Mock Exam 100-2

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Question 1

REM1.2043

Which of the following statements about the fee simple estate are TRUE?

• A) The fee simple is a type of leasehold estate.
• B) If a fee simple owner dies without a will the property will escheat to the crown.
• C) The term fee simple indicates an estate that can be inherited without qualification.
• D) The fee simple estate was created by the Torrens system of registration.

B and C are true.

A and C are true.

Only C is true.

C and D are true.

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Review Estates and Interests in Land

• a fee simple (freehold) is not a type of leasehold Multiple choice
• if a fee simple owner dies without a will, then their property will go to their heirs; if the fee simple owner dies without a will AND NO HEIRS then the property escheats back to Crown
• a fee simple can be inherited without qualification (without a will)
• the fee simple interest has been around for a long time as part of the common law

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Question 2

REM6.2023

The direct comparison approach is based on an analysis of recent sale prices for similar properties. Which of the following BEST describes the word 'recent'?

A period of time no less than one week and no more than six months.

A period of time during which supply and demand conditions have not changed and property values have remained stable.

A period of time during which at least four properties have sold in the subject property's neighborhood.

A period of time during which the prime interest rate has been stable.

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Review Comparative & Cost Methods (Appraisals)

• recent is not related to/about a specific time period
• recent refers to when the market (supply and demand) conditions have been stable
• recent is not related to/about how many properties have sold
• recent is not related to/about the prime interest rate

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Question 3

MM8.064

Kevin and Sara are looking to buy their first home in Salmon Arm. They have been saving money for a long time but will need a mortgage loan to help with the purchase. They believe that the current interest rates will decrease in the future. Given the information presented, which of these mortgage options would be most appropriate to recommend in this situation?

Graduated Payment Mortgage

Variable Rate Mortgage

Reverse Annuity Mortgage

Sinking Fund Assisted Mortgage

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Review MATH 8 - Variable rate mortgage

• the Bank of Canada's rates, are the best rates and which banks charge to/save for their best customers
• in Canada, mortgage interest rates are influenced by the financial markets. The interest rate charged on a variable rate mortgage is based on the Bank of Canada's rates, and are typically lower than fixed rate mortgages because there is reduced risk to the lender because any changes in the interest rate is passed on to (paid for by) the mortgago

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Question 4

REM4.1013

If a negotiator recognizes that the other negotiator is using dirty tactics, he should:

Use a similar tactic in return to prove that he is a better negotiator.

Ignore the tactics and proceed with the negotiation.

Raise the issue with the other negotiator and argue against it, if needed.

Raise his or her demands, in response to the dirty tactics, with similar behavior.

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Review Negotiations

• you should never use dirty tactics in order to "even things out"
• you should not ignore dirty tactics during a negotiation if it is bothering you
• you should raise the issue with the other negotiator and argue against it if needed
• you should never use dirty tactics in order to "even things out"

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Question 5

MM3.033

You purchased a warehouse for $600,000 cash and redeveloped it over a 15 months period. If you sold the warehouse for $725,000, what effective annual yield did you earn on this investment (assuming that these are the only cash flows)?

17.548922 %

15.235263 %

1.269052 %

16.345450 %

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Review Math 3 - find lYR % (yield)

J1 = ? (asking for effective yield)
PMT = 12 , because time is in months ; cannot do NPEPN

15N
600000 PV
0 +/- PMT
725000 +/- FV
12 #P/YR
Press I/YR = 15.2352... = J12
- conversion needed? YES, asking for J1 (effective yield)
- press #EFF = 16.3454...

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Question 6

REM7.2007

Why does a lender often require a survey of the property being purchased before advancing mortgage funds to the buyer?

The survey will confirm the boundaries of the property and the location of any buildings in relation to its boundaries, because encroaching structures could impair the quality of the proposed security for the mortgage loan.

The survey will reveal the floor plan of the property, which is something lenders require for valuation of the property.

The survey will investigate whether the seller, as the named owner on the certificate of title of the property, is actually entitled to the property, thus ensuring the seller can transfer it to the buyer upon sale.

The survey will appraise the condition and value of all buildings on the property so that the lender can confirm that the property will be adequate security for the mortgage loan.

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Review From Contract to Completion

• the survey confirms the boundaries of the property and the location of any buildings in relation to its boundaries to see if there are encroachments over the property line into adjacent land
• building plan: a drawing of the intended arrangement of rooms and zones within a building
• title search investigates entitlement and ability to sell/transfer that title to a buyer
• a property appraisal will give a lending value to use to decide on what security there is in a property for mortgage lending

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Question 7

MM3.060

You would like to build a house and require $575,000 in construction financing. High Risk Mortgage Co. has agreed to lend you the funds, in an interest-accruing loan. The interest rate is 9.25% per annum, compounded semi-annually. How much will you owe at the end of 9 months?

629417.46

616451.47

615348.37

579349.22

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Review Math 3 - find FV (I.A. loan)

J2 = 9.25
Pmt = 0 - no payments with interest accruing loans
-NPEPN to J12 because time is given in months
J2=9.5
Pmt = 12 , do NPEPN = 9.0766...

9 N
575000 PV
0 +/- PMT
Press FV = 615348.365....

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Question 8

REM4.2009

The Competition Act prohibits false or misleading advertising. Which of the following statements concerning this offense is FALSE?

The standard used in determining whether a statement is misleading or not is whether an inexperienced person would be misled.

For a misrepresentation to offend against the Competition Act it must be false or misleading in a material respect.

A person or company will not be guilty under the Competition Act when the general overall impression is misleading even though every part of their advertisement is literally true

Where an accused can show that they had taken all reasonable care to determine the truth of the statement and that they honestly believed it to be true, the accused will avoid liability.

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Review Contracts for Real Estate Transactions

• the standard is whether an inexperienced person would be misled; "inexperienced" are least knowledgeable and is a standard that protects the general public
• the misrepresentation must be misleading in a material respect which means someone relied on it and altered their position/lost something as a result
• if your overall general impression is misleading, then you are guilty of being in contravention of the Competition Act
• 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

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Question 9

REMS3.1007

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

Matching Principle

Materiality Principle

Revenue Principle

Conservation Principle

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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

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Question 10

MM8.021

In mortgage lending, the interest adjustment period is:

One period after the date on which the first payment is due on.

Any period of twelve consecutive months chosen by a business as a period.

The period of time agreed to by both parties to a real estate transaction to do adjustment of property taxes, rent, interest, and other terms.

The period of time between the date that funds are advanced and the first payment period.

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Review Math 8 - Interest Adjustment

• the interest adjustment period is the length of time between the date the funds are advanced and the beginning of the first payment period

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Question 11

REMS3.3025

Sheldon offered to buy Penney's house on June 3, and the offer stated it would remain open for acceptance until 7:00 p.m. on June 4. Which one of the following statements is FALSE?

If Sheldon mails a notice of revocation to Penney, the revocation is only effective if Penney receives the notice before she accepts the offer.

If Penney makes a counteroffer, she will terminate Sheldon's original offer.

If Sheldon's offer has not yet been accepted by Penney, he may revoke his offer prior to 7:00 p.m. on June 4.

Sheldon can revoke his offer after it is accepted by using the 'postal acceptance rule'.

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Review Law of Contract

• revocation has to be communicated/received/delivered to the other party for it to be effective; revocation must be effective before acceptance
• counteroffers release/expire the original offer
• revocation must be effective before acceptance
• revocation must be effective before acceptance; there is no such thing as the postal acceptance rule

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Question 12

REM6.3011

Which of the following is estimated using actual current rents paid on similar property based on 100% occupancy?

gross potential revenue

gross realized revenue

effective gross income

net operating income

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Review Income Method (Appraisals)

• 100% occupancy is with NO vacancy or bad debt = gross potential revenue

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Question 13

REM4.2001

Which of the following is a privacy principle from the Personal Information Protection Act?

Expand collection

Restrict access

Be open

Identify the proposal

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Review Contracts for Real Estate Transactions

Be accountable

• Identify the purpose
• Obtain consent
• Limit collection
• Limit use, disclosure and retention
• Be accurate
• Use appropriate safeguards
• Be open
• Give individuals access
• Provide recourse

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Question 14

REM3.1058

Rapid Roy Construction Company recently purchased $32,000 worth of new equipment. Rapid Roy expects to sell the equipment at the end of 15 years for $4,000. What is the annual depreciation expense, according to the straight line method?

1750.87

1866.67

2400

2133.33

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Review Financial Statements

Use formula for annual depreciation expense (ade, or just de):
annual depreciation expense = (cost - salvage value) / life, in years
= (32000 - 4000) / 15 = 28000 / 15 = 1866.666...

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Question 15

REM2.1007

Which of the following statements regarding innocent misrepresentation is TRUE?

To have liability for an innocent misrepresentation, there does not need to be a relationship between the plaintiff and the defendant which creates a duty of care.

A licensee can rely on the disclosure statement provided by the seller to protect themself from liability for providing this information to others.

