Mock Exam 100-1

#

Question 1

REMS8.1052

A company recently purchased $12,000 worth of new construction equipment. The company expects to sell the construction equipment at the end of its 5-year life for $1,000. What is the annual depreciation expense if the company uses the straight-line method of depreciation?

2000

2600

2400

2200

---

Review Financial Statements

Straight Line Depreciation Method: use formula
Annual Depreciation Expense (ADE or DE) = Cost - Salvage Value / Estimated Life

DE = 12,000 - 1,000 /5
= 11,000 / 5 = 2,200

#

Question 2

REM2.3048

In the context of strata properties, which one of the following statements is FALSE?

If a rule conflicts with a bylaw, the bylaw prevails.

A rule will have no legal effect if it contravenes the Strata Property Act, even if it was adopted unanimously by the strata council members

Bylaw amendments are not enforceable unless the strata corporation files them at the Land Title Office.

In an entirely residential condominium complex, a bylaw must be amended by a 2/3 vote of the strata corporation.

---

Review Strata Properties Condos and Co-ops

• if a rule conflicts with a bylaw, then the bylaw trumps the rule and the bylaw is followed
• a bylaw cannot contravene any other laws already in place (there are some exceptions)
• when a bylaw is amended, it is not enforceable until filed in the land title office
• in an entirely residential strata (no commercial units), bylaws must be passed by 3/4 majority

#

Question 3

REM6.2054

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. The comparable sold for $534,000 and had 3 bedrooms and 3 bathrooms. If the market value of a bedroom is $4,500 and the market value of a bathroom is

$5,000, the adjusted sale price for this comparable is:

534000

543500

538500

524500

---

Review Comparative & Cost Methods (Appraisals)

IASS formula:
When comparable is Inferior Add+ value
When comparable is Superior Subtract- value

SUBJECT: 4 bedrooms and 4 bathrooms
COMPARABLE: 3 bedrooms and 3 bathrooms
Bedrooms: One less bedroom, Inferior -> Add value (+4,500)
Bathrooms: One less bathroom, Inferior -> Add value (+5,000)
Adjust 534,000 sale price by +4,500 and +5,000

= 534,000 + 4,500 + 5,000 = 543,500

#

Question 4

REM1.2001

Mary and John own a piece of real property as joint tenants. Which of the following is TRUE?

Mary could sever the joint tenancy without John's knowledge.

Mary and John each have an undivided interest in the property.

Mary and John each have a right of survivorship.

All of the above statements are true.

---

Review Estates and Interests in Land

• sometimes a joint tenancy can be severed by one of the joint tenants even if the other joint tenant(s) is unaware of it
• in a joint tenancy, the co-owners each have an undivided share in the property (Title of Possession); joint tenants are co-owners of the same interest
• a defining feature of joint tenancy is the right of survivorship which means that when one joint tenant dies, the remaining joint tenants have the rights to that deceased joint tenants
  interest

#

Question 5

REM6.1001

Value in exchange is:

a range of mutual profit.

the owner's minimum price, called the floor price.

commonly referred to as value to the owner.

the price obtained in an actual transaction.

---

Review Appraisals Introduction

• value in exchange = sale price of the home

#

Question 6

REM2.3064

Which of the following details is NOT included in a form B information certificate?

any court proceeding, arbitrations, judgments, or orders involving or against the strata corporation.

the certificate of title

any amount by which the expenses of the strata corporation for the current fiscal year are expected to exceed the expenses budgeted for the fiscal year.

the monthly strata fees payable by the owner.

---

Review Strata Properties Condos and Co-ops

Form B includes:

• monthly strata fees payable
• amounts owner owes the strata corporation (incl notices/work orders, future special levies, and expenses relating to alterations to a strata lot, the common property, or the common assets)
• amount by which the actual will exceed budgeted expenses budgeted for the fiscal year
• the amount in the contingency reserve fund
• bylaw amendments and resolutions not yet filed in the land title office
• any winding-up resolution that have been passed (wind-up = get rid of strata)
• resolutions/bylaw amendments still to be voted which need a 3/4, 80% or unanimous vote
• court, arbitration, tribunal proceedings, judgments, court orders pending
• the number of strata lots in the strata plan that are rented
• parking stalls and storage lockers allocated to the strata lot (if any)
• must also attach the most recent depreciation report, current budget, and strata rules

#

Question 7

MM3.030

Your clients are going to pay $350,000 for undeveloped land which they feel will sell at the end of 5 years for $435,000. What yield expressed as a nominal rate with semi-annual compounding, will your clients earn on their investment? Assume that these are the only cash flows for this investment.

0.04371978

0.0439587

0.05851265

0.0444418

---

Review Math 3 - find lYR % (yield)

J2 = ? (asking for semi annual compounding)
PMT = 0, cannot do NPEPN
5x2N
350000 PV
0+/- PMT
435000+/-FV
2# PYR

Press IYR = 4.3958... = J2
- conversion needed? NO, asking for J2 (semi annual compounding)

#

Question 8

REM1.2002

Which of the following statements is FALSE?

Unlike a licence, an easement is an interest in land.

An easement always grants exclusive possession of the easement land.

A restrictive covenant must benefit a dominant tenement and burden a servient tenement.

A lease creates an interest in land.

---

Review Estates and Interests in Land

• easements do not grant exclusive possession; an easement is a right, acquired by a landowner, to use a neighbouring property in a specific way (without possessing it)

#

Question 9

REM3.3017

Which of the following statements is true regarding offers for contracts?

All offers must be given in writing.

Counter-offers do not terminate the offer.

If a time limit for acceptance of an offer is not given, then it may only be accepted within a reasonable time following the offer.

An offer is also called an invitation to treat.

---

Review Law of Contract

• offers can be verbal or written
• counter offers do terminate the original offer
• a time limit is one way to expire/release an offer; if no time limit is given then a reasonable time would be applied (court decides what is reasonable, if there is a dispute)
• invitation to treat is an offer exception (NOT an offer)

#

Question 10

REM7.1002

The demographic group most likely to use a reverse annuity mortgage is:

equity poor mortgagers.

first-time buyers.

elderly homeowners.

CMHC insured mortgagors.

---

Review Mortgage Law

• RAM mortgage: borrower removes some equity in the property so the lender makes payments to borrower; sometimes retirees need a bit more cash per month to manage their bills

#

Question 11

MM68.033

In BC, mortgage lenders and brokers must satisfy the requirements of the Business Practice and Consumer Protection Act by disclosing to the borrowers:

The annual percentage rate (APR)

The effective annual rate (EAR)

Cost of funds advanced to the borrower

The nominal rate with annual compounding

---

Review Math 8

• the disclosure statement must include the following: Effective date of the statement; Interest accrual date and the details of any grace period; Term and amortization period of the mortgage and nature, timing, and amount of all advances and payments; Initial outstanding balance of the mortgage with an accounting of every payment, advance, or charge that makes up that balance; Total of all advances made or to be made; Description of prepayment rights; Total cost of credit to the borrower; Annual interest rate and compounding frequency; Annual Percentage Rate (APR); Method of determining the annual interest rate at any time (if it changes) and the lowest annual interest rate at which payments would not cover accruing interest, unless the amount of the scheduled payments is adjusted automatically with interest rate changes; Nature and amount of any charges other than interest;
  Nature of any default charges; Description of the security interest

#

Question 12

REM2.1022

Which of the following would MOST likely constitute a private nuisance?

In spring, some blossoms from property 1 fall onto property 2

On a sunny Monday afternoon, property 2 can hear music playing from property 1

In an industrial complex, a fabrication shop can feel the vibration from a refinery that is nearby.

In a residential area, some liquid solutions used by the owner of property 1 on metalworking projects frequently run-off into property 2, causing considerable damage to

shrubs and fruit trees on property 2.

---

Review Professional Liability

• this is not a nuisance because it is expected to happen/reasonable
• this is not a nuisance because it has only happened on one Monday
• this is not a nuisance because it is reasonable based on use of the property (industrial)
• this is a nuisance because something is frequently being done on one property that is affecting another property

#

Question 13

REM2.1002

Which one of the following is NOT necessary to ascertain that a negligent misrepresentation has occurred and which could result in a contract being voided?

The representation was made as part of expertise related to employment.

The representation is one of fact or opinion.

The representation is false.

The representation induced the innocent party to enter a contract.

---

Review Professional Liability

• you need to be acting within your scope of expertise/course of business
• you need to make a misrepresentation of fact or opinion
• the misrepresentation needs to be false (a little or a lot doesn't matter)
• you don't need to have a contract in place or to have made a promise (inducement example: "list with me and | will sell your home in 60 days or buy it myself!")

#

Question 14

MM3.001

You have been offered an investment opportunity that will pay you 20 quarterly payments of $1,700 and a lump sum of $8,000 at the end of 20 quarterly payments. If interest rates are 4% per annum, compounded monthly, what is the maximum you should pay for the investment?

40323.43

96800.79

37233.8

37219.16

---

Review Math 3 - find PV

J12=4
PMT = 4, do NPEPN = 4.0133...

