Mock Exam 100-3

#

Question 1

MBM1.3036

There are many variations of identity fraud. Which one of the following is NOT an example of an identity fraud?

A fraudster electronically obtains information on a property and the registered owner, then forges a transfer of title into his own name.

A fraudster creates a fake letter of employment listing a co-conspirator's phone number who confirms the false employment record on a credit check.

A fraudster purchases property and then acquires a false appraisal, which is used to sell and finance at an inflated price to an unsuspecting purchaser.

A fraudster poses as the solicitor of a fake purchaser for a transaction and steals the mortgage funds upon advancement instead of directing the funds to the vendor.

---

Review The Mortgage Brokers Act

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

#

Question 2

REM4.2038

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

condition precedent.

Warranty.

condition subsequent.

penalty clause.

---

Review Contracts of Real Estate Transactions

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

#

Question 3

REM1.1003

Which of the following BEST describes the role of "equity" in relation to the common law?

Equity refers to the legal concept that once a court has laid down a principle of law applicable to a certain set of facts, judges will abide by that principle in subsequent cases.

The principles of equity are strict and rigid, however, they may be modified by the more flexible rules of the common law.

If you are dissatisfied with a decision from a common law court then you may apply separately to the courts of equity to get a fairer decision.

Equity allows judges to administer justice in accordance with fairness, instead of merely applying the more rigid rules of common law.

---

REVIEW Fundamentals of Law

• describes the doctrine of stare decisis which is the basis of the common law
• Common law is strict/formulaic/rigid; Equitable law is more flexible
• You cannot go to a different source of law to get a different decision
• Equity refers to the law of fairness, justness, and right dealing as contrasted with the strictly formulated rules of common law

#

Question 4

REM2.1003

Which of the following is NOT an aspect of the tort of innocent misrepresentation?

a statement of fact or opinion given negligently.

the person to whom the misrepresentation is given needs to reasonably rely on the statement.

a contractual relationship needs to exist between the parties.

the person giving the statement gives no qualification to disclaim liability for the statement's veracity.

---

Review Professional Liability

• you need to make a misrepresentation of fact or opinion
• another party needs to rely on your misrepresentation
• you don't need to have a contract in place
• if you make a qualifying statement then it would protect you from negligence and relieves you of liability

#

Question 5

REM6.3006

When preparing an appraisal using the income method, which of the following items is deducted from gross realized revenue to arrive at net operating income?

Vacancy and bad debt allowance.

Depreciation and cost capital allowance.

Income tax.

Operation expenses (paid by landlord).

---

Review Income Method (Appraisals)

NOI = Gross Realized Revenue - Expenses

#

Question 6

REM7.4014

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

search engine optimization

customer relationship management

social media

web analytics

---

Review Technology

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

#

Question 7

MM6.005

If an applicant for a mortgage loan has income of $1,000 per month, taxes are estimated of $60 per month and his permitted gross debt service ratio is 35%, what can he afford to pay for monthly principal and interest?

290

240

300

250

---

Review Math 6 - find PMT with PIG - tax

• use pig-tax formula:
  Pmt = 1x GDS% - tax = 1000/mo x 35% - 60/mo = 290

#

Question 8

REM4.3005

Scott wishes to use an agent to sign business contracts and perform other services on their behalf. Which of the following individuals has/ have the capacity to act as his agent? Consider the following individuals:

• A) Mark, who is fully licensed under the Real Estate Services Act
• B) Jane, a 17 year-old who just entered university
• C) Hector, a Spanish immigrant who is residing in Canada and is currently applying for Canadian citizenship.
• D) Laura, who served a two-year prison sentence a decade ago, but has not committed a crime since

Only A.

Only A and C

A, C and D only.

All of the above.

---

Review Law of Agency

• to have capacity to act on someone's behalf you need to be of sound mind and be given the authority by the person you will act on behalf of (and the question doesn't tell us that has not happened)
• Infants, non-citizens, and persons who have past criminal convictions CAN act as agents

#

Question 9

REM3.3002

Alex puts an advertisement in the local newspaper offering to sell his property for 1 million. This advertisement is known at law as:

Offer to sell.

Open offer.

Invitation to treat.

Standing offer.

---

Review Law of Contract

• this newspaper ad (other examples: store window, commercial, MLS listing) and is an invitation to treat and when it attracts an offer, the owner chooses to accept it or not
• this is not a standing offer because a standing offer has requirements that need to be met before it can be claimed/used/accepted

#

Question 10

REM3.1059

Bob bought a building in January 2009 for $250,000. The building is a Class 1 asset and has a 4% CCA rate. It is now the end of 2010 and Bob wants to know how much capital cost allowance can he deduct in computing his 2010 taxable income.

9800

12500

11875

5938

---

Review Financial Statements

1st year -> we are only allowed to depreciate by 2% (first year rule says you can only depreciate HALF of the allowable CCA rate)
1st year depreciation = 250,000 x 2% = 5,000

2nd year -> we must deduct the depreciation from year 1 to get the value of the item to depreciate in year 2 = 250,000 - 5,000 = 245,000
2nd year depreciation = 245,000 x 4% = 9,800

#

Question 11

REM1.1038

Which of the following is NOT a possible meaning of the term "common law"?

The law created by the courts as opposed to statute law.

The principles derived from the common law courts in England as opposed to the principles derived from the courts of Chancery.

The laws created by the Federal government in accordance with its power under the Constitution.

The system of law which relies upon the principle of stare decisis for its development.

---

Review Fundamentals of Law

• common Law refers to the law created by the courts (judge-made law recorded in written decisions), based on common-law principles as opposed to statute law which is made by the federal or provincial legislatures or the equitable court (the courts of "chancery")
• "common law" is the original set of court-developed principles that evolved separately from equitable principles
• the doctrine of stare decisis underlies the binding nature of precedent within the common law and means "let the former decision stand" (because past precedent cases are used to direct judges when they are making decisions on current cases)

#

Question 12

REM7.3012

When a firm or representative selects a relatively small target market, and then focuses on the needs of this target market, this concept known as:

Niche Marketing

Marketing Mix

Promotional Mix

Marketing Concept

---

Review Marketing

• Concentrated marketing = niche 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)
• marketing concept: focuses on the client's needs and uses satisfaction of that need as the starting point for the development of a marketing program

#

Question 13

REM7.3015

Which of the following message sources would be considered the MOST credible?

Sales promotion

Email

Personal selling

Word of mouth

---

Review Marketing

• word of mouth messages (informal sources/references from other people) are more powerful because they comes from someone other than YOU and are more credible than you proclaiming how awesome you are (through formal sources such as personal selling, mail/email advertisements, sales promotions)

#

Question 14

REM1.2036

Marianne dies and leaves her residential property to her daughter Nancy "as a tenant for life and without impeachment for waste and then to Vanna in fee simple." During Nancy's life tenancy, Vanna must pay for:

the property taxes assessed on the property.

an appraisal of the property's value.

the interest portion of the property's mortgage.

the insurance premiums for the property.

---

Review Estates and Interests in Land

Marianne is the original owner
Vanna is the remainderman

Nancy is the Life Tenant

The life tenant (Nancy) is liable for "waste", all yearly operational expenses, including electricity, water, heat and taxes, and for the payment of interest (but not the principal amount owing), if the property is encumbered by a mortgage.

