraisal, it is most important that the subject building and the comparable buildings be similar with respect to factors judged important by buyers and sellers. Options (1), (2), and (4) are incorrect because similarity is only required for those factors that have a major influence on buyers and sellers, and the sale prices they negotiate.
Question 605: If the cost of developing houses is greater than their market value, what will occur in the short run?
(1)Costs will decrease.
(2)Market value will increase.
(3)Development will stop.
(4)The style of new housing will be changed to reflect the increased costs.
Answer: 3 Explanation: Option (3) is correct because if the cost of developing houses is greater than their market value, development will stop in the short run until market values rise. Options (1), (2), and (4) are incorrect because they do not describe the short run effects of an increase in the cost of developing houses.
Question 606: Question 606 SKIPPED due to format
(1)Costs will decrease.
(2)Market value will increase.
(3)Development will stop.
(4)The style of new housing will be changed to reflect the increased costs.
Answer: 1 Explanation: Comparable A
Question 607: Which one of the following is FALSE with respect to the estimate of vacancy rates in the appraisal of income-producing properties?
(1)Vacancy rates are expressed as a percentage of gross potential revenue.
(2)Vacancy rates must be those existing at the time of the appraisal for the subject property.
(3)Vacancy rates are needed because the 100% occupancy assumption of gross potential revenue is unrealistic for most properties.
(4)Vacancy rates must be deducted from gross potential revenue.
Answer: 2 Explanation: Option (2) is correct (false) because the vacancy allowance should be determined by the long-term vacancy rates in the area; that is, the vacancies in comparable buildings modified, if necessary, by expected future trends. Options (1), (3), and (4) are incorrect because they are true.
Question 608: Which one of the following is termed functional incurable depreciation in a building?
(1)Worn carpeting
(2)No air conditioning
(3)Narrow hallways
(4)Poor landscaping
Answer: 3 Explanation: Option (3) is correct because functional incurable depreciation refers to outdated features that cannot be easily corrected, such as narrow hallways. Options (1), (2), and (4) are incorrect because these are relatively easily corrected.
Question 609: Which of the following is NOT an effective way for a licensee to communicate the value of their services in a listing presentation?
(1)Pay attention to details in the presentation, as this can provide evidence of performance.
(2)Refrain from discussing the marketing program for the property, as this is considered proprietary information.
(3)Turn intangibles into tangibles by including photos, virtual walk-throughs, or client testimonials.
(4)Clearly spell out the services and benefits that are being offered.
Answer: 2 Explanation: Option (2) is the correct answer: explaining the marketing program during a listing presentation will help a client understand what benefits the licensee is providing. Options (1), (3), and (4) are all ways that a licensee can effectively communicate the value of their services to a potential client in a listing presentation.
Question 610: Which of the following types of software is used to compute listing searches, produce automated hot sheets, and generate Comparative Market Analysis presentations?
(1)Forms software
(2)Back office management software
(3)Database software
(4)Multiple Listing Service® systems software
Answer: 4 Explanation: Option (4) is correct because the Multiple Listing Service® serves many functions, including computing listing searches, producing automated hot sheets, and generating Comparative Market Analysis (CMA) presentations and other client prospecting tools. Options (1), (2), and (3) are therefore incorrect.
Question 611: 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 British Columbia or an equivalent jurisdiction for 2 out of the 5 years preceding the application
(3)Have 3 years’ licensed experience in British Columbia
(4)All of the above
Answer: 2 Explanation: Option (2) is correct because a licensee is required to meet the educational and experience requirement appropriate to the level of licence for which the application is made. In addition to meeting the educational requirements for a representative licence, to qualify for a managing broker’s licence, a person must have been providing real estate services British Columbia or an equivalent jurisdiction for at least two years during the five years before the date of the application. Option (1) is incorrect because, while brokerages are required to keep certain specified financial records (section 25 of RESA), persons applying for managing broker’s licences do not need to submit personal financial statements for each licensee they intend to hire. Option (3) is incorrect because, as mentioned previously, an applicant’s licensed experience can come from British Columbia or an equivalent jurisdiction. Option (4) is incorrect because Options (1) and (3) are incorrect.
Question 612: Alan recently assisted Peter in the sale of Peter’s house. What are the legal consequences of his doing so?
(1)Unless he is licensed, Alan has breached the Real Estate Services Act.
(2)If Alan is unlicensed, but performed the service without receiving or expecting any money or reward, he has done nothing wrong.
(3)As long as Alan was not involved in the writing of the contract of purchase and sale, he may act for Peter and receive money for it.
(4)If Alan is unlicensed, but he is Peter’s brother, Peter can pay him for the work and no breach has occurred.
Answer: 2 Explanation: Option (2) is correct because the Real Estate Services Act requires that a person who provides “real estate services” on behalf of another for or in expectation of remuneration must be licensed. There is no licensing requirement for persons like Alan, who perform real estate services without receiving or expecting any money or reward. Option (1) is incorrect for the same reason. Option (3) is incorrect because “real estate services” are not limited to the writing of the contract of purchase and sale. The Real Estate Services Act defines “real estate services” as including actions such as advising on the appropriate price for real estate, making representations about a property, finding a party to acquire real estate, showing the real estate, and negotiating the price of real estate. Therefore, Alan may not perform any of these services (or any other service included in the definition of “trading services”) and receive money for it. Option (4) is incorrect because siblings are not exempt from the licensing requirement established by section 3 of the Real Estate Services Act. Therefore, if Alan is unlicensed, Peter cannot pay him for providing real estate services.
Question 613: Which of the following statements regarding joint tenancy is FALSE?
(1)Where a husband and wife own property in joint tenancy and one of them dies, the other becomes the owner of the whole interest.
(2)Where a joint tenant transfers their interest to a third party, the third party becomes a tenant in common with the original joint tenant.
(3)Where a husband and wife own property as tenants in common and one of them dies, the other becomes the owner of the whole interest.
(4)A joint tenancy becomes a tenancy in common upon severance.
Answer: 3 Explanation: Option (3) is correct because there is no right of survivorship in a tenancy in common. Therefore, where two people own property as tenants in common, they each may leave their interest by will to whomever they wish. Option (1) is incorrect because the essential feature of joint tenancy is the right of survivorship. This means that when one joint tenant dies, the property automatically vests in the surviving joint tenant(s). Option (2) is incorrect because all joint tenants must receive their interests at the same time and from the same document. Therefore, if one joint tenant transfers his interest to a third party, both the unity of time and the unity of title are destroyed, and the co-ownership is converted to a tenancy in common. Option (4) is incorrect for the same reason.
Question 614: Under the Torrens System of land registration in British Columbia, if property is registered in favour of a trustee, this is shown by which of the following?
(1)Registering a caveat against the title
(2)Registering a lis pendens against the title
(3)A notation of trust on the title
(4)Issuing the trustee a duplicate certificate of title
Answer: 3 Explanation: Option (3) is correct because British Columbia does not have a pure Torrens system of title registration, and therefore allows a notation of trust to be made on the title. In a pure Torrens system, no mention of a trust can appear on the register. Option (1) is incorrect because a caveat is a short-term notice registered against a title to land warning those looking at the title that a claim for an estate or interest in the property has been made. Option (2) is incorrect because a lis pendens is a term previously used for what is now called a certificate of pending litigation. Option (4) is incorrect because issuing a duplicate certificate of title does nothing to show that the property is registered in favour of a trustee.
Question 615: Mark, an experienced real estate licensee, showed a home in Lion’s Bay to John, who was a first-time home buyer. John asked Mark whether the house had termites. It was located in forested area and John told Mark that he was afraid that this location might have termite infestation problems. Mark told him that there were no termite infestation problems in the house. After the sale was completed, John discovered that the house had a serious termite problem, which would cost a considerable amount to repair. On what grounds might Mark be liable to John in a lawsuit?
(1)Occupier’s liability
(2)Private nuisance
(3)Negligent misrepresentation
(4)Vicarious liability
Answer: 3 Explanation: Option (3) is correct because the four requirements for an action for negligent misrepresentation are met: (1) Mark made an untrue statement when he told John that there was no termite problem; (2) the statement was likely negligent because, assuming that Mark was not outright lying, he failed to ascertain the necessary information regarding the termites before telling John that there was no infestation; (3) as an experienced professional giving advice to a person (John) who would reasonably rely on that advice, Mark owed John a duty of care; and (4) given the position of Mark, a real estate licensee showing a home, it was likely reasonable for John to rely on Mark’s statement. Since these four elements are likely met, Mark is likely liable to John for the repairs on the grounds of negligent misrepresentation. Option (1) is incorrect because John did not suffer loss while Mark was showing him the home. Option (2) is incorrect because private nuisance occurs where an owner or occupier of land unreasonably or substantially interferes with the reasonable use and enjoyment of a neighbouring property. Option (4) is incorrect because vicarious liability is the principle that renders employers liable for wrongful acts committed by their employees. In this case, vicarious liability may render Mark’s real estate brokerage liable for his negligent misrepresentation.
Question 616: Which of the following statements is TRUE with respect to security deposits in a commercial tenancy?
(1)The interest that accrues on a security deposit is always paid to the account of the landlord.
(2)Someone who purchases the property from the landlord is obligated to repay the security deposit to the tenant.
(3)The amount of a security deposit may be freely negotiated between the two parties to a commercial lease.
(4)All of the above
Answer: 3 Explanation: Option (3) is correct because there are no legal restrictions regarding security deposits in commercial tenancies. This amount is left open to negotiation. Option (1) is incorrect because the allocation of interest on security deposits in commercial tenancies is open for negotiation, and therefore may be allocated to the tenant. Additionally, the Residential Tenancy Act and the Residential Tenancy Regulation require that the landlord pay interest on a security deposit to the tenant upon termination of the tenancy. Option (2) is incorrect because, in commercial tenancies, the return of a security deposit is a personal obligation of the landlord. A purchaser is under no duty to the tenant to repay it. In residential tenancies a security deposit, and the obligation of the landlord to repay it (with interest), runs with the land. Therefore, assuming the tenancy continues after the property is transferred, the purchaser will be required to pay these amounts out to the tenant when the tenancy ends. Option (4) is incorrect because Options (1) and (2) are incorrect.