20N (do NOT enter as 20#N or 20 x 4 N - if you do, the calculator will think these are both representing 20 YEARS)
1700 +/- PMT
8000 +/- FV

Press PV = 37219.159... = 37219.16

#

Question 15

MM5.005

Your clients bought a house two years ago, at which time they arranged a $410,000 mortgage. This loan was written at a nominal rate of 2.5% per annum, compounded semi-annually, monthly payments, and fully amortized over 20 years. Today your clients have received an offer to buy their house for $75,000 cash plus assumption of the mortgage. If current mortgage rates are 4% per annum, compounded semi-annually, what is the market value of the offer?

$ 394622.7

$ 388475.25

$ 359128.29

$ 409622.7

---

Review Math 5 - PIMPO

Based on correct calculations it should be PIMPO = 409,624.245.. but this question has a solution mistake on calculations (but is not our mistake) so please choose option 4 as the
closest answer: $409,622.70

J2=2.5
PMT = 12 , do NPEPN = 2.4870...
20# N
410000 PV
0 +/- FV

P: Press PMT = -2170.021.. = 2170.03+/-PMT
I: A=T, do not re-enter term ; 18#N (years left on 20 yr term)
M: J2 = 4, do NPEPN = 3.9670...
P: Press PV = 334624.245...
O: +75000 = 409624.245...

#

Question 16

REM2.3030

Which of the following describes a 'strata plan'?

it is a development plan for the relevant local government, including timelines for the project

it is the marketing plan to be used for a strata development property in accordance with the Real Estate Services Act

indicates which parts of a strata project or property are strata lots and which parts are common area

designates the blueprints and building specifications for each of the strata units that will be a part of the strata project

---

Review Strata Properties Condos and Co-ops

• definition of a strata plan: a strata plan designates which parts of a strata project are strata lots and which parts are common property

#

Question 17

REM1.4023

In order to protect themselves from builders liens, individuals purchasing strata lots from the owner developer must hold back (X) of the gross purchase price for (Y) days after the project is substantially completed, ended, or abandoned. What are the values of X and Y?

X= 10%; Y = 55

X = 20%; Y = 20

X=7%;Y = 55

X= 15%; Y = 90

---

Review Title Registration in BC

This isn't a math question. This is a question that provides you with factual information the you need to remember. The format of the question is a "Fill in the Blanks" type question

• individuals purchasing strata lots from the owner-developer must hold back 7% of the gross purchase price for 55 days after the project is substantially completed, ended, or
  abandoned (NON strata purchasers need to hold back 10% for 55 days)

#

Question 18

REM1.1001

Which of the following statements are TRUE?

The Supreme Court of BC may exercise common law, but not equitable jurisdiction.

Small Claims court in BC does not have jurisdiction for claims exceeding $35,000

An appeal by the taxpayer to reduce a tax assessment would fall within the sphere of private law.

The Supreme Court of Canada is required to hear all appeals.

---

Review Fundamentals of Law

• the Supreme Court of British Columbia may use whichever law source (common or equitable) they want to use
• Small claims court is limited in territory/location and value/money ($35,000 max)
• appeals by taxpayers would fall under public law
• the Supreme Court of Canada is NOT required to hear all appeals

#

Question 19

REMS8.3037

On September 7th, Melvin offered to buy Jorah's private island for $5,000,000 and Jorah accepted. Since the island was secluded, neither of the parties knew that the beach house had been destroyed by a tidal wave three days before they contracted. Jorah has no insurance and wants to enforce the contract. Which of the following statements is TRUE?

Melvin and Jorah are relieved of their future obligations under the contract by frustration.

The doctrine of mutual mistake allows Melvin to rescind the contract.

This is an example of common mistake and the contact is void.

A court will set aside the contract based on "non est factum" (it is not my deed) or unilateral mistake since Jorah did not know the nature of the document he was signing

and could not have known the cottage was no longer usable.

---

Review Law of Contract

• frustration = subject matter of contract is destroyed AFTER contract has been signed
• mutual mistake = both parties make different mistakes
• common mistake = subject matter of contract is destroyed BEFORE the agreement was made (both parties make the same mistake)
• it cannot be non est factum because both parties know what the contract is for/about; unilateral mistake = one party is making a mistake and the other party says nothing even
  though they know about it (being deceitful)

#

Question 20

REM4.3029

Luna, Pontius's agent, has an express authority to enter into a contract with Trey on Pontius's behalf. However, since Luna did not disclose to Trey that she is was acting as an agent for Pontius:

No contract can exist because there is no disclosure.

Only Luna may sue Trey to enforce the contract.

Pontius may sue Luna to enforce the contract.

Trey may sue either Luna or Pontius to enforce the contract.

---

Review Law of Agency

• a contract could exist because the agent had authority to enter contracts on the clients behalf
• the agent is the one who has done something wrong so will likely get sued
• the client will not sue their own agent to enforce the contract
• the third party can sue either the agent of principal because both are liable

#

Question 21

MBM1.3001

Which of the following is NOT a "red flag" that a mortgage broker might use to identify a value fraud (as opposed to an identity fraud)?

An appraisal is missing or does not make sense

The information about the parties contained in the Land Title Office is inconsistent with the mortgage application

The appraiser is not on the approved list of appraisers for the lender

There are a number of trades on the property in a short period of time

---

Review Mortgage Broker's Act and Math 8

• Value Red flags (means where something is suspicious/wrong/not right): an appraisal is missing or does not make sense; the appraisal was conducted by one of the parties/connect to one of the parties involved in the transaction; the appraiser is not on the approved list of appraisers for the lender; there is a vendor take-back mortgage on the property; there are a number of trades on the property in a short period of time; the final purchase price is higher than the listing price; the property contains illegal suites; and goods/chattels are used as part of the purchase price or deposit

• Identity red flags: photo ID not provided when requested; the consumer has been involved in other offers that are "subject to financing" that have not gone through; the information contained at the Land Title Office is inconsistent with the mortgage application; the real estate transaction involves a relative of one of the real estate brokers; the purchasers/vendors are not related, such as "Mr. Jones and Ms. Sweeney - joint tenants"; the full name (first and last) of the purchaser or vendor is not disclosed on the application; the purchaser's employment report does not match industry standards; the purchaser has several investment properties, but no primary residence; the purchaser's cheque does not match his/her identity; the down payment or deposit is in cash form; the person signing the application has been granted power of attorney by the real registered owner; appointments are all arranged via cell phone, fax or email and the meetings are held in public locations; or the purchaser is involved in other real estate transactions with high ratio mortgages

#

Question 22

REM6.1002

Which of the following statements is TRUE?

The ownership of a single parcel of real estate can be divided legally, but not physically.

When considering the durability of structures, it is important to distinguish between the physical life and the economic life of the structure.

Land mobility means that the amount of land, in terms of the surface of the earth, is fixed within any given community.

Land is indestructible and therefore keeps its economic value forever.

---

Review Appraisals Introduction

• property can be divided physically (examples: subdivided, strata)
• the life ("usefulness") of a building depends on its economic durability (not physical durability)
• land mobility/immobility is related to land being fixed in place
• land is not indestructible, it is durable and its value depends on supply and demand (the market)

#

Question 23

REM6.2071

You have a partially completed appraisal report that you need to fill in. The subject property has 6 bedrooms and 6 bathrooms. The house next door is similar in all respects except for the number of bedrooms and bathrooms. It sold for $666,000 and 6 bedrooms and 5 bathrooms. If the market value of a bedroom is $6,000 and the market value of a bathroom is $6,600, this comparable will have to be adjusted for bedrooms and bathrooms by:

$0 and -$6000 respectively.

$0 and +$6,600 respectively.

-$6,600 and $0 respectively.

$6,000 and -$6,600 respectively.

---

Review Comparative & Cost Methods (Appraisals)

IASS formula:
When comparable is Inferior Add+ value
When comparable is Superior Subtract- value

COMPARABLE:
Bedrooms: Same amount, SAME -> NO CHANGE
Bathrooms: One less bathroom, Inferior -> Add value (+6,600)
Adjust by 0 and +6,600 (respectively means the values need to be given in the same order as the items are mentioned in the question)
(answer #4 in opposite order: +6,600 for bedrooms and $0 for bathrooms is incorrect)

#

Question 24

MM6.015

Which of the following statements regarding the stress test borrower qualification rule for uninsured mortgages is TRUE?

The BC Financial Services Authority established the stress test requirements for all new mortgages from federally chartered institutions.

The stress test qualification rules only apply to mortgages from credit unions.

The stress test borrower qualification rule allows borrowers to qualify for a smaller mortgage.

The mortgage qualifying rate is based on the greater of the government-specified rate and 3% above the mortgage's negotiated contract rate.

---

Review Math 7

• the Office of the Superintendent of Financial Institutions (OSFI) established the stress test (not BCFSA or FICOM or anyone else)
• the stress test applies to all mortgages (insured and uninsured) given by Federally regulated institutions (chartered banks, trust and loan companies, life insurance companies, etc.) but
  does NOT apply to credit union, private lenders, etc. that are not federally regulated
• stress testing is done to make sure that the borrower can still afford to borrow (and make their payments) the next time they get a mortgage contract term (and when rates may have
  increased)
• the mortgage qualifying rate is based on the greater of:
  the Bank of Canada rate or the Contract rate + 2%

#

Question 25

REM4.3016

Where a third party reasonably believes that, from the conduct or statements of the principal and agent, the agent possesses the authority to perform certain acts on behalf of the principal, what type of authority does the agent have?

