MiniCram Real Estate Exam Course 2
MiniCram Real Estate Exam Course 2
Study Notes & Practice Questions
Updated: August 2017
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Warning and Disclaimer
The information contained in this publication is essentially a summary, for the only purpose of
review of key concepts for exam preparation, and is not intended to replace direct research or original
source documents, actual classroom training or expert advice. This publication is for the sole purpose of
education.
Every effort has been made to make this book as complete, error free and as accurate as possible,
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This warning and disclaimer applies regardless of whether you access this publication in paper
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► There is no representation, warranty or guarantee, of any kind whatsoever, whether
expressed or implied, that the student will pass the exam. We provide only sample practice
questions to help you in exam preparation. These practice questions should not be considered
actual exam questions. No return, exchange or refund will be issued once the book has been
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Acknowledgements
The terms MLS® and REALTOR® are registered trademarks of the Canadian Real Estate
Association® (CREA®). OREA® is a trademark of the Ontario Real Estate Association®. RECO® is a
trademark of Real Estate Council of Ontario. The use of these trademarks or logos in this publication is
intended only for the purpose of general information and education and is not to affect any validity or legal
status associated with them.
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MiniCram Notes
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MiniCram Real Estate Exam Course 2
TABLE OF CONTENTS
Copyright
Table of Contents
Introduction & Exam Format
10 Tips for Exam
PART I – STUDY NOTES
1. Property Ownership
2. Land Description
3. Land Registration Acts
4. The Planning Act
5. Land Use Controls
6. Structural Components – Interiors
7. Exterior Finishes
8. Electrical and Mechanical Systems
9. Appraisal Fundamentals
10. The Direct Comparison Approach
11. The Cost Approach
12. The Income Approach
13. Mortgage Financing
14. Mortgage Qualification and Products
15. Agency Relationships
16. Client Representation
Part II – PRACTICE QUESTIONS
Sample Exam 1
- Answer Key
Sample Exam 2
- Answer Key
Sample Exam 3
- Answer Key
Sample Exam 4
- Answer Key
Detailed Answers
- Sample Exam 1
- Sample Exam 2
- Sample Exam 3
- Sample Exam 4
MiniCram Notes
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MiniCram Real Estate Exam Course 2
INTRODUCTION
Dear Reader,
Congratulations on purchasing our MiniCram for Ontario Real Estate License Exam
preparation. The purpose of this book is to provide you with last minute review of important theory
and math concepts for the exam.
This booklet has been written so that you can focus on key areas of study as well as
prepare to overcome most common mistakes the students make on the actual test day.
How to Use This MiniCram
You do not have enough time to waste. This MiniCram booklet is designed in such a way
that your review for the exam is fast paced. It is suggested that you go through each topic one by
one. It is assumed that you have already covered the topics in details in either the actual class or
by self-study.
We Want to Hear from You
This book is written by a practicing Real Estate Broker who is also a trained adult trainer.
If you have a feedback for the author, need more information or have general comments, please
send an email to minicram@outlook.com.
We hope you enjoy your review. Good luck for the exam!
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EXAM FORMAT - COURSE 2
Land Structures and Real Estate Training
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First 16 Questions
1 Mark Each
16 Marks
Next 33 Questions
2 Marks Each
66 Marks
Last 6 Questions
3 Marks Each
18 Marks
The marks for each question are given against the question itself.
Take a simple calculator. HP10BII Calculator is not absolutely necessary.
The exam booklet is separate from the answer sheet, which is a machine-readable
Scantron® sheet. The answer sheet is to be filled up with pencil only.
Cell phones or tablets are not permitted in exam centre.
For more information on the exam, visit the official website at www.orea.com.
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MiniCram Real Estate Exam Course 2
10 TIPS FOR THE EXAM
1. RELAX! Too much anxiety, panic, stress and fear are big distractions. Focus on the
question and choose the best answer.
2. GAME OF WORDS. All multiple-choice exams are merely variation of words. If you
know your course materials, it's only a matter of interpreting the question and then
selecting a correct option.
3. EASY ONES FIRST. In this exam, the first 10 questions are easy, simple and
straightforward questions. Do these questions first. If math is your weakness start with
these easy the questions.
4. READ ALL OPTIONS. Even if you think A is the correct answer, read options B, C
and D to make sure they are incorrect.
5. MANAGE YOUR TIME WISELY. Divide it according to marks for each question. Do
not spend too much time on 1 mark questions. Skip the question that you think is
difficult to answer. Mark it for review and proceed to the next one.
6. EXTREME PHRASES. Beware of absolute words in any option such as ALL, NONE,
ALWAYS, NEVER, MUST, NONE, EVERY, EXACTLY, ONLY, etc. In most cases, the
options that include any of these words are rarely correct.
7. HEDGE PHRASES. When a question asks you to conclude something and includes
words such as MAYBE, LIKELY, OFTEN, ALMOST, USUALLY, GENERALLY,
TYPICALLY, SOMETIMES, etc. Do not pick any answer that does not leave any room
for exception.
8. ALWAYS read the question twice. You must know what information is given and
exactly what is being asked. More than one choice may seem to be correct if you do
not understand the question properly. If that is the case use the method of elimination.
9. REMEMBER that your first instinct is mostly a correct answer. Be careful when
changing your answer but don't be afraid if you have to change it.
10. REVIEW. Make sure you did not skip any question and the answer sheet is neatly
filled in. Never mark more than one answer. If you need to change a marked answer
erase the previous one nicely. Otherwise, the machine may not be able to scan your
answer.
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MiniCram Real Estate Exam Course 2
PART I – STUDY NOTES
1. PROPERTY OWNERSHIP
1.1 Ownership
Types of Estates
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The Feudal System of Tenure refers to holding of land by Lords of land (Principal
Tenants/Tenants-in-Chief) without owning it and for a temporary period.
The Fee Simple Estate provides maximum rights with minimum restrictions. It is also
known as Absolute Right.
Fee Simple with Conditions automatically terminates when some condition on use is
violated.
Leasehold Estate flows from some other larger estate, is smaller than that and is for a
definite time period.
Estate to Uses is a type of Trust Ownership given by the owner based on a deed or
will. No longer in use.
Life Estate is granted to someone for lifetime. It ceases upon death of that person.
When Life Estate ends, it may revert to grantor (Reversion) or it may go to a third party
(Remainder).
Future Estate is related to Life Estate. When the estate goes to a third party (e.g.
son/daughter) after the death of Life Estate holder, it is a Future Estate for that party
when Life Estate starts.
Both Life Estate and Future Estate start simultaneously but the Future Estate holder
cannot use the estate till the time Life Estate exists.
Concurrent Ownership
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Concurrent ownership refers to simultaneous ownership of land by two or more
persons.
This is of two types – (i) Joint Tenancy, and (ii) Tenancy-in-Common.
Joint Tenancy is specifically created at the time of registration and must have Four
Unities:
➢ Time – each joint tenant gets ownership at the same time.
➢ Title – each joint tenant gets ownership by same title (document).
➢ Interest – each joint tenant has equal interest in the property.
➢ Possession – each joint tenant has undivided possession of the property.
Tenancy-in-Common has only one unity of Possession whereby everyone holds
undivided possession of property. Tenants-in- Common may have different interests
and may acquire them at different times or different ways.
The Right of Survivorship exists only in Joint Tenancy where upon death of one joint
tenant, the entire interest transfers to the surviving joint tenant(s).
The Right of Survivorship does not exist in Tenancy-in-Common. After death of a
Tenant-in-Common, the interest of that person becomes Estate of the Deceased.
Co-operatives
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Co-operative buildings also consist of Units and Common Elements but unlike
Condominiums, the entire property is owned by the corporation.
Unit holders get a lease called Occupancy Agreement.
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MiniCram Real Estate Exam Course 2
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In Equity Co-operative, the unit holders get shares of the cooperative and Occupancy
Agreement. When sold, the buyer gets the share certificate and the lease is
transferred.
Non-Profit Co-operatives are funded by the government. The unit holders do not get
any share certificated but only occupancy agreement.
Partnerships
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Partnership is based on a Partnership Agreement where all partners are personally and
jointly liable for the assets and liabilities.
Partnerships are easy to form and enable the partners to share their resources in order
to increase their borrowing power to start a business.
Limited Partnership
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Limited Partnership is created under the Limited Partnerships Act with at least two
partners – General Partner and Limited Partner.
The General Partner manages the business operation and his/her liability is not
limited.
The Limited Partner must be passive investor.
The liability of the limited partner is limited to the funds invested and profits shared.
1.2 Property Rights
Types of Interests and Rights
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Bundle of Rights: The rights of ownership associated with possession, use, enjoyment,
sale, purchase, lease, etc. in a Fee Simple estate. The right to refrain from using these
rights is also included. These rights are subject to limitations.
Surface Rights: These are ground level rights to use the physical surface of the
property.
Air Right: It is a Fractional Interest (a single right out of bundle of rights) given for using
the space above the physical surface of the property.