Question 617: Which of the following statements about bare land strata developments is TRUE?
(1)A typical way for a developer to ensure that the houses built within the strata lots have a uniform appearance is through a series of corresponding easement agreements affecting each lot.
(2)Within a bare land strata development, title to the roads is always transferred to the local municipality on completion, so that the municipality will be responsible for the costs of maintenance and repairs.
(3)Bare land strata developments are typically only used for residential or recreational properties.
(4)The owners of bare land strata lots will be responsible for the costs associated with the common property of the development, which may include outdoor recreational facilities such as lakes or trails.
Answer: 4 Explanation: Option (4) is correct because the owners in a bare land strata development will be responsible for any costs associated with common property. Recreational facilities are frequently built as common property on a bare land strata development. Option (1) is incorrect because uniform appearance is typically ensured through registered building schemes and strata bylaws, rather than easement agreements. Option (2) is incorrect because title to the land on which roads are placed can be retained by the strata corporation as common property, such that the owners of the strata lots would be responsible for maintenance and repair. Option (3) is incorrect because bare land strata developments, aside from being for residential and recreational development, are often also used for industrial and commercial development.
Question 618: Which of the following is/are TRUE regarding listing contracts?
(1)The purchaser can rely on the terms in the listing contract.
(2)The listing contract must be signed by all persons who have an ownership interest in the property being sold.
(3)If the licensee includes the terms “approximately” or “more or less” when describing the property, the licensee does not have to perform a title search.
(4)All of the above
Answer: 2 Explanation: Option (2) is correct because, if a property is to be listed and then sold, all persons who have an ownership interest in the property must agree to the listing. Therefore, it is essential that the listing contract is signed by all of the owners. Option (1) is incorrect because the purchaser is not party to the listing contract, and therefore cannot rely on any of the terms within it. Option (3) is incorrect because a licensee who does not review the title of the listed property assumes the risk of liability to the purchaser, loss of commission, and disciplinary proceedings if a complaint is registered with the British Columbia Financial Services Authority. This remains true even if the licensee includes terms such as “approximately” or “more or less” when describing a property. Option (4) is incorrect because Options (1) and (3) are incorrect.
Question 619: An agent will be personally liable to third parties:
(1)whenever the agent contracts on behalf of a principal.
(2)where the agent fails to disclose that they are an agent.
(3)where the agent has no written authority.
(4)in all of the above circumstances.
Answer: 2 Explanation: Option (2) is correct because at common law there are three situations where an agent will be personally liable to a third party. One of these situations is where the agent fails to disclose that he/she is an agent. Option (1) is incorrect because an agent will generally not be personally liable to third parties provided that the agent: (a) discloses their status as an agent; (b) has authority to act as an agent; and (c) does not commit any torts. Option (3) is incorrect because an agent may be granted authority from the principal orally, or by implication in certain cases. In either of these situations, the agent will possess legitimate authority and will not be personally liable to third parties merely for the reason do not have written authority. Option (4) is incorrect because Options (1) and (3) are incorrect.
Question 620: Victoria has agreed to sell her home to Penny for $140,000. Property taxes of $2,300 have been assessed and were paid in full by Victoria on July 15. There is an outstanding late payment penalty of $85, which Victoria has not yet paid. The adjustment and possession date is December 28. It is NOT a leap year. Penny’s share of the property taxes will appear on her own statement of adjustments as:
(1)a credit of $25.21.
(2)a credit of $18.90.
(3)a debit of $25.21.
(4)a debit of $18.90.
Answer: 3 Explanation: Option (3) is correct because, since Victoria (the seller) has already paid the full year’s property taxes, Penny (the buyer) should reimburse Victoria for the portion of the taxes from and including the adjustment date up to the end of the year. In this case, Penny’s share of the year’s property taxes (Dec. 28 – Dec. 31 = 4 days) is calculated in the following manner: 4/365 × $2,300 = $25.21. This amount will appear as a debit on Penny’s statement of adjustments. The late payment penalty incurred by Victoria will not be reflected on Penny’s statement of adjustments because it was Victoria’s responsibility to pay the property taxes on time. Therefore, Options (1), (2), and (4) are incorrect.
Question 621: Vivian has agreed to sell her home to Peggy for $140,000. Peggy has saved up $15,000, which she paid to her brokerage as a deposit. In addition, she has obtained $92,000 in new mortgage financing from her bank. Conveyancing fees of $690 and a mortgage administration fee of $250 are payable by Peggy. Vivian is paying a 6% real estate commission to her real estate brokerage. The adjustment and possession date is December 28. Vivian has agreed to take back a short term mortgage in the amount of $8,000 in order to help Peggy finance the purchase. In addition, the conveyancer will be discharging the existing mortgage on title, which has an outstanding balance of $12,000. Finally, property taxes of $2,300 have been assessed and were paid in full by Vivian on July 15. These taxes are to be adjusted between the parties. There is an outstanding late payment penalty of $85, which Vivian has not yet paid. No one is entitled to a home owner grant, and, as no exemptions apply, Peggy will be responsible for paying the property transfer tax on completion. Assume that it is NOT a leap year and Peggy is NOT a foreign entity for property transfer tax purposes. The cash proceeds of the sale which will be received by Vivian are:
(1)$111,540.21
(2)$140,025.21
(3)$111,533.90
(4)$111,515.21
Answer: 1 Explanation: Seller’s Statement of Adjustments (Vivian) ITEM DEBIT CREDIT Purchase Price 140,000.00 Commission 8,400.00 Take Back Mortgage 8,000.00 Outstanding Mortgage 12,000.00 Buyer’s Share of Taxes* 25.21 Penalty 85.00 Cash Proceeds of Sale** 111,540.21 _________ 140,025.21 140,025.21 * (Dec. 28-Dec. 31 = 4 days) 4/365 $2,300 = $25.21 ** Because the total Debits and Credits must balance, in order to find the Proceeds of Sale, you must first calculate the total Credits ($140,025.21) 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 622: Valentina has agreed to sell her home to Petra for $140,000. Petra has saved up $15,000, which she paid to her brokerage as a deposit. The deposit will appear:
(1)as a debit on Petra’s statement and a credit on Valentina’s statement.
(2)as a credit on Petra’s statement only.
(3)as a credit on both parties’ statements.
(4)as a credit on Petra’s statement and a debit on Valentina’s statement.
Answer: 2 Explanation: Option (2) is correct. When a deposit is paid to a real estate brokerage, the amount of the deposit will be reflected on the buyer’s statement of adjustments as a credit. It will not appear on the seller’s statement of adjustments, therefore Options (1), (3), and (4) are incorrect.
Question 623: Bernadette has agreed to purchase Steve’s home for $438,000. However, before the sale completes, she discovers that she has been the subject of an innocent misrepresentation that materially affects the contract. Bernadette may go to court and ask for the application of which of the following legal principles?
(1)Revocation
(2)Rectification
(3)Rescission
(4)None of the above
Answer: 3 Explanation: Option (3) is correct because, where a contract has not been executed, the available remedy for innocent misrepresentation is rescission (cancellation of the contract). Option (1) is incorrect because revocation refers to the cancellation of an offer. Once a contract has been made, revocation is no longer available. Option (2) is incorrect because rectification is a remedy typically available where there has been a mistake leading to the formation of a contract, not for misrepresentation. Option (4) is incorrect because Option (3) is correct.
Question 624: On January 1, Abdul placed an advertisement on CQXR radio station offering squash lessons for $30 per hour. Lois heard the ad and phoned Abdul on January 3 and said “I want to take squash lessons but I’m a student, do you give a lower rate to students?” Abdul said that he only had one rate of $30 per hour. Lois said she would phone back. On January 5, Lois phoned Abdul and said she accepted Abdul’s offer. Which of the following statements concerning Abdul and Lois is true?
(1)The January 1 advertisement was an offer, which Lois accepted on January 5.
(2)The January 1 advertisement was an offer and Lois’ telephone call on January 3 was a counter-offer.
(3)Lois’ January 3 call was a request for information and Abdul’s response on January 3 was an offer.
(4)Lois’ January 3 call was a counter-offer and Abdul’s response on January 3 was a second counteroffer.
Answer: 3 Explanation: Option (3) is correct because, in the context of Lois’ inquiry regarding the possibility of a lower rate, Abdul statement that his rate was $30 per hour was an offer. This was a valid offer because it contained the necessary terms for a contract to be entered into; in this case, price ($30 per hour) and subject matter (squash lessons). Option (1) is incorrect because the advertisement was most likely an invitation to treat, used by Abdul to induce radio listeners to pursue a contract for tennis lessons with him. Option (2) is incorrect for the same reason, and for the reason that Lois’ call was merely an inquiry regarding the possibility of a lower rate for students. Lois did not propose a new rate, therefore, he did not make a counter-offer. Option (4) is incorrect for the same reason.
Question 625: Which of the following statements regarding limited partnerships is TRUE?
(1)Each limited partner is personally liable for all debts that the partnership incurs.
(2)A limited partner can actively be engaged in managing the business without any consequences to their partnership status.
(3)Income is taxed before it is distributed to the partners.
(4)There must be one or more general partners.
Answer: 4 Explanation: Option (4) is correct because there must be at least one general partner in a limited partnership. The general partner(s) have unlimited liability, and can engage in the management or operations of the partnership. Options (1), (2), and (3) are all incorrect statements.
Question 626: In a single-storey house, joists are horizontal framing members that support which of the following?
(1)Rafters
(2)The foundation only
(3)Floors
(4)The foundation and ceilings
Answer: 3 Explanation: Option (3) is correct because joists are the horizontal framing members that support the floors. Option (1) is incorrect because joists do not support rafters. Options (2) and (4) are incorrect as the foundation is the poured concrete footprint that supports the superstructure above.
Question 627: Which of the following situations are consistent with the existence of a joint tenancy under current British Columbia law?
(1)Herman was a co-owner of Blueacre. When Herman died, the surviving co-owners of Blueacre automatically became its only co-owners.