Normal course authority

Apparent authority

Customary authority

Implied authority

---

Review Agency Law

• 'normal authority' is made up/nonsense
• this describes the agency by estoppel relationship because the principal is misleading the 3rd party; agency by estoppel relationship gives apparent authority
• customary and implied authority are types of Actual authority that are gotten from an express contract relationship

#

Question 26

MM6.040

A ten storey apartment building generates an annual net operating income of $15,000. Subject to a debt coverage ratio of 1.22, the bank is willing to grant the owners of the apartment building a loan at J2 = 10%, quarterly payments, a 15 year amortization period, and an 8 year term. What is the maximum loan available to the owners given the income constraint? (Round loan up to the next higher ten dollars.)

$ 95670

$ 96460

$ 114550

$ 71760

---

Review Math 6 - commercial (find PMT to find PV)

• Step 1:
  Find M, check if it is lowest answer in answer list
  no LV or LTV% given, so move on to step 2

• Step 2: Find PMT, and use PMT to find PV
  PMT = NOI / DCR = 15000/yr / 1.22 = 12295.081... / yr
  Divide annual payment by 4 to convert annual payment to quarterly
  = 12295.081... / 4 = 3073.770...
  J2 = 10
  PMT = 4
  NPEPN: 10#NOM, 2#PYR, #EFF, 4#PYR, #NOM = 9.8780...
  Enter: 15# N ; 3073.77 +/- PMT ; 0 +/- FV
  Press PV = 95669.634..., round to next higher $10 = 95670

• Step 3: Compare M and PV - no M so cannot compare
  PV = 95670, correct answer

#

Question 27

REM4.1018

Which if the following criteria are used by negotiation experts in determining the effectiveness of negotiations?

Efficiency, preservation of the relationship, a zero-sum game.

Distributive results, preservation of the relationship, minimal wasted resources.

False authority, efficiency, a zero-sum game.

Efficiency, satisfaction of both parties, minimum wasted resources.

---

Review Negotiations

• you want to avoid a zero-sum game (having no plan at all)
• you want to avoid distributive results ("I won, you lost")
• you want to avoid false authority (saying you can give something and then taking it back because someone else (a partner, a spouse, etc.) did not agree to it
• successful negotiations have: efficiency, satisfaction of both parties, minimal wasted resources, creativity in dividing the set of goods, preservation of the relationship, focus on the aspiration target, objective standards, packaging multiple issues to trade off, and concessions to get the things you really want

#

Question 28

REMS3.1008

Which of the following is NOT a generally accepted accounting principle?

Matching Principle

Materiality Principle

Revenue Principle

Calendar Year Principle

---

Review Financial Statements

• there are 7 GAAP's: Cost principle, Revenue recognition principle, matching principle, materiality principle, objectivity principle, consistency principle, and fiscal year principle

#

Question 29

REM3.1013

Which of the following statements regarding generally accepted accounting principles is TRUE?

The materiality principle holds that changes to accounting principles should only be made when the change results in providing more relevant and useful information to the user of the financial statements.

The consistency principle is closely aligned to the cost principle because the best way to ensure objectivity in accounting transactions is to record the amount of consideration given up at the date of transaction.

To conform with the objectivity principle, it is not appropriate to record the asset at what might be considered its fair market value; the asset should be recorded at the amount that the enterprise paid for it.

The matching principle requires the accrual basis of accounting; that is, expenses are always recorded when incurred, which is not necessarily when they are paid.

---

Review Financial Statements

• answer describes the CONSISTENCY principle; not the materiality principle
• answer describes the OBJECTIVITY principle, not the consistency principle
• answer describes the COST principle, not the objectivity principle
• accurately describes the Matching principle

#

Question 30

REM1.2048

In British Columbia, there are three basic requirements for an easement. Which one of the following is the requirement?

The easement must be negative in nature

The easement must accommodate the servient tenement

The dominant and servient tenements must be owned by different parties

There must be both a dominant and servient tenement

---

Review Estates and Interests in Land

• an easement can be either positive or negative in nature (in comparison to a restrictive covenant, which must be negative in nature)
• the easement must accommodate the dominant tenement (not the servient tenement)
• one party can own both the dominant and servient tenement provided that they are two different parcels

#

Question 31

MM4.001

If a borrower is looking to pay their mortgage loan off faster and save interest, which payment frequency should they use?

Constant annual payments.

Biweekly interest-only payments.

Accelerated biweekly payments.

Constant monthly payments.

---

Review MATH 4 and 7

• to pay down a loan faster and pay less interest, you need to decrease the amortization period; the amortization period is the length of time that you are charged interest for (life of the loan)
• to pay down a loan faster and pay less interest, you need to pay extra amounts to pay down the principal; less principal means you are paying less interest from that point onward
• accelerated bi weekly payments pay a little bit extra towards principal with every payment
• constant annual and monthly payments do not pay anything extra onto the loan amount and wouldn't pay it down faster
• bi weekly interest only payments also do not pay anything extra and do not even pay anything towards the principal

#

Question 32

REM4.2008

Canadas Competition Act establishes an offense for false or misleading advertisement. Which of the following is FALSE concerning these offenses?

Both the general impression of the representation as well as its literal meaning are relevant in determining whether a breach of the Act has taken place.

This offense includes both oral and written representations made to the public.

To escape liability, the accused must show that they took all the care that a reasonable person would have taken to determine if the representation was true, and that they honestly believed it to be true.

One test that the courts use to determine whether a statement is misleading in the context of real estate licensees is the "diligent licensee" / "diligent broker" test.

---

Review Contracts for Real Estate Transactions

• the court will look at the literal meaning of each statement as well as the general impression/overall meaning of the advertisement
• the forms of advertising covered by the Competition Act are extremely broad: "by any means whatsoever", which includes print, oral, and digital form, social media posts
• to show you are innocent, you need to have honestly believed that your representation was true and show you took reasonable care to ensure the representation you made was true
• there is no such thing as the diligent broker/diligent licensee tests

#

Question 33

REM2.1060

Which of the following statements concerning the tort of negligence is TRUE?

A duty of care owed by the defendant to the plaintiff exists when the plaintiff in a negligence action is found to be a person whom the defendant ought to have foreseen as someone likely to be injured by the defendant's conduct.

Where a duty to take care exists, the relevant standard of care will be that which a reasonable person would take, in all the circumstances of the case.

Where an employee is negligent in the performance of his or her duties of employment, the employer may be liable for any foreseeable damages under the principle of various liability.

All of the above are true statements.

---

Review Professional Liability

• ought to have known = should have known; duty of care exists when you know/should know that your negligence would harm someone because they would rely on your advice/information (the misrepresentation)
• the duty of care is based on the usual standard of the profession that all other professionals would provide
• vicarious liability = boss/owner is responsible for employee's actions

#

Question 34

REM6.2013

Which of the following statements regarding the comparative method of appraisal is TRUE?

The comparative method should be used if a property possesses latent value.

To apply the comparative method of appraisal, the appraiser estimates the market value of the subject property using the evidence of sale prices of similar properties which were sold at any time prior to the date of the appraisal.

The comparative method of appraisal is the most inexact approach for finding market value since cost and market value are not necessarily equal at any particular time.

The comparative method reflects market behavior and requires a minimum of subject opinion from the appraiser.

---

Review Comparative & Cost Methods (Appraisals)

• the residual method is used for latent value
• cannot used sales from any time prior
• the comparative method is the MOST exact method because using past sales represents what actual buyers were willing to pay (reflects the market)
• the comparative method is the MOST exact method and reflects the market; minimum of subjective opinion = the appraiser doesn't use their opinion for the appraisal because they use data from past sales

#

Question 35

MM8.035

Your client has a mortgage for $400,000 which is written at 5% per annum, compounded semi-annually. The mortgage calls for monthly payments rounded to the next higher dollar, a 5- year term, and a 25-year amortization period. The mortgage contract permits the borrower to prepay the full amount of the loan subject to the interest rate differential penalty. Your client wishes to prepay this loan at the end of the first year (with the 12th payment). At the time of prepayment, the current comparable interest rate is 4% per annum, compounded semi-annually. What is the amount of the interest rate differential prepayment penalty?

$ 3908.7

$ 18761.78

$ 15634.81

$ 25588.64

---

Review Math 8

J2=5
Pmt = 12 -> NPEPN = 4.9486..

25# N
400000 PV
0 +/- FV
Press PMT = -2326.419... = 2327+/-
Find OSB after 1 year: 1#N, press FV = 391,683.853...= OSB
4 yrs of term left = 48 months
Find IRD: J2 = 5 and J2 = 4 is a difference of J2 = 1
Convert J2 = 1 to J12 (monthly): J12 = 0.99792... / 12 = 0.083160 then press %
(might display as 0.0008316... or as an exponent: 8.31602508 E -4)
= 0.0008316...x OSB x 48 = 0.0008316...x 391,683.853 x 48 = 15,634.813...

#

Question 36

REM7.1027

Which of the following contractual clauses in a mortgage will not apply when the borrower defaults?

