Real Estate Test: 1-150

Front 1

1.Latent defects are defects which are unknown to the purchaser and are so material to enjoyment of the property that he might not have entered into the contract had he or she known that they existed. Latent defects are those which are:

1) immediately visible to the eye of the average person.
2) discoverable upon a reasonable inspection of the property.
3) the responsibility of the licensee of the property.
4) none of the above statements describe latent defects.

Back 1

4) none of the above statements describe latent defects.

Front 2

5. Consider a situation in which the principal is the vendor, the agent is the listing agent, and there is no dual agency. Which of the following events will terminate the real estate agency relationship?

1 )the principal's refusal to accept an offer to the purchaser presented by the agent where the offer exactly complies with the requirements in the listing
2) an act of the principal that is inconsistent with the continuation of the agent's authority.
3) an offer by the agent to personally purchase the principal's property.
4) the revocation of an offer to purchase by the offeror before the principal can accept it.

Back 2

2) an act of the principal that is inconsistent with the continuation

Front 3

10. Which of the following in NOT an exception of the principal of indefeasibility under the B.C. Torrens system of land registration?

1) a reservation contained in the original Crown grant
2) a lase for a period of eighteen months where the tenant is in occupation.
3) the right of any person to show fraud, by which the registered owner derived his or her title otherwise than bona fide for value.
4) an existing unregistered interest which will expire in five years.

Back 3

4) an existing unregistered interest which will expire in five years.

Front 4

15. On May 3rd, Mary offered to buy Harvey's house, and the offer was stated to be open for acceptance until 2:00pm May 4th. Which one of the following statements is FALSE?

1) Mary can revoke her offer prior to 2:00pm on May 4th.
2) Mary's offer represents an option agreement.
3) If Harvey makes any changes to the offer, Mary's original offer is terminated.
4) If Mary mails a notice of revocation to Harvey, the offer is only revoke if the the notice is received by Harvey before he accepts.

Back 4

2) Mary's offer represents an option agreement.

Front 5

17. Which of the following contractual clauses in a mortgage could apply where a borrower defaults?

1) an "omnibus" clause
2) a "mortgagee in possession" clause
3) a "acceleration" clause
4) All of the above clauses could apply.

Back 5

4) All of the above clauses could apply.

Front 6

20. Of the following four statements, which are TRUE and which are FALSE?

A. Real estate appraisers must be licensed in British Columbia.
B. Courts have recognized a margin of permissive error of 25% in assessing damages arising as a result of negligent appraisal.
C. A licensed real estate representative can give an appraisal of real property.
D. The market value of real property as determined by an experienced appraiser may be greater than the ceiling price of the purchaser.

1) A and B are true; C and D are false
2) B and C are true; A and D are false
3) A and C are true; B and D are false
4) C and D are true; A and B are false.

Back 6

4) C and D are true; A and B are false.

Front 7

22. In using the cost method of appraisal, the MAJOR difficulty is experienced in calculation:

1) curable physical depreciation
2) curable functional depreciation
3) incurable physical depreciation
4) replacement cost of the building as new.

Back 7

3) incurable physical depreciation

Front 8

23. An appeal from the small claims court is to:

1) the British Columbia Supreme Court
2) the Federal Court of Appeal
3) The British Columbia Court of Appeal
4) the Small Claims Court of Appeal

Back 8

1) the British Columbia Supreme Court

Front 9

26. Which one of the following is the generally accepted accounting principle which determines what amount will be recorded on the company's balance sheet as the value of the building at the time of purchase?

1) the objectivity principle
2) the consistency principle
3) the revenue recognition principle
4) the cost principle

Back 9

4) the cost principle

Front 10

32. Which of the following correctly completes the phrase "A mortgage is..."
A. a contract
B. evidence of a loan
C. security of a loan
D. required to be registered to be effective between the parties.

1) Only A, B, and D correctly complete the phrase.
2) Only A, B, and C correctly complete the phrase.
3) Only A and C correctly complete the phrase.
4) All of the above correctly complete the phrase.

Back 10

2) Only A, B, and C correctly complete the phrase.