(2)Joan and Anna are co-owners of Greenacre. The document transferring the property to them does not expressly state how they hold the property or what interest each owns.
(3)Paul, a co-owner of Blackacre together with Peggy, transferred his interest in the property to his son and registered the transfer in the land title office. Paul’s son is now a co-owner together with Peggy.
(4)Bert and Ernest are co-owners of Whiteacre. The front half of the property is Bert’s and the back half is owned by Ernest.
Answer: 1 Explanation: Option (1) is correct because an essential feature of joint tenancy is the right of survivorship. This means that when one joint tenant dies, the entire estate automatically vests in the surviving joint tenants. Option (2) is incorrect because, in British Columbia, the default form of co-ownership is tenancy in common, not joint tenancy. This means that if a document transfers a property without expressly stating the type of co-ownership, the new owners will be presumed to hold the property as tenants in common. Option (3) is incorrect because Paul severed the joint tenancy when he transferred his interest to his son and registered it at the land title office. This act converted the co-ownership of the property into a tenancy in common. Option (4) is incorrect because joint tenants enjoy a unity of possession, meaning that each co-owner is entitled to possession of the whole of the estate and no joint tenant can hold possession of any part separately and to the exclusion of others.
Question 628: A property is listed for $488,888, but the property’s lending value is estimated to be $480,000. Jay and Joan purchase the home for $485,500 subject to mortgage of $360,000. 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: 4 Explanation: Find the property’s loan-to-value ratio using the value of the mortgage and the property’s lending value.
Question 629: Three years ago Jim bought a house, at which time he arranged a mortgage for $120,000. The loan was written at a rate of 6.75% per annum compounded semi-annually, calling for monthly payments of $822.06 and an outstanding balance of $108,904.49 due at the end of the 5-year term. Jim has just received an offer from Alice to buy his house. Alice’s offer consists of $25,000 cash and assumption of the existing financing for the remainder of the term. If current lending rates for 2-year term mortgages are 8.75% per annum, compounded semi-annually, what is the market value of Alice’s offer?
(1)$97,335.06
(2)$109,829.02
(3)$122,335.06
(4)$134,829.02
Answer: 4 Explanation: The market value of Alice’s offer is the market value of the mortgage plus her cash down payment. Alice will assume the remaining 24 monthly payments of $822.06 and the outstanding balance of $108,904.49. Calculate the market value of the mortgage by determining the PV of the payments and OSB remaining at the end of the original 5-year term based on the current market rate of j2 = 8.75%. Press Display 8.75 NOM% 8.75 2 P/YR 2 EFF% 8.941406 12 P/YR 12 NOM% 8.594631 24 N 24 822.06 +/ PMT 822.06 108904.49 +/ FV 108,904.49 PV 109,829.017089 (market value of the mortgage) + 25000 = 134,829.017089 (market value of the offer)
Question 630: Kevin wants to purchase an investment that will give him payments of $450 at the end of every quarter for the next four years. If Kevin wants to earn an interest rate of 6% per annum, compounded quarterly, how much should he pay today for this investment?
(1)$8,069.57
(2)$7,224.92
(3)$6,359.07
(4)$6,983.29
Answer: 3 Explanation: Press Display 6 I/YR 6 4 P/YR 4 450 PMT 450 4 × 4 = N 16 0 FV 0 PV 6,359.06882 Kevin should pay $6,359.07 for this investment if he wants to earn j4 = 6%.
Question 631: Sue purchased a townhouse in March 20X3 for $262,000. Five years later, it was appraised at $350,000. Seven years after the townhouse was purchased, Sue sold the townhouse for $332,000. What was the pretax yield on her investment expressed as an effective annual rate?
(1)6.098489%
(2)3.440586%
(3)5.907385%
(4)4.717696%
Answer: 2 Explanation: Press Display 1 P/YR 1 262000 +/ PV 262,000 0 PMT 0 7 N 7 332000 FV 332,000 I/YR 3.440586 Sue’s pre-tax yield on her investment is an effective annual rate of 3.440586%.
Question 632: A borrower who makes accelerated biweekly payments:
(1)will make a smaller number of payments in a calendar year than a borrower who makes constant monthly payments (all other loan terms being equal).
(2)will pay more interest over the life of the loan than a borrower who makes constant monthly payments (all other loan terms being equal).
(3)pays one-twelfth of the annual payment every two weeks.
(4)pays one-half of the monthly payment every two weeks.
Answer: 4 Explanation: Option (4) is correct because the accelerated biweekly payment is calculated as the monthly payment divided in half; instead of paying once a month, one-half of the monthly payment is paid every two weeks. Since the effect of the accelerated biweekly payments allows the borrower to make the equivalent of one extra monthly payment, the borrower will pay less interest over the loan and make a larger number of payments in a calendar year than with a constant monthly repayment schedule. Option (1) is incorrect because the borrower will make more monthly payments in a calendar year than a borrower who makes constant monthly payments. Option (2) is incorrect because the borrower will pay less interest over the life of the loan than a borrower who makes constant monthly payments. Option (3) is incorrect because the borrower pays one-half of the monthly payment every two weeks. This amounts to one-twenty-fourth of the annual payment, since one-twelfth of the annual payment is equivalent to the monthly payment.
Question 633: An estimate of gross potential rents is achieved by:
(1)comparing all rents for similar space.
(2)comparing rents for recently leased similar space.
(3)projecting future rental increases.
(4)totalling current rents in the subject building.
Answer: 2 Explanation: Option (2) is correct because when estimating gross potential rents, the appraiser should have a sound knowledge of the current market rents for various types of accommodation, as gross potential rent is estimated using the market rents for recently leased similar space. Options (1), (3), and (4) are therefore incorrect.
Question 634: You are determining the market value of a subject property using the capitalization process. The gross potential rent for the subject property is $430,000, operating expenses are $130,000, and the long-term vacancy rate is 4%. If immediate repairs of $65,000 are required on the property and the appropriate capitalization rate is 6%, the market value of the property is approximately:
(1)$4,713,000
(2)$3,630,000
(3)$2,900,000
(4)$4,648,000
Answer: 4 Explanation: To find the market value of the subject property, determine the NOI for the subject property using the comparable information given.
Question 635: Which of the following refers to communication with employees, stockholders, clients, and the general public, with the aim of enhancing the image and reputation of a business?
(1)Sales promotion
(2)Undifferentiated marketing
(3)Public relations
(4)Target theory
Answer: 3 Explanation: Option (3) is correct because public relations refers to communications (other than personal selling and advertising) for the purpose of enhancing the image, recognition, and reputation of the firm. These communications can be with employees, stockholders, clients, and the general public. Option (1) is incorrect because sales promotion refers to any form of non-personal selling that does not fall under the head of public relations, advertising, or publicity. Option (2) is incorrect because undifferentiated marketing is a practice of marketing a product or service, not enhancing the general image and reputation of a business. Option (4) is incorrect because target theory is concerned with which group(s) a business focuses their marketing efforts on, and does not directly involve enhancing the general image and reputation of the business.
Question 636: The Superintendent of Real Estate is appointed by:
(1)real estate licensees.
(2)the Lieutenant Governor in Council.
(3)the real estate boards.
(4)the BC Financial Services Authority board of directors.
Answer: 4 Explanation: Option (4) is correct the Superintendent of Real Estate is appointed by the BC Financial Services Authority board of directors. Options (1), (2), and (3) are incorrect for that reason.
Question 637: Which of the following would likely NOT fall under the definition of a “residential complex” under the Excise Tax Act?
(1)Land that is reasonably necessary for the use and enjoyment of the complex as a place of residence
(2)A detached home in which a family resides
(3)A condominium unit being rented out to a university student on a year-long lease
(4)A home that is used for short-term rentals on Airbnb
Answer: 4 Explanation: Option (4) is correct because, although the definition of a residential complex includes most dwelling-units, a home which is used for short-term rentals would likely be considered a dwelling unit akin to a hotel, and thus would be excluded from the definition of a residential complex under the Excise Tax Act. Option (1) is incorrect because the residential complex definition includes land that is reasonably necessary for the use and enjoyment of the complex as a place of residence. Options (2) and (3) are incorrect because the definition of residential complex includes detached homes and condominiums used as dwelling houses which do not fall under the “hotel” exception.
Question 638: Your client, Bard, is a developer who owns land in an area zoned for single family residences. He wants to subdivide his 2.5 acre lot and build two 24 unit condominium projects on the land. Bard seeks your expert advice about how to overcome the land use bylaw obstacles that could prohibit the land development. You correctly advise Bard that:
(1)Bard will have to apply for a legal non-conforming use permit for this development site, according to the process outlined in the Local Government Act.
(2)a public hearing must be held by the municipal council prior to a change in the permitted land use or density under a zoning bylaw.
(3)the municipal council has the power, after a public hearing has been held, to alter an amended bylaw to further change the use or density of a zone without holding another public hearing, so long as it is in the public’s best interests to make this further change.
(4)All of the above statements are true.
Answer: 2 Explanation: Option (2) is correct because, in order to subdivide his lot and build two condominium projects, Bard will need the municipal council or regional district to pass a new bylaw amending the current zoning bylaw. To pass a bylaw changing the permitted use or density of the zone, a public hearing must be held to give persons whose interest in property would be affected an opportunity to be heard. Option (1) is incorrect because a legal non-conforming use refers to land use that is impermissible under current zoning restrictions, but which is nevertheless lawful because the use existed lawfully before the restrictions took effect. One cannot apply for a legal non-conforming use exemption for the purposes of converting a property to a use currently prohibited by an existing bylaw. Option (3) is incorrect because, in order to further change the use or density of a zone, the municipal council must hold another public hearing. Option (4) is incorrect because Options (1) and (3) are incorrect.
Question 639: There are several steps taken before a lawsuit actually is brought before a judge. Which of the following procedures does NOT take place before a trial begins?