A "lender's remedies" clause

A "sales" clause

An "acceleration" clause

A "mortgage in possession" clause

---

Review Mortgage Law

• 4 default clauses: acceleration clause, lender's remedies clause, mortgage in possession clause, omnibus clause

#

Question 37

MBM1.3022

The requirement for mortgage brokers to provide borrowers with disclosure statements, notices and statements of accounts is found in the:

Mortgage Brokers Act.

Bank Act.

Borrower Disclosure Act.

Business Practices and Consumer Protection Act.

---

Review Mortgage Broker's Act (MBA)

BPCPA - Part 5 requires that a Disclosure Statement, Notice or Statement of Account must be given to the borrower two business days prior to the borrower incurring an obligation
under a credit agreement (unless waived by the client)

#

Question 38

MM2.009

A borrower has arranged a loan of $32,000 at an interest rate of 17% per annum, compounded semi-annually with payments set at $1,575.00 per month. What is the period necessary to amortize the loan?

exactly 24.129764086 years

exactly 23.9705036885 years

approximately 2 years

approximately 20 years

---

Review Math 2 - find N

J2=17
Pmt = 12 , do NPEPN = 16.4274...

32000 PV
1575 +/- PMT
0 +/- FV
Press N = 23.9705... months
- convert? YES, asking for years so divide months by 12
23.9705... / 12 = 1.9975... years

#

Question 39

REM3.3050

The two types of contract assignments are:

Statutory assignments and common law assignments

Equitable assignments and regulatory assignments

Common law assignments and civil law assignments

Statutory assignments and equitable assignments

---

Review Law of Contract

• there are two types of assignments - statutory and equitable; statutory assignments comply with the three legal requirements set out in the Law and Equity Act: 1. the assignment is in
  writing, 2. the assignment is absolute (for the whole amount) and is unconditional, and 3. notice of the assignment has been given in writing to the original promissor.

• if any of those three essentials are missing, the assignment might still be an equitable assignment

#

Question 40

MM8.038

The Business Practices and Consumer Protection Act defines the Total Cost of Credit as:

the anticipated dollar cost of the mortgage loan to the borrower, over its term.

the average outstanding principal over the term of the loan.

Money paid or to be paid by the borrower to the lender.

the total cost of credit divided by the length of the term expressed in years.

---

Review Math 8 - total cost of credit

• total cost of credit: the anticipated dollar cost of the mortgage loan to the borrower, over its term; the difference between the value to be paid by the borrower and the value to be
  received by the borrower

#

Question 41

MM6.002

Your client wants to purchase a house that is listed for $356,000. The bank's appraiser estimates that the lending value of the property is $355,000. Your client's annual gross income is $60,000 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 = 4.75%. The Bank of Canada's posted 5-year rate is J2 = 6%. How much can your client borrow, given the stress test borrower qualification rules for uninsured mortgages? Round your answer to the nearest $10.

$ 284000

$ 205600

$ 286360

$ 211.66

---

Review Math 6 - residential, stress test (find M and find/use PMT to find PV)

STRESS TEST - decide the rate first!
Choose the larger between: BOC = 6
Contract + 2% =4.75 + 2 =6.75%

• Step 1: Find M, check if it is lowest answer in answer list
  M=LV x LTV% = 355000 x 80% = 284000 (not the lowest answer)

• Step 2: Find PMT, and use PMT to find PV
  PMT =I x GDS% - tax = 60000/yr x 32% - 1800/yr = 17400/yr
  Divide by 12 to convert annual payment to monthly:
  17400/yr / 12 = 1450.../mo
  J2 =6.75
  PMT = 12
  NPEPN: 6.75#NOM, 2#PYR, #EFF, 12#PYR, #NOM = 6.6569...
  Enter: 25# N ; 1450 +/- PMT ; 0 +/- FV
  Press PV = 211663.494..., round to nearest $10 = 211660

• Step 3: Compare M and PV
  M = 284000
  PV = 211660, correct answer because it is lower than M

#

Question 42

MM6.029

Which of the following statements regarding lending value are FALSE?

A. Lending value is always equal to 98% of the purchase price. B. Lending value is an estimate of the mortgage loan a purchaser will be able to obtain. C. Lending value is a long term conservative estimate of the value of the interest in land pledged as security. D. Lending value is equal to market value.

Only statements A and C are false.

Only statements A, B, and D are false.

Only statements B,C, and D are false.

None of the above statements is false.

---

Review Math 6 - Law

• lending value could be any percentage up to 95% (from 1 to 95%)
• M (loan amount) = LV (lending value) x LTV% (loan-to-value)
• LV is not equal to market value

#

Question 43

REM3.3048

The doctrine of privity of contract:

conveys right to a third party to sue on a contract.

only applies to contracts which create an interest in land.

does not apply to bare licences.

does not apply to contracts which create an interest in land.

---

Review Law of Contract

• doctrine of privity says that only the parties to a contract can sue or be sued in relation to that contract (so third parties who are not part of the contract cannot sue on the contract
  they aren't a part of)
• doctrine of privity does not apply to contracts regarding an interest in land (these contract that create an interest in land are an exception to the doctrine of privity because third
  parties CAN sue or be sued in relation to the contract that they aren't part of)
• doctrine of privity does apply to bare licenses; bare license = authority given to a person to enter another's property for that person's benefit; example: the authority of a salesperson
  to enter another's property
• doctrine of privity does not apply to contracts regarding an interest in land (these contract that create an interest in land are an exception to the doctrine of privity because third
  parties CAN sue or be sued in relation to the contract that they aren't part of)

#

Question 44

MM8.061

Which of the following is/are important client management functions?

A. Developing a client list of past, current and prospective clients containing addresses, contact numbers, and other vital information which can be constantly updated B. Mailing or emailing personalized, individually addressed letters to an individual or group of individuals C. Varied searching functions allowing customized grouping and targeted marketing D. Recording client information such as the type of client, motivation, sales history, birthdays, anniversaries, and so on

only A

only A and D

only A, C, and D

all of the above

---

Review Math 8

• customer relationship management (CRM) software - helps eliminate loss of clientele due to lack of contact; provides a place to collect clients' contact information and other details in
  'fields' (e.g., name, address, type of client, birthdate, etc.); each field can be searched; provides the ability to email individuals or to group based on the info collected in the fields

#

Question 45

REMS3.1005

Which of the following statements is FALSE?

Depreciation expense is another name for capital cost allowance

Depreciation expense is an expense that can be calculated using a number of different methods

Depreciation expense can be computed by subtracting the estimated salvage value from the cost of the asset and dividing the remaining amount by the estimated economic life.

Depreciation expense is a method used for allocating the cost of an asset over time.

---

Review Financial Statements

• depreciation expense is not another name for/not the same thing as capital cost allowance (CCA) because they are different methods of calculating depreciation but depreciation
  expense/straight line method is used for accounting purposes
  formula: DE = (cost - salvage value) / life (in years)

#

Question 46

REM1.4003

Which one of the following statements is FALSE?

The principle of indefeasibility protects an innocent fee simple purchaser who provides valuable consideration and deals with the registered owner of a fee simple interest.

The principle of indefeasibility extends to charges registered against property.

A registered owner of a fee simple may lose his or her interest in land through the operation of the principle of indefeasibility even though the registered owner has done nothing to deserve the loss.

An exception to the principle of indefeasibility is a lease of three years or less where there is a tenant in occupation.

---

Review Title Registration

• the principle of indefeasibility does not extend to charges (it does NOT protect mortgages or lenders); mortgages are registered as a charge on title

#

Question 47

MBM4.1001

Which of the following is FALSE?

Both arbitration and mediation can produce non-binding resolutions.

The neutral third party in both arbitration and mediation may impose a binding solution on the two parties.

The rules of evidence are relaxed for arbitration and mediation.

Both arbitration and mediation are less formal than the Courts.

---

Review Negotiations

• Mediation and Arbitration are popular types of ADR (Mediation = conciliation = facilitative systems all mean the same thing)
• mediation is only non-binding (it is never binding)
• rbitration can be binding or non-binding
• the rules for evidence for arbitration and mediation are not strict like the court

#

Question 48

MM8.059

A balloon payment is any payment of:

interest over and above regular interest payments, but only when it occurs during the term of the loan

principal over and above the regular payments, whether it occurs during or at the end of the loan term

principal over and above the regular periodic payments, but only when it occurs at the end of the loan term

interest over and above regular interest payment, whether it occurs during or at the end of the loan term

---

Review Math 8 - balloon payment

• balloon payments are extra payments which pay down the principal (not interest) over and above the regular payments, whether it occurs during or at the end of the loan term

#

Question 49

REM4.1015

Which of the following is NOT an 'interest' in a negotiation, but a 'position'?

The fear of carrying two loans at the same time.

The need to close the deal by Jan 12th.

The need to secure a house to live in prior to work commencing.

The desire to ensure that the wife receives more of the estate than the husband.

---

Review Negotiations

• trying to avoid two loans is an interest
• this is a position because there is no reason why given
• needing to move and find a place to live before you start work is an interest
• this is definitely an interest for the wife

#

Question 50

MBM2.1002

Ellen purchases a house for $200,000, most of it being financed by a mortgage Soon after completion, Ellen sells the house to her friend, Sandy, at an inflated price of $350,000, who promptly uses the property to secure a mortgage of $325,000 from Big Bucks Bank on the basis of the $350,000 valuation. The $325,000 is used to repay Ellen's mortgage and, as arranged, Ellen and Sandy share the remaining amount Sandy disappears and does not make any mortgage payments, forcing Big Bucks Bank to foreclose on the house whose price has been artificially inflated What sort of mortgage fraud have Ellen and Sandy likely committed?