Front 11

34. An investment corporation purchased an apartment building on March 31, 1989 for $280,000. Of that $280,000, $170,000 was attributed to the building and $110,000 to the land. Depreciation was to be claimed at $5000 per year for the life of the building. The building component of the property was valued on March 31, 1999, to be $240,000. What would be the net amount of the building appearing on the corporation's Statement of Assets and Liabilities as at March 31, 1999?

1) $170,000
2) $120,000
3) $240,000
4) $190,000

Back 11

2) $120,000

Front 12

38. Which of the following falls within the category of law called "public law"?

1) breach of contract
2) trespass
3) constitutional law
4) None of the above

Back 12

3) constitutional law

Front 13

40. Which one of the following is NOT a method of appraisal?

1) the residual method
2) the cost method
3) the income method
4) the depreciation method

Back 13

4) the depreciation method

Front 14

42. Which of the following statements about the BC Torrens system are FALSE

A. Trustees are shown on title as the registered owners of an estate or interest in land with no indication of the existence of the trust and beneficiaries are protected only by a caveat registered on title.
B. A charge registered on title is indefeasible.
C. Registered documents must be in the form prescribed by statute law to be enforceable between the parties.
D. A caveat will automatically lapse two months after it is registered on title.

1) A, B and C are false
2) A and C are false
3) A, C and D are false
4) B and D are false

Back 14

1) A, B and C are false

Front 15

45. 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 on demolition owned 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.

1) B, C, and D only
2) A and C only
3) C and D only
4) Only D

Back 15

4) Only D

Front 16

50. In BC, a lender who holds a mortgage registered as a charge on an otherwise clear title to a borrower's land has:

1) the equitable right to redeem the mortgage
2) an interest in land created by contract
3) priority over every other subsequent and lienholder in respect of the mortgaged land.
4) the right to retain the mortgagor's duplicate certificate of title to the mortgaged land until the loan is repaid in full.

Back 16

2) an interest in land created by contract

Front 17

52. 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.

1) B and C are true.
2) A and C are true.
3) Only C is true.
4) C and D are true.

Back 17

3) Only C is true.

Front 18

59. Common property in a strata title development is:

1) owned equally by all members of the strata corporation.
2) owned by the strata corporation.
3) owned jointly by the strata corporation and the strata council.
4) any property not designated as strata lots on a strata plan.

Back 18

4) any property not designated as strata lots on a strata plan.

Front 19

61. Purchaser of a residential property is often referred to as "the requirement of writing". Which of the following accurately summarizes the "requirement of writing" contained in s. 59 of the Law and Equity Act?

1) A contract respecting land must be in writing or it is void.
2) A contract respecting land can never be enforced against a party who has not signed it.
3) A contract for the sale of the land must be contained in one written document.
4) None of the above three statements accurately summarizes the requirement of writing.

Back 19

4) None of the above three statements accurately summarizes the requirement of writing.

Front 20

60. A purchaser of a residential property borrows $63,500 at J2 = 16%. The loan will be fully amortized over 15 years with monthly payments. The first monthly payment is due on May 1st. What amount will be advanced on March 21st if the borrower is to owe the face value of $63,500 on April 1st? Assume that it is NOT a leap year.

1) $63,206.13
2) $63,232.78
3) $63,795.24
4) $63,768.35

Back 20

1) $63,206.13

Front 21

62. The "possession date" in a standard form contract of purchase and sale is:

A. the date on which the purchaser takes vacant possession of the property, subject to any existing tenancy agreements.
B. the date on which adjustments are made between the parties for property taxes, erc.
C. always the same as the completion date.
D. the date on which the purchaser must assume responsibility for risk of loss or damage to the property.

Which of the above statements are TRUE?

1) Only A and D are true.
2) Only A is true
3) Only B is true
4) Only C is true.

Back 21

2) Only A is true

Front 22

65. Susan Jones has offered to purchase a house from a vendor who is willing to provide financing. Her offer is a $75,000 downpayment plus a mortgage of $125,000 at 14% per annum, compounded semi-annually. The loan is to be fully amortized with level monthly payments over twenty years. What is the market value of this offer if the market value for similar loans is 22.5% per annum, compounded semi-annually?