Innocent misrepresentation is the same as fraudulent misrepresentation.

An untrue statement needs to have been made for the courts to determine liability for innocent misrepresentation.

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Review Professional Liability

• a duty of care must exist
• you cannot rely on the property disclosure statement (PDS) to protect you (or your brokerage) from liability for misrepresentation
• negligence (innocent) and fraud are not the same
• you need to make an untrue misrepresentation/statement of fact or opinion

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Question 16

MMS3.052

Jim and Janice have just received an inheritance of $320,000. Their plans are to purchase a house with a $270,000 down payment after travelling around the world for five years. They have found a place to invest their money at 12.5% per annum compounded monthly for a five year term. What is the maximum amount of their inheritance which they can use to purchase traveller's cheques (which will be spent on their vacation) without sacrificing their $ 270,000 down payment?

144988.54

102443.22

175011.46

320000

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Review Math 3 - Inheritance question (find PV and subtract from inheritance)

J12 = 12.5
PMT = 0
- NPEPN not needed but could do it anyway (if you do the NPEPN, do not enter lYR and PYR)

5x12N
12.5 IYR
0 +/- PMT
270000 +/- FV
12#PYR
Press PV = 144988.544... ; this is how much needs to be invested
What can be spent = inheritance - amount to be invested
= 320000 - 144988.544... = 175011.455...

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Question 17

MBM1.3034

Which of the following is NOT an activity included in the definition of a mortgage broker under the Mortgage Brokers Act?

A person who carries on a business of lending money on secured in whole or in part by mortgages, whether the money is the mortgage broker's own or that of another person.

A person who, on behalf of another, in any manner acquires or disposes of real estate.

A person who carries on a business of buying and selling mortgages or agreements for sale.

A person who, in any one year, received an amount of $1,000 or more in fees or other consideration, excluding legal fees for arranging mortgages for other persons.

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Review Mortgage Broker's Act

• activities: lends money secured in whole or in part by mortgages, whether the money is the mortgage broker's own or that of another person; holds himself or herself out as, or by an advertisement, notice or sign indicates that he or she is, a mortgage broker; carries on a business of buying and selling mortgages or agreements for sale; in any one year, receives an amount of $1,000 or more in fees or other consideration; during any one year, lends money on the security of 10 or more mortgages; carries on a business of collecting money secured by mortgages

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Question 18

MBM1.3033

Which of the following are 'red flags' that a mortgage broker might use to indicate a value fraud?

• A) An appraisal is missing or does not make sense
• B) The real estate transaction involves a relative of one of the real estate brokers.
• C) The appraiser is not on the approved list of appraisers for the lender
• D) There are a number of trades on the property in a short period of time.

Only A, B and C

Only A, C and D

Only B, C and D

All of the above

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Review The Mortgage Brokers Act

Option B is FALSE as it is an Identity Fraud- The real estate transaction involves a relative of one of the real estate brokers.
All other options are Value fraud:

• the appraisal is missing or does not make sense;
• the appraisal was conducted by one of the parties involved in the transaction or is somehow connected to one of the parties;
• 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
• goods/chattels are used as part of the purchase price or deposit

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Question 19

1.1012

Which of the following is TRUE about the Civil Resolution Tribunal?

The Civil Resolution Tribunal has the authority to hear almost all strata corporation disputes, regardless of their value.

The Civil Resolution Tribuna's jurisdiction over strata corporation disputes is limited to $5,000 or less.

The Civil Resolution Tribunal is an online tribunal that completely replaced the BC Small Claims Court.

A party dissatisfied with a Civil Resolution Tribunal decision may appeal to the BC Court of Appeal.

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Review Fundamentals of Law

-the CRT handles almost all strata corporation disputes
-there is no monetary limit for strata corporation disputes submitted to the CRT
-the CRT is an alternative to Small Claims court (it didn't replace it)
-if you are not satisfied with a CRT decision then you can go to BC Provincial court to have it reheard (the Provincial Court of BC is a trial level court in British Columbia that hears cases in criminal, civil and family matters; it is not the same thing as the Supreme Court of BC)

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Question 20

MM8.066

Which of the following statements regarding mortgage broker origination software is/are TRUE?

• A) mortgage broker origination software allows mortgage application approvals to be granted very quickly.
• B) mortgage broker origination software does not help eliminate many of the data errors which occur in re-keying information.
• C) mortgage broker origination software connects mortgage brokers to lender online systems and can be set up with the lenders guidelines to help mortgage brokers determine which lender is suitable for the application they are currently dealing with.
• D) mortgage broker origination software is designed to streamline the application process between mortgage brokers and lenders

Only C

Only B and D

Only A, C and D

All of the above

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Review Math 8

• mortgage lender software (not mortgage broker origination software) allows lenders to manage mortgages after closing
• mortgage broker origination software:
• streamlines the application process between mortgage brokers and lenders to reduce the processing time needed for mortgage application approvals and improves the process of collecting data from the borrower
• gives mortgage brokers the ability to prepare online applications, match borrowers and lenders, attach electronic documents (e.g., credit reports), perform calculations, and track pending or completed transactions in an easy-to-use and efficient manner
• reduces the amount of data entry for the mortgage broker by helping to eliminate data errors that commonly occur when re-keying information

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Question 21

REM6.2005

Which 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:

the comparable property may never be used as evidence of market value.

the comparable sale price must be adjusted downward.

the comparable sale price may only be used as evidence of market value.

the comparable sale price must be adjusted upward.

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Review Comparative & Cost Methods (Appraisals)

• the vendor supplied mortgage on the comparable property is for a BETTER RATE than the market rate on the subject property so the comparable is SUPERIOR and means you need to subtract value from the comparable property's price (IASS, superior subtract)

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Question 22

REM2.3065

Which of the following statements comparing strata lots and cooperatives is FALSE?

A cooperative's board of directors will normally be required to approve a prospective buyer whereas generally, a strata lot owner may sell his or her lot to whomever he or she wishes.

Both stratas and cooperatives are created by depositing an incorporation agreement in the Land Title Office.

The owner of a strata lot holds a fee simple interest while the owner in a cooperative possesses a share in a company or cooperative association.

Where an existing building is being converted to either a strata or a non-profit cooperative, the existing tenants are covered by the protection afforded by the B.C. Residential Tenancy Act.

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REVIEW Strata Properties Condos and Co-ops

• a cooperative association's board of directors typically needs to approve potential buyers; strata lot owners are generally not restricted in any way whom they sell their strata lot to
• a fee simple strata property is created by a strata plan which is filed in the land title office; a cooperative is created by the incorporation of a company or a cooperative association
• cooperative (co-op) ownership does not give an individual fee simple title to the cooperative owner's unit; co-op owners possess shares in a non-profit corporation (and this corporation owns the title to the property)
• where a building is being converted to a cooperative, any residential tenants who are required to move will be entitled to the protections of the Residential Tenancy Act

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Question 23

MM3.029

You place $10,000 in a term deposit where it will accrue interest at a rate of 6.5% per annum, compounded quarterly. The term of the investment is 2 years. How much money will you receive at the end of the 2 year term?

11376.39

14723.57

8790.14

11364.75

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Review Math 3 - find FV

J4=6.5
Pmt = 0
- NPEPN not needed but could do it anyway (if you do the NPEPN, do not enter lYR and PYR)

2x4N
6.5 IYR
10000 PV
0 +/- PMT
4# PYR
Press FV = 11376.389...

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Question 24

MBM1.3002

Mortgage brokers who also act as mortgage administrator CANNOT:

receive mortgage payments from borrowers and send them to investors

enforce mortgage payments

act without a written agreement with the lender(s)

commence or continue enforcement proceedings in the event of default under a mortgage

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Review Mortgage Broker's Act

• some mortgage brokers also act as mortgage administrators, where they receive mortgage payments from borrowers and send them to investors and may also take steps on behalf of investors and lenders to enforce mortgage payments
• mortgage brokers who administer, or arrange for a person to administer, a mortgage can only do so if they have a written agreement with the lender(s); this written agreement needs to specify the extent of the responsibilities of the mortgage broker related to the collection of money, the prepayment of principal, the discharge or partial discharge of the mortgage on the satisfaction of the debt, and the commencement of enforcement proceedings in the event of default under the mortgage

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Question 25

MM68.042

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 70% of each revolving account's credit limit.

Regularly exceeding the credit limit on multiple credit cards.

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

Obtaining secured credit cards or loans.

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Review Math 8- Extra Mortgage Math

• credit report: a record identifying an applicant's habits regarding their financial commitments; it is created when financial institutions lend funds or provide credit to applicants and proceed to give credit reporting agencies regular information regarding their financial relationships with these applicants
• to improve a Credit Score: Obtain secured credit cards and loans; Reduce credit utilization below 70% (don't exceed the credit limit on credit cards and try to keep balances below the limit); Correct credit reports errors; Pay unpaid bills: make payments on time; make at least the minimum payment every month; make full payments as soon as possible; reduce the number of credit applications/inquiries from potential lenders

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Question 26

REM6.1007

Which one of the following does NOT result from the immobility of land?

the need for debt financing.

a vulnerability to outside environmental factors.

an inability to move a listed property to a better resale market.

the necessity for owners to travel in order to take advantage of services provided by different parcels of land.