To protect their fee simple estate, the remaindermen (Vanna) or reversioners must pay the principal on any outstanding mortgage and any insurance premiums.

#

Question 15

MM3.031

Your clients are going to pay $305,000 for a vacant lot which they feel will sell at the end of 4 years for $455,000. What yield, expressed as a normal rate with annual compounding, will your clients earn on their investment? Assume that these are the only cash flows for this investment.

10.516695 %

9.808765 %

10.060395 %

9.069905 %

---

Review Math 3 - find IYR % (yield)

J1 = ? (asking for annual compounding)
PMT = 0, cannot do NPEPN
4x1N
305000 PV
0 +/- PMT
455000 +/- FV
1 #P/YR
Press I/YR= 10.51669... = J1
- conversion needed? NO, asking for J1 (annual compounding)

#

Question 16

REM3.1053

Fanny Mac Ltd. purchased a small commercial building for $225,000 of which $100,000 was the value of the land. Fanny, the company president, felt this was an excellent deal because she would have been willing to pay as much as $250,000. One year later Fanny sold the property for $300,000. If, at the time of purchase, the expected economic life of the building was 10 years, there was an estimated salvage value of $25,000 at the end of that time, and Fanny uses the straight-line depreciation method, what is the depreciation expense for the year?

10000

12500

20000

25000

---

Review Financial Statements

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

COST of building = PAID 225,000 - 100,000 land value = 125,000

DE = 125,000 - 25,000 / 10
= 100,000 / 10 = 10,000

#

Question 17

REM6.1002

Which of the following statements is TRUE?

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

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

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

Land is indestructible and therefore keeps its economic value forever.

---

Review Appraisals Introduction

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

#

Question 18

REM1.4040

The principle that the Land Title Register is conclusive evidence that the person named as holding a fee simple estate in land is in fact entitled to that interest is also known as:

the notice principle.

the indefeasibility principle.

the registration principle.

the assurance principle.

---

Review Title Registration in BC

• the notice principle and registration principle are made-up (Torrens system is based on 4 principles: Indefeasibility principle, Effect of registration, Abolition of notice, Assurance principle)-assurance principle is about compensation for parties who have lost an interest in land as a result of the indefeasibility principle (because if the Land Title Act had not been passed they would have been able to claim their interest back in the court under the principles of common law

#

Question 19

MM4.014

Your client purchased a property for $200,000 and financed part of the purchase price with a mortgage loan having a face value of $150,000 written at J4 = 10%, fully amortized over 25 years with monthly payments. Their mortgage broker charged a brokerage fee of 4% of the face value, which was deducted from the face value of the loan. What is the cost of funds advanced to your client, expressed as an effective annual interest rate?

10.449074 %

10.381289 %

10.964087 %

10.448871 %

---

Review Math 4 - PIPI

If you solve using PMT rounded up to the next higher penny, the converted EFF rate is 10.96412. Choose closest answer #3 - 10.96408...

P: find PMT round up and plug back in
J4=10

PMT = 12 > NPEPN = 9.9178...

Enter: 25# N ; 150000 PV ; 0 +/- FV

Press PMT = -1354.369... = 1354.37+/-PMT

|: Apply Term, N + F
A=T, do nothing

P: 150000 - 4% PV (144000)

I: press IYR = 10.4489..
Convert?: YES, asking for J1 (Effective), press #EFF = 10.964123...

#

Question 20

MMS3.002

How much should an investor be willing to pay for a property that they expect to sell for $900,000 in 5 years if they desire a yield of J2 = 4.75%?

720459.12

694210.66

711710.48

660451.05

---

Review Math 3 - find PV

J2 = 4.75
PMT = 0
- NPEPN not needed but could do it anyway (if you do the NPEPN, do not enter lYR and PYR)

5x2N
4.75 IYR
0 +/- PMT
900000 +/- FV
2#PYR
Press PV = 711710.481...

#

Question 21

REMS8.1061

RE/LAX Realty Inc. has ended the current year with a net income of $234,000. During the year, RE/LAX issued $14,000 in dividends, incurred $112,000 of operating expenses, and paid $ 15,000 in taxes. Which of the following most likely occurred on RE/LAX's balance sheet?

Owners' equity increased by $234,000.

Revenue decreased by $14,000.

Net income increased by $234,000.

Retained earnings increased by $220,000

---

Review Financial Statements

• a corporation may choose to withhold income as retained earnings, deferring further taxation (to pay less taxes) for owners
• shareholders' equity section of the balance sheet has two major classifications;
• "share capital" = the investment made by all of the owners (Shareholders) of the corporation
• "retained earnings" = accumulation of net income of the corporation minus dividends paid to the shareholders
• net income = $234,000 - $14,000 dividends = retained earnings of $220,000
• net income is calculated from revenues and expenses on the income statement (not the balance sheet)
• Balance sheet = B, balance sheet is A, assets and L, Liabilities

#

Question 22

MBM4.1001

Which of the following is FALSE?

Both arbitration and mediation can produce non-binding resolutions.

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

The rules of evidence are relaxed for arbitration and mediation.

Both arbitration and mediation are less formal than the Courts.

---

Review Negotiations

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

#

Question 23

REM1.4002

Where a registered owner discovers that his title has been transferred by forgery to another person, and registered in the forger's name, he should:

try to repurchase it from the forger who is now the registered owner.

file a caveat to prevent the forger from transferring the property to a bona fide purchaser.

register a judgment against the title to recover his title to the property.

remove the duplicate certificate of title from the land title office.

---

Review Title Registration

• when a registered owner discovers that their property has been transferred and is now registered in a forger's name, they can get their name back on title as the registered owner as long as the property has not been sold to an innocent (bona fide) purchaser for fair market value
• judgments are related to a debt owed by the person on title to someone else and do not help in recovering title from a fraudulent party
• the rightful owner would not be able to remove the duplicate certificate of title from the land title office because they are not registered on title

#

Question 24

REM7.1002

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

equity poor mortgagers.

first-time buyers.

elderly homeowners.

CMHC insured mortgagors.

---

Review Mortgage Law

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

#

Question 25

REM6.2001

Considering that different appraisals, as estimates, are subject to some acceptable error, which of the following is LEAST likely to be considered an acceptable error for an appraiser between several recent sales?

Appraised for $235,000 sells on the appraisal date for $250,000.

Appraised for $462,000 sells on the appraisal date for $410,200.

Appraised for $321,000 sells on the appraisal date for $343,500.

Appraised for $529,000 sells on the appraisal date for $487,000.

---

Review Comparative & Cost Methods (Appraisals)

• acceptable margin of error is -10% to +10%; calculations: best to use the RATIO Method with multiple properties; take appraised value divide by sale price (SP) and multiply by 100
  235,000 / 250,000 = 0.940... x 100 = 94%, acceptable, only 6% error (less than 10%)
  462,000 / 410,200 = 1.126... x 100 = 112.6%, unacceptable, 12.6% error (more than 10%!)
  321,000 / 343,500 = 0.934... x 100 = 93.4%, acceptable, only 6.6% error (less than 10%)
  529,000 / 487,000 = 1.086... x 100 = 108.6%, acceptable, only 8.6% error (less than 10%)

#

Question 26

REM1.1004

Which one of the following statements is FALSE?