(1)Filing and serving a notice of civil claim
(2)Filing and serving a response to civil claim
(3)Conducting an examination for discovery
(4)Obtaining a garnishing order
Answer: 4 Explanation: Option (4) is correct because a garnishing order may only be obtained either during or after a lawsuit (depending on the circumstances), but never before the lawsuit has been brought before a judge. Option (1) is incorrect because a notice of civil claim outlines the details of a plaintiff’s claim, and is served to the defendant before the claim is actually brought before a judge. Option (2) is incorrect because a response to civil claim is the defendant’s initial written reply to the notice of civil claim, and it is also filed and served before the claim is brought before a judge. Option (3) is incorrect because discovery proceedings are a means for bringing out the relevant evidence before the case gets to trial.
Question 640: All other things being equal, the type of loan with the most risk to the lender is:
(1)an interest accruing loan.
(2)an interest only loan.
(3)a straight line principal reduction loan.
(4)a constant, blended payment loan.
Answer: 1 Explanation: Option (1) is correct because with an interest accruing loan, the lender receives no payments before the maturity of the loan. This means that the entire loan amount and the interest accrued is at risk throughout the entire term of the loan, making it the most risky of the four types of loans in this question, all other things being equal. Option (2) is incorrect because an interest only loan is less risky because the borrower contracts to make regular payments of the interest earned to the lender throughout the term of the loan. Options (3) and (4) are incorrect because, with both of these loans, the lender receives periodic payments of both the principal amount and interest throughout the term of the loan.
Question 641: Assume that it is not a leap year. A property is sold on the following terms: Price: $195,000 (cash) Commission: 5% on the first $100,000 of the sale price and 2½% on the balance. Adjustment, possession, and completion date: August 28. Taxes for the current year were paid by the seller on July 1 in the amount of $1,015. The buyer has paid a deposit of $20,000 legal fees for the conveyance amount to $491. Where would the tax adjustment appear on the Statements of Adjustment?
(1)As a credit on the Seller’s Statement and a debit on the Buyer’s Statement
(2)As a credit on the Buyer’s Statement and a debit on the Seller’s Statement
(3)As a credit on both statements
(4)As a debit on both statements
Answer: 1 Explanation: Option (1) is correct because property taxes are paid on July 1, therefore, they have been paid by the seller. When property taxes have been paid by the seller, the buyer should reimburse the seller for that portion of the year from and including the adjustment date. The tax adjustment will appear as a credit on the seller’s statement and a debit on the buyer’s statement. Options (2), (3), and (4) are therefore incorrect.
Question 642: Where a licensee is personally involved in a real estate sale, which of the following is NOT a part of the disclosure requirements under the Real Estate Services Act ?
(1)The licensee must disclose that they, or an associated company or partnership, are purchasing the property on their own behalf.
(2)The licensee must disclose that they, or an associated company or partnership, are selling their own property.
(3)The licensee must disclose any other properties currently under consideration by the licensee.
(4)The licensee must make the required disclosure in writing, in the required form, prior to entering into any agreement.
Answer: 3 Explanation: Option (3) is correct because the British Columbia Real Estate Services Act does not require licensees to disclose any other properties that they are considering. Options (1), (2), and (4) are incorrect because section 53 of the Real Estate Services Rules requires licensees who are selling or purchasing real estate on their own behalf to make a written disclosure of their personal interest in the transaction to the other party.
Question 643: Which of the following is NOT a commonly used financial statement?
(1)A statement of profit and loss
(2)An income statement
(3)A balance sheet
(4)A corporate statement of holdings
Answer: 4 Explanation: Option (4) is correct because there is no financial statement called a corporate statement of holdings. Options (1), (2), and (3) are incorrect because they are commonly used financial statements.
Question 644: Which of the following options defines the term “amperage”?
(1)A measure of electrical potential
(2)A measure of electrical consumption
(3)A measure of electrical flow
(4)A measure of electrical power
Answer: 3 Explanation: Option (3) is correct because amperage is defined as a measure of electrical flow. Option (1) is incorrect because voltage is defined as a measure of electrical potential. Options (2) and (4) are incorrect because wattage is defined as a measure of electrical consumption or power.
Question 645: A borrower has arranged a loan of $196,000 at an interest rate of 6% per annum, compounded annually over an amortization period of 15 years. What is the monthly payment required?
(1)$1,386.30
(2)$1,543.86
(3)$1,262.84
(4)$1,637.18
Answer: 4 Explanation: In this question, convert the effective annual interest rate to a monthly rate (j12) and then calculate the monthly payment. Press Display 6 NOM% 6 1 P/YR 1 EFF% 6 12 P/YR 12 NOM% 5.841061 196000 PV 196,000 180 N 180 0 FV 0 PMT 1,637.176436
Question 646: All other things being equal, a selling price less than the market value of a property is most likely to be obtained in a sale when:
(1)real estate prices are increasing very quickly.
(2)the seller is not in a hurry to sell.
(3)the buyer is in a hurry to buy.
(4)the property has been exposed to the market for more than two months.
Answer: 1 Explanation: Option (1) is correct because when real estate prices are increasing very quickly, they are reflecting the increasing market values of properties. The selling price would therefore likely be lower than the actual market value in a time of rapidly increasing real estate prices. Options (2) is incorrect because if a seller is not in a hurry to sell, he or she is likely to wait to obtain the highest possible price. Option (3) is incorrect because a buyer who is in a hurry to buy may pay a premium to acquire a property. Option (4) is incorrect because a property that has been exposed to the market for more than two months does not necessarily indicate that the sale price will be lower than the market value, as the market could fluctuate in many ways throughout the two months.
Question 647: 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 6.5% 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 to be 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)7.061529%
(2)6.047054%
(3)7.135586%
(4)6.842788%
Answer: 2 Explanation: To find the nominal interest rate with semi-annual compounding, calculate the payment based on the face value of the loan of $217,200. Then, calculate the investor’s yield based on the loan payment and the amount that the investor pays ($225,000). Press Display 6.5 NOM% 6.5 2 P/YR 2 EFF% 6.605625 12 P/YR 12 NOM% 6.413688 217200 PV 217,200 240 N 240 0 FV 0 PMT 1,608.366906 1608.37 +/ PMT 1,608.37 Use the amount the investor pays as the new PV to calculate the yield. The calculator steps continue as follows: Press Display 225000 PV 225,000 I/YR 5.972251 (j12) EFF% 6.138471 (j1) 2 P/YR 2 NOM% 6.047054 (j2)
Question 648: What is the amortization period of a $125,000 loan that has a term of 7 years, an interest rate of 6.5% per annum, compounded semi-annually, and monthly payments of $926?
(1)300 months
(2)250 months
(3)239.803291 months
(4)227.985233 months
Answer: 3 Explanation: To determine the amortization period for the loan, convert the annual interest rate, compounded semi-annually to an annual rate, compounded monthly. Then, calculate the amortization period. Press Display 6.5 NOM% 6.5 2 P/YR 2 EFF% 6.605625 12 P/YR 12 NOM% 6.413688 125000 PV 125,000 926 +/ PMT 926 0 FV 0 N 239.803291 The amortization period is 239.803291 months.
Question 649: A property that is not employed in its highest and best use:
(1)should be renovated.
(2)possesses latent value.
(3)should be rezoned.
(4)should be appraised by the cost approach.
Answer: 2 Explanation: Option (2) is correct because a property that is not at its highest and best use has redevelopment potential, which is recognized as latent value. Options (1), (3), and (4) are incorrect.
Question 650: An individual is planning to purchase a property that has a list price of $368,888. The proposed purchase price will be $365,000 and the lender will apply a lending value of $363,000. How large will the down payment need to be if the lender insists on a maximum loan-to-value ratio of 80%?
(1)$74,600
(2)$73,000
(3)$75,300
(4)$76,888
Answer: 1 Explanation: Max loan = Lending value × Loan-to-value ratio Max loan = $363,000 × 0.80 Max loan = $290,400 This is the amount of their mortgage. The question asks for the down payment. If the purchase price is $365,000, and the mortgage is $290,400, then the down payment is equal to the difference of $74,600 ($365,000 $290,400).
Question 651: Which of the following statements regarding electrical service is FALSE?
(1)If the home is less than 25 years old, the size of the main breaker usually determines the service.
(2)The wires to most homes carry 120/240 volt, 3-wire electrical service.
(3)The Canadian Electrical Code requires that new or substantially renovated houses of more than 80 square metres have a service capacity of at least 100 amps.
(4)Voltage is a measure of power or consumption.
Answer: 4 Explanation: Option (4) is correct because voltage is a measure of electrical potential, not power or consumption. Options (1), (2), and (3) are true statements.
Question 652: The process used in underwriting income-producing properties is similar to that for residential borrower qualification except that in underwriting commercial properties:
(1)a loan-to-value constraint is never used.
(2)the income from the property is more important than the personal income of the borrower.
(3)a gross debt service ratio is commonly employed.
(4)a safety margin is not necessary.
Answer: 2 Explanation: Option (2) is correct because lenders are more interested in the income generated from the commercial property than the borrower’s personal income. Options (1), (3), and (4) are incorrect because they do not describe differences between underwriting income-producing properties and residential borrower qualification.
Question 653: A board of variance is a board established to:
(1)ensure that actions by municipalities are not at variance with the Local Government Act.
(2)settle boundary line disputes between private parties.
(3)ensure that all non-conforming uses cease within six months after a change in a zoning bylaw.
(4)permit a minor deviation from a zoning bylaw for an individual property owner.
Answer: 4 Explanation: Option (4) is correct because a board of variance must be established by every local government that has adopted a zoning bylaw to ensure that the bylaw does not cause undue hardship. A board of variance may grant minor variances from zoning bylaws where compliance would cause undue hardship provided that the variance would not conflict with the policies of the local government. Option (1) is incorrect because boards of variance do not enforce municipality compliance with the Local Government Act. Option (2) is incorrect because boards of variance do not settle boundary line disputes between private parties. Option (3) is incorrect because legal non-conforming uses may be permitted to exist for more than six months.
Question 654: Which of the following is a liability on a financial statement?
(1)Accumulated depreciation
(2)Inventory
(3)Rent receivable
(4)Accounts payable
Answer: 4 Explanation: Option (4) is correct because accounts payable is a liability, since it represents a debt owed. Option (1) is incorrect because accumulated depreciation will fall under the asset category of the balance sheet, and will take away from the value of the depreciable asset(s). Options (2) and (3) are incorrect because inventory and rent receivable are both current assets.