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Review Appraisals Introduction

• debt financing is not related to the immobility of land and the externalities in that local market
• describes an externality due to the immobility of a parcel of land
• describes an externality due to the immobility of a parcel of land
• describes an externality due to the immobility of a parcel of land

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Question 27

M1.001

A $150,000 mortgage loan, written at a nominal rate of 12.5% per annum, compounded semi-annually, has a 5 year contractual term. Payments are made monthly and are based on a 25 year amortization period. Payments are rounded to the next higher dollar. What is the size of the required payments?

1601

3375

1636

1146

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Review Math Classes 1, 2, 3 - Find PMT

J2 = 12.5
Pmt = 12 , do NPEPN = 12.1863...
25#N
150000 PV
0 +/- FV
Press PMT = -1600.534...

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Question 28

MM68.018

Your $150,000 loan has quarterly payments (rounded up to the next higher ten dollars) over an amortization period of 20 years and a nominal interest rate of 6% per annum, compounded semi-annually. Calculate the final payment.

1730.77

1817.34

3219.43

1912.58

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Review Math 8

• Step 1: Find PMT, round up, plug back in
  J2=6
  PMT = 4
  NPEPN: 6#NOM, 2#PYR, #EFF,4#PYR, #NOM = 5.9263...
  Enter: 20#N ; 150000 PV ; 0 +/- FV
  Press PMT = -3220.702... = 3230 +/- PMT

• Step 2: Find N for rounded up PMT, round up and plug back in, find FV
  Press N = 79.560...
  Enter: 80N
  Press FV = 1412.664..., overpayment amount
  Step 3: Subtract overpayment from PMT to find final PMT amount
  3230 - 1412.664... = 1817.335...

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Question 29

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 $65,000 per year. The bank applies an 80% loan-to-value ratio and a gross debt service ratio of 35%. Property taxes amount to $2,000 per year. Assume that the lender demands a 20-year amortization period and monthly payment at a contract rate of J2 = 5%. Assume the government-specified qualifying rate is J2 = 6%. How much can your client borrow, given the stress test borrower qualification rules for uninsured mortgages? Round your final answer to the nearest $10.

224770

257980

266930

284000

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

1. M=LV xLTV% = 355000 x 80% = 284000 (not the lowest answer)
2. PIG - tax + PMT =I x GDS% - tax = 65000/yr x 35% - 2000/yr = 20750/yr
   Monthly payment so divide by 12 = 20750/yr / 12 = 1729.166... = 1729.17
   Choose higher rate between BOC rate and Contract + 2%
   BOC: J2=6
   Contract rate: J2 = 5 + 2 =7; this is higher, so use this rate
   Use PMT to find PV

J2=7
PMT = 12 , do NPEPN = 6.90004...
20# N
1729.17 +/- PMT
0 +/- FV
Press PV = 224768.763... = 224770
3. Compare M and PV and choose the lower answer:
M = 284000
PV = 224770, this is the correct answer because it is lower than M

Add value (+3,500) Square feet: 100 square feet smaller, Inferior --> Add value (+5,000) Adjust 700,000 sale price by +3,500 and +5,000 = 700,000 + 3,500 + 5,000 = 708,500 -->

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Question 30

REM6.2056

You have a partially completed appraisal report that you need to fill in. The 2,500 square foot subject property has 5 bedrooms. The house next door is similar in all respects except for the number of bedrooms and square footage. The 2,400 square foot comparable sold for $700,000 and has 4 bedrooms. If the market value of a bedroom is $3,500 and above a 2,000 square foot benchmark, each 100 square feet is worth $5,000, the adjusted sale price for this comparable is:

708500

700000

691500

703500

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Review Comparative & Cost Methods (Appraisals)

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

SUBJECT: 5 bedrooms and 2,500 square feet
COMPARABLE: 4 bedrooms and 2,400 square feet
Bedrooms: One less bedroom, Inferior --> Add value (+3,500)
Square feet: 100 square feet smaller, Inferior --> Add value (+5,000)
Adjust 700,000 sale price by +3,500 and +5,000
= 700,000 + 3,500 + 5,000 = 708,500

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Question 31

REM6.1025

Your friend mentioned to you that the value of his house was $789,000 Understanding what he means, you know that the true value of an appraisal is:

Known as the value to the owner because it is subjective in nature.

The market value of the physical property.

A combined value that considers personal property, public property, and government limitations.

The value of the legal rights of ownership vested in a particular piece of property

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Review Appraisals Introduction

• market value (objective) does not reflect owner's value (Subjective)
• there is more value in real property than just the land; real property = land + improvements + all other interests
• none of these are included in true/market value
• correct description of the subject of an appraisal (true value)

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Question 32

REM1.1022

Which one the following is TRUE regarding the doctrine of stare decisis?

Disputes that have already been in the courts are predictable with absolute certainty.

If a court in BC has already decided a particular issue, and another court is faced with the same issue, the earlier decision should direct the subsequent decision.

Decisions from Ontario courts will have no relevance to BC courts.

The BC Court of Appeal is authoritative for judges in BC Courts.

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Review Fundamentals of Law

• court cases are never predictable and especially not with absolute certainty
• a judge CAN go to a different province/country to look for a similar case to help them make a decision on theirs (as long as it has a similar legal system)
• this is a good description of stare decisis - 'let the former decision stand'
• the BC Court of Appeal only handles appeal cases from other courts so a judge will not use a BC Court of Appeal case as a precedent case

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Question 33

REM2.3036

Which of the following BEST describes the 'strata corporation'?

The collective group of individual strata lot owners once the strata plan has been deposited at the land title office

A body of three to seven elected representatives from among the owners of the strata lots

A corporation formed by a group of individuals who possess an undivided joint tenancy ownership interest in a single parcel of fee simple

A group of professionals managers hired by a condominium project to handle the matters affecting the security and maintenance of the common property, facilities, and assets of the condominium.

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REVIEW Strata Properties Condos and Co-ops

• two definitions of strata corporation: 1. Formed by the deposit of a Strata Plan whose members are the owners of the strata lots in the strata plan OR 2. collectively, the group of owners as one entity, once the strata plan has been deposited at the Land Title office
• the strata COUNCIL is the representatives elected from among the owners of the strata lots
• a single parcel cannot be a strata (stratas are made up of at least two properties); also, strata owners own a fee simple interest but HOW the strata lot is owned is up to the owner (the strata unit/lot could be owned as a joint tenancy or as tenants in common)
• professional managers hired by a condo project is a property management company

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Question 34

MM8.001

You are arranging a partially amortized mortgage loan with a face value of $400,000 for your client. The loan contract is to be written at 3.5% per annum, compounded semi-annually, with monthly payments rounded up to the next higher cent, an amortization period of 20 years and term of 3 years. A brokerage fee of $5,000 will be deducted from the face value of the loan. Under the BPCPA, what is the Total Value Paid by the borrower?

439516.5

407889.21

407670.29

455000

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Review Math 8 - Interest cost, but asking for total value paid

Interest Cost type question (but a sneaky one), and you will calculate starting with the FACE VALUE of the loan (including the fees) and instead of doing the interest cost after one or two months, you will find the interest cost after the term length of 3 years and then add that to the PV to get the Total Value Paid
Find PMT, round up, plug back in = 2314.66+/-PMT
Then enter: 1 input 36 # Amort = = 39,516.496... for the Interest cost
Add 400,000 PV = 39516.496... + 400000 = 439516.50
The BPCPA defines Total Value Paid by the Borrower as money paid or to be paid by the borrower to the lender, such as regularly scheduled loan payments and the outstanding balance paid out at the end of the term.

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Question 35

MM2.013

Max has arranged a loan of $232,000 at an interest rate of 7% per annum, compounded semi-annually. Payments are $1,528 per month. What is the period necessary to amortize the loan?

approximately 30 years

2.5 Years

29.9973846 quarters

approximately 10 years

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Review Math 2 - find N

J2=7
Pmt = 12 , do NPEPN = 6.9000...
232000 PV
1528 +/- PMT
0 +/- FV
Press N = 359.9683... months
- convert? YES, asking for years so divide months by 12
359.9683... / 12 = 29.9973... years

#

Question 36

MM6B8.065

A $300,000 variable rate mortgage was written at 5.5% per annum, compounded semi-annually, to be fully amortized over 25 years with monthly payments rounded to the next higher dollar. The mortgage contract specified that the interest rate could be adjusted, on each anniversary of the mortgage to the current market rate. Two years later, the market rate decreased to 4.5% per annum, compounded semi-annually. Calculate the required payments, rounded to the next higher dollar, after the second year, assuming the amortization period is not to be extended and the contract allows variable payments.