Mineral Rights: These rights are related to exploring, drilling and extracting minerals
well below the surface of the property. Mining leases granted by Ministry of Natural
Resources refer to Mineral Rights.
Riparian Rights: These rights are associated with shoreline properties and include right
to use water, irrigation, navigation, drainage, flood prevention measures, etc.
Adverse Possession: This right arises from unauthorized occupation of the property by
someone other than owner, with the knowledge but without consent of owner. If this
possession continued without interruption for over 10 years, it was possible for the
occupier to become owner. This is not possible now under Land Titles Act.
Encroachment: Unauthorized intrusion on to the land of another owner.
Easements
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An Easement is a right enjoyed by one land owner over the land of another. Dominant
Tenement is the person who gets benefit and Servient Tenement is the person who
suffers the burden.
There must be a clear objective to create easement and separate ownership of
properties must exist.
MiniCram Notes
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MiniCram Real Estate Exam Course 2
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Once created, the easement binds to land and to subsequent owners if the property is
sold.
➢ By Express Grant: Refers to creation by mutual consent when one land owner
agrees to grant this privilege to another owner.
➢ By Implication/Necessity: Refers to creation of easement when it becomes
absolute necessity.
➢ By Prescription/Squatter’s Rights: This type of easement is created when someone
had used a right-of-way for a long period of time (Adverse Possession).
➢ By Statute: These easements are for public utility companies such as hydro,
telephone, water, sewage, etc.
An easement can be terminated by three methods- (i) Release by dominant tenement,
(ii) when the purpose ceases, and (iii) Merger of properties.
1.3 Limitations on Rights
Government Limitations
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The Power of Escheat refers to the fact that if no heir can be found for a property, it
reverts to Crown. Intestate refers to a person who dies without leaving a will.
Police Power refers to the power of different levels of government to regulate division,
development and use of land using various laws and by-laws.
Power of Taxation means that ownership of property may be subject to taxes such as
land Transfer Tax, Property Tax, etc.
The government can take private property for public use under the Right of Eminent
Domain. The activity under tis right is known as Expropriation.
Restrictive Covenants (Private Deed Restrictions)
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A Restrictive Covenant limits the use of property for a specific purpose and manner.
It is usually contained in the title/deed of property (Deed Restriction).
These are commonly found in sub-divisions and condominium Declaration so that all
owners are obliged to conform to them.
In principle, a restrictive covenant is an agreement between two land owners, one
gives the promise (Covenanter) and the other gets a promise (Covenantee).
A restrictive covenant must be negative in nature but still reasonable and be in public
interest.
Deed Restrictions prevent the use of property for a purpose which is otherwise
permitted by zoning by-law.
Expropriation
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Expropriation is the act of taking private property for public use by paying fair
compensation to the owners.
When served with an expropriation notice, the owners may request a hearing with the
Enquiry Officer. After than the public body (usually upper-level municipality) registers a
survey of land under expropriation and becomes owner.
Fair compensation is determined based on Common Law using 4 assumptions of
market value. The owners may dispute the amount and serve a notice for resolution.
To resolve the compensation issue, the parties first meet the Board of Negotiations,
then go to Arbitration and if issue is not resolved, may proceed to Court of Appeal or
even the Superior Court of Justice.
MiniCram Notes
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MiniCram Real Estate Exam Course 2
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Salespersons involved in sale/purchase of property under expropriation must disclose
in Listing Agreements and subsequent Agreements of Purchase and Sale that pending
expropriation may reduce the lot size and hence, the property value.
1.4 Family Law Act
Matrimonial Home
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The Family Law Act defines a Matrimonial Home as deemed primary residence of a
family. Other properties may also be designated by a family as matrimonial homes.
A matrimonial home provides Equal Right of Possession to both spouses, whether both
are owners or one of them is non-owner.
In case one of the spouses is not on title (non-owner spouse), the owner spouse must
get Spousal Consent to sell or encumber the matrimonial home property.
Settlement of Net Family Property
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The Family Law Act provides for equitable settlement in case of separation, divorce or
death by equally dividing the Net Family Property.
Any property purchased after marriage is equally divided.
Each spouse calculates his/her share of Net Family Property by deducting the value of
property that he/she brought in to marriage.
Only increase in the value of net family property is equally divided as opposed to the
entire value.
Exceptions: Property excluded in a Domestic Contract, inherited or gifted property,
amount received from court judgment, insurance claims, etc. are not part of
calculations.
1.5 Real Estate vs. Real Property
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Real Estate: Refers to Tangible (physical) aspects of the property. Land and
improvements on land.
Real Property: Includes both Tangible and Intangible aspects of the property. Includes
land, improvements on land and the rights of the owner.
Personal Property
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Personal Property: Movable assets of the owner.
Chattels: These are personal and movable assets of the owner. For example, furniture,
furnishings, appliances (fridge, stove, washer, dryer), bookshelves, etc. Chattels are
usually not included in the sale price unless they are specifically included in the
agreement.
Fixtures: These are the items which are fixed to the property (non-movable). Fixtures are
usually included in the sale price unless they are specifically excluded in the agreement.
Included or Excluded: Certain items, such as dishwasher, should not be assumed to be
automatically included or excluded from the sale. Salespersons must not be negligent
about such items.
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MiniCram Notes
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MiniCram Real Estate Exam Course 2
2. LAND DESCRIPTION
2.1 Historic Methods
Chains and Links
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Land was divided into Counties, Townships, Concessions and Lots.
Most county boundaries were marked on the banks of rivers or lakes. Most townships
were square or rectangular in shape.
Land was measured using Chains and Links method.
One chain had 100 links and was 66 feet in length.
The length of 80 chains was equal to 1 mile.
Concessions are strips of land that that make up a Township and passing through the
entire township. They were separated by a Road Allowance.
Concessions had a frontage of 100 Chains and the Road Allowance was 1 chain (66
feet) between concessions.
Any parcel of land could be completely described legally like Lot 3, Concession II,
Anytown, Anycounty.
Township Structures
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In a Single Front township system land was divided into lots of 200 acres with each lot
having dimensions of 20 chains by 100 chains.
In a Double Front township system land was divided into lots of 200 acres with each lot
having dimensions of 30 chains by 66.67 chains. Each lot was patented into two half
lots of 100 acres each.
In the Sectional township system, a section consisted of 1000 acres divided into 10 lots
of 100 acres each.
Metes and Bounds
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Metes (distances) and Bounds (directions) is a method of written land description (not
a survey, but a part of Survey).
Land could be described by indicating a Point of Commencement and proceeding to
indicate the perimeter of the parcel.
Angle bearings were from North and South only while directions are towards East and
West only. The first direction is always True North or True South.
A boundary line could be described as North 45 Degrees East, 120 Feet meaning that
it is at 45 degrees with North and runs between North and East directions.
Each line could have two descriptions, one in each direction, showing which direction
to follow.
Some (not all) measurements may have the words ‘More or Less’ to allow for minor
errors.
Compiled Plans
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They were visual depictions of land required to clarify the Metes and Bounds
descriptions.
They are used for general information and guidance only.
They are not treated as Plan of Survey.
MiniCram Notes
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MiniCram Real Estate Exam Course 2
2.1 Surveys
Legal Description of Land
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Precise land description is necessary so that properties can be identified clearly.
The primary and reliable sources of obtaining land description are the Deed or the
Survey.
Property tax documents also provide legal description but these may not be reliable.
A Survey has four essential components: Research, Measurement, Monumentation
and, Plan or Written Report.
The four types of surveys commonly found are: Reference Plan, Plan of Survey, Plan
of Sub-division and Surveyor’s Real Property Report.
Reference Plan (R-Plan)
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R-Plan is a graphic illustration (visual description) of land which is less complex and
has shorter description than Metes and Bounds.
It may be used to replace the complicated Metes and Bounds written description.
An example of legal description of land using R-Plan would be: Part 1 of Lot 2,
Concession III, Township of Anytown, and Deposited in Land Registry Office of
Anycounty.
It is written as Plan 88R-1075. The letter ‘R’ is called pre-fix to R-Plan number and
indicates a Reference Plan.
R-Plan is deposited and not registered in Land Registry Office as it is for descriptive
purposes only.
It has no effect on land until there is a transaction according to R-Plan.
An R-Plan may show more than one property.
Plan of Survey
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A Plan of Survey has a format similar to a Reference Plan but does not have any
certification.
It is provided only to the client and describes only one specific property.
It is specifically prepared for the client to describe his property.
It is Part 1 of Surveyors Real Property Report.
Surveyor’s Real Property Report
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This type of survey has two parts: Part 1 – Plan of Survey, and Part 2 - A Written
Report (and Certification).
It shows municipal address and designation under Land Registry or Land Titles.
Dimensions and bearings of all property boundaries and designation of adjacent
properties are included on the survey.
This survey also shows improvements on land, easements, right-of-way and, any
encroachments.
Plan of Sub-division
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A Plan of Sub-division is usually approved by Upper Tier Municipality (Region) and
registered in Land Registry Office.