1) $160,241.42
2) $258,301.80
3) $ 83,539.11
4) $158,539.11

Back 22

4) $158,539.11

Front 23

69. In answer to the ringing of her doorbell, Kim opened the front door to her house to find a door-to-door vacuum salesperson on her doorstep. The salesperson walked into Kim's house uninvited. Before Kim could stop him, he dumped some dirt onto her carpet for use in a demostration of the vacuum cleaner he was selling. The dirt stained Kim's carpet. Her lawyer correctly advises Kim that:

1) the salesperson may be liable in negligence for the damage he caused to the carpet.
2) the salesperson may be liable to Kim under the common law of occupier's liability.
3) Kim will not recover any damages in a lawsuit against the salesperson because he was a trespasser.
4) she will probably succeed in a lawsuit based on the tort of private nuisance.

Back 23

1) the salesperson may be liable in negligence for the damage he caused to the carpet.

Front 24

For purposes of assessment and taxation:

(1) the strata development is assessed as a whole and each strata lot owner pays taxes in proportion to his value on destruction.
(2) each strata lot is assessed and taxed separately from the common areas which are assessed and taxed to the strata corporation.
(3) the strata development is assessed as a whole and each strata lot owner pays taxes in accordance with his unit entitlement.
(4) each strata lot, together with the owner's share in the common property, is deemed to be a separate parcel of land and improvement.

Back 24

(4) each strata lot, together with the owner's share in the common property, is deemed to be a separate parcel of land and improvement.

Front 25

75. To calculate income taxes payable for a corporation:

(1) depreciation expense cannot be treated as a deductible expense.
(2) capital cost allowance cannot be treated as a deductible expense.
(3) the computation of taxable income is irrelevant.
(4) it is necessary to know what the amount of declared dividends will be.

Back 25

(1) depreciation expense cannot be treated as a deductible expense.

Front 26

80. A life tenancy has been granted to Avon "without impeachment for waste". For which of the following actions would Avon be liable?

(1) putting new shingles on the garage roof
(2) allowing the tool shed to deteriorate and collapse
(3) cutting down some trees on the property
(4) Avon would not be liable in any of the above situations.

Back 26

(4) Avon would not be liable in any of the above situations.

Front 27

84. Which one of the following would NOT be included in the operating expenses of a commercial property for purposes of determining its market value?

(1) reserve for replacement of equipment
(2) interest on the mortgage
(3) property taxes
(4) advertising of vacant suites

Back 27

(2) interest on the mortgage

Front 28

86. Which one of the following items is NOT likely to be available to an appraiser valuing a commercial property?

(1) current lease conditions at the time of sale of the property
(2) the amount of any registered mortgages
(3) the purchaser's expected rent and expense forecasts
(4) physical characteristics of the building

Back 28

(3) the purchaser's expected rent and expense forecasts

Front 29

88. If an applicant for a mortgage loan has income of $1,200 per month and taxes are estimated at $60 per month and his permitted gross debt service ratio is 30%, what can he afford to pay for monthly principal and interest?

(1) $285
(2) $240
(3) $300
(4) $250

Back 29

(3) $300

Front 30

89. Which one of the following statements is TRUE?

(1) In order to appraise real property one needs a minimum of a real estate trading services licence.
(2) The complexity of real estate as a product requires the involvement of an expert appraiser.
(3) Real estate can be classified as a homogeneous commodity.
(4) Due to the low turnover of real estate it is easy to collect information regarding recent transactions.

Back 30

(2) The complexity of real estate as a product requires the involvement of an expert appraiser.

Front 31

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

(1) Mary could sever the joint tenancy without John's knowledge.
(2) Mary and John each have an undivided interest in the property.
(3) Mary and John each have a right of survivorship.
(4) All of the above statements are true.

Back 31

(4) All of the above statements are true.

Front 32

100. A fee simple owner in B.C. who is the victim of a fraudulent conveyance of his or her land will lose the right to have the transfer set aside when:

(1) the transfer of the property to the dishonest person has been registered in the land title office.
(2) the title to the property has been transferred to a good faith purchaser for valuable consideration.
(3) the guilty party has been convicted of fraud by a court.
(4) he or she notifies the registrar of land titles that fraud has occurred.