The Supreme Court of British Columbia may exercise both common law and equitable jurisdiction.

Small claims courts in British Columbia have jurisdiction for claims of more than $35,000.

A taxpayer's appeal to reduce a tax assessment would fall under public law.

The Supreme Court of Canada is not required to hear all appeals.

---

Review Fundamentals of Law

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

#

Question 27

REM7.1001

When a mortgagor grants a mortgage subsequent to a first registered mortgage, the mortgagor has created:

an equitable mortgage.

a legal mortgage.

an assignment of the first mortgage.

none of the above.

---

Review Mortgage Law

• subsequent = after something else has already happened, so any mortgages granted AFTER the 1st registered (legal) mortgage is an equitable mortgage; mortgagor (borrower) grants a mortgage contract to the lender and lender grants money in return

#

Question 28

MBM1.3019

The Registrar of Mortgage Brokers has issued guidelines stating that wherever repayment schedules or rates are advertised relative to a borrowed amount, the mortgage broker must also include the ......... in the advertisement.

registration number of the mortgage broker

amortization period

name of the lender offering the financing

Form 10

---

Review Mortgage Broker's Act (MBA)

• the amortization period used in determining these repayment figures should be given/stated and should also indicate whether the monthly payment advertised is a repayment of the interest only and does not include the principal amount

#

Question 29

REM2.1012

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

A duty of care exists and is owed to the plaintiff when the plaintiff proves that the defendant ought to have known that the plaintiff was someone likely to be injured by their negligence.

When a duty of care exists, the standard of care will be what a reasonable person takes, considering all the circumstances of the case.

When an employee is negligent during the course of employment, under vicarious liability the employer may be liable for any anticipated damage.

All of the above statements.

---

Review Professional Liability

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

#

Question 30

MM3.036

Your client plans to pay for a vacant lot $500,000 which he feels will sell at the end of 5 years for $650,000. Assuming that these are the only cash flows for this investment, what is the yield expressed as a nominal rate with monthly compounding, will your client earn?

5.25877 %

7.88447 %

6.57706 %

5.38739 %

---

Review Math 3 - find IYR % (yield)

J12 = ? (asking for monthly compounding)
PMT = 0 ; cannot do NPEPN
5x12N
500000 PV
0 +/- PMT
650000 +/- FV
12 #P/YR
Press I/YR = 5.2587... = J12
- conversion needed? NO, asking for monthly compounding

#

Question 31

REMS3.1025

Which of the following statements regarding sole proprietorships is TRUE?

A sole proprietorship is a distinct legal entity in Canada.

A sole proprietorship does not file its taxes separately from the principal.

A sole proprietorship has a lifespan that can exceed that of its owner.

A sole proprietorship is the least common small business ownership model in service industries.

---

Review Financial Statements

• a corporation is a legal entity
• sole proprietorships cannot be separated from the sole proprietor/individual/principal
• corporations can exceed the lifespan of the owner(s)
• sole proprietorships are the most common small business model

#

Question 32

MBM1.3015

Which of the following statements about the BC Financial Services Authority (BCFSA) (formerly the Financial Institutions Commission) is FALSE?

BCFSA is an agency of the provincial government that administers a number of statutes and regulations, including the Mortgage Brokers Act.

BCFSA's sole jurisdiction is over the Mortgage Brokers Act.

BSFSA has some jurisdiction over the Business Practices and Consumer Protection Act, as it relates to the regulation of mortgage brokers.

Through the registrar of Mortgage Brokers, BCFSA governs the registration of mortgage brokers and sub-mortgage brokers.

---

Review Mortgage Broker's Act (MBA)

• BCFSA has regulatory responsibility over the financial services sector including: real estate services (RESA), real estate development marketing (REDMA), mortgage brokerages (MBA and BPCPA), credit unions, pension plans, and trust and insurance companies

#

Question 33

MM68.068

The term "collateral security" as used in mortgage lending refers to:

the amount of the down payment made by the borrower.

a particular type of mortgage clause that is unenforceable.

the mortgagee's right of foreclosure.

None of the above

---

Review Math 8

• collateral: something of the borrower's that is pledged/named for security during repayment of a loan, which is intended to be forfeited if the borrower defaults (doesn't pay)

#

Question 34

REM4.3007

Lucy, Paul's agent, has his express authority to enter into a contract with Tom on Paul's behalf. However, since Lucy did not disclose to Tom that she was acting as an agent for Paul:

No contract exists because there is no disclosure.

Only Lucy may sue Tom to enforce the contract.

Paul may sue Lucy to enforce the contract.

Tom may sue either Lucy or Paul to enforce the contract.

---

Review Law of Agency

• at common law, where an agent does not disclose to a third party that he or she is acting as an agent, the agent may be held liable as a principal because the third party was led to believe that they were contracting with the agent personally (and may not have chosen if they had known the true situation)

#

Question 35

REM3.3046

Which of the following situations will result in common law duress?

Jonah is forced to agree to a contract to transfer his rare stamp collection as a result of death threats to his daughter.

Jonah is fooled into entering into a financing agreement with a furniture store because of the salesman's use of complicated and confusing terms relating to the agreement's obligations.

Jonah decides to contract to purchase of a picnic table from Tristan, but neither Jonah nor Tristan is aware that the picnic table was stolen the night before.

Jonah breaches a fundamental term of a consulting agreement that he signed with a software company.

---

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
• using confusing language is not duress
• the bicycle being stolen BEFORE the contract was signed is a common mistake
• breaching contract terms may make the contract voidable (but it is not duress)

#

Question 36

REM1.4006

Which of the following is NOT one of the four key principles of the Torrens system of land registration?

The assurance principle

The void deed

The effect of registration

The indefeasibility principle

---

Review Title Registration

• the concept of a "Void deed" is not a principle/key aspect of the Torrens system

#

Question 37

MBM1.3011

Who is responsible for ensuring that mortgage brokers meet the requirements of the Mortgage Brokers Act?

Real Estate Council of British Columbia

Registrar of Mortgage Brokers

Superintendent of Real Estate

Mortgage Brokers Institutions Commission

---

Review Mortgage Broker's Act (MBA)

• the Real Estate Council used to oversee Real Estate licensees but does not exist anymore because they were replaced with BCFSA
• the Superintendent was combined into the BCFSA and still oversees licensing for real estate licensees
• no such thing as the Mortgage Brokers Institutions Commission

#

Question 38

REM6.1022

Consider the following statements regarding the supply and demand of real property. - A) As the price of real property increases, the supply increases. - B) The demand for real property will decrease as the price increases. - C) The supply of real property cannot be altered. - D) Real property is fixed in location.

Which of the above statements is/are TRUE?

Only statements A and B are true

Only statements C and D are true.

Only statements A, B and D are true.

All of A, B, C and D are true.