Upon registration, a sequential number is assigned to the plan.
MiniCram Notes
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MiniCram Real Estate Exam Course 2
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It is written as Registered Plan 88M-165. Letter ‘M’ is called Pre-fix to plan number and
indicates a subdivision.
It divides land into numbered or named units such as lots, blocks and roads.
It creates new geographic identity for parcel of land.
2.3 Geographic Information System
Mapping and Data Maintenance
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Geographic Information System (GIS) refers to the software used for surveying
(mapping) of lands and maintaining data.
Advantages – (i) better planning and decision making, (ii) lower administration costs,
and (iii) fewer redundancies (duplicate data).
Data may be displayed in either Vector or Raster method.
Vector method shows only township boundaries, roads, property boundary lines, etc.
Raster refers to images or bit-mapped visual description where landscaping or terrain
is clearly visible.
Sources of data for GIS –
➢ Spatial Data includes maps of buildings and streets.
➢ Tabular Data includes mapping features such as buildings permits.
➢ Image Data includes visual images using satellites or aerial photographs.
2.4 Condominium Corporation
Condominiums (The Condominium Act)
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Condominium is called a Creature of Statute and is created after registration of
Declaration and Description
These two documents create the legal structure of the condominium corporation.
Once the condominium is registered, individual units can be registered separately.
It is the Freehold (Fee Simple) or Leasehold ownership of a specified amount of space
(Unit) in a multiple-dwelling building with Tenancy-in-Common ownership of Common
Elements.
Condominium enables a person to share in the ownership and operation of a
residential or commercial complex, while having negotiable title to an individual unit.
A condominium building consists of Units (defined space) and Common Elements (all
property except Units).
Unit owners have exclusive ownership of their units and also have Tenancy-inCommon ownership of common elements with other unit owners.
The costs related to the performance of objects and duties are paid for by unit owners
through Common Expenses (Maintenance Fees).
The corporation does not provide limited liability to unit owners because they are
personally responsible for debts of the corporation.
Any default in payment of common expenses of condominium unit results in a lien
against the Title of the unit.
This is called Condominium Lien and it can be enforced in the same way as the
Mortgage Lien.
A Condominium Lien has priority over all other liens except Crown claims and property
taxes.
MiniCram Notes
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MiniCram Real Estate Exam Course 2
Declaration
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This document is referred to as constitution of the condominium corporation.
It sets out the responsibilities of the owners and the corporation.
It includes information on –
➢ Statement that the Condominium Act is the governing law.
➢ Consent of the mortgagees.
➢ Proportionate share of each unit owner in the common elements and their common
expenses.
➢ Common areas given exclusively to any unit owner.
➢ Obligations to maintain units and common elements in case of significant damage.
➢ Conditions or restrictions on use of units and common elements.
Description
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Description is a diagrammatic representation of the property.
It includes plan of survey, architectural plans, structural plans, boundaries of units,
shape/size and dimensions of each unit, certificate of Ontario land surveyor, etc.
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MiniCram Notes
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MiniCram Real Estate Exam Course 2
3. LAND REGISTRATION ACTS
3.1 Recording Acts
Land Registry Act (Old)
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All land previously was registered under either the Registry System or the Land Titles
System but not under both.
No Guarantee: In this system, the Land Registrar does not take any responsibility for
verification of title information.
Recording books are divided on township basis and are called Abstract Books.
These books are indexed on the basis of land description (Tract Indexing).
Information on individual properties is recorded on Abstract Pages.
Since there was no guarantee of accuracy of information, the buyer’s lawyer would
have to perform a Title Search for a minimum of 40 years’ period.
Land Titles Act (New)
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Guarantee: This system guarantees that no interest in land other than those given in
the register can affect the land.
The Parcel Register (Land Titles Register) is the sole information source for purchasers
because it contains only existing and valid interests in land.
This reduces the time taken for title search as only current records have to be
searched.
Three Principles of Land Titles Act
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Mirror Principle: Title information accurately and completely reflects the current facts
and present status of land.
Curtain Principle: The parcel register is the sole source of information for purchasers.
Insurance Principle: If a flaw (defect) appears due to human error, anyone who suffers
loss must be compensated.
Land Titles Assurance Fund
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It provides compensation to anyone who suffers loss (or is deprived of ownership) due
to errors, document forgery or fraud.
Such compensation then cannot be obtained from other sources.
It is different from Title Insurance.
3.2 Land Registration Reform Act
Standards Forms
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The purpose of this Act was to reduce the number of standard registration documents
to five (5).
Form 1: Transfer/Deed of Land: Used to register a deed under Registry Act or Land
Titles Act. Land Transfer Tax Affidavit is a part of this form. It is required so that Land
Registrar or the lawyer may collect Land Transfer Tax.
Form 2: Charge/Mortgage of Land: Used to register a mortgage lien and provides
information on the lender, amount of loan and mortgaged property.
MiniCram Notes
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MiniCram Real Estate Exam Course 2
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Form 3: Discharge of Charge/Mortgage: This form is executed by the mortgagee and
given to the mortgagor verifying that the mortgage loan has been paid off in full. This
document needs to be registered in the Land Registry Office. If the mortgagor has paid
off the loan but failed to obtain a discharge, a discharge may be obtained from court by
providing evidence or by paying off any remaining monies.
Form 4: Document General: This form is used for registration of other interests such as
Cautions, notice of lien, discharge of power, power of attorney, judgment, notice of
survivorship, etc.
Form 5: Schedule: Standard attachment to other forms.
Standard Charge Terms
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It is a document containing standard terms and conditions of the mortgage loan.
Lenders may register this documented in one Land Registry Office and it is and
circulated to all Land Registry offices
This document is given a number and the lender may refer to the number in
registration document.
These terms vary from lender to lender and may be amended by a lender filing a new
set of terms.
Implied Covenants
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Implied Covenants are obligations of the borrower when Standard Charge Terms are
not registered with the mortgage document.
There covenants ensure that the mortgagor has the legal right to give mortgage; will
maintain the property in good repair; will make mortgage payments; will keep the
property insured; etc.
These covenants provide for legal remedies for the mortgagee when the mortgagor is
in default.
The mortgagee may take possession of the property, collect rents from tenants and
may sell the property to recover monies.
3.3 Electronic Land Registration
The POLARIS System
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POLARIS refers to Province of Ontario LAnd Registration and Information System.
This system is developed and implemented by Teranet.
POLARIS operates on the basis of Title Index and Property Mapping.
A unique 9-digit Property Identification Number (PIN) is assigned to individual
properties.
PIN can be located using Block Index Map (Block Number) and Property Index Map
(Property Number). Example: PIN 00114-0051 means Block number 00114 and
Property number 0051.
Teraview is the software package used to perform e-registration.
Examples of e-registration activities include title searching, creating and submitting title
documents for registration; viewing or printing title related documents and accessing
parcel registers and maps.
Law firms are usually issued a Personal Security Package (PSP) to access POLARIS.
This includes a removable storage disk with encryption capabilities.
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Land Titles Conversion Project
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This project involved conversion from Land Registry system to Land Titles system.
Land Titles Absolute initial was issued for properties converted by way of First
Application.
Land Titles Conversion Qualified (LTCQ) initials are given to properties converted by
way of Large Scale Administrative Conversion.
A 40-year history of interests and claims is searched in the conversion project including
at least previous 3 deeds or ownership for 10 years.
If a title related problem is uncovered during search, the property is not converted to
Land Titles automatically but converted later when the issue is resolved.
3.4 Other Non-Ownership Interests
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Crown Lands: All Crown lands in Ontario fall under the Public Lands Act regulated by
federal government. Crown Patent is an original title deeded by the government and is
accepted as Root of Title. Sale/purchase of Crown Lands needs special research and
issue of a patent that is registered in land registry office.
•
Native Lands: These are reserve lands held by the Crown for use and benefit of native
people and are under The Indian Act. In order to convey such land, it must first be
surrendered to the federal government.
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Power of Attorney: A delegated written authority given to a person (attorney) to act on
behalf of another (grantor). It is of three types but for real estate the Continuing Power
of Attorney for Property is used under the Substitute Decisions Act. The power of
attorney must be registered in land registry office.
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Estate of the Deceased: It is administered by an Estate Trustee who signs documents
on behalf of the deceased person. Typically, a Certificate of Appointment of Estate
Trustee is issued by the courts and is registered in the Land Registry Office. Estate
Trustee with a Will is issued by court if the person left a will. Estate Trustee without a
Will is issued by court if the person did not leave a will.
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Leasehold Interest: According to Statute of Frauds, a lease for less than 3 years need
not be in writing. The tenant may register his interest in the Land Registry Office to
protect his/her interests.
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4. THE PLANNING ACT
4.1 The Provincial Perspective
The Planning Act
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The Ministry of Municipal Affairs and Housing (MMAH) directs the provincial Planning
Act which provides for orderly division, development and use of land.
The ministry uses Provincial Policy Statements to direct the planning process at the
provincial level.