Back 32

(2) the title to the property has been transferred to a good faith purchaser for valuable consideration.

Front 33

101. Which of the following factors will affect the value of land?

(1) immobility
(2) diversification
(3) externalities
(4) both (1) and (3)

Back 33

(4) both (1) and (3)

Front 34

102. In Canada, the power to make laws is divided between the federal and provincial levels of government. Which of the following have been assigned to the federal government?

A. jurisdiction over harbours
B. jurisdiction over the regulation of the heights of buildings and structures around airports
C. jurisdiction over matters affecting private property and the power to delegate some provincial
authority to a third level of government
D. jurisdiction over the regulations to protect fisheries

(1) A, C and D.
(2) A, B and D only.
(3) B, C and D only.
(4) Only A and B.

Back 34

(2) A, B and D only.

Front 35

103. Which one of the following is NOT a course of action that the Real Estate Council can take following a disciplinary hearing.

(1) reprimand the licensee
(2) order the cancellation of the licensee's licence
(3) suspend the licensee from participation in the Multiple Listing Service.
(4) order the licensee to enroll in and complete a course of studies or training prescribed by the Council

Back 35

(3) suspend the licensee from participation in the Multiple Listing Service.

Front 36

104. To qualify for a managing broker’s licence in B.C., a person must meet which of the following requirements?

(1) submit personal financial statements for each licensee they intend to hire.
(2) be of good reputation.
(3) three years’ licensed experience in British Columbia.
(4) all of the above are requirements for a managing broker’s licence.

Back 36

(2) be of good reputation.

Front 37

105. A loan of $124,500 is fully amortized by monthly payments over 15 years. The interest rate is 14 1/4% per annum, compounded semi-annually. Round the monthly payment up to the next higher cent. Calculate the final payment.

(1) $1,639.49
(2) $1,620.94
(3) $1,645.04
(4) $1,650.59

Back 37

(1) $1,639.49

Front 38

106. The principle of indefeasibilty under the Torrens system means:

(1) that a person dealing in good faith with the registered owner of property is not required to investigate how the owner got his title.
(2) that no notice of trusts may appear on the title.
(3) an applicant for registration does not need to give prior notice to the registrar.
(4) a purchaser has deemed knowledge of all unregistered interests.

Back 38

(1) that a person dealing in good faith with the registered owner of property is not required to investigate how the owner got his title.

Front 39

109. A borrower is arranging a third mortgage with Brass Knuckle Finance Company. The loan amount is $17,000, the interest rate is 21.5% per annum, compounded semi-annually, the amortization period is 15 years and the contractual term is 2 years. If payments are made monthly and rounded up to the next higher $10, calculate the outstanding balance at the end of the loan term.

(1) $16,542.73
(2) $16,579.53
(3) $16,464.31
(4) $16,758.22

Back 39

(3) $16,464.31

Front 40

111. Most zoning bylaws include density restrictions. Which of the following is NOT a method of measuring density?

(1) total floor area of the building in relation to the size of the lot
(2) floor area ratio
(3) number of dwelling units per hectare
(4) prescribing the maximum lot area per dwelling

Back 40

(4) prescribing the maximum lot area per dwelling

Front 41

112. Which one of the following statements about the revocation of an offer is TRUE?

(1) If an offer has a specified time for expiry, it cannot be revoked prior to that time.
(2) Unless consideration is paid to keep an offer open for a specific time, revocation can be made at any time prior to acceptance.
(3) Revocation can be made prior to or after acceptance.
(4) The method of revocation must be exactly the same as the method used in the offer.

Back 41

(2) Unless consideration is paid to keep an offer open for a specific time, revocation can be made at any time prior to acceptance.

Front 42

115. If, under a principal’s instructions, an agent makes certain representations concerning a property which are false to the knowledge of both the principal and the agent:

(1) the principal is liable because he or she explicitly authorized the tort.
(2) the agent cannot escape personal liability by arguing that he or she was authorized to commit the tort.
(3) the agent will be personally liable for the tort.
(4) All of the above will be applicable.

Back 42

(4) All of the above will be applicable.

Front 43

116. Which one of the following types of authority would NOT provide an agent with sufficient authority to create a binding contract between his principal and a third party?