1671

1832

1967

1660

---

Review MATH 8 - Variable rate mortgage, find PMT

• Step 1: Find PMT based on original loan terms
  J2 =5.5 ; Pmt = 12 ; N 25# ; PV 300,000 ; FV 0+/-
  Press PMT, round up, plug back in = 1832+/- (rounded up)
• Step 2: Find OSB after first year
  2#N -> FV = 288,049.02... (this becomes the new PV at the beginning of the 3rd year)
  Step 3: Find new PMT based on NEW PV (OSB)
  J2 = 4.5 ; Pmt = 12 ; N 23# (25 - 2) ; PV 288,049.02 ; FV 0+/-
  Press PMT = 1,670.41...+/- = 1,671

#

Question 37

REM6.2082

You have been assigned the task of appraising a small apartment building. The building is 10,000 square feet, and construction costs today are $98 per square foot. Land value is $200,000, and total depreciation on the structure to date is estimated to be 10%. The gross potential rents for the building are estimated at $120,000. Also, the average capitalization rate in the area is 12%. Using the cost method of appraisal, what will be the market value of the property?

1082000

1090909

1180000

1300000

---

Review Comparative & Cost Methods (Appraisals)

Market Value = Cost of the Building - Depreciation + Land Value
1. Find cost of the building = 10,000 x 98 = 980,000
2. Plug the values into the market value formula
= 980,000 - 10% + 200,000 = 1,082,000

#

Question 38

MM3.018

A real estate developer has borrowed $60,000 by way of an interest accruing loan written at J12 = 18%. How much will he owe at the end of nine months?

74400

68603.4

68279.6

70800

---

Review Math 3 - find FV (I.A. loan)

J12 = 18
Pmt = 0 - no payments with interest accruing loans
- NPEPN not needed but could do it anyway (if you do the NPEPN, do not enter lYR and PYR)

9N
18 IYR
60000 PV
0 +/- PMT
12# PYR
Press FV = 68603.398....

#

Question 39

MM8.028

Your clients are retired and have decided to supplement their income with a reverse annuity mortgage (RAM) based on the security of their $600,000 home. The terms of the mortgage specify an interest rate of 6% per annum, compounded monthly and that the borrower will receive $1,500 per month. The bank decides that the RAM will not exceed 60% of market value of the home at the time the loan was written. How many full payments will be received during the term of the loan?

158

117

142

165

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Review MATH 8 - RAM, # of PMTs

J12=6
PMT = 12 , do NPEPN = 6.0000...
How much will the RAM mortgage amount be? 600,000 x 60% = 360,000

0 +/- PV
1500 +/- PMT
360000 FV
Press N = 158.085... = 158 FULL pmts and 1 partial pmt

#

Question 40

REM3.3045

Which of the following statements is TRUE with respect to common law duress?

To make a successful claim of duress, the innocent party has to prove that they were physically harmed by the other party.

A finding of common law duress will automatically void the contract.

To successfully claim common law duress, the innocent party must prove that the contract is substantially unfair.

A finding of common law duress will result in the contract being voidable by the party that was robbed of the free will to contract.

---

Review Law of Contract

• duress = forcing someone to enter into a contract as a result of a threat of actual physical force or by a threat of imprisonment; you do not need to actually be harmed
• duress makes the contract voidable - it allows the forced party who was robbed of their free will to decide whether they want to stay contracted or not
• duress is not about the situation being unfair; it is worse than that because you have been forced and didn't have freedom to choose
• duress makes the contract voidable - it allows the forced party who was robbed of their free will to decide whether they want to stay contracted or not

#

Question 41

MM4.025

A mortgage lending, a 'bonus' is:

The mortgage principal amount outstanding at any point in time.

The portion of the face value of a mortgage loan which exceeds the funds actually received by the borrower.

The amount of the future value of a mortgage loan that is received by the mortgage broker for arranging the loan.

The fee charged by a mortgage broker that can be deducted or added to the future value of the loan.

---

Review Math 4 - PIPI Law

• bonuses added onto a mortgage loan are amounts that are not used to purchase the property (fees, taxes)

#

Question 42

REM7.1048

When the original loan agreement between the lender and a seller of property is replaced by a new loan agreement between the lender and the buyer of the property for the mortgage debt, what legal concept has occurred?

Assignment

Novation

Redemption

Foreclosure

---

Review Mortgage Law

• assignment: where a mortgage lender transfers his or her interest in a mortgage to a third party
• redemption: referring to equity of redemption which is the right to redeem your equity in your property once you have met the obligations in your mortgage contract
• foreclosure: the option/process that a lender may take when a borrower defaults on (misses) their mortgage payments

#

Question 43

REM4.1009

Which of the following actions facilitates the exchange process in a negotiation?

Ignoring the underlying interests and needs of each party.

Determining both parties weaknesses.

Considering as many solutions as possible.

Focusing on, and dedicating significant time to, asserting, and defending the position of each party.

---

Review Negotiations

• ignoring the interests and needs of the parties does NOT facilitate exchange; if you don't listen to what the other person is trying to tell you then you won't be able to negotiate with them
• determining weaknesses is not helpful for negotiation
• having as many options as possible is a good thing
• you do not focus on 'positions' because they have no 'interest'; positions have no reasoning behind them and do not answer a 'why' question like an interest does

#

Question 44

REMS3.2016

The purpose of a code of ethics is to:

A. provide guidelines to ensure that human actions are morally fair as well as lawful. B. replace the rigidity of the legal system for professionals. C. provide a remedy through the courts to people who have been wronged by a professional. D. maintain the reputation of the profession in the eyes of the public.

A and D only.

A and B only.

B and C only.

All of the above

---

Review Professionalism & Code of Ethics

• the Code ensures licensees actions are lawful and moral
• the code of ethics cannot replace the law/legal system
• the law decides/sets out remedies for the courts
• the Code helps maintain the reputation of the profession by ensuring good/better conduct

#

Question 45

REM6.3008

In appraisal, an annual sum set aside for replacement, repairs and renovations is best known as a:

special fund.

cyclical repair.

replacement reserve.

capitalization rate.

---

Review Income Method (Appraisals)

• made up/nonsense answer
• cyClical repairs: repairs that are done on a periodic basis, an appropriate annual allowance should be made to cover the total periodic cost
• correct
• capitalization rate is the average return on investment for multiple properties (average of multiple yields from more than one example property)

#

Question 46

REM7.1065

The following statements concern the rights and preferences of the petitioner and respondents in foreclosure. Which of these statements is FALSE?

If the value of the property is less than the amount of mortgage debt owed to the petitioner, the mortgagor would want the property to be foreclosed, while the petitioner would want the property to be sold in a judicial sale.

Where the value of the property exceeds the total amount of mortgages, the respondents would want a judicial sale, but the petitioner would prefer the property to be foreclosed.

Where the court orders a judicial sale, the petitioner may make an offer, and if the court approves the offer, the petitioner will become registered owner, and still be able to sue the mortgagor for any shortfall between the sale price and the mortgage debt.

Where the value of the property being foreclosed exceeds the total amount of the mortgages, both the petitioner and the respondents will desire a judicial sale of the property.

---

Review Mortgage Law

Rights and preferences of petitioner and respondents = what path/choice would the lender and the borrower prefer? If there is equity, then the borrower wants a judicial sale because they get the excess monies from the sale, but the lender would want to go with an order absolute in this situation because then the lender gets to keep the excess monies.
If asking you about what is false, then you look for a statement where they would agree on the path.
If they ask you for what is true, then you look for a statement where they disagree on the path.

#

Question 47

REM7.2022

Orwell is purchasing Winston's house. Given the following information, calculate the cash proceeds of sale payable to Winston on completion: Price: $375,000 Deposit paid to brokerage: $60,000 Financing: 1st mortgage of $115,000 to be assumed. 2nd mortgage of $80,000 has been arranged by Orwell. Taxes: The taxes in the amount of $1,500 are not due before completion. Commission: 5% of sale price. Conveyancing Fees: $1,100 Adjustment, Completion, Possession Date: May 15th Note: It is not a leap year.

240699.32

240695.21

355669.32

242199.32

---

Review From Contract to Completion

• Credits:
  375,000 (purchase price)
• Debits:
  115,000 (assumed mortgage)
  18,750 (commission) 375,000 x 5%= 18,750
  550.68 (Property taxes)
  Property taxes calculation (seller's portion):
  Jan - May 14 = 31 + 28 + 31 + 30 + 14 (BUYER PAYS FOR MAY 15)
  = 134 / 365 x 1,500 = 550.68, seller's portion
  (debited to the Seller, credited to the Buyer)

#

Question 48

REM6.1046

You are interested in purchasing a house listed for sale and are aware of the asking price. Consider the following:

A. the ceiling price will be equal to or above the asking price. B. the probable sale price will be equal to or above the vendor's "value to owner". C. the probable sale price will be equal to or above the floor price. D. the ceiling price will be equal to or below the asking price.

Which of the above statements are TRUE?

Only A is true.

Only B and D are true.

Only A, B and C are true.

Only B, C and D are true.