The ministry works in conjunction with Ontario Municipal Board (OMB).
It gives approvals for certain development projects under the Planning Act and provides
support to municipalities.
Provincial Interests
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The purpose of Provincial Interests is to make the actions of the Ministry of Municipal
Affairs and Housing, the Ontario Municipal Board and municipalities consistent while
implementing the Planning Act.
Examples of Provincial Interests –
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Conservation and management of natural resources.
Development of safe and healthy communities.
Protection of ecological systems and agricultural resources.
Conservation of significant architectural, cultural, historical and archeological
resources.
➢ Efficient use of communication, transportation, water/sewage services, and
minimizing waste.
Ontario Municipal Board (OMB)
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OMB It is a form of Judicial Tribunal under the Planning Act and administers certain
parts of the Act at provincial level.
It handles planning related appeals.
It hears objections to decisions made by municipalities.
It resolves financial issues for development charges
It acts as Board of Negotiations for compensation disputes for land expropriation.
Municipalities
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Municipalities are classified as Upper Tier (Regional) and Lower Tier (Township).
They have specific rights and responsibilities in land development process.
They maintain strict control over the process of developing and dividing land in their
areas.
They prepare, adopt and revise Official Plans within their respective areas.
They adopt Zoning By-laws for land use control.
Official Plans and Zoning By-laws
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An Official Plan is developed by the local municipalities.
It provides long range development guidelines and framework for up to 15 years.
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The plan typically requires provincial approval by Ministry of Municipal Affairs and
Housing.
No development can take place if the developer’s plan does not conform to the
approved Official Plan.
Zoning By-laws are enacted by municipality to reinforce the Official Plan. They define
Zones for various uses and set out land development standards.
Committee of Adjustment
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Appointed by lower tier municipality (municipal council).
Grants Minor Variances from Zoning By-laws. They cannot add new uses but can
approve similar uses.
They control Continuance of Non-Conforming Use when the use existed prior to
passing of zoning by-law.
They grant Consents to Sever land when an owner wants to divide the land into 2 or 3
pieces.
Approval to divide land is generally granted if the severance does not have a major
impact on the orderly development of municipality.
Approval for division of land depends on factors such as compliance with Official Plan,
Zoning By-laws, Provincial Policy Statements, etc.
4.2 Division of Land
Subdivision Control
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The Planning Act prohibits any conveyance (transfer) of land without approval. This is
subject to certain exceptions.
Section 50 of the Planning Act states that no one is allowed to convey (sell) or lease
land for more than 21 years, unless:
➢ The person conveying does not retain ownership or interest or rights in any
abutting land.
➢ The person conveying has received Consent to Sever land.
➢ The land is within a Registered Plan of Subdivision.
➢ The land is being sold or bought by Crown, federally, provincially or municipally.
➢ The land is required for transmission lines.
➢ The land is being acquired to enforce flood control measures.
Land Severance
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Consent to Sever is required for a land owner who wants to divide one parcel of land in
to 2 or 3 parcels.
The process starts by application to the local Committee of Adjustment.
The authority is sometimes given to the Land Division Committee at the regional level.
Where both do not exist, the Ministry of Municipal Affairs and Housing grants consents.
The application includes information about the owner and the person to whom land is to
be transferred.
Type and purpose of consent and details of any previous severance must be included
along with the description of property.
Approval process includes providing notices to adjoining land owners, concerned
governing bodies, advertisements and posting of road signs.
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If approval is conditional then conditions that must be fulfilled within a specified time,
typically 1 year.
The Lapse of Consent occurs 2 years from written notice of conditions.
The Subdivision Plan
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If a land owner wants to divide one parcel of land into many parcels, a Plan of
Subdivision registration is required.
It is a two-stage process –
➢ Draft Plan Approval, and
➢ Final Plan Approval.
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The detailed proposed project is called Draft Plan.
The application is made to the approval body which is usually the Upper Tier
Municipality (Regional).
Notifications are sent to concerned public bodies and a public meeting is also required
if the plan falls within a municipality.
When all requirements are met, the approval body sends the application to Provincial
Planning Services Branch of Ministry of Municipal Affairs and Housing for a review.
Upon approval of Draft Plan, the developer/builder may proceed with construction of
roads and lots.
The Plan of Subdivision is later approved the assuming that the plan is according to
the approved Draft Plan and that if any conditions were there they have been or will be
fulfilled.
The Final Plan of Subdivision is submitted for registration as Registered Plan of
Subdivision and is given a sequential number.
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5. LAND USE CONTROLS
5.1 Zoning By-laws
Zones
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Zoning By-laws are enacted by municipalities to re-enforce the Official Plan and to
regulate the use of land.
They set out permitted uses, building structure standards and other regulations.
Zones are broken in to classifications (residential, commercial, mixed use, etc.) and
sub-classifications (single-family, retail, etc.).
Individual zones detail permitted uses, regulations for uses, maximum lot coverage,
setback (minimum front, side and rear yard) requirements, enlargement of existing
dwellings, etc.
Zoning by-laws also include regulations for accessory buildings.
An application for Amendment to Zoning By-law may be filed if a property owner wants
development that does not conform to Zoning by-laws. Approval is granted only if the
proposed use conforms to the Official Plan.
Increased Density Provision provides that increased height (buildings) or density may
be permitted if facilities, services, etc. are also increased.
Site Plan Control Agreement
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This agreement sets out terms for property development within a Site Plan Control
Area.
It applies to all structures, especially to commercial, industrial buildings and
cottages/recreational properties.
Detached single-family homes, duplexes & triplexes are excluded.
Ontario Building Code
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The Ontario Building Code includes the Fire Code for new constructions.
It establishes minimum provisions respecting safety of buildings, public health, fire
protection, exits (means of egress) and structural sufficiency.
Building inspectors are granted access rights to property under construction for code
violations.
The Fire Code is for occupant safety requirements in buildings and is determined by
size of buildings and their use.
Part 9 of the Fire Code specifies Retrofit Standards for different building types.
It includes Fire Separation requirements for each unit, escape (egress) methods, fire
alarm and detection, suppression and electrical safety.
A combined smoke detector and audible device is required for all residential buildings
on every floor. Failure to comply may result in fines of up to $50,000 for landlords.
A carbon monoxide detector is mandatory for all buildings where fuel is burned.
Fire Classifications
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Class A: Ordinary materials which burn easily such as paper, wood, cloth, rubber and
plastic. These can be extinguished with water.
Class B: Flammable liquids which burn rapidly such as grease, gasoline, oil, petroleum
products, paints. A blanketing effect is required to put out such fire.
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•
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Class C: Starts in energized electrical equipment such as transformers, motors,
generators, etc. Water or Chemicals should not be used to control such fire.
Class D: Starts in combustible metals such as aluminum, magnesium, sodium,
potassium, etc.
Building Permit
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A building permit may be required for finishing previously unfinished space, repair and
underpinning of foundations, installation of swimming pools, construction of decks in
excess of specific height and area, construction of garages, and accessory buildings.
➢ Application: It is submitted to Building Development Department along with plans
and property survey.
➢ Review: Drawings must conform to zoning by-laws and Ontario Building Code
standards regarding mechanical and architectural/ structural requirements.
➢ Permit: Permit is a legal permission to start construction. Permit and plans must be
kept on site.
➢ Inspections: Requests for inspection must be made within 24 hours before work
proceeds beyond stages set out in permits. Failure can result in Work Stoppage.
•
Occupancy Permit is granted after the building passes the Final Inspection and
complies with all requirements of Ontario Building Code.
5.2 Flood Plains
Flood Plain
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Flood Plains: The area along stream or watercourse that is subject to flooding is called
Flood Plain. Construction of buildings on land located within the Flood Plains is
regulated by the Conservation Authority.
Regulated Area: Includes all areas of a Flood Plain that is subject to flood hazard.
Property owners in these areas must get permit for any construction work.
One-Zone Flood Plain: An area in which the entire flood plain is considered a
Floodway. All development is prohibited except minor repairs to existing structures,
parks, marinas, agriculture or public work.
Two-Zone Flood Plain: Two outer areas of the Flood Plain are called Flood Fringe. This
area is considered less hazardous and restricted development is permitted. The inner
area (Floodway) is more hazardous and no construction is allowed.
Flood Proofing
•
Refers to techniques used or structural changes in order to reduce the effect of flood
damage, reduce risk to life and property or erosion of river banks.
➢ Active Flood Proofing (Wet Flood Proofing): An action taken at the time of advance
warning of flood. It anticipates that water may enter the building but will not cause
significant damage.
➢ Passive Flood Proofing (Dry Flood Proofing): Involves construction activity where
elevated improvements (by means of fill) on property may reduce effects of flood.
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Wetlands
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Wetlands are those areas which are covered either seasonally or permanently by
shallow water or where water table is at or near the surface.
Generally, no new development is permitted in these areas.
Ministry of Natural Resources is involved and an Environmental Study is necessary to
ensure wetland function is not affected.