Identity fraud

title fraud

Equity fraud

Value fraud

---

Review Professional Liability

• artificially inflating the price through 'flipping the property' or a false appraisal is a form of value fraud

#

Question 51

MBM1.3020

According to the Mortgage Brokers Act Regulations, mortgage brokers shall keep separate and make available at their registered business address, all records relating to each mortgage transaction or potential mortgage transaction in which the mortgage broker is involved, for a period of:

seven years.

five years.

four years.

two years.

---

Review Mortgage Brokers Act (MBA)

• generally, a brokerage must retain records for transactions for at least seven years after their creation

#

Question 52

REM7.3003

The marketing mix consists of:

Place, publicity, place, and public relations.

Product, price, publicity, and personal selling.

Price, place, publicity, and promotion.

Product, place, price, and promotion.

---

Review Marketing

• 4 P's of marketing = marketing mix = product, place, price, promotion (in any order is fine)
• Promotional mix = personal selling, advertising, public relations, sales promotion, publicity (in any order is fine)

#

Question 53

REMS3.1001

Cash and other assets that are expected to be converted to cash within one year, or the normal operating cycle of the entity, whichever is longer, are known as:

accounts payable.

noncurrent assets.

current assets.

current liabilities.

---

Review Financial Statements

• current assets are cash and other assets that are expected to be converted to cash within one year or the normal operating cycle of the entity - whichever is longer; examples of
  current assets include cash, marketable securities, accounts receivable, inventories, and prepaid expenses

#

Question 54

MM6.020

A young executive has applied to her bank for a mortgage loan to enable her to purchase a house. Her income is $66,000 per year. The bank informs her they will apply a 30% gross debt service ratio when calculating her maximum loan, and that the current mortgage rates are 2.75% per annum, compounded semi-annually for 20-year amortization mortgages. Assume the government specified qualifying rate is 5.25% per annum, compounded semi-annually. Annual property taxes are $1,980 and mortgage payments are to be made monthly. What is the maximum mortgage loan the bank will grant, given the stress test borrower qualification rules for uninsured mortgages?

$ 205388.36

$ 199845.75

$ 186395.79

$ 221413.5

---

Review Math 6 - residential, Stress test, find max loan amount

• Step 1. Solve for M = no info given for LV or LTV% so move on to step 2

• Step 2. PIG - tax ~ PMT =| x GDS% - tax = 66000/yr x 30% - 1980/yr = 17820/yr
  Monthly payment so divide by 12 = 17820/yr / 12 = 1485.000... = 1485
  Choose higher rate between BOC rate and Contract + 2%
  BOC: J2 = 5.25 ; this is higher, so use this rate
  Contract rate: J2 = 2.75 +2=4.75
  Use PMT to find PV

  J2 = 5.25
  PMT = 12 , do NPEPN = 5.1934...
  20# N
  1485 +/- PMT
  0 +/- FV
  Press PV = 221,413.498...

• Step 3. Cannot Compare M and PV, so the PV is the answer

#

Question 55

REM7.2002

Which of the following statements is/are FALSE?

A. The adjustment date and the possession date must be the same day. B. The standard form contract provides that the buyers liability for loss begins at 12:01 am on the completion date, even though he or she may not yet be in possession of the property C. It is standard practice to hold the buyer responsible for the taxes on the adjustment date itself. D. The total of the debit column on the seller's statement must be identical to the total of the credit column on the buyer's statement.

Only C and D are false.

Only B and C are false.

Only A and D are false.

Only A, C, and D are false.

---

Review From Contract to Completion

• adjustment, possession, and completion dates can all be the same or they can be different
• under current laws (the standard CPS contract is from current laws), the buyer becomes responsible for loss or damage to the property as of the completion date (when title can be put in their name); this does NOT refer to property tax calculations
• for calculation of monies for the statement of adjustments, the buyer pays/receives amounts from the adjustment date onward; this is NOT referring to loss or damage to the property
• debits and credits will not be equal between the parties because some items are only recorded on one person's statement

#

Question 56

REM2.1008

For which of the following circumstances would an employer likely NOT be vicariously liable for the actions of their employee?

An employee of a corner store didn't clean up a spill in the dairy section before a customer slipped on the spill and broke his elbow.

An employee of a local gym noticed that some of the free weights were lying on the mat after the previous weightlifters didn't put them back on the racks. The employee decided to leave them on the mat since others may want to use them. A customer stumbled over the weights which resulted in the customer breaking their nose.

An employee of a delivery company used the company's forklift during his days off to landscape his friend's yard without his employer's permission. While using the forklift, the employee accidentally backed into and damaged a car that was parked nearby.

An employee of a detailing business scratched a customer's car while vacuuming it.

---

Review Professional Liability

• employer/boss would be held vicariously liable for the injury due to the spill
• employer/boss would be vicariously liable for the injury due to the weights being a tripping hazard
• employer/boss would not be held vicariously liable for the employee causing damage to the neighbour's car using the forklift to do his friend's yardwork
• employer/boss would be held vicariously liable for the scratching the car

#

Question 57

REM6.1007

The portability of a mortgage refers to

the fact that the interest charged is variable and subject to change over the course of the term

the ability of a buyer of property to assume the seller's existing mortgage

the ability of a borrower to prepay the mortgage at any time during the term

the ability of a borrower, in the event that he or she sells the property, to take his or her mortgage to a new property

---

Review Mortgage Law

• variable rate mortgages have interest rates variable and which change over the contract term
• purchaser assuming seller's mortgage describes mortgage assumption
• right to prepay refers to the right to prepayment in Sec 10 of the Interest Act: can prepay after 5 years of mortgage initiation by paying a 3 month penalty, and can't be for a corporation
• portable mortgage allows the borrower to sell his or her home and carry the mortgage terms over to the purchase of a new home to possibly save money on rates and fees/penalties

#

Question 58

REM6.1012

In appraisal, highest and best use is based on the principle that the market value of property depends on:

potential use rather than on current use alone.

the guaranteed replacement cost.

past use rather than on future use alone.

the wishes of the public at large.

---

Review Appraisals Introduction

• highest and best use is about current zoning vs redevelopment potential (future/potential use)

#

Question 59

REM1.4001

Which one of the following was NOT considered a void deed at common law?

A deed executed by a limited company

A forged deed

A deed given for illegal consideration

A deed signed in circumstances where the party could plead non est factum

---

Review Title Registration

• VOID DEEDS: Illegal deed, Forged Deed, Non Est Factum Deed

#

Question 60

MM5.001

Three years ago your client bought a house at which time she arranged a mortgage in the amount of $320,000. The loan was written at a rate of 5.75% per annum, compounded semi- annually, with a 5 year term, 20 year amortization period and monthly payments. She has just received an offer which provides $55,000 cash and assumption of the existing financing for the remainder of the term. If current lending rates for 2 year term mortgages are 7.5% per annum, compounded semi-annually, what is the market value of the offer?

$ 328401.21

$ 337946.52

$ 353819.67

$ 349085.97

---

Review Math 5 - PIMP/O

P: find PMT round up and plug back in
J2 =5.75
PMT = 12 , do NPEPN = 5.6823...
Enter: 20# N ; 320000 PV ; 0 +/- FV
Press PMT = -2234.318... = 2234.32 +/- PMT
I: Two steps to check for timeline:
1. Enter Term? yes, 5#N , press FV = 270240.132...
2. Enter years left on AGO? yes, 5 yr term - 3 yrs ago = 2#N (do not press FV)

M: 2nd NPEPN, J2 = 7.5, PMT = 12
NPEPN: 7.5#NOM, 2#PYR, #EFF, 12#PYR, #NOM = 7.3854...
P: press PV = 282946.522...
O: Add cash? + 55000 = 337946.522...

#

Question 61

MM8.050

Which of the following statements regarding a credit score is TRUE?

In order to improve a credit score, a borrower should slightly exceed the credit limit on their credit card.

A high credit score indicates a high risk of delinquency.

A high credit score may mean that the applicant has very little or no credit.

A high credit score will typically allow a borrower to get the lowest mortgage interest rate.

---

Review Math 8 - credit score

• to improve credit score, do the following: make payments on time; make at least the minimum payment every month; make full payments as soon as possible; don't exceed the credit limit on credit cards and try to keep balances below the limit; reduce the number of credit applications/inquiries from potential lenders; correct errors on the credit report
• high credit scores = lots of credit/good reputation and which means that person is likely to make their payments
• credit scores are used to rank credit worthiness and affect the rates of interest and terms that a borrower may receive; credit scores range from 300 to 900; high 600's range is
  considered a good credit rating; 750+ would typically qualify a borrower for the best possible rate (lowest) and terms

#

Question 62

REM4.2038

A "subject to" clause in a contract of purchase and sale is correctly known as a:

condition precedent

Warranty.

condition subsequent.

penalty clause.