Question 655: Jennie has rented her apartment on a month to month basis for two years without a rent increase. She receives a properly delivered rent increase notice on July 31 raising her rent from $750 per month to $1,075 per month, effective November 1. She feels this increase is excessive and discusses it with her landlord, but her landlord remains convinced that $1,075 is a fair market value rent, even though the applicable Consumer Price Index (CPI) is 3%. Which of the following statements is TRUE?
(1)The notice of rent increase is invalid because it is less than six months before it becomes effective.
(2)This rent increase cannot be valid or approved because it is greater than the CPI.
(3)This rent increase will be valid only if there has been a change of landlords.
(4)This rent increase will be valid only if approved for special circumstances as set out in the Residential Tenancy Regulations.
Answer: 4 Explanation: Option (4) is correct because the Residential Tenancy Regulation limits annual rent increases to an amount equal to the Consumer Price Index (CPI) for British Columbia (in this case, 3%). Since this rent increase exceeds this amount, it will only be valid if approved for special circumstances as set out in the Residential Tenancy Regulation. Option (1) is incorrect because written notice of a rent increase need only be given to a tenant at least three months before it becomes effective. Option (2) is incorrect because the landlord may apply for approval for this rent increase based on special circumstances. Option (3) is incorrect because a new landlord is not given the right to raise the rent above the set amount (the applicable CPI).
Question 656: Which of the following is a key determinant of the value of a property?
(1)Vendor financing
(2)Cash-equivalent price
(3)Listing (asking) price
(4)Rights of ownership
Answer: 4 Explanation: Option (4) is the correct answer because the legal rights of ownership and the physical property will determine the value of a property. The listing price, Option (3), may represent the value to owner, but does not determine the actual value that the property is worth in the market. Option (1) is incorrect because vendor financing may impact the value, but is not a key determinant of value. Option (2) is incorrect because cash-equivalent price represents the market value of a property only if non-market financing was involved in a sale/purchase.
Question 657: Where a principal adopts a contract that their agent entered into without any authority:
(1)the third party is not obligated to honour the contract if they do not wish to.
(2)the principal can sue the agent for breach of warranty of authority.
(3)the agent is given authority retroactively to enter into that contract.
(4)the agent becomes a party to that contract.
Answer: 3 Explanation: Option (3) is correct because a principal can retroactively ratify a contract which was entered into by his agent without the necessary authority. Ratification expresses the principal’s consent to be bound just as if the agent had been authorized to make the contract in the first place. Option (1) is incorrect because, if the principal ratifies the contract, the contract is valid and the third party is obligated to honour the contract. Option (2) is incorrect because a warranty of authority is an agent’s promise to third parties (not the principal) that his or her actions fall within the scope of authority given by the principal. Therefore, only third parties to whom the warranty of authority is made can sue the agent for breaching the warranty. Option (4) is incorrect because, where a principal adopts a contract which his agent entered into without any authority, the principal (not the agent) becomes a party to that contract.
Question 658: Mr. and Mrs. Tom Jones and Ashraf Menzies have a signed contract of purchase and sale for a triplex owned by Alan Sinclair. Mr. and; Mrs. Jones have agreed to pay $100,000 each and Ashraf has agreed to pay the balance of $50,000. They would like their ownership registered as a joint tenancy. Which one of the following statements is TRUE?
(1)Tom, Mrs. Jones, and Ashraf cannot register their ownership as a joint tenancy because they did not each contribute the same amount of cash.
(2)If their interest is registered as a joint tenancy, Tom, Mrs. Jones, and Ashraf will each own an undivided interest in the triplex.
(3)Tom and Mrs. Jones would be allowed to register their interests as a joint tenancy because they are husband and wife, but Ashraf would have to be a tenant-in-common with them.
(4)Tom, Mrs. Jones, and Ashraf cannot meet the four common law principles required to create a joint tenancy.
Answer: 2 Explanation: Option (2) is correct because, in a joint tenancy, co-owners are viewed as a single legal owner against everyone else; and therefore, each owns an undivided interest in the whole of the estate. Option (1) is incorrect because individuals can enter into a joint tenancy regardless of their respective financial contributions to the purchase of the property. Option (3) is incorrect because more than two individuals can enter into a single joint tenancy and because individuals do not have to be married to enter into a joint tenancy. Option (4) is incorrect because each of the following four common law “unities” can be satisfied: (1) all joint tenants must receive their interests at the same time; (2) all joint tenants must receive their interest from the same document; (3) all joint tenants must have the same interest in the land; and (4) all joint tenants must be entitled to possession of the whole estate.
Question 659: A friend of yours is cleaning out her real estate office and is throwing away the hard copies of all her transaction-related documents. When you ask her why, she explains that she has electronic copies of all of these documents and that they are just taking up space. Which of the following statements regarding data backup and legal considerations should your friend be aware of?
(1)Keeping only electronic copies of transaction-related documents is advisable and hard copies are not necessary in the real estate industry.
(2)There is no need to keep hard copies because of the use of digital signatures.
(3)She should retain her hard copies in case there is a question as to the authenticity or origin of the electronic documents and email communications.
(4)It is only necessary to retain hard copies of documents if they do not contain signatures or initials.
Answer: 3 Explanation: Option (3) is correct because any verification of dated communication helps to give credibility to a statement or allegation. However, verifying the authenticity of electronic documents and email communications is difficult. Further, electronic communication may not stand alone as evidence if there is a question as to the authenticity or origin of the communication. Therefore, keeping hard copies is extremely important from a legal perspective. Options (1), (2), and (4) are incorrect for the same reasons.
Question 660: Which of the following correctly lists assets from most liquid to least liquid?
(1)Accounts receivable, inventories, accounts payable, marketable securities
(2)Marketable securities, accounts receivable, inventories, prepaid expenses
(3)Cash, accounts receivable, land, marketable securities
(4)Building, cash, prepaid expenses, inventories
Answer: 2 Explanation: Option (2) is correct because marketable securities, accounts receivable, inventories, and prepaid expenses is the correct listing of assets from most to least liquid. Option (1) is incorrect because marketable securities are more liquid than accounts receivable, and accounts payable is not an asset. Option (3) is incorrect because marketable securities are more liquid than accounts receivable, and land is the least liquid asset listed. Option (4) is incorrect because inventory is generally more liquid than prepaid expenses, and the building is the least liquid asset listed.
Question 661: Elly, a licensed real estate representative, entered into a written exclusive listing contract with Laura to list Laura’s house for sale for $300,800. Shortly after entering into this agreement, Elly’s licence expired. Unaware of the expiration of her licence, Elly proceeded to hold three open houses and several other showings of the house, eventually finding a buyer who offered $300,800 for the house. Laura accepted the offer, but when she learned about Elly’s licence expiry, she refused to pay any commission to Elly. Which of the following statements is TRUE?
(1)A court will not award Elly any form of remuneration in this situation.
(2)The Real Estate Services Act permits Elly to sue Laura for commission in this situation whether or not the listing contract specified the amount Elly was to receive.
(3)A lawsuit to recover damages against Laura for breach of the listing contract will probably succeed even if Laura later refuses to complete the sale of her house.
(4)Based on the limited facts in this situation, the listing contract likely violates the statutory requirements of the Real Estate Services Act.
Answer: 1 Explanation: Option (1) is correct because section 4 of the Real Estate Services Act stipulates that if an agent is unlicensed at the time real estate services were provided, he or she cannot bring a court action to collect commission. Options (2) and (3) are incorrect for the same reason. Option (4) is incorrect because there is no indication, based on the facts presented in this situation, that the listing contract violates the statutory requirements of the Real Estate Services Act.
Question 662: In which one of the following situations may the landlord choose to give the tenant one month’s notice of the end of the tenancy agreement?
(1)Charles is renting a one-bedroom apartment in the West End of Vancouver on a month-to-month basis. He has been diligent in paying his rent on the due date each month but the landlord has recently discovered that Charles’ friend, Christine, has moved into the apartment with him.
(2)Jordan’s warehouse is long overdue for a major renovation, which cannot be completed with the present tenant in occupation. Aladdin, the tenant, has four months left on his fixed term tenancy and does not wish to move.
(3)On September 1, Kirsten moved into a small house owned by Jackson without paying the security deposit of $300 requested by the rental agent and according to the terms of the tenancy agreement. On September 30, she tenders $600 for the October rent but refuses to pay the additional $300 for the security deposit.
(4)MacGregor’s son is moving to Vancouver and wants to live in an apartment that MacGregor owns and has rented out to Mrs. Julian for the last 20 years.
Answer: 3 Explanation: Option (3) is correct because, under section 47(1)(a) of the Residential Tenancy Act, a landlord may give a tenant a notice of the end of a tenancy if the tenant does not pay the security deposit within 30 days of the date it is required to be paid under the agreement. Option (1) is incorrect because, as per section 47(1)(c) of the Residential Tenancy Act, a landlord may only give a tenant notice of the end of a tenancy for reasons relating to the number of occupants if there are an “unreasonable” number of occupants in the rental unit. Two occupants in a one-bedroom apartment would not be considered unreasonable, and therefore, a landlord could not end a tenancy for this reason. Option (2) is incorrect because Jordan cannot end the tenancy early in order to renovate the warehouse. Jordan must wait until the lease term expires. Option (4) is incorrect because MacGregor must give the tenant at least 2 months’ notice in order to end Mrs. Julian’s tenancy to allow his son to move into the apartment.
Question 663: With respect to an insured mortgage loan, which of the following statements is FALSE?
(1)In Canadian mortgage loan insurance, the lender pays the insurer a single premium, the cost of which is generally passed on to the borrower.
(2)Borrowers can add the mortgage loan insurance premium to the mortgage amount.
(3)Canada Mortgage and Housing Corporation (CMHC) is the only institution in Canada that provides mortgage loan insurance.
(4)Federally regulated financial institutions require mortgage insurance in order to make loans with loan-to-value ratios higher than 80%.