Conservation Land Tax Incentive (CLTI) is paid to eligible owners whose land is more
than half acre.
5.3 The Environmental Protection Act
Environment Protection
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The Environmental Protection Act (EPA) is enforced by the Ministry of Environment for
investigations related to pollution, waste management, waste disposal and litter
management/ disposal.
The ministry has search & seizure authority, empowers officers to enter and search
premises, interview individuals, and examine documents to ensure compliance.
It also issues various licenses, permits and certificates of approval concerning activities
that impact environment.
The ministry grants approvals related to private water wells, herbicide use by cottage
owners to control aquatic plant life, remediation of contaminated land, land
development and associated sewage work, haulage of septic waste, air quality
including control of emissions in vehicles and industries.
EPA focuses on soil or water pollution due to spills. It is a main concern for industrial
and commercial properties that use hazardous materials such as chemicals, petroleum
products, etc.
Orders Under EPA
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Remedial Order to remedy a situation where discharge or spill is involved.
Preventive Order to take preventive measures to control pollution.
Waste Removal Order.
Control Order to control or eliminate the source of pollution.
Stop Order to stop the discharge of a contaminant that is a threat to human health/life.
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6. STRUCTURAL COMPONENTS - INTERIORS
6.1 Footings and Foundation
Footings
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Footing is the wide section made of concrete under the foundation wall, pier or column.
Their function is to transmit the house weight to the soil without allowing the structure
to sink.
If all footings fail, the entire structure may move. The structure may sink on a side if
footings fail on that particular side.
Foundations
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Foundation is the base usually built of poured concrete, on which the structure is built.
Their function is to transmit the weight of the structure from the above grade walls to
below Frost Line to Footings.
They resist the lateral pressure of the soil and act as a retaining wall.
Foundation is made damp proof with below grade moisture resistant material, Batt
Insulation, Vapour Barrier and Drywall on interior side.
Concrete floor rests on ground and is made of 3-inch thick slab with slope.
Foundations which have inadequate reinforcement or that are too thin are weak.
Foundations that do not provide enough lateral support may deflect inwards due to - (i)
mechanical forces exerted during backfilling, (ii) backfilling with frozen soil, (iii) unusual
frost development in the soil outside the building, or (iv) when floor system does not
provide enough support.
Sill
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Sill provides a continuous pad between foundation top and bottom of framing. It is laid
flat on top of concrete foundation wall.
Sills are anchored to the foundation using bolts. The floor Joists are installed directly on
sill.
Problems include rot and termites due to closeness to soil, excessive pointed or
concentrated loads and poor anchoring, which may shift the whole structure.
Posts Columns
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They carry the weight of the beam vertically down to the footings. They are made of
steel, brick or concrete.
Problems include moisture, out of plumb (not at right angle), rust, sinking due to
insufficient footing size, or improperly fixed to beam.
6.2 Basement
Basement Leakage
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It is not structurally significant in most cases and can be controlled.
Most leaks are intermittent – the basement may only be wet during or after the rain or
when the snow melts.
Indications of basement leakage -
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➢ Repair patches on exterior or interior walls, cement parging or use of water
proofing materials are indications of repairs done by owners.
➢ Musty odours (smell) and mould forming on walls.
➢ Rusts on metal objects such as steel posts or furnace.
➢ Floor tiles starting to peel off or excessive dampness under carpets.
➢ Stains on paneling, drywall or other interior finishes.
➢ Leakage from below grade windows.
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Sump Pump is often installed by property owners to remedy dampness or influx of
water into basement. The purpose is to keep basement area dry. It is done by installing
tile inside the footings below basement floor.
Efflorescence is a whitish mineral deposit found on interior of foundation walls
indicating that moisture was present at some point of time. It is not a sign of basement
leakage.
Termites and Shelter Tubes: Termites live is soil, close to moisture but below frost line.
They travel in wood or soil but do not expose themselves to open surface. Shelter
Tubes are small tunnels of earth built by termites.
Wood Rot: Deterioration of wood due to the effect of moisture, temperature and
oxygen.
6.3 Floors and Framing
Wall Framing
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Walls (exterior or interior) carry the weight of the roof and the floor to the foundation.
Framing is the rough timber works of a structure including studs, plates, lintels and
rafters.
Balloon Framing was used in older structures and consists of wall studs that are were
built before the floor system and were continuous up to the roof line. The floors were
hung to the studs.
Platform Framing is used in most modern structures and consists of separate wood
floor joists and subfloors for each platform.
Problems with framing include - (i) large openings may lead to sags, (ii) Insufficient
nails, (iii) condensation, and (iv) poor quality timber.
Beam
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Beams are made of wood or steel and their function is to carry the weight of floor or
wall horizontally to the foundation.
Steel beams are better than wood beams because they are free from rot, termites and
mechanical damage.
Disadvantage is that steel beams are heavy and susceptible to rust.
Wooden beams can be weakened by notching, cutting or drilling.
Undersized or over-spanned beams may sag or crack resulting in failure of entire
framing system.
Over-spanned beams may be remedied by adding more posts.
Fire is a concern for both wooden and steel beams.
When a structure is on fire, wood actually burns but steel melts at high temperatures.
Steel beams lose strength earlier than wooden beams.
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Joists and Sub-floors
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Joists are a series of horizontal wood members used to support the floor, ceiling or
roof.
They rest on sills or beams and provide the structure.
Bridging/Blocking in joists is done to restrain the joists from twisting. One set of either
bridging or blocking is required for each joist span. It helps transmit the load of one
Joist to the next Joist and reducing springiness of floor.
Subfloors are attached on top of joists.
Subfloor transmits live loads of people and furnishings to the floor joists. It is usually
covered with a finish.
Springy floors are caused by thin board. Squeaky sounds are heard when the subfloor
is not secured properly to floor joists. This problem may be remedied by using more
nails to secure the subfloor properly to joists.
Penetration of water may damage the wood and nails may start coming out.
6.4 Components of Roof
Roof Styles
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Roof protects the occupants of the building from rain, snow, sun and wind is the
primary purpose of roof.
Roofing Styles include Sloped Roof and Flat Roof.
A flat roof some still has slope to run off water.
Sloped roofs are not water tight but flat roofs are water tight.
Pitch or Slope is defined as Rise over Run. A “6 in 12” pitch indicates a vertical rise of 6
feet over horizontal distance of 12 feet.
Roof Sheathing
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Roof sheathing supports the roof covering and transmits live loads due to snow, ice
and wind to the roof rafters, trusses or roof joists.
The material used is wood planks (older buildings) and wafer board panels (new
buildings).
Condensation or moisture in attic can cause loss of strength in the sheathing and make
the nailing of the sheathing ineffective, as nails are pulled out of the rafters, or through
the sheathing.
Unsupported edges of sheathing result in differential movement between two panels.
Horizontal ridges in the roof are caused by unsupported edges of rafters.
Roof Rafters
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Rafters support the roof sheathing and transmit roof loads to bearing walls and beams.
Roof Joists perform the same function in flat roofs.
A Collar Tie is used horizontally for each pair of opposing rafters.
Knee Wall is a small wall at a proper location in the attic area to support the roof and
prevent sagging of roof.
Condensation in attic areas is usually caused by good insulation but poor ventilation.
Over spanned rafters cause sagging of roof.
Rafters may spread if not properly fixed to the walls.
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If thin board has been used it deflects under load and results in sagging of the roof.
Roof Trusses
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Trusses are mostly engineered systems and installed 24 inches apart.
Top and bottom members are called Chords and interior parts are called Web
Members.
Two types of trusses –
➢ Fink Trusses: They have web members shaped as ‘W’.
➢ Howe Trusses: They are considered more durable and stronger than Fink Trusses.
They are identified by ‘M’ shape and a vertical member going to the peak.
•
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Problems with trusses include damage to wood due to cuts and drills.
Truss Uplift is caused by bottom member lifting upwards due to winter weather. This
may result in gaps in the interior walls where they join the ceiling. Serious uplift may
also result in lifting of entire wall and separation from floor.
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7. EXTERIOR FINISHES
7.1 Roof Covering
Roofing Materials
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Asphalt Shingles: These are most commonly used for residential buildings and are selfsealing. They are classified by weight. Most common type weighs 210 pounds per
square (Square is amount of shingles required to cover 100 square feet).
Metal Shingles: These are good to withstand weather influences and high winds.
Advantages include low maintenance, resistance to decay and long lasting durability.
Wood Shingles and Wood Shakes: Wood Shingles are machine cut while shakes are
hand cut. Wood Shakes are thicker and have uneven surface.
Slate Roof: Made of slate or sedimentary rock. It is 3 to 5 times heavier than asphalt
shingles.
Corrugated Plastic Tile: This type of roof covering is generally used over patios and
light structures.
Eavestroughs and Downspouts
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The purpose of these roof components is to collect water from roof and take away from
the buildings. They protect the walls from water damage.
They also prevent local ground level erosion caused by heavy water runoff.
They assist in keeping the basement areas dry by taking rain water away from
foundations.