---

Review Appraisals Introduction & Review Comparative & Cost Methods (Appraisals)

• higher demand increases price, and increased prices mean more owners will be willing to sell so supply will increase as prices increase
• as prices increase, less buyers will be willing to buy so demand will decrease as prices increase
• the supply of real property (land and improvements) is NOT fixed because more units can be created by changing existing properties to a higher and better use (even though there is a finite/fixed amount of physical land)
• real property is: immobile/fixed in location/fixed in place and cannot be moved to a better location/better market

#

Question 39

REM7.2023

Given the following information, calculate the cash proceeds to Valerie, the vendor, from Dakota, the purchaser: Price: $150,000 Deposit to brokerage: $ 15,000 Financing: 1st mortgage of $71,000 to be assumed 2nd mortgage of $34,000 has been arranged Taxes: Unpaid and overdue in the amount of $1,095 A penalty is owing of $105. These will be paid by the conveyancer. Commission: 6% of sale price Conveyancing Fees: $600 Adjustment, completion, and possession dates: August 31st Note: Assume that it is NOT a leap year.

69169

69538

69204.38

140169

---

Review From Contract to Completion

CREDITS:
150,000 (purchase price)
369 (buyer's share of taxes)
Property taxes calculation (buyer's portion):
Dec + Nov + Oct + Sept = 122 + 1 (Aug 31) =
= 123 days/365 days = 0.3369... x 1095 = $369, buyer's portion
(debited to the buyer, credited to the seller)
DEBITS:
71,000 (assumed mortgage)
9,000 (commission)
1,095 (prop taxes)
105 (penalty)

#

Question 40

REMS3.1004

If the commercial tenant is a corporation, a corporate search from the British Columbia register of companies can provide some useful information. Which of the following would a corporate search NOT UNVEIL?

The registered directors of the corporation.

Whether the corporation is in good standing with respect to the filling of its annual returns.

The total value of this corporation's outstanding liabilities.

Whether the corporation has been involuntarily dissolved.

---

Review Financial Statements

• a corporate search will show: status, address, incorporation date, previous company names, if the company is in good standing with respect to filing its annual returns (failure to file annual returns for two consecutive years can result in a company being involuntarily dissolved), the registered directors of the corporation, provided the company has met its obligations to update the registry upon changing directors

#

Question 41

MM3.017

Your client borrowed $260,000 by way of an interest accruing loan at J12 = 4% How much will your client owe at the end of nine months?

257600.78

270400

270592.8

267904.81

---

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

J12=4
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)

9 N
4 IYR
260000 PV
0 +/- PMT
12# PYR
Press FV = 267904.812....

#

Question 42

REM6.2031

The residual method of appraisal is the most suitable method for use where the subject property:

is an apartment block in an area currently zoned for residential duplexes only.

is vacant land.

represents the highest and best use of the site and there is a large volume of market data available.

has latent value.

---

REVIEW Comparative & Cost Methods

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

#

Question 43

REM1.2024

In British Columbia there are three basic requirements for an easement. Which one of the following is not a requirement?

The easement must be negative in nature.

The easement must accommodate the dominant tenement.

There must be both dominant and servient tenements.

The easement must be capable of forming the subject matter of a grant.

---

Review Estates and Interests in Land

• easements don't have to be negative in nature (restrictive covenants need to be negative in nature)
• easements must accommodate the dominant tenement
• easements must have a dominant and servient tenement
• easements must form the subject matter of a grant (must have specific boundaries)

#

Question 44

MM6.028

Which of the following is used in calculation of the maximum allowable mortgage loan under the loan-to-value constraint?

purchase price

market value

lending value

purchase costs

---

Review Math 6 - Law

M (loan amount) = LV (lending value) x LTV% (loan-to-value)

#

Question 45

REM6.2004

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 Comparative & Cost Methods (Appraisals)

• 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 46

MM6.016

A mortgage broker is considering how her client would be affected if his income were to become interrupted for six months. This is known as:

strength - assessment

variability- measuring

Income-assessment

Stress-testing

---

Review Math 6 - Stress test Law

#

Question 47

REM6.2018

Reproduction cost is best defined as:

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

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

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

the original cost of construction, adjusted for inflation.

---

Review Comparative & Cost Methods (Appraisals)

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

#

Question 48

REM6.2014

An appraiser using the comparative method of the appraisal and who is estimating a single-family house can use sale prices of the following comparative properties EXCEPT:

Houses in different neighborhoods.

Houses recently sold between relative parties.

Houses with different lot sizes.

Houses sold over three months ago.

---

Review Comparative & Cost Methods (Appraisals)

• theory of substitution says to use similar properties; can be from a different neighbourhood as long as it is reasonable to use; it is difficult to find two properties that are very much alike
• property sold between related parties is not an arm's length transaction; the relationship between the parties will affect the sale price agreed upon between the parties
• theory of substitution says to use similar properties; it is difficult to find two properties that are very much alike so lot size will likely be different
• theory of substitution says to use recently sold properties and recent means when market conditions have remained stable; 3 months prior could still reflect a stable market

#

Question 49

REM7.1066

The term "security" as used in mortgage lending refers to:

the amount of the down payment made by the borrower.

a particular type of mortgage clause that is unenforceable.

the interest in land provided as security for the loan.

None of the above

---

Review Mortgage Law and Math 7

• land/property is given as security so the borrower will pay back the money they borrowed from the lender; if the borrower doesn't pay back the loan, the lender can lien the borrower's title

#

Question 50

REM7.4002

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

Expand collection

Restrict access

Be open

Identify the proposal

---

Review Technology & Review Contracts for Real Estate Transactions

Ten privacy principles of PIPA

• Principle 2: Identify the purpose
• Principle 4: Limit collection
• Principle 8: Be open
• Principle 9: Give individuals access

#

Question 51

REM6.1006

Which of the following statements regarding the immobility and durability of land is FALSE?

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

The physical durability of real property means that it has value as an investment and a source of shelter.

The immobility of real estate as a commodity allows it to be moved to a better market.

Immobility is responsible for the local nature of real property markets.

---

Review Appraisals Introduction

• the life ("usefulness") of a building depends on its economic durability (not physical durability)
• real property has many uses/purposes, including being a place to live and being an investment
• land is immobile which means it cannot be moved
• immobility of land causes the real estate markets to be local (you cannot move the asset out of the local area because it is fixed in place)

#

Question 52

REM1.2014

Which of the following items, if found on a property, is most likely to be considered a chattel?

New carpeting in the hallways

A floor lamp

A pear tree in the backyard

A new sink in the bathroom

---

Review Estates and Interests in Land

• carpeting is a fixture that enhances the property
• a floor lamp is a chattel that you take with you
• a pear tree is a fixture that enhances the property
• a sink is a fixture that enhances the property

#

Question 53

REM1.2029

Which of the following statements is FALSE?

So long as the effect is negative, positive words may be used in the document.

Restrictive covenants must be intended to run with the land.

A restrictive covenant will be presumed to be released if there has been temporary inconsistency with it.

Significant changes to the character of a neighborhood may render a restrictive covenant unenforceable.