(1) implied authority
(2) apparent authority
(3) assumed authority
(4) express authority

Back 43

(3) assumed authority

Front 44

117. Which of the following is characteristic of a mortgage as an investment?

(1) mortgages are not "unique", which makes them easy to trade
(2) requires a high degree of administrative work
(3) requires a low initial outlay of capital
(4) All of the above are characteristics of a mortgage as an investment.

Back 44

(2) requires a high degree of administrative work

Front 45

118. Calculate the amount by which the principal is reduced during the five-year term of a $159,900 mortgage at j12 = 12% with a 25-year amortization. Assume the monthly payments are rounded to the next higher cent
and paid when due. The principal reduction is:

(1) $ 89,583.15
(2) $ 6,950.91
(3) $152,949.09
(4) $ 6,529.15

Back 45

(2) $ 6,950.91

Front 46

119. A borrower is arranging a third mortgage with Brass Knuckle Finance Company. The loan amount is $17,000, the interest rate is 21.5% per annum, compounded monthly, the amortization period is 15 years and the contractual term is 2 years. If payments are made monthly, rounded up to the next higher $10, calculate the outstanding balance at the end of the loan term.

(1) $16,614.51
(2) $16,317.91
(3) $16,839.34
(4) $16,542.73

Back 46

(4) $16,542.73

Front 47

120. Mike Moneylender, an investor in mortgages, would prefer to earn which of the following yields?
(1) j2 = 20%
(2) j1 = 21%
(3) j365 = 19.25%
(4) Mike would be indifferent amongst the 3 yields quoted above.

Back 47

(3) j365 = 19.25%

Front 48

121. After a borrower has given a mortgage of real property, the borrower's remaining interest is described at law as:

(1) a right of foreclosure.
(2) a common law mortgage.
(3) the equity of redemption.
(4) None of the above.

Back 48

(3) the equity of redemption.

Front 49

122. In a mortgage contract, the promise by the borrower to pay the installments of principal and interest as they fall due entitles the lender to exercise the remedy of an ordinary creditor, separately from a foreclosure application, in the case of default. This promise is known as:

(1) the equity of redemption.
(2) the personal covenant.
(3) the insurance covenant.
(4) a collateral advantage.

Back 49

(2) the personal covenant.

Front 50

124. Given the following information, calculate the minimum annual income a purchaser must have in order to qualify for a $42,500 loan.

Interest rate: 11 1/4% per annum, compounded semi-annually.
Term: 5 years
Amortization period: 25 years
Payments: Monthly
Maximum Gross Debt Service Ratio: 27%
Net Real Property Taxes: $600 per annum

(1) $ 20,728.89
(2) $ 18,506.67
(3) $ 19,490.52
(4) $ 5,596.80

Back 50

(1) $ 20,728.89

Front 51

126. What is an assessment notice?

(1) a demand for payment of a specified amount of property taxes
(2) a notice issued by the municipality stating the date on which the assessor will appraise your property
(3) an extract from the assessment roll concerning a specific property
(4) a notice of the cost to the property owner of a local improvement project

Back 51

(3) an extract from the assessment roll concerning a specific property

Front 52

128. Of the following four statements, which are TRUE, and which are FALSE?
A. Appraisers must be licensed in British Columbia.
B. Courts have recognized an acceptable range of error in the determination of market value by appraisers.
C. A licensed trading services representative can give an appraisal of real property.
D. The market value of real property as determined by an experienced appraiser will always be greater than the floor price of the owner.

(1) A and B are true; C and D are false
(2) B and C are true; A and D are false
(3) A and C are true; B and D are false
(4) C and D are true; A and B are false

Back 52

(2) B and C are true; A and D are false

Front 53

131. Where a single-family residence in Vancouver contains a wood burning furnace as its primary heating system, this would be considered an element of:

(1) physical curable depreciation.
(2) functional curable depreciation.
(3) functional incurable depreciation.
(4) physical incurable depreciation.

Back 53

(2) functional curable depreciation.

Front 54

137. The "subject of an appraisal" is:

(1) the market value of the physical property.
(2) a fee simple estate on a cash or cash-to-first-mortgage basis.
(3) a subjective measure of value by an experienced appraiser.
(4) the value of the legal rights of ownership vested in a particular piece of real estate.