---

Review Contracts of Real Estate Transactions

• A condition precedent is a condition in a contract which must be satisfied before the contract is to be performed, and is the formal term for what is usually called a "subject to" clause
  in the real estate industry.
• A warranty is a clause which is not fundamental to the contract and whose breach would not allow a party to terminate the contract, only to sue for damages.
  "subject to" clauses must are conditions precedent (they precede contractual performance) rather than conditions subsequent.
• A penalty clause is a clause which states that a party who breaches the contract must pay a penalty to the innocent party. These clauses will not be enforced by the courts.

#

Question 63

REM4.3003

Sam hires Ethan to act as his agent for the purchase of a vintage car. Acting within the scope of his authority for Sam, Ethan discloses to Dave, a vintage car dealer, that he is acting as an agent for Sam, and enters into a contract with Dave for a vintage car. Who are the parties to the contract?

Ethan and Sam

Dave and Sam

Dave, Ethan, and Sam

None of the above

---

Review Law of Agency

• agents (Ethan) are not part of ANY contracts
• Dave is the seller and Sam is the buyer - this is a contract of purchase and sale

#

Question 64

REM7.4014

The measurement, collection, analysis, and reporting of data pertaining to how visitors are using a website is called:

search engine optimization

customer relationship management

social media

web analytics

---

Review Technology

• SEO: related to how easily a website can be found in organic (unpaid) results on search engines; many methods for SEO, for example: using relevant keywords throughout the website and regularly updating the website
• CRM: software used to organize client information in a database
• social media: virtual communities and networks that allow participants to communicate, interact, create, share, and exchange information and ideas (Facebook, Instagram, Twitter)

#

Question 65

REM2.1032

You own an older house that you have rented out. The house has a steep set of stairs and your one of your tenant's party guests slips on the stairs, is seriously injured, and is considering action under the Occupiers Liability Act. Which of the following is a TRUE statement?

The tenant is not liable under the Occupiers Liability Act because they are not the property owner.

You are not liable as the property owner because the guest willingly accepted the risk of walking down the stairs.

Your tenant owes a duty to guests that they will be reasonably safe while visiting the house.

As stated in the Occupiers Liability Act, there can only be one responsible occupier and which is the tenant, in this case.

---

Review Professional Liability

• enants and owners are both liable under the Occupier's Liability Act; "occupier" definition = someone who has control over the persons, activities, and conditions on the property
• guests don't willingly accept risk; trespassers who have intent to do criminal activity accept risk
• tenants have a duty of care to persons on their property that they will be reasonably safe while visiting the property
• there can be many responsible "occupiers" of a property

#

Question 66

REM7.2008

Which of the following statements with respect to pending applications on title in British Columbia is CORRECT?

Conveyancers cannot make closing payments based on pending applications. They must await final registration of the conveyance before making closing payments.

Conveyancers make closing payments based on pending applications. They do not have to await final registration of the conveyance before making closing payments.

Conveyancers generally await final registration of the conveyance before making closing payments, because if an application for conveyance is rejected, it is the conveyancer's responsibility to resolve any issues.

Conveyancers make closing payments based on pending applications because if an application for conveyance is rejected, they will not be responsible for resolving any issues.

---

Review From Contract to Completion

• the conveyancer/lawyer does a title search and then prepares the documents required for completion (Form A Freehold Transfer, both parties Statements of Adjustment, PTT form,
  among others); in BC, conveyancers make payments in accordance with the statements of adjustments based on pending applications (instead of waiting for "final" registration which
  can sometimes take 1-2 weeks)
• if an application for conveyance is rejected, then it is the responsibility of the conveyancer to resolve this issue

#

Question 67

REM3.2003

A particular professional code of ethics of a real estate association states, "The member shell not engage in any activity that could be reasonably construed as contrary to the best interests of the client or client's property". This is an example of the ethical duty of:

Discretion

Loyalty

Competence

To disclose all of the options

---

Review Professionalism & Code of Ethics

• such a rule goes a long way to avoiding conflicts of interest.
• a principle closely linked to that of loyal is the responsibility to not receive undisclosed benefit

#

Question 68

REM6.2018

"Reproduction cost" is best defined as:

the current construction cost of a building which would provide the same utility as the subject property.

the current cost of moving the building to a site where the building would represent the highest and best use of that site.

the current cost of constructing an exact replica of the subject property.

the original cost of construction, adjusted for inflation.

---

Review Comparative & Cost Methods (Appraisals)

• this describes costs of construction for cost method
• this is a made up/nonsense answer
• reproduction = re-produces an exact replica using the same building materials and components as in the original
• this is a made up/nonsense answer

#

Question 69

REM7.1004

Kent and Sabrina are looking to buy their first home in Colwood. Even though they have been saving money for a long time, they will still need a mortgage loan to purchase a home. They think that the current interest rates will decrease in the future. Given this information, which of these mortgage options would be most appropriate to recommend that they choose?

Graduated Payment Mortgage

Variable Rate Mortgage

Reverse Annuity Mortgage

Sinking Fund Assisted Mortgage

---

Review Mortgage Law

• graduated payment mortgages start with a low payment that increases over time
• variable rate mortgages change when the Bank of Canada's and prime rates change; if you believe BOC/prime rate will go downward, having your rate of interest connected to that downward movement is a benefit because it will lower the interest you have to pay
• RAM mortgage: borrower removes some equity in the property and the lender makes payments to borrower
• sinking fund: regular payments are set aside to accumulate money for a specific future purpose; sinking fund assisted mortgage (not in the textbook): advances the borrower an amount that is less than the full face value of the loan, and the difference is put in an interest-bearing account and used to draw down (lessen) initial payments

#

Question 70

REM7.1003

Bonused mortgages are subject to specific legal requirements under the provisions of the:

Interest Act

Consumer Protection Act

Mortgage Act

Mortgage Broker Act

---

Review Mortgage Law

• bonused mortgages are covered under the BPCPA; "bonuses" = extra fees and costs added to mortgage that are not used to pay for the property itself; bonused mortgage = PIPI
• questions from math class 4

#

Question 71

REM7.4011

Which of the following statements pertaining to the Canadian Anti-Spamming Legislation is TRUE?

The maximum penalty for a single contravention for an individual is $10,000,000.

The maximum penalty for a single contravention for a business is $1,000,000.

Recipients who have previously consented to receiving commercial electronic messages must always be provided with an easy-to-find unsubscribe option, and requests to unsubscribe must be honoured within 30 days.

Licensees must obtain consent from recipients prior to sending any commercial electronic messages, maintain records of how the consent was obtained, and quickly remove recipients who request to be unsubscribed from receiving future commercial electronic messages.

---

Review Technology

Canadian Anti-Spamming Legislation = CASL Commercial Electronic Messages = CEM's
- Max admin penalties for contraventions of CASL : Individuals = $1,000,000
Businesses/any other legal entity = $10,000,000
- you must provide an ability to opt out of CEM's and anyone who requests to opt out of CEM's must be "quickly removed" (no specific timing is given in the legislation)
- you must get permission to send CEMs and you must keep records for how/when/what form of consent (express or implied) has been obtained

#

Question 72

MM2.001

Your client is considering purchasing a property for $500,000. She would like to finance the purchase with an interest-only loan of $400,000, written at a contract rate of 4.5% per annum, compounded semi-annually. If the term of the loan is one year and interest-only payments are to be made at the end of each month, what will the amount of your clients second monthly interest-only payment be?

$ 1649.57

$ 1857.66

$ 1142.47

$ 1486.13

---

Review Math 2 - find PMT (I.0. loan)

J2=4.5
PMT = 12 , do NPEPN = 4.4583...

2#N (anything you want because this is an 1.0. loan)
400000 PV
400000 +/- FV

Press PMT = -1486.127... = 1486.13

#

Question 73

REM1.1018

Susan plans on suing John for breach of contract. John can expect to be served with what document?

Notice of civil claim.

Response to civil claim.

Notice of motion.

Statement of defense.

---

Review Fundamentals of Law

• the notice of civil claim is how the plaintiff outlines the details of their claim and then they send it to the defendant
• the response to civil claim is the defendant's reply to the notice of civil claim

#

Question 74

MM1.002

A $190,000 mortgage loan, written at a nominal rate of 5% per annum, compounded semi-annually, has a 3 year contractual term. Payments are made monthly and are based on a 20 year amortization period. Payments are rounded up to the next higher dollar. What is the size of the required payments?

$ 1297

$ 1249

$ 1157

$ 2093

---

Review Math Classes 1, 2, 3 - Find PMT

J2=5
Pmt = 12 , do NPEPN = 12.1863...
20#N
190000 PV
0 +/- FV
Press PMT = -1248.537...

#

Question 75

REM7.1061

Which of the following statements regarding mortgage default insurance are TRUE?

A. An insured mortgage is generally referred to as a conventional mortgage. B. In Canada, an insured loan can only be obtained from private lenders. C.Ina majority of cases, the insurance fee is added onto the loan amount since borrowers have used their cash for the down payment and other transaction costs. D. With an insured mortgage, an insurance company guarantees that the lender can recover all of the funds loaned on case of default.

Only statements C and D are true

Only B and C are true

Only A, C and D are true

All of the above are true.