---

Review Estates and Interests in Land

• restrictive covenants need to be "negative in nature" but don't have to use negative words (cannot, do not, never, etc.); the words can be positive but the overall meaning still be restrictive
• restrictive covenants stay on title ("run with the land")
• restrictive covenants do not get released when ceased/stopped/not observed/not enforced temporarily
• changes to the area surrounding a property may make the restrictive covenant unnecessary

#

Question 54

MM4.028

Whenever the amount advanced to a borrower is less that the face value of the mortgage, the loan is referred to as a:

Bonused mortgage

Vendor take back mortgage

Assumed mortgage

Graduated mortgage

---

Review Math 4 - PIPI Law

• bonuses added onto a mortgage loan are amounts that are not used to purchase the property (fees, taxes) which means that part of the money loaned (face value) is sent to pay for these bonuses and the rest (less than the face value) is sent to the borrower

#

Question 55

MM2.010

A borrower has arranged a loan of $100,000 at an interest rate of 6% per annum , compounded semi-annually with payments set at $839.89 per month. What is the period necessary to amortize the loan?

Exactly 191.280874 months

Exactly 179.997514 months

Exactly 15 months

Exactly 16 years

---

Review Math 2 - find N

J2=6
Pmt = 12 , do NPEPN = 5.2963...
100000 PV
839.89 +/- PMT
0 +/- FV
Press N = 179.9975... months
- convert? NO, asking for months

#

Question 56

REM4.3004

Trevor is acting as an agent for Henry. Trevor tells Jason, a third party, that he is acting as Henry's agent. On that basis, Trevor enters into a contract with Jason. Who are parties to the resulting contract?

Henry, Trevor and Jason.

Jason and Trevor.

Henry and Jason.

Trevor and Henry.

---

Review Law of Agency

• agents (Trevor) are not part of ANY contracts

#

Question 57

REM2.1009

Which of the following is a fiduciary duty?

The duty of full disclosure

The duty to remunerate the principal

The duty to act with reasonable care and skill

The duty to comply with the agency agreement

---

Review Professional Liability

Fiduciary Duty = Utmost duty of care:

• Relationship is confidential
• Full disclosure
• Duty of utmost good faith
• Advantageous price

#

Question 58

REMS3.1006

Which of the following is a generally accepted accounting principle (GAAP)?

Calendar Year Principle

Substitution Principle

Income Principle

Objectivity Principle

---

Review Financial Statements

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

#

Question 59

MM4.017

A local mortgage broker has arranged a mortgage in the amount of $240,000. The borrower has agreed to pay a brokerage fee of $8,999.82 which is to be added to the loan amount, giving a face value of $248,999.82 for the loan. The mortgage bears interest at a contract rate of 18% per annum, compounded quarterly. The mortgage has a term and amortization period of 25 years. The loan is to be repaid using monthly payments. The equivalent periodic interest rate, expressed as a rate per month on the funds advanced is:

1.53649446786 %

1.42140087486 %

1.50410643789 %

1.67322516185 %

---

Review Math 4 - PIPI

P: find PMT round up and plug back in
J4=18
PMT = 12
NPEPN: 18#NOM, 4#PYR, #EFF, 12#PYR, #NOM = 17.7365...
Enter: 25# N ; 248999.82 PV ; 0 +/- FV
Press PMT = -3726.000... = 3726.01 +/- PMT
|: Apply Term, N + F
A=T, do nothing

P: 240000 PV

I: press IYR = 18.4379... = J12
Convert? YES, asking for monthly rate
J12 = 18.4379...
i m=? = 18.4379.../12 = 1.5364...

#

Question 60

MM5.006

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 $75,000 cash and to assume the existing financing for the remainder of term. If current lending rates for 2-year term mortgages is 5.75% per annum, compounded semi-annually, what is the market value of the offer?

551068.2

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: +75000 = 551068.200...

#

Question 61

REM3.2007

In section 3-4 of the Rules, the duty of the licensee to act honestly and with reasonable care and skill, is owed to which persons?

Only clients.

Both clients and non-clients.

Only unrepresented parties.

Only sellers of real estate.

---

Review Professionalism & Code of Ethics

• this duty applies to clients and non-clients

#

Question 62

REM6.3002

The income approach is generally NOT used for the valuation of:

warehouses.

single-family residences.

leasehold interests.

any of the above.

---

Review Income Method (Appraisals)

• income method is used to for investment properties which generate income; single-family properties are usually not income-generating investment properties and are owner occupied

#

Question 63

REM2.3002

Given the notice requirements in the Strata Property Act, the notice period for an annual general meeting is if the strata corporation mails the notice to each person entitled to receive notice.

12 days

14 days

16 days

20 days

---

Review Strata Properties Condos and Co-ops

• 20 days written notice is required

#

Question 64

MBM1.3008

The Registrar of Mortgage Brokers has the power to order that a person pay an administrative penalty up to a maximum of

50000

1000

500000

1000000

---

Review Mortgage Broker's Act (MBA)

With respect to the enforcement action available to the Registrar, section 8 states that the Registrar may make one or more of the following orders:

• suspension of the person's registration;
• cancellation of the person's registration;
• that the person cease a specified activity; and
• that the person must carry out specified actions that the Registrar considers necessary to remedy the situation.

Furthermore, the Registrar has the power to order a person who, in the opinion of the Registrar, has breached the Act, the Regulations, or a condition of registration to pay an
administrative penalty of up to $50,000.

#

Question 65

MM8.047

The evaluation of an applicant's ability to meet the terms of a mortgage and the amount of their income available for future mortgage payment is known as:

a credit history

a credit review

a credit score

a credit analysis

---

Review Math 8

• credit history allows lenders to see a history of the client's ability to manage sizeable credit obligations (credit cards, car loans, lines of credit)
• a credit review is an overall look at a borrower

#

Question 66

MM8.070

The Chongs are retired and have decided to supplement their income. Their home has a market value of $468,000. They have approached the bank to receive a reverse annuity mortgage (RAM). The terms of the mortgage specify an interest rate of 5% per annum, compounded monthly. The bank decides that the RAM cannot exceed 50% of market value. The borrower receives $800 per month. How many full payments will be received during the term of the loan?

192

190

191

189

---

Review Math 8

Step 1: Find RAM mortgage amount = 468000 x 50% = 234000
Step 2: Find N
J12=5
PMT = 12
NPEPN: 5#NOM, 12#PYR, #EFF, 12#PYR, #NOM = 5.0000...
Enter: 0 PV ; 800 +/- PMT ; 234000 FV
Press N = 191.664... = 191 FULL MONTHLY PMT's

#

Question 67

REM4.1002

Which one of the following statements is FALSE regarding successful negotiations?

Honed negotiation skills are essential for handling all aspects of a client's real estate transaction.

Learned negotiation skills can be used in one's personal and professional life.

Reading about negotiation skills is not sufficient to master the skills, as practice is required as well.

The single best thing that you can do to improve your negotiation effectiveness is to take detailed notes during negotiations.

---

Review Negotiations

• the single best thing you can do to improve your negotiation effectiveness is to prepare

#

Question 68

REM3.1060

Which of the following statements concerning a corporation's capacity to contract is TRUE?

Under the Business Corporations Act, a contract entered into by a company before that company exists CANNOT be ratified after the company is formed.

There can never be a limitation on the legal capacity of a corporation to enter a contract because a corporation can contract just as an individual person can.

Any person may ascertain the legal capacity of a corporation to contract by reviewing its incorporation documents maintained at its official records office.

None of the above are true.