The downspout discharge of water is into drains or onto ground about 6 inches away
from the building.
Vulnerable Areas of Roof
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The roof does not have enough strength and may be damaged by a falling tree or
heavy snow. It is also a bad poor insulator and is not intended to keep the cold out.
The most vulnerable areas of roof are - (i) where roof changes direction, and (ii) where
change in material occurs.
Flashings
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The purpose of flashings is to prevent water leakage.
They are installed –
➢
➢
➢
where the roof changes direction,
where a change in material occurs (dissimilar materials meet), and
where there is a joint in materials.
Roof Leaks
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Sources of roof leakage include - (i) Condensation in attic areas, (ii) flashings, (iii)
skylights, and (iv) ice damming.
Roof leaks are often difficult to trace. Water does not always appear immediately below
the defective area.
Most roof leaks are local on intersections or flashings. Water may also run along
framing.
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7.2 Wall Exteriors
Types of Walls
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Walls (exterior or interior) carry the weight of the roof and the floor to the foundation.
•
A Brick Masonry wall bears the load of the roof and the floors down to the foundation.
It may be built of brick only or a combination of concrete blocks and bricks.
•
A Brick Veneer wall has an exterior single width of brick and the inner wall is made of
wood. The wood framing transmits the roof and floor loads down to the foundation. The
brick wall does not have any load bearing responsibility. Metal ties are used to secure
the bricks to exterior sheathing.
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Rain Screen Principle: It is related to wind driven rain that may pass through brick layer
into the air space. It allows for dispersal of rain water through weep holes spaced 24
inches apart.
Wall Siding
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Wood, metal, vinyl and stucco are most common materials for siding.
Stucco siding: It consists of cement like material coated to exterior walls. Cracks are a
common problem. Stucco over masonry walls is better than stucco over wooden walls.
Metal and Vinyl Siding: They have low maintenance costs. Vinyl can become brittle in
winter and can be cracked or punctured.
Wood Siding: Penetration of water in wood siding at joints may cause rot and termites.
A lack of proper securing and improper detail work at edges and corners are most
common deficiencies.
Interiors: Typically, drywall is used for interior finish.
Drywalls are pre-manufactured wallboard typically built using Gypsum.
7.3 Building Materials and Indoor Air Quality
Volatile Organic Compounds (VOCs)
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Building materials usually contain paint, adhesives, resins, caulking, fillers and finishes.
They produce gas emissions inside the structure.
These compounds can be toxic and cause harmful health effects to occupants who are
hypersensitive to chemicals and gases.
Selection of low-VOC materials and proper air filtration/ventilation systems reduce
problems.
Sick Building Syndrome (SBS)
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SBS involves circumstances under which building occupants experience health related
problems due to time spent in a structure.
SBS conditions can cause dizziness, nausea, and lack of concentration, allergy, throat
irritation, headaches and asthma.
The main reasons for SBS are inadequate building ventilation, lack of proper air
filtration, inappropriate measures to control moisture that causes mould, etc.
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7.4 Windows
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Windows are openings in walls.
Windows are made of glass panes which are held in sashes, top and bottom rails.
Sides of window frame are called jambs.
A Lintel is a horizontal beam that supports the load over an opening such as doors or
windows.
Casement window is commonly used for replacing old windows due to proper
ventilation and air tightness. It is hinged at sides and opens inwards or outwards.
A Double Hung window has two moving parts – (i) outer part on top, and (ii) inner part
on bottom half. Both parts can be moved up or down.
Window Glass
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Thick glass is used where high thermal values are needed.
Glass is tempered to provide strength, tinted to reduce glare or absorb heat, coated to
reflect heat, wire inserted to resist fire, and Laminated to improve strength, safety
and/or sound insulation
Glazing refers to act of furnishing and/or fitting panes or sheets of glass.
Single Glazed windows have insulation value or R-1, Double Glazed have R-2 and
Triple Glazed have R-3.
Double glazed factory sealed windows have no air passage between panes.
Vented double glazing allows for outside air movement to space between two panes.
Inert Gases (Argon or Krypton) are filled between glass panes to reduce heat transfer.
Window Efficiency
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CSA Standards for windows uses three main criteria –
➢ A Criteria – Air Tightness
➢ B Criteria – Water Tightness
➢ C Criteria – Wind Resistance
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Window Efficiency Ratings (ER): Measures thermal performance. A positive number
indicates that more solar heat is produced and lesser heat is lost. A negative number
indicates that more heat is lost than heat gained.
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Low Emissivity (Low-E): Emissivity is the ability of the surface to reflect long-wave
radiation. Low-e glass allows sunlight to pass into the structure.
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Heat Transfer Co-efficient (U-Value): It is a measure of heat flow through an object. It is
used in calculating the Efficiency Rating of Windows. U-Value is reciprocal of R-Value.
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8. ELECTRICAL AND MECHANICAL SYSTEMS
8.1 Electrical Systems
Electrical Service
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Most homes have 100 Ampere or 200 Ampere service. Two 100 Ampere wires
entering the property mean a service size of 100 Ampere.
Service Size is dictated by the entrance cable to the property and upgrading is
generally required for modern appliances.
Most commonly used material for wiring is Copper. Aluminum wiring has more risk in
case of fire as it melts quickly.
Distribution Panel distributes electricity throughout the house and may have Fuses or
Circuit Breakers.
Electrical Main Disconnect inside the distribution panel is used to shut on/off all power
in a structure.
The function of Auxiliary Panels is to accommodate branch circuits. They do not bring
additional power but only allow for more branch circuits.
Knob-and-Tube wiring or 60 Ampere service in old properties may pose problem for
Fire Insurance coverage. This may prove expensive to buyer as he may have to
upgrade.
Ground Fault Circuit Interrupters are used for bathroom outlets and installations near
water. It shuts off power automatically even if small amount of current is leaking.
8.2 Heating
Heating Systems
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Furnaces, Electrical Baseboard Heaters or Hot Water Boilers with Radiators may be
used for heating.
Furnaces and Hot Water Boilers are central heating systems where hot air is produced
and is distributed using Ducts.
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Heating, Ventilation and Air Conditioning (HVAC) is commonly associated with
commercial properties. Main components include – Air Handler, Condensing Unit,
Ductwork, Roof Top HVAC and Unit Heater.
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Electric Heating: Consists of two main types - (i) Baseboard Resistance Heater, and (ii)
Radiant Heating cables or coils. Panel Heating refers to direct heating units which are
placed in sections of floor, ceiling or wall.
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Wood Burning Fireplaces are another source of heat but they lose more heat from the
structure than the heat generated. It is more of recreational as opposed to functional.
They need Flue and Chimney for discharge of smoke.
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Boilers (Hot Water): These are central heating system used in commercial properties.
Heat is distributed by means of steam from the Boiler to cast iron radiators. Steam
gives up heat to the radiator, becomes cool, condenses as water and returns by gravity
to the boiler. Two Types – (i) Closed Boiler System, and (ii) Open Boiler System.
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Efficiency
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Capacity of a heating system refers to the amount of heat generated.
High efficiency means a seasonal efficiency of 90% or more.
Mid-efficiency is in 80% range while 55 to 60% efficiency is in the low range.
Types of Furnaces
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Electrical Furnace: There is no actual combustion and no need for chimney, burner or
heat exchanger. The blower (fan and motor) simply forces the hot air.
Gas Furnace: Most commonly used. Uses gas to produce heat which is distributed in
the structure using sheet metal ducts. There is a heat exchanger, gas burner, fan and
motor and a chimney.
Oil Furnace: Operates similar to gas furnaces. There is a burner, a combustion
chamber and exhaust through flue pipe and chimney. On-site storage of oil tank is
required.
Gravity Furnace: Also called Octopus Furnace. There is no fan to draw or force air.
Warm air uses gravity (convection) that rises through the ducts and cool air settles
back through return ducts. These furnaces are now obsolete.
Other Heating Systems
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Ground Source Heat Pumps (Geothermal System): They use earth’s temperature as a
heat source in winter and a heat sink (removal of heat) in summer. Liquid (usually
antifreeze) circulates through loops (vertical or horizontal) extending into the ground.
Benefits are minimum maintenance, quiet operation and energy cost savings.
Zoned Heating/Cooling Systems: Single-zone system refers to one duct system.
Multiple zones are created used for personalized heating/cooling control. Zoned
systems use sensors and communicate with controllers to direct air as required. A high
efficiency furnace is usually required.
8.3 Insulation
Purpose
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Insulation prevents heat loss from a building. Insulation standards are in Ontario
Building Code.
Thermal insulation is described as R-Value (Imperial) or RSI Value (Metric) and is given
as per inch thickness of insulation.
The higher the R-Value or RSI Value number, the better is the insulation.
Energy Audit: It is an inspection of property to identify sources of energy loss. This
computer driven analysis identifies Air Leakage, Humidity Levels, Windows/doors,
Furnace and ducting and Water Heater.