---

Review Mortgage Law

• conventional mortgage = uninsured mortgage loan (80% loan to value ratio or less) where the lender has only the personal covenant of the borrower and the value of the property as security
• insurance for mortgage loans can be gotten from either private or government insurers
• if a borrower has a loan to value ratio higher than 80% (less than 20% down) and they require mortgage insurance then the insurance premium/fee can be included in the loan amount
• mortgage insurance guarantees the lender can recover amounts from missed payments

#

Question 76

MM8.039

Consider the scenario where a lender offers a low upfront mortgage rate and then raises the mortgage rate to market levels within six months to two years. This would be best described as a:

refinancing mortgage.

teaser rate mortgage.

blend and extend mortgage.

reverse mortgage.

---

Review Math 8- teaser rate

• a "teaser rate" is a low, introductory interest rate that is typically offered for the first few months as an incentive to choose a certain mortgage program; after the introductory/teaser
  period is over, the rate is bumped up (or slowly bumped up over a short period of time) to the current market rates; this concept is similar to offers you see for 0% APR credit cards

#

Question 77

REM6.2007

In appraisal, physical wear and tear that cannot be corrected economically is best known as:

functional incurable depreciation.

physical incurable depreciation.

functional curable depreciation.

physical curable depreciation.

---

Review Comparative & Cost Methods (Appraisals)

• physical wear and tear = physical; corrected economically = curable; question asks for which one CANNOT be corrected economically which is INCURABLE

#

Question 78

REM7.2021

Avneet is purchasing Robert's house. Given the following information, calculate the cash proceeds of sale to Robert on completion: Price: $295,000 Deposit paid to brokerage: $30,000 Financing: 1st mortgage of $105,000 to be assumed. 2nd mortgage of $47,000 has been arranged by Avneet Taxes: The taxes in the amount of $1,200 are not yet due. Commission: 5% of sale price. Conveyancing Fees: $900 Adjustment, Completion, and Possession Dates: April 30th Note: It is not a leap year.

$ 174858.77

$ 144858.77

$ 176058.77

$ 174855.48

---

Review From Contract to Completion

Credits:
295,000 - sale price

Debits:
105,000 - assumed mortgage
14,750 - commission
391.23 - property taxes
Property tax calculation (seller's portion):
Jan 31, Feb 28, Mar 31, Apr 29 = 119 days (BUYER PAYS FOR APR 30)
119/365 = 0.32602... x 1200 = 391.23, seller's portion
(debited to the Seller, credited to the Buyer)

#

Question 79

MM2.023

Archie and Veronica have recently purchased a new home, partially financed by a mortgage loan. They would like to know the amount by which the principal is reduced during the five year term of their $175,000 mortgage written at J2 = 14% with a 25 year amortization. Assume the monthly payments are rounded to the next higher dollar and paid when due. The principal reduction is:

$ 170000

$ 168991.31

$ 6008.69

$ 5947.62

---

Review Math 2 - find PR

J2=14
PMT = 12 = NPEPN = 13.608...

25#N
175000 PV
0 +/- FV
Press PMT = -2054.283...
Step 1. Find PMT, round up, plug in: 2055+/-PMT
Step 2. Apply Term (N+F): 5#N, press FV = -168991.306... = OSB
Step 3: PV - OSB = 175000 - 168991.306.. = 6008.693...
OR Step 3: Add PV to OSB = -168991.306... + 175000 = 6008.693...

#

Question 80

REM7.2001

What is a statement of adjustments?

A closing statement in a real property transaction whose format is structured by debits and credits and that provides the parties to the transaction with detailed information relating to the balance due from one to the other.

The property tax form that must be filed at the land title office immediately after completion of the transaction.

The form that transfers title from the seller to the buyer.

The document setting out the funds going in and out from the buyers conveyancer's trust account prior to the closing date.

---

Review From Contract to Completion

• the form that transfers title is the Form A Freehold Transfer
• the other answers are made up/nonsense

#

Question 81

REM7.1040

The Property Law Act states that, if the mortgaged property is sold and the buyer assumes the mortgage, then:

The lender has a direct right of action against the buyer if the mortgage loan is not repaid according to the mortgage agreement.

Both the seller and the buyer of the property will always remain liable if the mortgage loan is not repaid according to the mortgage agreement.

The lender can only sue if the seller of the mortgage loan has not repaid according to the mortgage agreement.

The privity of contract prevents the lender from suing the buyer if the mortgage loan is not repaid according to the mortgage agreement.

---

Review Mortgage Law

• the Property Law Act allows the Lender to ignore the Doctrine of Privity (under Common law) and which says that only the parties to a contract could sue or be sued in relation to that contract (which means a Lender could not sue a buyer who assumes a mortgage) so they can sue the buyer if they don't make the payments despite them not being an original party of that contract (the buyer assumed the contract)
• the buyer is liable because it became their loan/liability and the seller may also be liable under certain circumstances
• the BUYER assumes the loan and would be the one to default

#

Question 82

MM8.046

Your client has asked you for assistance with improving her credit score. Which of the following is a strategy that will typically improve the credit score?

Increasing credit utilization above 90% of each revolving account's credit limit.

Correcting all credit report errors.

Increasing the number of credit applications and enquiries from an assortment of lenders.

Obtaining a large number of unsecured credit cards or loans.

---

Review Math 8

• the credit score indicates the rate of default of the borrower (how likely they are to not make payments)
• to improve credit scores, borrowers should: get a secured credit card with a $2,000+ minimum; make payments on time and at least the minimum payment every month; make full
  payments as soon as possible; not exceed the credit limit on credit cards and try to keep balances below the limit; reduce the number of credit applications/inquiries from potential
  lenders; avoid the closure of old inactive accounts because that can raise credit utilization and hurt the credit score; reducing credit utilization below 65-70% of each revolving
  account's credit limit; pay unpaid bills; and correct credit report errors

#

Question 83

REMS3.3015

A company has the capacity to make a binding contract only if:

A. it is properly incorporated and legally recognized under provincial law. B. a lawyer acting on the company's behalf drafts and approves the final written form of the contract. C. the contract can be ratified by the company after the company has been duly incorporated.

Which of the above statements are FALSE?

Only B and C are false.

Only C is false.

Only A is false.

None of the above statements is FALSE.

---

Review Law of Contract

• under common law, an incorporated company cannot make a contract until it is actually formed and legally recognized under the laws of the province
• random fact that has to be true because A and C are both true as per the course material and using method of elimination, None of the above is the only possible answer
• The Business Corporations Act allows contracts to be ratified AFTER the company is formed (incorporated) even though the contract was entered into pre-incorporation.

#

Question 84

REM4.3001

Paul signed an agency agreement giving Audrey the right to sell his sailboat for a minimum price of $25,000 in his absence. Audrey sold the boat to Teresa for $20,000. What is the legal result?

Paul would likely succeed against Audrey for damages for breach of the agency contract.

Paul would likely succeed against Audrey for breach of her warranty of authority.

Audrey has done nothing wrong.

Both are legal results.

---

Review Law of Agency

• If an agent acts outside his or her authority, as Audrey did in selling the boat for less than the authorized amount, the agent may be liable to the principal for breach of the agency
  contract
• A warranty of authority is an agent's promise or guarantee to third parties (not the principal) that his or her actions fall within the scope of authority given by the principal. Paul would
  not succeed here as he is the principal, and not the third party. Teresa, however, may be able to succeed against Audrey for her breach of her warranty of authority

#

Question 85

MM2.014

A mortgage was written for $56,000 at an interest rate of J2 = 9%, an amortization period of 15 years and monthly payments. Calculate the balance owing at the end of two years, rounded to the nearest dollar.

$ 52073

$ 51619

$ 52885

$ 52946

---

Review Math 2 - find OSB

J2=9
PMT = 12 , do NPEPN = 8.8357...

15# N (or 15 x 12 N)
56000 PV
0 +/- FV
Press PMT = -562.530...
Step 1. Find PMT, round up, plug in: 562.54+/-PMT
Step 2. Apply Term (N+F): 2#N, press FV = -52072.688... = 52073

#

Question 86

REM6.3015

You are trying to calculate the market value of an income-producing property. In order to determine the market value, however, you must find the yield of several comparable properties and determine a market capitalization rate. The following information is for the recent sale of a similar income-producing property. Selling Price $875,000 Gross Potential Revenue $150,000 per annum Operating Expenses $30,000 per annum Market Vacancy Rate 4% What is the yield on the sale of the comparable property?

13.1944 %

13.0286 %

16.6667 %

13.8889 %

---

Review Income Method (Appraisals)

Yield = NOI/Sale price
BUT missing NOI so you need to find the NOI first!

1. Find NOI:
   NOI = Gross Potential Revenue - Vacancy & Bad Debt - Expenses
   = 150,000 - 4% = 144,000 - 30,000 = 114,000

2. Yield = NOI / Sale price = 114,000 / 875,000 = 0.13028... x 100 = 13.0285....%

#

Question 87

REM1.4036

A caveat is:

Any warning which is issued by a court.

A notice placed on the land title register by a person who is alleging a claim to an interest in the land.

A specific category of builder's lien.

Formal notice to anyone searching title that a court action has begun concerning that property.