---

Review Financial Statements

All companies must have an official records office. At that office, any person can look over the incorporation documents of the company. Option (1) is incorrect because the common law has been altered by statute to make it possible for companies incorporated under the Business Corporations Act to ratify a pre-incorporation contract by act or conduct. Option (2) is incorrect because different ratification rules apply to companies operating in British Columbia that are incorporated under federal or another province's legislation. These rules may, therefore, restrict the legal capacity of a corporation to enter a contract.

#

Question 69

MM6.032

The selling price of a property is $510,000. The purchaser has applied to a lender for mortgage funds and has been told that the maximum loan that can be obtained is $375,000. The lender's appraiser feels that a long-term conservative estimate of the property's value is $500,000. Which one of the following statements is TRUE?

The loan-to-value ratio on this loan is 75 %.

The loan-to-value ratio on this loan is 72 %.

The lending value of this property is $ 510,000.

The market value of this property is $ 510,000.

---

Review Math 7

M=LV xLTV% ; rearrange for LTV%
LTV% =M/LV
= 375,000 / 500,000 = 0.75000 x 100 = 75%

#

Question 70

REM4.2020

Which one of the following statements is true with respect to a listing contract?

While the listing contract is a contract between the brokerage and the vendor, the purchaser is bound by some terms contained in the contract.

It is not necessary that an exclusive listing contains an expiry date.

Of the three basic listing agreements, an open listing provides the best protection for the brokerage in terms of claims for commission.

None of the above statements are true.

---

Review Contracts for Real Estate Transactions

• the listing contract does not bind the purchaser in any way since the purchaser is not a party to this contract and they cannot rely on it
• an exclusive listing needs an expiry date (as does a multiple listing)
• an open listing is the listing type that provides the least security of payment since that is the one where you don't get paid if you don't sell the property

#

Question 71

REMS3.2004

Which of the following is a common law source of duties to clients?

The Real Estate Services Act

The Real Estate Services Regulation

Fiduciary duties

The Strata Property Act

---

Review Professionalism & Code of Ethics

• fiduciary duties are an example of a common law source of duties to clients
• the other answers are examples of legislative duties to clients

#

Question 72

MM4.031

Mr. K Cole purchased a property for $110,000 and financed part of the purchase price with a mortgage loan having a face value of $80,000, written at J4=10%, fully amortized over 25 years with monthly payments. His mortgage broker charged a brokerage fee of 4% of the face value, which was deducted from the face value of the loan. What is the cost of funds advanced to Mr. Cole, expressed as an effective annual interest rate?

10.4490742578 %

10.3812890625 %

10.8286244283 %

10.964310493 %

---

Review Math 4 - PIPI

P: find PMT round up and plug back in
J4=10
PMT = 12, do NPEPN: = 9.9178...
Enter: 25# N ; 80000 PV ; 0 +/- FV
Press PMT = -722.330... = 722.34 +/- PMT
|: Apply Term, N + F
A=T, do nothing
P: 80000 - 4% PV (should be 76800)
I: press IYR = 10.4490... = J12
Convert? YES, asking for J1 (effective rate), press #EFF = 10.9643...

#

Question 73

REM7.2005

Which of the following is TRUE with respect to a deposit paid to a buyer's brokerage pursuant to a contract of purchase and sale?

The brokerage can immediately use the deposit money to pay itself commission.

The brokerage can only use the deposit money to pay itself commission once the sale is completed and the deposit is no longer being held by the brokerage as a stakeholder.

The brokerage must return the deposit to the buyer once the sale is completed.

The brokerage holds the deposit for its own benefit, not for the benefit of either the buyer or seller.

---

Review From Contract to Completion

• deposit monies can only be used/released according to the client's instructions; commissions are not paid until the deal completes
• the deposit money is returned to the buyer is the deal falls through and does not complete
• the agent/brokerage collect/hold the deposit monies as a stakeholder, for the benefit of, the parties to the contract

#

Question 74

MM1.003

Sam and Sally recently negotiated a second mortgage in the amount of $24,000 at an interest rate of 19% per annum, compounded semi-annually. The loan is to be amortized over twenty years by equal monthly payments. What is the size of the monthly payment to be made by Sam and Sally?

357.74

369.74

375.74

388.97

---

Review Math Classes 1, 2, 3 - Find PMT

J2=19
Pmt = 12 , do NPEPN = 18.2888...
20#N
24000 PV
0 +/- FV
Press PMT = -375.738...

#

Question 75

MM2.025

Brent Sopul has arranged a loan of $85,000 at an interest rate of 18% per annum, compounded semi-annually with payments set at $2,157.00 per month. What is the period necessary to amortize the loan?

exactly 4.89775062693 years

exactly 4.9705036885 years

approximately 3 years

approximately 25 years

---

Review Math 2 - find N

J2=18
Pmt = 12 , do NPEPN =

85000 PV
2157 +/- PMT
0 +/- FV
Press N = 58.7730... months
- convert? YES, asking for years so divide months by 12
58.7730... / 12 = 4.8977... years

#

Question 76

REMS3.1002

The principle which holds that expenses directly associated with particular revenues should be recognized in the same period in which the revenue is recognized is known as the:

revenue recognition principle.

materiality principle.

matching principle.

cost principle.

---

Review Financial Statements

the revenue recognition principle: revenue must be recorded when it is earned, which is not necessarily when the cash is/will be received

• the materiality principle: purchases with a relatively low cost that are used up over a period of several months, such as stationery or cleaning supplies, may be immediately expensed when acquired (which is an exception to/not the same as/different than/contrary to the matching principle that says expenses must be recorded when they are incurred;

  example: for pre-paid expenses like annual insurance, we cannot expense the entire amount all at once - it would need to be portioned out per month for that year that it covers

• the cost principle: the amount paid for the asset when purchased (the purchase price) is the proper amount to record/recognize as the value of an asset in the accounting record/books

#

Question 77

MM5.010

An offer of $150,000 is accepted, comprised of a cash down payment of $50,000 and a vendor-supplied mortgage loan of $100,000 at 8% per annum, compounded semi-annually. The loan has an amortization period of 20 years, a term of 2 years, and calls for monthly payments rounded up to the next higher dollar. Market rates of interest for equivalent mortgages are currently 10% per annum, compounded semi-annually. The market value of the offer is:

250966.26

143284.85

146581.62

243284.85

---

Review Math 5 - PIMPO

J2 =8
PMT = 12 , do NPEPN = 7.8698...
20# N
100000 PV
0 +/- FV
P: Press PMT = -828.357.. = 829+/-PMT
I: 2#N, press FV = 95514.596..+/-
M: J2 = 10 , do NPEPN = 9.7978...
P: Press PV = 96581.616...
O: +50000 = 146581.616...

#

Question 78

REM7.1034

Where a borrower believes that the amount of interest being charged is excessive, under which statute might relief be granted?

the Interest Act

the Business Practices and Consumer Protection Act

the Land Title Act

all of the above

---

Review Mortgage Law

• Interest Act says max of 5% per annum can be charged if not specified in the contract but doesn't not allow the borrower to attack the interest rate being charged
• the BPCPA allows the borrower to attack the rate of interest being charged
• among many purposes, the LTA is the legislation which establishes the Torrens system in BC and allows registered interests on title to run with the land (effect of registration); but the LTA has nothing to do with interest rates

#

Question 79

MM8.041

Josie Purchaser arranged a mortgage loan for $175,500 at 9.25% per annum, compounded semi-annually, with a 25-year amortization period and monthly payments. What is her interest cost for the first month?