Answer: 3 Explanation: Option (3) is correct (false) because there are several organizations that offer mortgage loan insurance such as CMHC, Genworth Financial Canada, and the Canada Guaranty Mortgage Insurance Company. Options (1), (2), and (4) are incorrect because they are true statements.
Question 664: Ownership of land in British Columbia includes not only the surface of the land, but also:
(1)the column of airspace above it insofar as the owner can see.
(2)the gold and silver below the land to a depth of ten feet.
(3)objects affixed to the land for the purpose of improving the land.
(4)petroleum down to the centre of the earth.
Answer: 3 Explanation: Option (1) is incorrect because landowners in British Columbia now own or have rights in the airspace above their property only to the extent that they can make effective use of it (not insofar as the owner can see). Option (2) is incorrect because the Government of British Columbia has reserved subsurface rights to gold and silver in favour of the Crown since the time when original Crown grants were made in the 19th century. Option (4) is incorrect because subsurface rights to petroleum have also been reserved in favour of the Crown since 1899; therefore, only landowners whose property was granted by the Crown prior to this date might have ownership of subsurface petroleum (depending on the terms of the original grant).
Question 665: A strata plan is:
(1)filed in the Land Title Office and designates which parts of a strata projects are strata lots and which are common property.
(2)used for both condominium and cooperative developments.
(3)required only when creating five or more strata lots.
(4)essentially a package of restrictive covenants.
Answer: 1 Explanation: Option (1) is correct because an owner developer must file a strata plan in order to create a strata development. The strata plan divides the entirely of the building between strata lots and common property. Option (2) is incorrect because cooperative developments are not strata developments, and therefore have no corresponding strata plans. Option (3) is incorrect because strata plans are required for all strata developments. Option (4) is incorrect because restrictive covenants impose restrictions on the use of one person’s land for the benefit of another piece of land. A strata plan does not impose restrictions on “burdened” land for the benefit of some other “benefitted” land. [NOTE: This question has been replaced. Please review your Bulletins posted on your Course Resources webpage.]
Question 666: The primary purpose of a credit analysis of a mortgagor is:
(1)to ensure that the borrower has both the ability and the intention of complying with the mortgage agreement.
(2)to determine if the borrower is worth suing if they default on the mortgage.
(3)to determine the exact interest rate to charge the borrower.
(4)to appraise the value of the property given as security for the loan.
Answer: 1 Explanation: Option (1) is correct because a credit analysis evaluates an applicant’s ability to meet the terms of a mortgage and the amount of his or her available for future mortgage payments. Options (2), (3), and (4) are incorrect as they do not describe the primary purpose of a credit analysis of a mortgagor.
Question 667: A licensee is required to provide the consumer with a Disclosure of Risks to Unrepresented Parties form if the licensee is providing trading services to the consumer as an unrepresented party in such a way that the licensee must provide a Disclosure of Representation in Trading Services form to that unrepresented party AND:
(1)the unrepresented party is particularly vulnerable in the trade in real estate.
(2)the licensee is also representing a client in the same trade in real estate.
(3)the unrepresented party is not obtaining legal advice in respect of the trade in real estate.
(4)the unrepresented party has never worked with a real estate licensee before.
Answer: 2 Explanation: Option (2) is correct because under section 55 of the Real Estate Services Rules, a licensee must provide a consumer with a Disclosure of Risks to Unrepresented Parties form when the licensee makes a disclosure under section 54 to an unrepresented party AND the licensee is also representing a client in the same trade in real estate. Options (1), (3), and (4) are incorrect because licensees are not required to make this disclosure to an unrepresented party if the licensee is not also representing a client in the same trade.
Question 668: When a borrower is unable to make the mortgage payments (in part or full):
(1)the lender will immediately use legal remedies to recover the outstanding amounts.
(2)the borrower has the right to automatically adjust payment terms.
(3)the lender cannot grant extra time to repay the deficit amounts.
(4)it may be due to loss of employment.
Answer: 4 Explanation: Option (4) is correct because a borrower may be unable to make the mortgage payments due to a number of reasons including loss of employment. Option (1) is incorrect because when this occurs, the lender can, but may choose not to, take immediate legal action against the borrower. Options (2) and (3) are incorrect because sometimes it is in the best interest of the lender to grant extra time for the borrower to repay the deficit, but the borrower cannot automatically adjust the payment terms.
Question 669: The consumer price index is a good method to adjust sale prices to the level of values prevailing as of the date of appraisal:
(1)where the comparable sales are deemed to be not recent.
(2)where there are inadequate numbers of comparable sales within a particular neighbourhood.
(3)where the cost approach of appraisal is deemed to be inappropriate.
(4)under no circumstances.
Answer: 4 Explanation: Option (4) is correct because general price indices, such as the consumer price index or the shelter price index, are irrelevant to the appraisal of one particular property since changes in the value of consumer products are not necessarily the same as changes in the value of property. Therefore, Options (1), (2), and (3) are incorrect.
Question 670: An appraiser is using the market approach for an appraisal of a single-family house. By proper adjustment, the appraiser can use sale prices of all the following properties for comparison purposes, EXCEPT:
(1)houses in different neighbourhoods.
(2)houses with different square footage.
(3)houses recently sold between related parties.
(4)houses sold over six months ago.
Answer: 3 Explanation: Option (3) is correct because appraisers cannot use sale prices for houses recently sold between related parties for comparison purposes. Market value is determined by analyzing market transactions where the buyer and seller have no special relationship (i.e., the sale occurred at arm’s length) and the properties sold are similar (or comparable) to the subject property. Options (1), (2), and (4) are incorrect because with appropriate adjustment, the sale prices of all of these properties can be used for comparison purposes.
Question 671: Wally Walters wants to determine the market value of his property. Unfortunately, he lives in a sparsely inhabited region where there are no similar properties that have recently sold. However, he does know that the replacement cost (new) of his 2,600 square foot house is $42.50 per square foot. The land value estimate using the comparative approach of appraisal is $41,500. Mr. Walters has not taken adequate care of his house and it has depreciated in value. There has been $16,300 of curable physical depreciation. In addition, the bathroom and kitchen fixtures are outdated; their replacement cost is $13,200. Based on the above information, what is the market value of Mr. Walters’ property?
(1)$122,500
(2)$81,000
(3)$152,000
(4)$135,700
Answer: 1 Explanation: Replacement cost of house: $42.50 × 2,600 = $110,500 Land: $41,500 Land + House = $152,000 minus depreciation ($16,300) = $135,700 minus bathroom kitchen fixtures ($13,200) = $122,500 The market value is $122,500.
Question 672: You have a partially completed appraisal report that you need to fill in. The subject property has 5 bedrooms and an alarm system. The house next door is similar in all respects except for the number of bedrooms and alarm system. It recently sold for $445,500 and had a +$3,500 adjustment for bedrooms and a +$5,500 adjustment for an alarm system. If the market value of a bedroom is $3,500 and the market value of an alarm system is $5,500, it can be concluded that this comparable has:
(1)4 bedrooms and no alarm system.
(2)3 bedrooms and no alarm system.
(3)4 bedrooms and an alarm system.
(4)5 bedrooms and an alarm system.
Answer: 1 Explanation: Option (1) is correct because in relation to the subject property, this comparable has one less bedroom and no alarm system. Options (2), (3), and (4) are therefore incorrect.
Question 673: Jonathan Wong has offered $231,000 for a house, providing he is able to obtain acceptable financing. The house lists for $242,000, but the lender has set the lending value at $238,000. The lender requires a loan-to-value ratio of 80% and a gross debt service ratio of 30%. Property taxes are $1,750 per year and Mr. Wong’s annual gross income is $65,000. If the interest rate is 6.5% per annum, compounded annually, the amortization period is 20 years, and payments are made monthly, what is the maximum amount this lender will advance, rounded to the nearest $100?
(1)$201,300
(2)$196,800
(3)$215,200
(4)$190,400
Answer: 4 Explanation: To solve this question, calculate the maximum amount of money that can be lent out given the two constraints: the loan-to-value amount and the gross debt service ratio amount. Calculate the loan amount for the loan-to-value constraint and then calculate the loan amount for the GDSR constraint. In order to determine the maximum amount that the lender will advance, choose the lesser of the two results. LTV = 80%
Question 674: Which of the following is NOT characteristic of a mortgage as an investment?
(1)Smaller investors face a mortgage payment reinvestment problem.
(2)Mortgages require a high initial outlay of capital.
(3)Mortgages require a low degree of administrative work.
(4)Mortgages are “unique”, which makes them difficult to trade.
Answer: 3 Explanation: Option (3) is false. Mortgages require a high degree of administrative work such as writing contracts, registering the mortgage charge, and subsequent administration of outstanding balance and refinancing. Options (1), (2), and (4) are incorrect because they are characteristics of a mortgage as an investment.
Question 675: Cornelius gave a life tenancy to Ruel, which did not expressly state anything about Ruel’s liability for waste. Ruel will NOT be liable to the remainderman for:
(1)permissive waste.
(2)voluntary waste.
(3)ameliorating waste.
(4)equitable waste.
Answer: 1 Explanation: Option (1) is correct because, at common law, a life tenant is generally under no obligation to repair or compensate for waste that occurs as a result of allowing the property to deteriorate without any positive acts (permissive waste). Option (2) is incorrect because life tenants are liable to the remainderman for direct, positive acts that result in damage to the property beyond the use to which the life tenant is entitled (voluntary waste). Option (3) is incorrect because a life tenant is liable for direct, positive acts which improve rather than destroy the property (ameliorating waste) – but, usually no damages can be awarded, as the property has been improved. Option (4) is incorrect because a life tenant is liable for waste that he or she causes by flagrantly or maliciously damaging or destroying the property (equitable waste).
Question 676: Which of the following statements about depreciation expense is TRUE?
(1)It is another name for capital cost allowance.
(2)It is a deductible expense in computing income for purposes of income taxation.
(3)It is usually calculated on land by the straight-line method.
(4)It is the method used to allocate the cost of an asset over time.