---

Review Appraisals Introduction

• ceiling price is highest price you are willing to pay and is not likely to be above the asking price (asking price is not the same thing as floor price); do you/buyers look at asking price and think: "I want to pay MORE!" - no, you usually want to negotiate the most advantageous, lowest price
• vendor's value to owner = floor price (see next point)
• floor price (FP) is lowest seller is willing to accept so the sale price will be at least equal to or possibly more that the FP
• ceiling price is highest price you are willing to pay and is not likely to be more than the asking price (asking price is not the same thing as floor price)

#

Question 49

MM8.043

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

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

A low credit score indicates a high risk of delinquency.

A credit score of 0 may mean that the applicant has very little or no credit.

In order to improve a credit score, a borrower should not exceed the credit limits on his or her credit cards.

---

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 and terms

#

Question 50

REM3.1040

The RR Corporation sold all 15 of the inflatable rafts that produced during the year for $4,400 each. This is the first year of production for RR so there were no rafts in inventory at the beginning or end of the year. To produce these rafts the corporation incurred operation expenses of $31,000, and interest payments of $3,500. Assuming that each raft cost $1,100 to produce and income taxes for the year amounted to $7,500, what is RR's after-tax Net Income?

7500

31500

18500

15000

---

Review Financial Statements

Corporation's Income statements must also include subtracting income tax
Net income = Revenues - Expenses - Income tax
= 66,000 (4400 x 15) revenue from selling the rafts for $4400 each

• 16,500 (1100 x 15) cost to produce the rafts at $1100 each
• 31,000 operating expenses
• 3500 interest payments
• 7500 income taxes
  = $7500, after-tax net income for RR Corp

#

Question 51

0.036

The business practices and consumer protection act requires that a disclosure statement be given by mortgage brokers and lenders to individuals who borrow for primarily personal, family or household purposes:

Only when the broker is charging a brokerage fee

If the annual percentage rate is above 10%

2 days prior to the borrower incurring an obligation under a credit agreement, unless the time period is waived by the borrower.

Only when the broker or lender is charging additional fees and expenses.

---

Review Math 8 - disclosure

• the BPCPA requires that a Disclosure Statement, Notice, or Statement of Account must be given to the borrower: 2 days prior to the borrower incurring an obligation under a credit agreement (unless waived by the BORROWER); once every 12 months if the interest rate is floating; within 30 days of the borrower missing a payment or a default charge being imposed by the lender; within 30 days of any 1% or greater increase in the interest rate for agreements with rates subject to change; within 30 days after an amendment to the credit agreement; within 21 days prior to the end of a mortgage term, if the mortgage is being renewed; every month if the loan is for open credit (your credit card statement)

#

Question 52

REM6.3019

Deb recently sold her property for $675,000. The stabilized annual net operating income for the property is $64,000. Calculate the yield on this property.

0.90 %

0.9090909091 %

9.48148148 %

10.546875 %

---

Review Income Method (Appraisals)

Yield = NOI/Sale price
= 64,000 / 675,000 = 0.094814.. x 100 = 9.48148148..%

#

Question 53

REM7.1041

In an agreement for sale:

The buyer is immediately registered on title, and the seller has a contractual right to collect the purchase price in installments of principal and interest.

The buyer may take possession of the property only after paying the entirety of purchase price.

The seller remains on title and the buyers interest, as the holder of an agreement for sale, is registered as a charge against the sellers title.

The seller executes a freehold transfer to the buyer as soon as the buyer takes possession of the property.

---

Review Mortgage Law

• "buyer is immediately registered...right to collect... principal and interest." answer: describes a normal mortgage contract and loan
• under an agreement for sale, the purchaser gets immediate possession of the property
• agreement for sale (rent to own): the seller/vendor remains the owner of the property until the purchaser pays an agreed upon amount to the vendor (could be a downpayment or the full purchase price), by instalments over time (usually along with/in addition to the rent payments
• the freehold transfer is not executed until an agreed upon amount is paid to the seller

#

Question 54

REM7.1049

Which of the following statements about federal legislation governing mortgages is FALSE?

The Interest Act provides that if the mortgage agreement requires interest payment but does not specify the rate of interest chargeable, the rate allowed by law is 5%.

Criminal Law defines a criminal rate of interest as an effective annual rate in excess of 60%.

The Interest Act gives borrowers the right to attack the rate of interest being charged in a mortgage on the basis that the rate is either harsh or unconscionable.

Section 10 of the Interest Act provides an individual with the right of prepayment on his or her mortgage at the expiry of five years from the date of the mortgage if the mortgage provides that it is not payable for more than 5 years from the date of the mortgage.

---

Review Mortgage Law

• the Business Practices Consumer Protection Act (BPCPA) gives borrowers the ability to attack the rate of interest on a mortgage loan if they think it harsh/unconscionable (not reasonable, unreasonably excessive)"

#

Question 55

REM3.1057

A sole proprietor purchases a camera for his business at a cost of $3,500. The camera has an estimated economic life of 10 years and an annual depreciation expense of $325, using the straight-line method. What is the camera's estimated salvage value?

250

275

325

350

---

Review Financial Statements

Straight Line method
Rearrange the formula to find Salvage value:
Depreciation expense (ADE) = (cost - salvage value) / estimated life
(ADE x life) = cost - salvage value
(ADE x life) - cost = - salvage value
can't have salvage value be negative so you need to multiply both sides of the equation by -1
Cost - (ADE x Life) = Salvage value

You can also choose to just memorize this rearranged formula:
Salvage value = Cost - (ADE x Life)
= 3500 - (325 x 10)
= 3500 - 3250
= 250, salvage value

#

Question 56

REM2.1021

Which of the following is NOT a likely remedy for private nuisance?

Damages

Specific performance

Abatement

Injunctive relief

---

Review Professional Liability

• remedies acronym for nuisance: AID

#

Question 57

REM7.1047

Mikayla, a mortgage lender, assigns a mortgage worth $860,000 to Alvin on July 10th. On July 15th, Pinder receives notice of assignment of the mortgage from Mikayla to Alvin. On July 31st, Pinder, the borrower, pays Mikayla the $3,000 monthly mortgage payment. Pinder's liabilities on August 1st are:

$ 860,000 to Mikayla

$ 857,000 to Alvin

$ 857,000 to Mikayla

$860,000 to Alvin

---

Review Mortgage Law

• when a mortgage contract is assigned, the investor/lender who buys it needs to give notice to the borrower that they are the borrower's new lender
• Pinder paid $3,000 to Mikayla (previous lender) that should've gone to Alvin (new lender) - but it is Pinders mistake because Pinder was given notice about the assignment BEFORE that payment was due. Which means that Pinder is still liable to Alvin for the entire $860,000
• Pinder would need to pursue/sue Mikayla for the $3,000

#

Question 58

MBM1.3027

Which of the following statements regarding the misleading of mortgage lenders is TRUE?

If a mortgage broker does not verify a particular piece of information from a borrower he/she does not have to advise the lending institution of this fact.

financial institutions are encouraged to report to the Registrar of Mortgage Brokers instances of false information parsed on by mortgage brokers

mortgage brokers may safely rely on all of the information provided to them by potential mortgage borrowers in support of a mortgage application.

the failure to provide mortgage lenders with accurate information is an ethical breach only

---

Review Mortgage Brokers Act

• mortgage brokers have a legal and ethical duty to verify all information provided by borrowers/clients and report to the lender (lending institution) when they have not done so
• misleading a lender (financial institution) is unethical, fraudulent, and is considered conduct that is contrary to the public's interest and should be reported to the Registrar (and may lead to disciplinary proceedings by the Registrar)

#

Question 59

REMS3.3043

Ada, a real estate licensee, is listed as the selling representative with regard to the sale of Jacon's house to Odev. After the sale completed, Odev discovered that the top floor of the house was sloped. Ada, Jacon, and Odev had not noticed this before, although the defect was discoverable using ordinary diligence. Based on the above, which of the following statements is TRUE?

Neither Ada nor Jacon is liable to Odev for failing to tell Odev about the defect.

Ada had a responsibility to inspect the premises for structural soundness and defects before listing it for sale.

The sloping floor is a latent defect that should have been brought to Odev's attention

Both 2 and 3 are true statements

---

Review Law of Contract

• patent defects do not need to be "disclosed" since they can be found upon reasonable inspection
• licensees do not have to "inspect" properties, but they do have certain disclosure requirements; Ada is not the listing licensee, she is the selling agent and is working for the buyer
• the sloping floor is a patent defect because it states that it was "discoverable using ordinary diligence" but since it is a patent defect there is no disclosure requirement
• "Caveat emptor" = "let the buyer beware" and means it is the buyer's responsibility to do their due diligence to get an inspection done before buying a property; caveat emptor applies because the sloping floor is a patent defect and that should have been discovered by the inspecto

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Question 60

REM2.1013

Which of the following could NOT be used as a defense to a claim of negligence against a defendant?

The defendant did not plan to cause injury or damage to the plaintiff.

A duty of care was not owed to the plaintiff.