1482.01

1183.3

1327.46

154.55

---

Review MATH 8 - find interest cost

Find PMT, round up, plug back in = 1,482.01+/-PMT (PV is 175 thousand, 500 dollars)
Then enter: 1 input # amort = = 1,327.456... - interest cost for the first month

#

Question 80

REM2.3030

Which of the following describes a "strata plan"?

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

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

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

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

---

REVIEW Strata Properties Condos and Co-ops

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

#

Question 81

REM1.4005

The BC Land Title Act provides that mortgages can be registered on the title of a fee simple interest as:

an easement

a caveat

a leasehold interest

a charge

---

Review Title Registration

• mortgages are registered as a charge on title

#

Question 82

REM2.1011

Matthew, an experienced licensee, showed a house to Jacob, a prospective buyer. Jacob asked Matthew whether the house had had any problems with insects or pests. The vendor had lied to Matthew because the seller knew there was a fire ant problem. Jacob bought the house and discovered the fire ants. On which basis might the seller, Geoff, be liable to Jacob ina lawsuit?

Breach of the warrant of authority

Deceit

Negligent misrepresentation

Breach of one of the contract's condition precedents

---

Review Professional Liability

Geoff is the seller, and Jacob is the buyer

• breach of warranty of authority is when you do something outside of the authority that you have been given from the person who hired you
• deceit = lies = moral fraud = moral deficit
• negligence = careless
• condition precedent = subject clause

#

Question 83

REM1.1011

Quantum meruit is a legal principle that:

requires consideration to be measurable in the eyes of the court.

voids all contracts where the terms are not specific enough.

prevents consideration that occurred in the past from having any legal effect.

implies a promise to pay a reasonable amount where none is mentioned.

---

REVIEW Fundamentals of Law

• 'requires consideration to be measurable' means that something would need to have been paid in order to quantify it (decide what it is worth); quantum meruit is about when there IS
  NO payment but a reasonable sum would be expected to be paid
• it does not void a contract
• it does not negate/nullify previous consideration
• Quantum meruit means "as much as is deserved"; when someone requests the contractual services of another, even though there is no mention of a specific amount in the contract,
  the law will imply a promise to pay a reasonable amount.

#

Question 84

REM7.1011

Under the Land Title Act, in British Columbia a mortgage is registered on a fee simple title as:

a charge

an agreement for sale

a caveat

a restrictive covenant

---

Review Mortgage Law

• mortgages registered to a title are a "charge" on that title; charge: an interest in land that is less than a fee simple interest (fee simple is a full interest)
• agreement for sale = vendor supplied mortgage; vendor agrees to sell his interest in land for a price payable by installments upon payment of the price in FULL (rent-to-own)
• caveat: notice placed on the title to freeze it and claims an interest in that property (from Title Registration in BC chapter)
• restrictive covenant: imposes a restriction on the use of one person's land for the benefit of another piece of land (from Estates and Interests in Land chapter)

#

Question 85

REM7.1033

The Interest Act states that, if a mortgage requires that interest is payable but the rate of interest is not provided:

the rate shall be 10% per annum

the interest charges will be based on quantum meruit

no interest may be collected

the rate shall be 5% per annum

---

Review Mortgage Law

• Interest Act says max of 5% per annum can be charged if not specified in the contract
• quantum meruit is an equitable law remedy (from Fundamentals of Law chapter)
• interest can be charged if it is specifically or only generally mentioned

#

Question 86

MM8.071

A $116,000 mortgage has an interest rate of 5% per annum, compounded semi-annually. It calls for monthly payments sufficient to amortize the loan over a 25-year period. If payments are rounded up to the next higher $10, what is the amount of the final payment required to fully amortize the loan?

475.12

267.87

321.24

268.97

---

Review Math 8

Step 1: Find PMT, round up, plug back in
J2=5
PMT = 12
NPEPN: 5#NOM, 2#PYR, #EFF, 12#PYR, #NOM = 4.9486...
Enter: 25#N ; 116000 PV ; 0 +/- FV
Press PMT = -674.661..., round to next higher $10 = 680 +/- PMT
Step 2: Find N for rounded up PMT, round up and plug back in, find FV
Press N = 295.395...
Enter: 296N
Press FV = 411.030..., overpayment amount
Step 3: Subtract overpayment from PMT to find final PMT amount
680 - 411.030... = 268.969...

#

Question 87

REM4.3040

Under the Rules of the Real Estate Services Act, a listing licensee is not required to disclose a known material latent defect to a potential buyer of the property if:

the material latent defect only impacts the value of the property, but not its usage by the buyer.

the material latent defect will not impact the buyer's decision to purchase the property.

the material latent defect existed before the seller became the owner of the property.

the buyer has already been informed in writing of the material latent defect by the seller.

---

Review Law of Agency

• material latent defects must always be disclosed prior to the buyer submitting an offer
• the licensee has no idea what effect the latent defect will have on the buyer's decision to purchase so they must disclose
• the seller is still required to disclose even though they didn't cause/start the latent defect
• if the seller has already informed the buyer then the licensee is no longer required to disclose

#

Question 88

MM7.019a

In which one of the following mortgage repayment schemes do the monthly mortgage payments increase on a regular basis?

Reverse Annuity Mortgage

Straight line principal reduction mortgage

Graduated mortgage

Variable Rate mortgage

---

Review Math 1 and Math 7

• graduated payment mortgages have smaller (lower) payments that increase over the term/time and because those payments start out smaller, this type of loan has increasing (not decreasing) indebtedness for the first portion of the loan

#

Question 89

REM3.3003

When Mike entered into a contract, he was 18 years old. The contract was for a two-year telephone plan with Telus with the requirements for him to make monthly payments in exchange for telephone service. The Telus representative thought that Mike was 19 years old because he signed up for a plan payable to university students. After reaching 19, Mike keeps making monthly payments for several months. Assuming that the contract is governed by the laws of BC, which of the following statements is TRUE?

The contract is voidable by Mike as it was made when he was an infant.

The contract is void as it was made between an infant and a party who did not know that it was dealing with an infant.

The contract is enforceable because only those individuals who are less than 18 years old are considered to be "infants' in BC.

The contract is enforceable as Mike continued to perform it after turning 19.

---

Review Law of Contract

• 'under 19' or '18 and under' = infant (not "less than 18")
• infants can enter a contract and have it be enforceable after they turn 19
• if an infant enters a contract, the contract is voidable by the infant, but it is still binding upon the other party

#

Question 90

REM2.3034

Which of the following correctly completes the sentence: In a strata plan, the term "unit entitlement" refers to: - A) the value of each condominium unit relative to other units. - B) the share of the value of demolition owed by each condominium unit owner. - C) the share of real property taxes payable by each condominium unit owner. - D) the figure used to calculate a strata owner's contribution to the common expenses of the strata corporation.