Answer: 4 Explanation: Option (4) is correct because depreciation expense is used to allocate the cost of a depreciable asset over the course of its life. Option (1) is incorrect because depreciation expense is an accounting framework, whereas capital cost allowance is a taxation framework. Option (2) is incorrect because depreciation expense cannot be deducted from taxable income, whereas capital cost allowance can be. Option (3) is incorrect because land is not a depreciable asset.
Question 677: The owner of an interest in real property that is located in British Columbia always has:
(1)a fee simple interest.
(2)the right to use their property in any way they choose.
(3)at least a 99-year lease from the Crown.
(4)common law rights as modified by legislation.
Answer: 4 Explanation: Option (4) is correct because real property ownership in British Columbia is based on English common law property rights as modified by legislation such as the Property Law Act and the Land Title Act. Option (1) is incorrect because an owner of an interest in real property in British Columbia may have a number of interests that fall short of a fee simple interest (e.g., life estate, estate pur autre vie, leasehold, etc.). Option (2) is incorrect because the extent of the usage rights enjoyed by an owner of an interest in real property depends heavily upon the type of interest that the owner holds. Additionally, even an owner of real property in fee simple must still abide by various common law restrictions as well as legislative restrictions (e.g., municipalities have the power to regulate subdivision). Option (3) is incorrect because an owner of an interest in real property in British Columbia can have an interest less than a 99-year lease from the Crown (e.g., a lease for a term of less than 99 years).
Question 678: Steelgrave Developments is contemplating the construction of a large residential building. They have been guaranteed financing by their bank in the amount of $1,500,000. The terms of the financing are j2 = 9.75% with a 20-year amortization period, 5-year term, and monthly payments. Steelgrave believes that if market conditions are favourable, they will sell the building when it is completed, 2 years from now. How much principal will be paid off at the end of the 2-year construction period, rounded to the nearest dollar?
(1)$53,826
(2)$55,072
(3)$160,075
(4)$125,212
Answer: 2 Explanation: Find the amount of principal that has been paid off during the 2-year term. Press Display 9.75 NOM% 9.75 2 P/YR 2 EFF% 9.987656 12 P/YR 12 NOM% 9.557657 1500000 PV 1,500,000 20 × 12 = N 240 0 FV 0 PMT 14,038.492319 14038.49 +/ PMT 14,038.49 1 INPUT 24 AMORT PER 1-24 = 55,071.663913 The amount of principal paid off during the 2-year term is $55,072, rounded to the nearest dollar.
Question 679: Question 679 SKIPPED due to format
(1)$53,826
(2)$55,072
(3)$160,075
(4)$125,212
Answer: 2 Explanation: Comparable A
Question 680: In which of the following situations will the agency authority continue to exist?
(1)Lorne lists his house for sale with Steve. The house burns down.
(2)Lorne enters into an exclusive listing agreement with his agent Mark. Lorne then sells the property himself without Mark’s assistance.
(3)Lorne tells his agent over the phone that he no longer has the authority to sell his house.
(4)None of the above.
Answer: 4 Explanation: Option (4) is correct because each of the scenarios laid out in Options (1), (2), and (3) would terminate the agency authority. Option (1) is incorrect because the doctrine of frustration appears to apply to the agency relationship, meaning that if a house listed for sale burns down, the agency would probably be terminated. Option (2) is incorrect because, the moment the principal sells his or her property, he or she terminates the authority of all listing brokers, no matter what kind of listing agreement they have. The principal may, however, still be liable to pay commission. Option (3) is incorrect because either party to an agency agreement can terminate the authority (orally or by conduct) at will.
Question 681: Blackacre, a revenue producing property, has been sold. The date of adjustment will be January 31, 2011, exactly 18 months after the contract of purchase and sale was signed and a deposit of $3,500 was paid directly to the seller. If interest on this deposit accrues for the benefit of the buyer, 6% per annum, compounded annually, what will be the amount shown on the seller’s statement of adjustment?
(1)$3,815.00 debit
(2)$3,819.68 debit
(3)$3,815.00 credit
(4)$3,819.68 credit
Answer: 2 Explanation: Press Display 6 I/YR 6 1 P/YR 1 3500 PV 3,500 1.5 N 1.5 0 PMT 0 0 FV 3,819.678782 The future value of the deposit at an effective annual rate of 6% is $3,819.68. Since the buyer paid the deposit to the seller directly, it reduces the amount of cash that the seller will receive on closing. Therefore, the $3,819.68 will appear as a debit on the seller’s statement of adjustments.
Question 682: Which of the following statements is TRUE with respect to listing contracts?
(1)While a listing contract is a contract between the brokerage and the seller, the buyer is bound to some of the terms contained in the contract.
(2)It is not necessary that an exclusive listing contain a specified duration or commencement date.
(3)The open listing provides better protection for the agent than the exclusive listing.
(4)None of the above statements is true.
Answer: 4 Explanation: Option (4) is correct because none of the previous statements is true. Option (1) is incorrect because the buyer is not privy to the listing contract, meaning that the buyer owes no rights and has no obligations under the listing contract. Option (2) is incorrect because Clause 1A of the standard form listing agreement created by the British Columbia Real Estate Association requires an “Effective Date” and an “Expiry Date”. Option (3) is incorrect because an open listing provides less protection for the agent than an exclusive listing. This is because, as opposed to an exclusive listing, an open listing does not prevent the seller from employing a number of other brokerages to represent the seller. Commission is only paid to the brokerage who is the effective cause of the eventual sale.
Question 683: Which of the following will NOT result in the release or expiry of an offer?
(1)The illiteracy of the offeree
(2)The expiry of a specified time limit in the offer prior to acceptance
(3)A counter-offer by the offeree
(4)Revocation of the offer, communicated to the offeree by the offeror
Answer: 1 Explanation: Option (1) is correct because the general rule is that an illiterate person is bound by a contract that he or she has agreed to, unless he or she did not know the general nature of the contract. Therefore, the illiteracy of the offeree, alone, is insufficient to release an offer. Option (2) is incorrect because an offer expires if it is not accepted within the time limit specified in the offer. Option (3) is incorrect because a counter-offer constitutes a rejection of the original offer. Option (4) is incorrect because the offeror can revoke an offer at any time provided that the offeror communicates the revocation to the offeree prior to acceptance.
Question 684: Which of the following options is an advantage of using a central, gas-fired, forced hot water heating system?
(1)Its air filtration capabilities
(2)The production of a steady, consistent heat
(3)Money can be saved by leaving it off during an owner’s winter absence
(4)Heat transmission is completely by radiation
Answer: 2 Explanation: Option (2) is correct because a central gas fired, forced hot water heating system produces steady and consistent heat. Option (1) is incorrect as this type of heating system does not provide air circulation or filtration. Option (3) is incorrect as this type of heating system must be kept circulating in cold weather otherwise water will freeze and the piping will crack. Option (4) is false because this type of heating system transmits heat through convection and radiation.
Question 685: Which of the following could be called “legislation”?
(1)The Land Title Act
(2)The Principle of Specific Performance
(3)The Equity of Redemption
(4)All of the above
Answer: 1 Explanation: Option (1) is correct because the Land Title Act is a body of law written and passed by the provincial government of British Columbia. Option (2) is incorrect because specific performance is a remedy that was developed by the courts of equity, not enacted via government statute. Option (3) is incorrect because the equity of redemption is a doctrine that was developed by the courts of equity, not enacted via government statue. Option (4) is incorrect because Options (2) and (3) are incorrect.
Question 686: Which one of the following is NOT a mortgagor covenant?
(1)Pay all taxes on the land and on the improvements
(2)Keep the premises in a reasonable state of repair
(3)To convey the property to the mortgagee, at its option, in exchange for an amount equal to current market value
(4)Pay the debt and accrued interest according to the agreed upon schedule
Answer: 3 Explanation: Option (3) is correct because there is a fundamental principle of mortgage law which prohibits “clogging” on “the equity of redemption”. This principle states that the borrower (or the mortgagor) cannot be prevented by the terms of the mortgage from eventually redeeming his or her property free from the conditions contained in the mortgage upon repayment of the loan. An option to purchase a mortgaged property given by the borrower to the lender at the time the mortgage is negotiated, if exercised, would prevent the mortgagor from redeeming his or her property upon repayment, and is therefore void. Option (1) is incorrect because, in mortgage agreements, mortgagors generally covenant to pay all taxes on land and the improvements. Option (2) is incorrect because it is common for a mortgagor to covenant to keep the land and buildings thereof in “good condition and repair”, thereby protecting the value of the security (the property). Option (4) is incorrect because the repayment clause of a mortgage agreement will set out the borrower’s promise to pay the debt and accrued interest according to the schedule agreed upon.
Question 687: Which one of the following statements is TRUE?
(1)Given that the net operating income remains constant, the market value of a property rises as the required yield rises.
(2)The market value of an income-producing property is best determined by averaging the sale prices of any three other income-producing properties that have recently sold.
(3)In the determination of an income producing property’s market value, the terms “gross realized income” and “net operating income” are synonymous.
(4)The capitalization rate applied to the net operating income of an investment property is related to the yield on comparable investment properties.
Answer: 4 Explanation: Option (4) is correct because it is true. Option (1) is incorrect because given that the net operating income remains constant, the market value of the property will decline as the required yield rises. Option (2) is incorrect because the market value of an income-producing property is best determined by the yields that prospective purchasers reasonably expect to earn. Option (3) is incorrect because net operating income and gross realized income (also known as “gross realized revenue” or “gross effective income”) are different; net operating income is derived by subtracting operating expenses from gross realized income.
Question 688: Robert asks Whitney to act as his agent at the auction of the effects of a deceased rock star. Robert was an enthusiastic fan of the deceased and tells Whitney that no matter what, he must become the owner of the deceased’s vintage Rolls Royce, which is painted in a most attractive paisley motif. Whitney is also told that under no circumstances is she to come away from the auction without buying this automobile for Robert. At the auction, the rock star’s paisley Rolls Royce is offered with a second pin-striped version of the vehicle. The two vehicles are offered as a package and accordingly, Whitney as the successful bidder purchases both vehicles for Robert. If asked to discuss Whitney’s scope of authority, you would correctly answer that during the course of the fact pattern, Whitney was provided with:
(1)express authority.