Back 54

(4) the value of the legal rights of ownership vested in a particular piece of real estate.

Front 55

139. In British Columbia, before approving a conversion of a rental building to a condominium, the approving authority must consider a number of factors. Which one of the following is NOT a mandatory consideration?

(1) the priority of rental accommodation over private ownership in the area
(2) the proposal to relocate existing tenants
(3) the life expectancy of the building
(4) the potential increase in real property tax revenue

Back 55

(4) the potential increase in real property tax revenue

Front 56

142. On a straight line principal reduction loan, the monthly payment:

(1) is a constant amount each month.
(2) pays interest only.
(3) pays principal only.
(4) declines over time.

Back 56

(4) declines over time.

Front 57

146. An investor has the opportunity to invest in one of four alternative mortgages, each with the same degree of risk. The only distinction between these investments is the rate of interest charged to the borrower.These rates are:

Loan A: 13.25% per annum, compounded daily
Loan B: 13.50% per annum, compounded quarterly
Loan C: 13.75% per annum, compounded semi-annually
Loan D: 14.25% per annum, compounded annually

Assuming that the investor can purchase each mortgage for the same amount of money, which investment will he prefer?

(1) Loan A
(2) Loan B
(3) Loan C
(4) Loan D

Back 57

(4) Loan D

Front 58

147. A local mortgage broker arranged a mortgage in the amount of $210,000. The borrower has agreed to pay a brokerage fee in the amount of $7,200 which is to be added to the loan amount, giving a face value of $217,200 for the loan. The mortgage bears interest at a contract rate of 17 3/4% per annum, compounded
semi-annually. The mortgage has an amortization period and term of 20 years and calls for monthly payments rounded to the next higher cent. If the mortgage is to be sold to an investor for $225,000 immediately after the loan is initiated, the investor will earn the following nominal interest rate, with semi-annual compounding:

(1) 17.0265603822%
(2) 16.354586295%
(3) 16.452236868%
(4) 17.7513197783%

Back 58

(1) 17.0265603822%

Front 59

148. What is the result of the doctrine of stare decisis?

(1) Former decisions are used as a basis for later decisions.
(2) The common law system has uniformity.
(3) Decisions by the Supreme Court of Canada are accorded the most weight in our jurisprudence.
(4) All of the above result from the doctrine of stare decisis.

Back 59

(4) All of the above result from the doctrine of stare decisis.

Front 60

149. Consider the following statements regarding the income method of appraisal.

A. Net Operating Income is a measure of return on the equity portion of a property's value.
B. Items specific to an owner or investor are omitted in the calculation of Net Operating Income.
C. Net Operating Income does not consider depreciation, income tax or debt service.
D. The income method of appraisal is only used for apartment buildings.

Which of the above statements are TRUE?

(1) All of the above statements are true.
(2) Only statements A and C are true.
(3) Only statements B and C are true.
(4) Only statements A and D are true.

Back 60

(3) Only statements B and C are true.

Front 61

150. Karen's neighbour, Jack, is a gas barbecue enthusiast who cooks two meals a day, seven days a week, on his outdoor gas barbecue. As a result, the smoke, fumes and even ashes (from charred meats) are carried onto Karen's property where they interfere with her use and enjoyment of her backyard. The barbecue
smoke has discoloured Karen's dining room curtains and killed her rare Japanese shrubs. Which of the following statements are TRUE?

A. This scenario reveals a cause of action for interference with the airspace rights of a fee simple owner.
B. If Karen chooses to sue Jack for negligence she must prove that he has breached the standard of care owed to her by a reasonable person in Jack's situation.
C. Jack is probably liable to Karen for private nuisance and Karen may seek an injunction to prevent Jack from continuing the nuisance.
D. Karen need not prove that she has suffered any form of damage to succeed in her lawsuit against Jack because her cause of action is "actionable per se" (i.e. without proof of damage).

(1) Only B and C are true.
(2) Only C is true.
(3) None of the above statements is true.
(4) All of the above are true.

Back 61

(1) Only B and C are true.