The damage suffered by the plaintiff could not be reasonably anticipated by the defendant.

The defendant did not breach the standard duty of care

---

Review Professional Liability

• it makes no difference if you did not intend to cause injury to the other party/client/customer; negligent misrepresentation = careless (intentional/on purpose/deceit/lying = fraudulent misrepresentation)

#

Question 61

REM7.1055

Jessen grants Margaret a mortgage over his property, Stonehenge Grotto. One of the terms in the standard mortgage contract that they execute allows Margaret, aside from pursuing a foreclosure, to exercise the remedies of an ordinary creditor if Jessen defaults. If Jessen defaults and Margaret pursues this option, she will be taking action on the:

order nisi

personal covenant

collateral advantage

priorities

---

Review Mortgage Law

• order nisi is part of the foreclosure process
• if Jessen defaults, Margaret is going to use her ability to act as an ORDINARY creditor (apart from foreclosure = not use any lender's default/foreclosure remedies) which means that she would rely on Jessen's promise to pay = personal covenant (which is an implied term of any contract)
• collateral advantage: a collateral advantage is an extra advantage over and above the repayment of principal and payment of interest
• priorities refers to the competing charges and claims against the property and which ones get priority for payment over the others

#

Question 62

REM1.4007

Which of the following statements about the B.C. Torrens system is TRUE?

A caveat will automatically expire two months after it is registered on title.

Registered documents must be in the form prescribed by statute law to be enforceable.

A charge registered on title is indefeasible.

Trustees are shown on title as the registered owners of an estate or interest in land, with no notation that the trust exists, and beneficiaries are protected only by a caveat that also needs to be registered on title.

---

Review Title Registration in BC

• a caveat automatically expires/lapses after 2 months
• there is no prescribed form for the lawyers documents to charge/register items onto the title; any form can be used as long as they are legal and do what they're supposed to do
• charges are defeasible (can be overturned, can be taken away) - they are not indefeasible and are not protected by the principle of indefeasibility
• trustees/Trusts ARE indicated on title as well as the beneficiary of the trust

#

Question 63

MM7.008

Which of the following was created by Canada Mortgage and Housing Corporation (CMHC)?

Virtual banks

Ginnie Mae Mortgage-Backed Securities

Canada Housing Trust Bonds

Credit unions

---

Review Math 7

• in 2001, CMHC launched Canada Mortgage Bonds to increase the supply of low-cost mortgage funds in Canada, and provide easy access to investment in Canadian residential mortgages; the Canada Mortgage Trust is the organization created by CMHC to issue these bonds

#

Question 64

REM7.4009

Which of the following statements regarding digital signatures is FALSE?

The purpose of a digital signature is to authenticate or guarantee that the individual sending the message really is who he claims to be.

A digital signature uniquely identifies the sender by including a picture file of the sender's written signature.

To be effective, digital signatures must be "unforgeable".

Digital signatures are used to authenticate the individual sending the message so as to ensure the integrity of the data.

---

Review Technology

• digital/e-signature: an encrypted code attached to an electronically transmitted messages; acts like an electronic "seal" (from Law of Contract chapter); uniquely identifies the sender; authenticates or guarantees that the individual sending the message really is who they claim to be; ensures the integrity of the data (that it has not been altered in any way)
• to be effective, digital/e-signatures must be impossible to forge

#

Question 65

MM7.001

The higher the borrower's amortization period, the:

longer the borrower's term.

lower the borrower's interest rate.

lower the borrower's payment.

the sooner the mortgage loan will be paid off in full.

---

Review Math 7

• if you lengthen the Amort, you will take longer to pay off the PV because you will have smaller payments, pay more interest, and each payment will pay off less of the PV per payment (payment is made up of principle and interest)

#

Question 66

MM5.008

Three years ago, you bought a house at which time you arranged a mortgage in the amount of $520,000 The loan was written at a rate of 4.75% per annum, compounded semi-annually, with a 5 year term, 25 year amortization period and monthly payments. You have just received an offer to buy your house. The offer is to provide $60,000 cash and to assume the existing financing for the remainder of the term. If current lending rates for 2 year term mortgages are 5.75% per annum, compounded semi-annually, what is the market value of the offer?

$ 532106.49

$ 484174.13

$ 536068.2

$ 544174.13

---

Review Math 5 - PIMPO

J2 = 4.75
PMT = 12 , do NPEPN = 4.7036...
25# N
520000 PV
0 +/- FV

P: Press PMT = -2950.769.. = 2950.77+/-PMT
I: 5#N, press FV = 458410.381... ; 2#N (years left on 5 yr term)
M: J2 = 5.75 , do NPEPN = 5.6823...
P: Press PV = 476068.200...
O: +60000 = 536068.200...

#

Question 67

REM1.2018

In a real estate transaction, an item that is excluded from the purchase price and can be removed by the seller when he or she vacates the property is known as a/an:

chattel.

feature.

easement.

fixture.

---

Review Estates and Interests in Land

• fixtures are affixed to the property for the enhancement of the property and stay with the property (and become the property of whoever owns/buys the land)
• chattels are sometimes not affixed at all but if they are, then they are affixed for the better enjoyment of the object/item/chattel; chattels are removed by the seller when they vacate
  the property

#

Question 68

MBM1.3024

Which of the following persons is NOT a "sophisticated person" for purposes of disclosure to investors and lenders (Form 9)?

A person who earns more than $250,000 per year.

A savings institution.

A mortgage broker acting as a principal.

A trust company.

---

Review Mortgage Broker's Act

• sophisticated Persons: a government/ municipal /corporation, a savings institution, an insurance/ trust company, a mortgage broker acting as principal, a person registered under the Securities Act

#

Question 69

MM8.034

You are arranging a mortgage loan with a face value of $ 575,000. You have calculated that the Total Cost of Credit to the borrower will be $220,000, and the average outstanding principal over the 4 year term of the loan (P) will be $562,500. What is the Annual Percentage Rate (APR) that you must disclose on the disclosure statement. Note: APR = (100xC)/(TxP).

9.777778 %

7.822222 %

5.189189 %

6.392025 %

---

Review MATH 8

APR = (100xC)/(TxP)
100 x C = 100 x 220,000 = 22,000,000
Tx P= 4 x 562,500 = 2,250,000
APR = 22,000,000 / 2,250,000 = 9.777..%

#

Question 70

REM6.2019

The current cost of constructing an exact replica of the subject property is best known as:

Historic cost.

Reproduction cost.

Site value.

Replacement cost.

---

Review Comparative & Cost Methods (Appraisals)

• reproduction = re-produces an exact replica using the same building materials and components as in the original

#

Question 71

REM4.3013

Matty is Hank's agent with the express authority to lease Hank's ski chalet for the summer months. However, in his capacity as Hank's agent, Matty accepts an offer to purchase the ski chalet instead. When Hank discovers what Matty has done, he is so impressed by the price, he calls the purchasers to tell them that he adopts Matty's act. Which of the following is the result of these actions at law?

When Hank adopted Matty's act, he created legal authority by means of revocation.

Hank did not need to ratify Matty's actions as he had implied authority.

Hank did not need to adopt Matty's act because Mark had apparent authority.

When Hank adopted Matty's act he became bound by the contract as if Matty had been explicitly authorized to create the contract in the first place.

---

Review Law of Agency

• revocation = revoke/take back/withdraw an offer
• this is not an example of implied authority; implied authority is exercised to get the job done (to carry out the express authority) which in this case was to LEASE the premises (not to sell it)
• apparent authority occurs with an agency by estoppel relationship where the principal misleads 3rd parties
• this is an example of ratification because Matty stepped outside his warranty of authority and needed his principal to give him permission to do what he had already done (sell the property)

#

Question 72

REM1.4012

Graham is the registered owner of 122 Shell Road property, a property located just outside Kent. Danny forges and registered a transfer of 122 Shell Road to himself and then borrows $630,000 from FatCat bank. The loan is secured against 122 Shell Road by way of a mortgage. Which one of the following statements is TRUE?

FatCat is secure in relying on Danny's title

Graham can recover 122 Shell Road but the title to the property will remain encumbered by the FatCat mortgage

Because of the forgery, Graham can recover 122 Shell Road free of the FatCat Mortgage

FatCat may recover its $630,000 from the assurance fund.

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Review Title Registration in BC

• FatCat, as a lender, has a higher due diligence to investigate title and they cannot rely on title like a buyer can (the bank cannot rely on the principle of indefeasibility and abolition of notice)
• because of the void deed (Danny forging the title), Graham can recover title without the mortgage
• because of the void deed (Danny forging the title), Graham can recover title without the mortgage
• FatCat, as a lender, has a higher due diligence to investigate title and they cannot rely on the principle of indefeasibility or the assurance principle so they cannot recover any losses from the assurance fund

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Question 73

REM6.2051

In applying the cost method of appraisal to the valuation of a single-family residence built forty years ago:

The original construction cost from forty years ago should be used to represent the costs of construction.

The current costs on a replacement basis should be used to represent the costs of construction.