R-2000 Homes: These houses reduce heat costs by about 20% due to improved
insulation. The standards are enforced by Office of Energy Efficiency. They are
inspected, numbered and certified. An identification label is issued.
Heat Gain/Loss
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Conduction: Transfer of energy through a substance. Example – Loss of heat through
basement, walls and ceilings.
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Convection: Movement of gas or liquid with changes in density. Controlled by
minimizing air leakage between a structure’s interior and exterior surfaces. Example –
Loss of heat through doors and windows.
Radiation: Transfer of energy through a straight line between the source and the
absorber, without a medium. Example - Sunlight entering a structure.
8.3 Water Supply and Drainage
Plumbing
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There are two aspects of water systems - (i) supply side, and (ii) waste side.
Supply side includes consumption of water for drinking, washing and cooking.
The commonly used type of pipes for supply side is Copper.
Hot Water Heaters: Heat water for consumption. They should be sized adequately to
satisfy the needs of the house. Recovery Rate refers to the ability of the hot water
heater to supply hot water.
Well Water
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Well Water (Bored or Drilled) are used in rural properties for water supply.
Water Quantity must be sufficient for the household use.
Quality (Bacteriological Testing) must be inspected for existence of contamination.
The Water Well Record provides information about installation of well.
Drainage
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Waste side of plumbing system includes removal of waste water and mostly uses PVC
pipes.
It is associated with system of piping & conduits to run off water on land or subsurface
levels.
Drainage systems use Galvanized steel plumbing for venting.
Exterior drainage is related to foundation.
Ontario Building Code specifies the types of granular material needed to drain the
bottom of foundation and location of drainage disposal piping.
The Class 4 septic systems are most common and
They consist of two parts – (i) Treatment Unit (Septic Tank), and (ii) Leaching Bed
(Absorption Bed).
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9. APPRAISAL FUNDAMENTALS
9.1 Property Valuation
The Appraisal Profession
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Appraisal is the process of estimating value. Professional Appraisers are called Fee
Appraisers.
Appraisal Institute of Canada awards the Canadian Residential Appraiser (CRA) and
Accredited Appraiser Canadian Institute (AACI) designations.
REBBA 2002 Code of Ethics discourages registrants from conducting appraisal
assignments.
Registrants are not covered under RECO Errors and Omissions Insurance for appraisal
assignments.
A Letter of Opinion to sellers about estimate of market value is also discouraged due to
legal issues.
Registrants may use Comparative Market Analysis (CMA) to estimate a reasonable
listing price of residential properties.
Purpose of Appraisal
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Transfer of Ownership: For buying, selling or exchange of property.
Extension of Credit: Used by lenders for approval of a mortgage loan or refinancing.
Compensation for Damage: Used by insurance companies to settle a claim.
Compensation for Loss: Used by Municipalities for providing compensation to owner
for property under Expropriation.
Taxation: Used by Municipal Appraisers for assessment of value for the purpose of
property taxes. Also used for Capital Gains Tax.
Land Use and Feasibility Studies: Used by investors to establish highest and best use
of land.
Automated Valuation Model (AVM)
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AVM is valuation software which provides quick on-line estimate of property value.
It is cost effective and many lenders and insurance companies use it for low value
properties.
It has created a competition for professional appraisers.
The disadvantage of using AVM is that there is no physical inspection and this may
lead to mortgage fraud.
Effective Date of Appraisal
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The Effective Date (‘As of Date’) of an appraisal is the date to which the value estimate
applies.
It is considered a critical date and appraisers insist that their estimate is good only for
the date of appraisal.
A Current Date is typically used for mortgage lending, refinancing, etc.
Historic Appraisal refers to valuation for a past date. It may be for unpaid Capital Gains
Tax, matrimonial settlement (date of separation), insurance claims (date of
fire/damage) or settlement of a Will (date of death).
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9.2 Analysis of Data
Things That May Affect Value
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Stigma refers to feelings or perception about the property in the minds of
sellers/buyers. It usually negatively affects value and results in longer time to sell the
property.
A Grow House, crime in the property, haunted house, etc. may attach a stigma to a
property.
Environmental conditions of the property may also result in loss of value.
Examples are noise in area, smell from a nearby factory, costs involved in remedy of
contamination, etc.
Neighbourhood Age Cycles
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Growth: When a new development is taking place in some neighbourhood.
Stability: When the neighbourhood is completely built-up and prices have stabilized.
Decline: When the buildings pass their prime economic life and start declining in value.
Renewal: When the area becomes popular again after years of neglect.
9.3 Appraisal Reporting
Types of Appraisal Reports
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Form Reports have mostly pre-printed information.
Form Reports are short and may have 5-10 pages. They may be used for mortgage
lending, insurance or any other purpose.
Form Reports cannot be used when the purpose of appraisal is litigation.
Narrative Reports are lengthier and detailed. They may be used for separation/divorce
actions, investment properties, litigation, expropriation, etc.
Reconciliation and Final Estimate
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Reconciliation refers to selecting one value estimate out of two or more alternative
estimates to arrive at a value estimate.
Typically, the most recent sale is considered the most reliable.
In case of more than one recent sale, the most similar among the recent sales is
selected.
The estimate must be Convincing and Defensible.
Assumptions and Limiting Conditions
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These are a series of qualifying statements that define, limit or restrict the scope of
appraisal.
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Examples –
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No warranty of legal issues such as validity of title.
No expertise in environmental issues or hazardous materials.
Appraiser’s reliance on others for information such as the MLS® system.
No warranty that the improvements on property conform to structural standards.
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Certification
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Certification attached to an appraisal report is an attestation by the appraiser that the
appraisal contains factual information.
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Example statements –
➢ That he has conducted personal inspection of the property.
➢ That the appraiser has no interest in property and there is no bias towards the
owner or the client.
➢ That the estimate is not based on compensation received.
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10. THE DIRECT COMPARISON APPROACH
10.1 Features
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The Direct Comparison Approach is a reliable method of valuation and is used
popularly for residential properties.
It is widely accepted by courts, lenders, insurance companies and is understood by
general public
Lack of recent comparable sales may be a problem because the older the comparable
sales, the less reliable they are.
This method may pose problems for evaluation of Special Purpose
industrial/commercial properties and certain unique properties because comparable
sales data may not be available.
Investors do not prefer this method as they look for economic performance of property.
They will prefer Income Approach or Cost Approach.
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10.2 Selecting Comparable Sales
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The appraiser would collect sales date of comparable properties in the neighbourhood.
Qualities of good comparable sales include➢ The comparable property should preferably be in same neighbourhood.
➢ The sale date should be as close as possible to the date of appraisal.
➢ The comparable should appeal to the same type of buyer who would buy the
subject property.
➢ The comparable should be an arm’s length sale.
10.3 Sales Analysis and Adjustments
Market Trend Using Time Resales
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In Time Resale method, the same property is sold and resold within some specified
months. There is an Old value and a New value.
The appraiser selects at least 3 Time Resales to arrive at Percentage Change per
Month.
Percentage Change = (New Value – Old Value) ÷ Old Value x 100
Divide by months to get Percentage Change Per Month.
Example: A vacant lot was sold 7 months ago for $150,000 and resold last month for
$164,000. What is the percentage change per month?
Percentage Change = (164,000 – 150,000) ÷ 150,000 x 100 = 9.33%
The time difference between sale and resale is 6 months.
Percentage Change per month = 9.33 ÷ 6 = 1.56%
►Tip: Last month is considered 1 month ago.
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Time Adjustment
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Time adjustment is done to bring the sale price of the comparable as of the date of
appraisal.
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The appraiser first uses the Time Resale method to estimate the price trend in the
neighbourhood.
Time Adjustment = Sale Price X Months X %Change Per Month
Time Adjusted Price = Sale Price ± Time Adjustment
►Note: If the given Percentage Change is not in months, then divide the given percentage
by number of months.
Example: A comparable property was sold 3 months ago for $350,000. The prices in the
market have decreased by 4% over the last 8 months. What is the amount of Time Adjustment
and Time Adjusted Sale Price?
Since the given percentage is not ‘per month’, divide it by 8.
Time Adjustment = 350,000 x 3 x (4% ÷ 8) = ― $5,250
Time Adjusted Sale Price = 350,000 ― 5,250 = $344,750
►Special Note: Time Adjustment is NIL if the comparable is sold –
➢ Few Days Ago; 1 Week Ago, 2 Weeks Ago, 3 Weeks Ago or 4 Weeks Ago.
➢ 30 Days Ago or This Month.
Watch out for above words in the exam. In this case, the Time Adjusted Sale Price is
equal to the Sale Price.
Feature Adjustments
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Features of each property are compared with the subject.
Remember a simple rule – More is Less and Less is More.
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Plus (+) Adjustment: If a feature in comparable is worse than the subject, the
adjustment is Plus (+).
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Minus (–) Adjustment: If any feature in comparable is better than the subject, the
adjustment is Minus (―).
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Value Difference: Calculate the difference in values for bathroom and garage.
► Note: If both Cost and Value are given, use Value and ignore the Cost.