B, C and D only

A and C only

C and D only

Only D

---

REVIEW Strata Properties Condos and Co-ops

• Definition of Unit Entitlement: the figure used to calculate a strata owner's contribution to the common expenses of the strata corporation

#

Question 91

REM7.1063

On July 1, 2016, Mabel grants a mortgage over the house she is purchasing. The mortgage term is for five years, terminating on June 30, 2021. Mabel sells her home to Donald on July 1, 2017, who assumes Mabel's mortgage. On October 15, 2021, the lender realizes that there are two months of payments outstanding. The lender has recourse to pursue:

Mabel and Donald, as the Property Law Act provides that they are jointly responsible for the outstanding balance.

Mabel only, as she is the only mortgagor to the initial mortgage contract.

Donald only, as the Property Law Act provides that Mabel's liability has been extinguished.

Mabel and Donald, as they are both responsible at common law.

---

Review Mortgage Law

• the mortgage term contract ended on June 30, 2021 and the lender didn't ask for payment until Oct 15, 2021 (3.5 months later) which means the bank cannot sue Mabel for Donald's missed payment amounts
• the Property Law Act (not common law) gives three ways for the vendor (who lets their mortgage or agreement for sale be assumed) to escape/avoid liability if the buyer who assumes their mortgage defaults/misses payments:
• if the lender expressly approves the assumption, in writing
• if the vendor gets a court order approving the purchaser (when the lender unreasonably refuses to give their approval)
• if lender does not demand payment within 3 months of the expiry of the term of the mortgage

#

Question 92

REM1.2003

Celeste and Jacques own a property as joint tenants. Which of the following is FALSE?

Celeste could sever the joint tenancy without Jacques' knowledge.

Celeste and Jacques each have an undivided interest in the property.

Celeste and Jacques each have a right of survivorship.

Celeste and Jacques can have different interests in the property.

---

Review Estates and Interests in Land

• you don't need to tell the other joint tenant's before you sever (end) your interest (sell it, for example) in a joint tenancy
• undivided interest = Unity of Possession
• as a joint tenant, you have the right to the other joint tenant's interest in that joint tenancy if you survive them (if they die first)
• to register a joint tenancy, you must register it as the same type of interest (Unity of Interest - fee simple interest, for example)

#

Question 93

REM6.3015

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

13.1944 %

13.0286 %

16.6667 %

13.8889 %

---

Review Income Method (Appraisals)

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

1. Find NOI:
   NOI = Gross Potential Revenue - Vacancy & Bad Debt - Expenses
   = 150,000 - 4% = 144,000 - 30,000 = 114,000
2. Yield = NOI / Sale price = 114,000 / 875,000 = 0.13028... x 100 = 13.0285....%

#

Question 94

MM2.002.

Your friend is considering purchasing a property for two million dollars. He would like to finance the purchase with an interest only loan of $1,900,000, written at a contract rate of 5% per annum., compounded quarterly. If the term of the loan is ten years and payments are to be made at the end of each month, what will the amount of your friend's third interest only payment be?

7916.67

8030.58

7835.44

7883.91

---

Review Math 2 - find PMT (1.0. loan)

J4=5
Pmt = 12 , do NPEPN = 4.9793...
10#N
1900000 PV
1900000 +/- FV
Press PMT = -7883.907...

#

Question 95

REM3.3005

Garfield, a trading services representative, was the listing and selling representative with respect to the sale of Madison's house to Tyler. After the sale completed, Tyler discovered that the main and lower floors of the house sloped. Garfield, Madison and Tyler had not noticed this before, although the defect was discoverable using ordinary diligence. Based on the above, which of the following statements is TRUE?

The sloping floor is a latent defect.

The sloping floor is a patent defect which should have been brought to Tyler's attention.

Madison is not liable to Tyler for failing to bring the defect to Tyler's attention.

Both and are true statements.

---

Review The Law of Contract

• since this defect was discoverable using ordinary diligence, it is a patent defect as opposed to a latent defect. Option is false. The rule for patent defects is that in most cases, the buyer assumes the risk (caveat emptor - "let the buyer beware"). Therefore, Madison was not required to bring the defect to Tyler's attention.

#

Question 96

REM6.2055

You have a partially completed appraisal report that you need to fill in. The 2,200 square foot subject property has 4 bedrooms and 4 bathrooms. The house next door is similar in all respects except for square footage, the number of bedrooms, and the number of bathrooms. The 2,300 square foot comparable sold for $245,000 and has 3 bedrooms and 3 bathrooms. If the market value of a bedroom is $4,000, the market value of a bathroom is $5,700, and above a 1,900 sq. ft. benchmark, each 100 sq. ft. is worth $6,000, the adjusted sale price for this comparable is:

248700

260700

229300

241300

---

Review Comparative & Cost Methods (Appraisals)

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

SUBJECT: 4 bedrooms, 4 bathrooms, and 2,200 square feet
COMPARABLE: 3 bedrooms, 3 bathrooms, and 2,300 square feet
Bedrooms: One less bedroom, Inferior -> Add value (+4,000)
Bathrooms: One less bathroom, Inferior -> Add value (+5,700)
Square feet: 100 square feet larger, Superior -> Subtract value (-6,000)
Adjust 245,000 sale price by +4,000 and +5,700 and -6,000
= 245,000 + 4,000 + 5,700 - 6,000 = 248,700

#

Question 97

MBM1.3032

A mortgage broker must provide a written disclosure statement in certain circumstances. The disclosure statement must be in the prescribed form and must be dated and signed by the mortgage broker. Assuming none of the exemptions apply, in which of the following transactions would the mortgage broker be required to provide a written disclosure statement?

A transaction where the mortgage broker arranges a mortgage for a lender in return for a commission.

A transaction in which a mortgage broker arranges the sale of a lender's interest in a mortgage in return for a brokerage fee.

A transaction in which a mortgage broker sells his or her interest in a mortgage to a third party.

In all of the above circumstances, a written disclosure is required.

---

Review Mortgage Broker's Act

• written disclosure is required when a mortgage broker: arranges a mortgage in which another person is to be the mortgagee (lender); arranges a sale of a mortgagee's (lenders) interest in a mortgage to another person; or sells the mortgage broker's own interest as mortgagee (lender) under a mortgage to another person

#

Question 98

REM2.3042

Common property in a strata title development is:

owned equally by all members of the strata corporation.

owned by the strata council

property designated for the exclusive use of the owners of one of more strata lots

subject to strata council rules regulating its use, safety, and condition.

---

REVIEW Strata Properties Condos and Co-ops

• common property is not owned equally - they own a proportionate share based on unit entitlement
• common property is owned by the OWNERS, not by the strata council or strata corporation
• "Limited common property" is common property designated for the exclusive use of the owners of one or more strata lots
• "Common property" is subject to strata rules (created by the council)

#

Question 99

MM8.048

A credit report is:

A critical factor used to determine an applicant's annual gross income.

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

The evaluation of an applicant's ability to meet the terms of a mortgage.

Established by private lenders during the application process.

---

Review Math 8

• Gross Income is a critical factor determined during the credit analysis procedure
• a credit analysis evaluates the applicant's ability to meet the terms of a mortgage and the amount of income available for future mortgage payments
• the application process for private lenders may not be as strict as conventional lenders

Quiz Progress

0 / 0 questions answered (0%)

0 correct

Quiz Complete!

0%

Reset quiz