The historic costs on a reproduction basis should be used to represent the costs of construction.

The exact costs incurred when the residence was built forty years ago should be used to represent the costs of construction.

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Review Comparative & Cost Methods (Appraisals)

• original/historic costs are not used
• when using the cost method, current costs are almost always used
• this description mixes historic costs and reproduction (exact replica) costs, historic cost is never used and reproduction/replica cost is very rarely used
• this describes reproduction (exact replica) costs which is very rarely used

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Question 74

REM2.1006

Which of the following are necessary for Sharon, a property management licensee, to be liable for the tort of innocent misrepresentation? A. Sharon negligently gave a statement of fact or opinion. B. The person to whom the statement was given reasonably relied on the statement and it was harmful to them. C. Sharon made a clear qualification to disclaim any liability for the statement's veracity. D. Sharon needs to have a pre-existing contractual relationship with the person she speaks to.

All of the above.

A, B and C

A, B and D

A and B

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Review Professional Liability

• you need to make a misrepresentation of fact or opinion
• it needs to be part of the reason that someone made a decision/took an action (formed a contract); and suffered because they relied on your misrepresentation
• misrepresentations can be oral or written
• if you make a qualifying statement then it would protect you from negligence and relieves you of liability
• you don't need to have a contract in place

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Question 75

REM1.2005

Which of the following situations are consistent with the continuing existence of a joint tenancy under current British Columbia law?

The document transferring Blue Spruce Acres to Jeremy and Jimmy as co-owners does not expressly state how they hold the property or what interest each owns.

Parker, Petra and Patricia are co-owners as joint tenants of Blue Spruce Acres. Petra suddenly dies and Patricia and Parker are automatically the sole co-owners.

Anne and Angus are co-owners as joint tenants of Blue Spruce Acres. Anne, after getting into a fight with Angus, transfers her interest to her brother Brian.

Mandy and Moses are co-owners of Blue Spruce Acres. Mandy owns the east half of the property and Moses owns the west half.

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Review Estates and Interests in Land

• if the title transfer document does not indicate what type of ownership it should be, then it will be registered as a Tenants-in-Common (TIC)
• when a joint tenant dies, their interest is split between the remaining joint tenants
• Joint Tenancy (JT) interests cannot be transferred to another party
• for both JT and TIC interests, the Unity of Possession must exist; this Unity gives each owner an equal, undivided ownership in the property

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Question 76

MM6.031

Federally regulated financial institutions require mortgage insurance on loans with loan-to-value ratios higher than:

75 %

80 %

85 %

90 %

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Review Math 6 - Law

• conventional mortgages - a loan UP TO a maximum of 80% of the lending value
• if a mortgage loan has a loan-to-value ratio of MORE than 80%, it is known as a high-ratio or insured mortgage and typically needs to be insured

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Question 77

M2.022

Mario is arranging a third mortgage with Shady Financiers, a local finance company. The loan amount is $22,000, the interest rate is 19.75 per annum compounded semi-annually, the amortization period is 15 years and the contractual term is 5 years. If the monthly payments are rounded up to the next higher $10, calculate the outstanding balance at the end of the term.

19743.29

19826.9

19334.45

$ 41 ,826.9

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Review Math 2 - find OSB

J2 = 19.75
PMT = 12 = NPEPN = 18.9822...
15#N
22000 PV
0 +/- FV
Press PMT = -369.963...
- Step 1. Find PMT, round up, plug in: 370+/-PMT
- Step 2. Apply Term (N+F): 5#N, press FV = -19826.902...

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Question 78

MM6.001

A potential borrower with an annual income of $100,000 and net real property taxes of $5,000 per annum has been told by a mortgage lender that the largest loan available will be $390,551.90. What is the maximum gross debt service ratio allowed by the lender given that the loan has annual payments and is to be written at 4% per annum, compounded annually and amortized over 25 years?

28 %

30 %

31 %

32 %

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Review Math 6 - find GDS%

Find PMT:
J1=4
PMT = 1
NPEPN: 4#NOM, 1#PYR, #EFF, 1#PYR, #NOM = 4.0000...
Enter: 25# N ; 390551.90 PV ; 0 +/- FV
Press PMT = -24999.999... = 25000/yr
PMT =| x GDS% - tax + rearrange this formula (go to lesson videos for help)
GDS% = PMT + Tax /|
= 25000/yr + 5000/yr = 30000/yr / 100000/yr = 0.3000...x 100 = 30%

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Question 79

MM4.032

The Bridals borrow $210,000 written at J1=7%, with quarterly payments over 20 years and a 4 year term. Included in the face amount is a $2,200 fee and $1,500 legal expense. What is the effective annual rate on the funds advanced?

6.82341 %

9.5243 %

7.36049 %

7.56615 %

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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
|: 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 J1 (effective rate), press #EFF = 7.5661...

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Question 80

REM7.3001

The shopping behavior model defines shopping goods as:

Goods that a consumer will not buy unless the see or hear about the goods.

Goods that possess some characteristic which causes the consumer to want that particular product or service.

Goods that a consumer purchases frequently and needs immediately.

Goods purchased by the consumer only after having made comparisons of competing goods or services on the basis of price, quality, style, colour and service quality.

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Review Marketing

• Unsought goods - consumers do not necessarily want or know about these and are unlikely to buy these unless they see or hear about it through personal marketing or promotional items
• Specialty goods - possess some characteristic causing the consumer to want that particular product or service and no other substitute
• Convenience goods - purchased frequently and used immediately
• Shopping goods - purchased only after comparisons are made of competing goods on the basis of price, quality, style, colour, and service quality

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Question 81

REM3.3009

Jared, a strata manager, recently signed a contract with a waste disposal company for the removal of waste and recyclables from the strata corporation that he manages. The terms of the contract stipulate that the garbage will be removed twice per week, on Mondays and Thursdays, and that the garbage will be removed by noon on those days. With respect to the terms of the contract, which of the following statements is TRUE?

The requirement to remove garbage twice per week is a core term of the contract, known as a warranty.

The requirement to remove the garbage twice per week is a core term of the contract, known as a condition.

Whether a term is a condition or warranty has no impact on the remedies that are available following a breach of the contract.

Only a breach of a warranty will allow the contract to be terminated.

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Review Law of Contract

• condition: contractual promise that is fundamental to the contract, breach of which allows the injured party to terminate the contract. A condition is a term that goes to the very heart or root of the contract.
• warranty: a promise that is not fundamental to the contract. For example, if A contracts to buy B's home, and one term is that the master bedroom be painted before possession, a breach of this obligation is probably a breach of warranty

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Question 82

REM6.2050

A long-term conservative estimate of the value of the property pledged as security for a loan is known as:

The value to the owner.

The market value.

The lending value.

The mortgage value.

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Review Appraisals Introduction

• must be able to know the different definitions of market value and lending value

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Question 83

REM2.3026

In a strata corporation, who owns the fee simple interest in the common property?

The strata corporation, as trustee for the strata lot owners

The strata council, on behalf of the strata lot owners

The owner-developer or company that filed the strata plan, as a trustee for the strata lot owners

The strata lot owners

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REVIEW Strata Properties Condos and Co-ops

• the OWNERS own the common property, not the strata corp; the strata corp is not a trustee for the owners; and trustees are not the owners of the properties that they manage (they manage them on behalf of the owners) so when any answer says a trustee is the owner of the property, that is FALSE
• the strata council does not own the common property (it is made up of only a few owners and is not listed on title as the owner)
• the owner-developer does not own the common property; the developer is not a trustee for the owners; trustees never own the properties that they manage
• the OWNERS own the common property and hold title for it

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Question 84

MM5.026

Tanner has put his house up for sale for $260,000. Jerome has made an offer consisting of $95,000 cash and a mortgage loan for the balance. The mortgage loan has a 15 year amortization period with monthly payments over a 5 year term. The rate is J2 = 6%. The market rate for similar mortgages is J2 = 7.5%. What is the market value of Jerome's offer?

$ 251 582.17

251483.01

251016.87

245547.47

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Review Math 5 - PIMPO

J2=6
PMT = 12 , do NPEPN = 5.9263...
15#N
16500 PV (260000 - 95000)
0 +/- FV
P: Press PMT = -1385.806... = 1385.81+/-PMT
I: 5#N, press FV = 125240.992...+/-
M: J2 = 7.5 , do NPEPN = 7.3854...
P: Press PV = 156016.872...
O: +95000 = 251016.872......

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Question 85

MM8.060

Any payment of principal over and above the regular periodic payments, whether it occurs during or at the end of the loan term, is best known as:

an arrears payment.

a constant payment.

a balloon payment.

an accelerated payment.

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Review Math 8 - balloon payment

• arrears = late payment
• constant payment - when a loans payments never change (most loans are constant pmt loans)
• 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
• accelerated payment - not specific enough to know what this is referring to

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Question 86

REM2.3003

Amanda has decided that she wants to convert her apartment building to a condominium development. Amanda knows that the conversion must be approved by the municipal council. In making its decision, which of the following criteria in the municipal council required, by statute, to consider?