(2)implied authority.
(3)both express and implied authority.
(4)neither express nor implied authority.
Answer: 3 Explanation: Option (3) is correct because Robert expressly granted Whitney the authority to purchase the deceased’s “paisley motif” Rolls Royce by instructing Whitney not to come away from the auction without buying the automobile under any circumstances. These instructions also granted Whitney the implied authority to purchase the second “pin-striped” automobile since purchasing the second automobile was necessary in order to carry out the express instructions (to purchase the “paisley motif” automobile). Option (4) is incorrect for this reason. Options (1) and (2) are incorrect because they do not describe the full scope of Whitney’s authority.
Question 689: Which of the following correctly outlines the objective/task method of creating a promotional budget?
(1)Define the competition, outline competitors’ expenditures, and set tasks to maintain competitive-parity with competitors
(2)Conduct tasks in order to reach a sales objective that is specific, realistic, measurable, and within a predetermined timeline
(3)Create an objective, analyze costs and benefits, and determine the tasks to reach the objective
(4)Define the advertising objective as “SMART”, outline the necessary tasks, and estimate the costs of performing the tasks
Answer: 4 Explanation: Option (4) is correct because the “objective/task” method of creating a promotional budget requires that the licensee first determine the objectives of the advertisement, and then determine the desired tasks and activities necessary to reach the objective. This involves defining a “SMART” marketing objective, outlining the tasks required to attain the objective, and estimating the cost of performing these tasks. Option (1) is incorrect because this approach describes the “follow-the-competition” method. Option (2) is incorrect because this approach describes the “SMART” criteria for developing effective business and marketing goals. Option (3) is incorrect because it fails to discuss the step of defining a “SMART” marketing objective.
Question 690: An investor plans to pay $200,000 for a vacant lot that he feels will sell at the end of 3 years for $300,000. What effective annual interest rate will the investor earn? (Ignore real property taxes)
(1)13.480354%
(2)11.169912%
(3)14.471424%
(4)12.604314%
Answer: 3 Explanation: Given the present and future values of the vacant lot, find the effective annual interest rate. Press Display 1 P/YR 1 200000 +/ PV 200,000 0 PMT 0 3 N 3 300000 FV 300,000 I/YR 14.471424
Question 691: Which of the following BEST describes the MLS®?
(1)A site that allows the user to create written documents in MLS® format
(2)A site that is used to register domain names for real estate offices
(3)A software program that allows you to conduct an appraisal
(4)A site that pulls together information on real estate related topics with a focus on real estate listings
Answer: 4 Explanation: Option (4) is correct because the MLS® serves many functions, including computing listing searches, producing automated hot sheets, and generating Comparative Market Analysis (CMA) presentations and other client prospecting tools. Options (1), (2), and (3) are incorrect because none of these statements correctly describes a primary function of the MLS®.
Question 692: The effective annual rate of interest for 8% per annum, compounded semi-annually, is:
(1)less than the effective annual rate for 7.2% per annum, compounded quarterly.
(2)greater than the effective annual rate for 8.5% per annum, compounded annually.
(3)greater than the effective annual rate for 8.5% per annum, compounded monthly.
(4)greater than the effective annual rate for 7.5% per annum, compounded daily.
Answer: 4 Explanation: This question requires you to compare the effective annual interest rates of Options (1), (2), (3), and (4) with the effective rate of the given nominal rate: Press Display 8 NOM% 8 2 P/YR 2 EFF% 8.16 Option (1) Press Display 7.2 NOM% 7.2 4 P/YR 4 EFF% 7.396743 Option (2) 8.5% per annum, compounded annually is equal to the effective rate.
Question 693: What rate of interest per compounding period would allow savers to “double their money” in 8 compounding periods? Assume that you invest $100 today so that it will grow to $200 in eight compounding periods.
(1)12.5%
(2)10.609279%
(3)25%
(4)9.050773%
Answer: 4 Explanation: This question requires you to find an interest rate that would allow you to “double your money” in eight compounding periods. If you invest $100 now to produce a future value of $200, the calculator steps are as follows: Press Display 100 +/ PV 100 200 FV 200 8 N 8 1 P/YR 1 0 PMT 0 I/YR 9.050773 Your investment would double in eight compounding periods if invested at an interest rate of 9.050773% per compounding period.
Question 694: The interest that is acquired by a buyer of a strata lot is:
(1)a share in the strata corporation in proportion to the unit entitlement.
(2)a joint tenancy with all of the other strata lot owners.
(3)a fee simple interest in the strata lot and a joint tenancy with respect to the common property.
(4)a fee simple interest in the strata lot and a fee simple interest, as a tenant in common, with respect to the common property.
Answer: 4 Explanation: Option (4) is correct because it correctly describes the interest which is acquired by a buyer of strata lot. Option (1) is incorrect because it describes what is acquired by a buyer of a unit in a cooperative, not a strata lot. Option (2) is incorrect because a buyer of a strata lot does not acquire their interest as a joint tenant with all of the other strata lot owners. If this was the case, then each owner within a given strata would share an undivided interest in the entire property (including each other’s units). Option (3) is incorrect because if the common property was shared via a joint tenancy agreement, then each owner would share a single undivided interest, and ownership could not be allocated in proportion to the unit entitlement.
Question 695: A constant payment mortgage is written for $48,951.77 and specifies payments of $548.91 per month for 15 years. The interest rate on this mortgage is approximately:
(1)12% per annum, compounded semi-annually.
(2)8% per annum, compounded semi-annually.
(3)10% per annum, compounded semi-annually.
(4)11% per annum, compounded semi-annually.
Answer: 4 Explanation: Press Display 12 P/YR 12 48951.77 PV 48,951.77 548.91 +/ PMT 548.91 180 N 180 0 FV 0 I/YR 10.756093 EFF% 11.302522 2 P/YR 2 NOM% 11.000021 The interest rate is approximately 11% per annum, compounded semi-annually.
Question 696: A seller agreed to sell her home for $155,000. The buyer paid a $5,000 deposit to his brokerage. The buyer will assume the existing mortgage on title, which has an outstanding balance of $71,000. Furthermore, the buyer will be granting a second mortgage to his father for $34,000. Taxes are unpaid and overdue in the amount of $1,095, with a further penalty owing of $105. Real estate commission is 6% of the sale price. Conveyancing fees for the transaction are $600. The adjustment, completion, and possession date is August 31. It is NOT a leap year and property transfer tax is payable in this transaction. Moreover, assume that the buyer is NOT a foreign entity for property transfer tax purposes. What are the cash proceeds due to the seller?
(1)$69,169
(2)$69,538
(3)$73,869
(4)$74,169
Answer: 3 Explanation: This question deals with statements of adjustment and completion of the sale. You must take into account all debits and credits in order to solve for the correct value. Debits: 1st mortgage: $71,000 Taxes + penalty: $1,095 + $105 Commission: $9,300 Credits: Sale price: $155,000 Taxes for August 31 to December 31 that must be paid by the purchaser for the time they live in the property - don’t forget that the purchaser always pays taxes for the completion date and thereafter: 123/365 × $1,095 = $369 Credits ($155,369) Debits ($81,500) = $73,869
Question 697: A seller agreed to sell her home for $155,000. The buyer paid a $5,000 deposit to his brokerage. The buyer will assume the existing mortgage on title, which has an outstanding balance of $71,000. Furthermore, the buyer will be granting a second mortgage to his father for $34,000. Taxes are unpaid and overdue in the amount of $1,095, with a further penalty owing of $105. Real estate commission is 6% of the sale price. Conveyancing fees for the transaction are $600. The adjustment, completion, and possession date is August 31. It is NOT a leap year and property transfer tax is payable in this transaction. Moreover, assume that the buyer is NOT a foreign entity for property transfer tax purposes. What is amount of the cash that the buyer will be required to provide on the completion date?
(1)$52,519
(2)$45,969
(3)$47,516
(4)$47,519
Answer: 4 Explanation: Buyer’s Statement of Adjustments ITEM DEBIT CREDIT Purchase Price 155,000.00 Deposit 5,000.00 1st Mortgage 71,000.00 2nd Mortgage 34,000.00 Buyer’s Share of Taxes* 369.00 Conveyancing Fees 600.00 Property Transfer Tax 1,550.00 Balance Due to Complete** _________ 47,519.00 157,519.00 157,519.00 * (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 ($157,519.00) and then subtract the known Credits. The result is the balance due from the buyer to complete the transaction.
Question 698: Which of the following is NOT a private lender?
(1)Mortgage corporations
(2)Vendors who carry a part of the purchase price by granting a mortgage loan on a property
(3)Trust companies whose estate and trust funds are invested in mortgages
(4)Credit unions
Answer: 4 Explanation: Option (4) is correct because credit unions are considered to be institutional lenders that finance their investment by accepting deposits from their members. Private lenders are different from institutional lenders because private lenders typically do not fund their investment by receiving deposits from individuals. Options (1), (2), and (3) are incorrect because they are all examples of private lenders.
Question 699: Where no time period is stipulated in an offer, the offer:
(1)will lapse in 24 hours’ time.
(2)will lapse after a reasonable time.
(3)will lapse in 2 hours’ time.
(4)will not lapse but rather, it must be revoked by the offeror.
Answer: 2 Explanation: Option (2) is correct because, where no time limit is specified, an offer will lapse after a reasonable time has passed. Courts will determine what constitutes a “reasonable” time for acceptance based on the nature of the offer or the nature of what is being sold. Options (1) and (3) are incorrect because there is no set expiration time for offers where no time period is stipulated. Option (4) is incorrect because offers can expire without being revoked by the offeror.
Question 700: Which one of the following BEST describes curable functional depreciation?
(1)General wear and tear that is easily repaired
(2)An outdated design that can be corrected easily
(3)Damage to the interior of a building that can be repaired economically
(4)An outdated design that cannot be corrected easily
Answer: 2 Explanation: Option (2) is correct because curable functional depreciation refers to an outdated feature that can be corrected economically, such as outdated bathroom fixtures. Options (1), (3), and (4) are incorrect for this reason.