---

Review Title Registration in BC

• it is not a warning issued by the court
• Caveat - a note placed on title by someone claiming interest in that land which lasts for two months and prevents all dealings (transfers, mortgages, etc.) with the land; to enforce the interest claimed by the caveat, court action needs to be started within the two-months and a CPL needs to be registered against the title
• it is not a type of builder's lien
• this describes a certificate of pending litigation (CPL)

#

Question 88

REM1.2038

A life tenancy created in a will grants to the life tenant the right to use and occupy a piece of property during the life tenant's life, "without impeachment for waste". Upon the death of the life tenant, the remainderman is entitled to the property. If the life tenant wants to deliberately damage the property in order to ensure remainderman will have little or nothing of value to inherit upon the lie tenant's death, which additional phrase must the will contain in order to protect the life tenant from liability for waste?

Without impeachment for waste, including permissive waste

Without impeachment for waste, including ameliorating waste

Without impeachment for waste, including equitable waste

Without impeachment for waste, including voluntary waste

---

Review Estates and Interests in Land

• permissive waste is taking no action at all (allowing property to decline over time); permissive waste is not the life tenant's responsibility so it doesn't need to be mentioned in the life tenancy
• ameliorating waste is an improvement to the property
• equitable waste is deliberate damage which has significant effect on the property's value
• voluntary waste is damage to the property beyond what the life tenant is allowed but doesn't have significant effect on the property's value

#

Question 89

REM6.2030

Which of the following is the best description of a property that has latent value?

A property that possesses the potential for redevelopment.

A property that is in its highest and best use.

A property for which the highest net return is likely to result from its current use.

A warehouse, located in an industrial park, that has high value to the owner.

---

REVIEW Comparative & Cost Methods

• residual method, latent value, redevelopment! Latent = Later; redevelopment will happen in the future (later) and is of value to those whose properties have this potential

#

Question 90

MM8.049

A credit report is:

a report that documents applicants' current and expected financial resources and obligations.

a score indicating the level of a borrower's risk of delinquency.

a record identifying an applicant's habits regarding their financial commitments.

established by private lenders during the application process.

---

Review Math 8 - credit report

• a credit analysis evaluates the applicant's ability to meet the terms of a mortgage and the amount of income (resources) available for future mortgage payments (obligations)
• the credit score indicates the rate of default of the borrower (how likely they are to not make payments)
• the application process for private lenders may not be as strict as conventional lenders

#

Question 91

REM7.3002

In marketing, the initial trigger that starts the buying process is known as:

The buying decision.

Self-actualization.

The product purchase activity.

A felt need.

---

Review Marketing

• 'felt need' is the trigger; for real estate, many different events can trigger a felt need: changes in family life, changes in job/work life, changes in finances, increases in rent/interest rates/property values, the ending of a lease, etc.
• the other answers are either made up or are from other concepts that are not part of your course

#

Question 92

MM6.030

A property is listed for $625,000, the market value is estimated to be $615,000 and the property's lending value is estimated to be $600,000. If you purchase the property for $600,000 subject to a mortgage of $450,000, what loan-to-value ratio was applied by the lender that you negotiated the mortgage with? Assume that the loan-to-value ratio was the binding constraint on the loan size.

75 %

70 %

80 %

1.25 %

---

Review Math 6 - find LTV%

M=LV x LTV% <- rearrange this formula (go to lesson videos for help)
LTV% = M/ LV = 450000 / 600000 = 0.7500 x 100 = 75%

#

Question 93

REM7.3018

Which of the following statements is TRUE under the Canadian Anti-Spamming Legislation?

Commercial electronic messages can never be sent for the purposes of encouraging participation in a commercial activity.

Commercial electronic messages may be sent if the sender has the recipient's consent.

It is always prohibited to send commercial electronic messages by text message or social media, but commercial electronic messages are allowed if sent by email.

A business may be fined up to $10,000 for a single contravention.

---

Review Marketing

• the Canadian Anti-Spamming Legislation (CASL) prohibits the sending of commercial electronic messages (including email, text message, social media, and voicemail) without the recipient's consent, but messages may be sent if the appropriate consent is obtained.
• The maximum penalty for a single contravention is $1,000,000 for an individual and $10,000,000 for any other legal entity (e.g., a business)

#

Question 94

REM1.1002

Jas, who lives in Saskatchewan, came to Vancouver to visit his grandmother. Tired after the long drive from Saskatchewan, he accidentally puts his foot on the gas pedal instead of the brake pedal when parking near his grandmother's house. As a result, his car crashed into and damaged the fence of one of the neighbours, Chris, who paid $42,000 to have the fence built only two months ago. Jas is refusing to pay for the damage. What actions can Chris take?

A. He can take Jas to Small Claims for $42,000. B. He can sue Jas's grandmother under vicarious liability, since Jas is staying with her while visiting Vancouver. C. He can bring an action against Jas in the Supreme Court of British Columbia for $42,000. D. He can apply for court supervised mediation after initiating a claim against Jas.

A, B and D only.

C and D only.

A and D only.

C only.

---

REVIEW Fundamentals of Law

• Small claims is limited to 35,000 or less
• Vicarious liability - boss/owner/manager is liable for employees actions during employment (Jas's grandmother is not his boss)
• Supreme Court of BC has no limits (money/value or location/territory)
• Instead of going through the regular courts, parties may start mediation simply by delivering a Notice to Mediate form to every other party and to the Dispute Resolution Office.

#

Question 95

MM4.013

You have arranged a mortgage for a borrower in the amount of $210,000. The loan calls for quarterly payments based on a 20 year amortization period and a contract rate of 7% per annum, compounded annually, with a 4 year term. Included in the face amount is your $2,200 commission and legal fees of $1,500. What is the cost of funds advances to the borrower, expressed as a nominal rate, compounded semi-annually?

7.428208 %

9.524296 %

7.360487 %

7.566156 %

---

Review Math 4 - PIPI

P: find PMT round up and plug back in
J1=7
PMT = 4, do NPEPN: = 6.8234...
Enter: 20# N ; 210000 PV ; 0 +/- FV
Press PMT = -4830.612... = 4830.62 +/- PMT
I: Apply Term, N + F
4#N, press FV = 187256.186...

P: 210000 - 2200 - 1500 PV (should be 206300)

I: press IYR = 7.3604... = J4
Convert? YES, asking for J2 (semi annual compounding)
- do EPN : #EFF, 2#PYR, #NOM = 7.4282...

#

Question 96

REMS3.1024

Which of the following statements made during a recent discussion about ownership is TRUE?

A. Acorporation is subject to income tax, unlike a partnership. B. Only shareholders are entitled to manage a corporation in accordance with the Consumer Protection Act. C. A corporation whose shares are traded on a stock exchange is referred to as a private company. D. Individuals who acquire shares in a company do not own the assets of the company.

Only statements A and D are true

Only statements A, B and C are true

Only statements B and D are true.

A, B C and D are true.

---

Review Financial Statements

• a corporation is a legal entity that pays its own (is subject to) income tax
• the board of directors manages the corporation
• public companies have shares that are traded on a stock exchange
• individuals who acquire shares in a corporation do not own the assets of the company

#

Question 97

REM4.2018

Which of the following is a federal statute designed to hold business actors accountable for misleading, deceptive, or anti-competitive practices?

The Criminal Code

The Business Corporations Act

The Competition Act

The Real Estate Development Marketing Act

---

Review Contracts for Real Estate Transactions

• Competition Act addresses agreements in restraint of trade and misleading advertising

#

Question 98

REM1.4004

In which of the following situations is registration required for a previously unregistered manufactured home?

The home is destroyed in a fire or natural disaster

The home undergoes significant renovations

The home is to be sold

Registration is not required in any of the above situations

---

Review Title Registration

• to MOVE or SELL a manufactured home, proof of registration is required

#

Question 99

REM3.3001

Adam has a contract to sell Caitlin a 2003 green Audi automobile with black leather seats, 50,000 kilometers on it , and in generally good repair for $15,000. Caitlin purchased the car relying on (poor quality) pictures only, and she did not see the car before entering into the contract. Unfortunately for Caitlin, the car that Adam provides has the following flaws:

A. The car has dark grey, not black leather seats. B. The car is Toyota , not Audi C. The car has travelled 51,731 kilometers. D. The car does not have an engine.

Which of the above flaws will likely allow Caitlin to terminate the contract without paying Adam the purchase money?

B only.

B and D only.

C and D only.

All of the above.

---

Review Law of Contract

• about the colour: Caitlin relied on the pictures and did not do her due diligence and what is reasonable to expect from a buyer in this situation
• about the km: it is reasonable that if the car is used as a means to go to/from work and/or personal use, then the car would have a little more KM on it by the time it was sold
• there is a general principle of good faith performance in contract law which says that the parties generally must perform their contractual duties honestly and reasonably and not capriciously (unpredictably or arbitrarily); the car being a different make/manufacturer and/or not having an engine is not acting with honesty/good faith

#

Question 100

MBM3.2005

Licensees who behave ethically and professionally are MOST likely to:

be perceived as the most qualified licensee in the area by clients

have many discussions about ethics with their managing broker

constantly update their brokerage's policies to address unethical behaviour

earn the trust of the public with their honesty and integrity

---

Review Professionalism & Code of Ethics

• licensees have a role in building/earning and maintaining trust of the public for the profession, and they do this by acting professionally and ethically with honesty and integrity

Quiz Progress

0 / 0 questions answered (0%)

0 correct

Quiz Complete!

0%

Reset quiz