A. Whether Amanda has complied with the disclosure statement requirements set out in the Real Estate Services Act B. The priority of rental accommodations over privately owned housing in the area. C. The life expectancy of the building D. Public option on the location of the building

Only B, C and D

Only B and C.

Only A, B and C.

All of the above.

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Review Strata Properties Condos and Cooperatives

• disclosure statement requirements are for developers under the RE Dev Marketing Act
• it is not mandatory to consider the potential increase in real property tax revenue to convert a rental building to a condominium

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Question 87

REM3.1044

Which of the following statements regarding corporations is TRUE?

A corporations individual shareholders liability is limited to their investment in the company.

A corporation is not a legal entity separate from its owners and managers.

Individuals who acquire shares in a corporation own the assets of the company.

A Corporation does not pay income taxes.

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Review Financial Statements

• shareholders legal liability/responsibility is limited to their share in the company
• a corporation is considered a person (a legal entity) under the Law
• shareholders do not own the assets of the corporation
• corporations are subject to Income tax - they are considered a person (a legal entity) by Law

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Question 88

MBM1.3003

Which of the following forms of discipline would NOT be open to the disciplinary committee of a mortgage brokerage professional association?

Suspension of a registration under the Mortgage Brokers Act

A reprimand

Suspension of membership privileges

Reimbursement for the costs of the disciplinary hearing

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Review Mortgage Broker's Act

• discipline options include: a reprimand; a suspension of membership privileges (in the association, NOT the license); monetary fine, amount set by the hearing panel; the costs of the hearing; expulsion from membership (of the association, NOT taking away your license); successful completion of certain educational courses
• only the BCFSA can suspend or cancel your registration (your license) under the MBA

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Question 89

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.

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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

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Question 90

REM1.1034

Which of the following BEST describes the difference between common law and statue law?

Statue law refers to judges written decisions, and the common law refers to unwritten legal principles and customs.

When responding to a legal question, the judge will first look to common law and will then use statue law to fill in the gaps.

Common law refers to judge-made law typically recorded in written decisions, while statue law refers to legislation passed by governments.

Common law refers to the generally applicable laws passed by governments, while statute law refers to specific principles enacted under those general common laws

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Review Fundamentals of Law

• common law is made up of written decisions and statute law is legislation that has been enacted (passed) by government
• the court will use the most current law, whenever possible

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Question 91

REM1.2047

A small town in British Columbia, Hope, passes a bylaw which requires that anyone who runs for mayor to own an interest in land in Hope. Any valid interest in land, no matter how small, qualifies under this bylaw. Which of the following people would NOT be able to run because of this bylaw?

Peter, a resident of PEI, buys an airspace parcel above a private residence in Hope.

Kelly, a resident of a neighbouring town, has the right to operate her hot dog stand in Hope's central park.

Gunther, a resident of Calgary, is the remainderman of a fee simple estate in Hope.

Kathy has a month to month lease in an apartment in Hope.

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Review Estates and Interests in Land

REQUIREMENT to run for mayor - own an interest in land in Hope
Peter - airspace, is an interest in land
Kelly - holds a License, not an interest in land
Gunther - remainderman, will inherit an interest in land when his parents die
Kathy - a lease is an interest in land

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Question 92

MM6.041

What will be the maximum loan (rounded to the nearest dollar) granted on a commercial building with the lending value of $4,250,000 and yielding a net operating income of $300,000 per year, where the lender requires a debt coverage ratio of 1.2 and a 70% loan-to-value ratio? The loan will be amortized over 20 years with annual payments and the interest rate of 7% per annum, compounded annually.

2437500

2648504

3107425

2975000

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Review Math 6 - find DCR

1. M=LV xLTV% = 4250000 x 70% = 2975000 (not the lowest answer)
2. PNOID formula: PMT = NOI / DCR = 300000/yr / 1.2 = 250000/yr
   J1=7
   PMT = 1 , do NPEPN = 7.0000
   20# N
   250000 +/- PMT
   0 +/- FV
   Press PV = 2648503.561...
   Compare M and PV and choose the lower answer:
   M = 2975000 ; this is LOWER, this is the correct answer
   PV = 2648503.561... = 2648504

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Question 93

REM1.2031

Which of the following elements is NOT required in order to establish a restrictive covenant?

It must be negative in nature.

Both the benefited and burdened land must be precisely identified in the agreement of document creating the restrictive covenant

The burden of the restriction must have been intended by the parties to bind the land.

The covenantor must also retain the restricted property as any subsequent purchaser will not be a party to the original contract.

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Review Estates and Interests in Land

• restrictive covenants must be negative in nature
• a restrictive covenant must have both parcels clearly identified
• a restrictive covenant must be binding on both the parties to bind the land
• because the restrictive covenant runs with the land it will still be in effect if the property is sold - there is no need for the original covenantor to keep the property

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Question 94

REM7.3006

The Promotional Mix is a blend of:

Publicity, sales promotion, public relations, advertising, and personal selling.

Product, price, personal appearance, public relations, and sales promotions.

Product, niche marketing, public relations, pricing, and personal marketing.

Product, price, place, and personal appearance.

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Review Marketing

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

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Question 95

REMS3.1035

Which one of the following will NOT be found of the corporation balance sheet?

Retained earnings to date

Names of the corporations shareholders

Original cost of the property owned by a corporation

Number of shares issued

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Review Financial Statements

• retained earnings are on the balance sheet of a corporation
• Names of shareholders are not on a balance sheet because there may be a million names (Pepsi or Apple, for example)
• cost of assets owned are on a balance sheet
• number of shares and value of each share would both be on the corporations balance sheet

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Question 96

REMS3.2002

The duty of fair dealings and high integrity:

Recognizes that a licensee cannot pursue his or her client's goals at all costs, with no consideration of the impact it may have on others, particularly the other parties to the transaction.

ls categorized as one of the duties owed exclusively to one's clients.

Recognizes the importance of maintaining clients' confidentiality with the utmost discretion.

Requires that a licensee present all options to a client, regardless of how favourable each option may be to the licensee on a personal level

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Review Professionalism & Code of Ethics

• licensees must communicate all offers to the Client in a timely, objective and unbiased manner (unbiased means not influenced by inappropriate considerations like personal interest)

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Question 97

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.

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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)

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Question 98

MBM1.3005

John is a member of a mortgage brokerage professional association and has just been found by a disciplinary committee to have breached the association's by-laws. Which of the following penalties are likely to be available to the association to impose on John?

A. Suspension of the use of association's member services. B. Performance of community service. C. Imprisonment for offences which are also criminal in nature. D. A monetary fine.

A, B, and D only

A and D only

B and C only

All of the above

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Review Mortgage Broker's Act

• discipline options include: a reprimand; a suspension of membership privileges (in the association, NOT the license); monetary fine, amount set by the hearing panel; the costs of the hearing; expulsion from membership (of the association, NOT taking away your license); successful completion of certain educational courses
• the Registrar's powers of investigation are broad:
• Registrar's staff are allowed to enter brokerage offices, inspect all books of account and other records, and to seize any relevant information
• Registrar can summon and enforce the attendance of witnesses and compel them to give evidence and produce documents, property, assets, etc. (withholding/failure to cooperate makes that person liable to be convicted for contempt by a court)
• Registrar is also given to freeze the trust funds of any mortgage broker pending the outcome of an investigation
• the Registrar CAN investigate criminal fraud - this is done largely through relicensing and the need for a criminal record check

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Question 99

REM4.3008

Scott hires Eric to act as his agent. In the course of acting within the scope of his authority for Scott, Eric discloses to David, a third party, that he is acting as an agent for Scott, and enters into a contract with David on that basis. Who are the parties to this contract?

Eric and Scott.

David and Scott.

David, Eric and Scott.

None of the above combinations.

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Review Law of Agency

• agents (Eric) are not part of ANY contracts

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Question 100

MM4.024

A mortgage loan with a face value of $475,000 is arranged through a mortgage broker. A commission of $7,250, appraisal fees of $425, as well as survey and legal fees of $600 will be deducted from the face value before the funds are advanced to the borrower. Calculate the cost of funds advanced to the borrower, expressed as an effective annual rate, if the loan is written at 5% per annum, compounded semi-annually, with monthly payments over a 25 -year amortization and a 5 year term.

5.344991 %

5.368395 %

5.502478 %

6.954952 %

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Review Math 4 - PIPI

P: find PMT round up and plug back in
J2=5
PMT = 12
NPEPN: 5#NOM, 2#PYR, #EFF, 12#PYR, #NOM = 4.9486...
Enter: 25# N ; 475000 PV ; 0 +/- FV
Press PMT = -2762.623... = 2762.63 +/- PMT
|: Apply Term, N + F
5#N, press FV = 420410.229...
P: 475000 - 7250 - 425 - 600 PV (should be 466725)
I: press IYR = 5.3683... = J12
Convert? YES, asking for J1 (Effective), press #EFF = 5.5024...

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