Total Adjustments
Add all the amounts for adjustments for each sale to get the Total Adjustments.
Totally Adjusted Sale Price
Totally Adjusted Sale Price = Time Adjusted Sale ± Price Total Adjustments
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10.4 Reconciliation and Final Estimate
Reconciliation
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Reconciliation is the process of selecting one value estimate out of two or more.
The most recent sale is most reliable because social economic and political
changes in the local market may have resulted in significant changes to real estate
values.
Most Recent Sale: Pick the Fully Adjusted Sale Price of the Most Recent
comparable sale.
More than One Recent Sales: If there are more than one recent (two sales within a
month), pick the Totally Adjusted Sale Price of the comparable which has minimum
number of adjustments. In this case, ignore the amount of Total Adjustments in this
case.
No Averaging: Appraisers do not calculate average (mean) of the fully adjusted
sales prices of the comparable sales.
► Note: If any answer option is based on Average of Totally Adjusted Sale Prices of three
comparable sales, that option is incorrect.
Final Estimate
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The final estimate of value may be given as a single value or a value range.
The value range is provided when the range is useful for the client.
The final estimate is given as a rounded number because the estimate of value is
an opinion and may not be accurate.
The estimate of value must be Convincing and Defensible.
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11. THE COST APPROACH
11.1 The Cost Approach
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The Cost Approach is useful when either good comparable sales are not available or
the subject property is unique.
This method is also used when the subject property is unique or is a special purpose
building.
This method is preferred by those consumers who give more importance to costing and
depreciation (loss in value due to aging, wear and tear, etc.).
It may be used for residential, commercial and special purpose buildings.
Subjective vs. Objective: The Cost Approach is an interplay of both Subjective Values
and Objective Values. While Site Value is estimated using comparable sales data
(subjective), the cost of other improvements is calculated using objective values.
Limitations: Calculating Depreciation is a challenge and this method may not work well
for very old properties or structures.
11.2 Cost New and Depreciation
Reproduction Cost New Vs. Replacement Cost New (RCN)
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Reproduction Cost New: The cost of creating an exact replica of the structure using
same materials. This is commonly used for valuation of newer buildings.
Replacement Cost New: The cost of reproducing a structure with equal quality using
current materials. Estimating replacement cost is easier as data is readily available.
This is commonly used for valuation of older buildings because current data about
materials and labour is readily available. This method is preferred by lenders and
insurance companies.
Depreciation
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Depreciation refers to loss in value or diminished value due to physical deterioration,
functional and/or external obsolescence.
Physical deterioration can be Curable or Incurable.
Short Term Incurable are those items in the structure that do not need immediate
replacement but may need to be replaced sometime before the Remaining Economic
Life of the building.
Long Term Incurable are those items which will not need replacement anytime during
the Remaining Economic Life of the building.
Obsolescence refers to building components that are unpopular, unappealing or have
less utilization.
Functional Obsolescence (within the structure) as well as External related to location or
economy.
Economic Age/Life Depreciation Method
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Actual Age (Chronological Age): The actual number of years that have passed since
the structure was built.
Effective Age: Estimated number of years based on amount of care, maintenance,
renovations or modernization. Effective age is less than actual age if maintenance is
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better than average. Effective age is more than actual age if the structure is poorly
maintained.
Remaining Economic Life: The number of years remaining in the economic life from the
effective date of appraisal. Remaining life can be extended indefinitely by continuous
renovating/ modernizing.
Economic Life (Life Expectancy): The amount of time in years a structure is useful or
habitable without any renovations, updating or modernization.
11.3 Steps in Cost Approach
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Step 1: Estimate the Site Value
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Step 2: Estimate the Cost New of the Building (RCN)
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Step 3: Calculate the Depreciation of the Building and Other Improvements
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Step 4: Estimate the Current Value of the Building
Current Value = Cost New - Depreciation
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Step 5: Estimate the Current Value of Other Improvements
Current Value = Cost New - Depreciation
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Step 6: Add the Site Value to Current Value.
11.4 Site Value Calculations
Time Adjustments
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Time adjustment is done to bring the sale price of properties as of the Appraisal Date.
Typically, the price trend of property values is estimated using a monthly percentage.
Calculating Percentage Change
In Time Resale method, the same property is sold and resold within some specified
months. There is an Old value and a New value.
Percentage Change = (New Value – Old Value) ÷ Old Value x 100
Divide by months to get Percentage Change Per Month.
Calculating Time Adjustment
Time Adjustment = Sale Price X Months x %Change Per Month
Time Adjusted Price = Sale Price ± Time Adjustment
►Tip: If the given Percentage Change is not in months, then divide the given percentage
with months.
Example: A comparable site was sold 5 months ago for $176,000. The prices in the
neighbourhood have increased by 6% over the last 10 months. What is the amount of Time
Adjustment and Time Adjusted Sale Price?
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Since the given percentage is not ‘per month’, divide it by 10.
Time Adjustment = 176,000 x 5 x (6% ÷ 10) = $5,280
Time Adjusted Sale Price = 176,000 + 5,280 = $181,280
►Special Note: Time Adjustment is NIL if the comparable is sold –
➢ Few Days Ago; 1 Week Ago, 2 Weeks Ago, 3 Weeks Ago or 4 Weeks Ago.
➢ 30 Days Ago or This Month.
Watch out for above words in the exam. In this case, the Time Adjusted Sale Price is
equal to the Sale Price.
Calculating Feature Adjustments
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If any feature in comparable site is better than the subject, the adjustment is Minus (―).
If a feature in comparable site is worse than the subject, the adjustment is Plus (+).
Remember a simple rule – More is Less and Less is More.
►Tip: If a feature adjustment is given as percentage, multiply the sale price with
percentage.
Example: A comparable site was sold 6 months ago for $180,000. The prices have been
declining by 1.25% per month. This site is backing on to ravine which adds $7,500 to value. What
is the amount of Time Adjustment and Feature Adjustment?
Time Adjustment = 180,000 x 6 x 1.25 = ― $13,500
Feature Adjustment = – $7,500
Calculating Fully Adjusted Price
Fully Adjusted Price = Time Adjusted Price ± Total Adjustments
For the example above Fully Adjusted Sale Price = 180,000 – 13,500 – 7,500 = $159,000
Reconciliation and Final Estimate
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Pick the Fully Adjusted Sale Price of the Most Recent comparable sale.
If there are more than one recent sales (e.g. two sales within a month), pick the Fully
Adjusted Sale Price of the comparable which has minimum number of adjustments.
Ignore the amount of Total Adjustments in this case.
11.5 RCN and Depreciation Calculations
Reproduction/Replacement Cost New (RCN)
Reproduction Cost New = Area x Cost
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Multiply the area of the building and other improvements with cost.
If the building is two-storey, multiply the area with 2.
Add the cost of all improvements to get total RCN.
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► Tip: If the dimensions are given in Meters and cost is given as Per Square Foot, then
conversion is required.
Example: A two storey house has dimensions of 12.35 metres by 9.40 metres on each of
the two floors. The cost new of this type of building is $85 per square foot. What is the
Replacement Cost New (RCN) of this house? (1 Square Metre = 10.76 Square Feet)
Area = 12.35 x 9.40 x 2 = 232.18 Square Metres
Covert = 232.18 x10.76 = $2,498.26 Square Feet
Replacement Cost New = 2,498.26 x 85 = $212,352
► Tip: Multiple the area with 2 because the subject is a two-storey house. Convert to
square feet because the cost is given as per square feet. The conversion factor is provided in
exam.
Depreciation: Age/Life Depreciation Method
Depreciation = Reproduction Cost New X Effective Age ÷ Economic Life
Economic Life = Effective Age + Remaining Economic Life
► Tips
➢
➢
➢
➢
Ignore the Actual Age unless the Effective Age is same as Actual Age.
Economic Life is also called Life Expectancy.
If Remaining Economic Life is given, add the Effective Date to get Economic Life.
Accrued Depreciation refers to total depreciation of all parts of structure.
Example: The Reproduction Cost New (RCN) of a structure is $146,800. It was built 20
years ago, but its effective age appears to be 16 years. If the remaining economic life of this
structure is 30 years, what would be the amount of depreciation?
Do not use the Actual Age.
Economic Life = 16 + 30 = 46 Years.
Depreciation = 146,000 x 16 ÷ 46 = $50,782.61
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12. THE INCOME APPRAOCH
12.1 Valuation of Income Properties
Basics
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The Income Approach is used for valuation of commercial or income producing
properties.
This approach is based on the fact that the value of an investment property is the
Present Worth of Future Cash Flows.
Appraisers review the Annual Operating Statement of the owner which represents one
year’s analysis of income and expenses.
The statement provided by the owner may not be reliable and hence, the appraiser
may have to make certain modifications.
Reconstructed Operating Statement: This is the operating statement prepared by
appraiser with adjustments and modifications made according to comparable
properties.
Operating Expenses
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All expenses must be annualized because the statement is for one year only.
Only those expenses should be included in the operating statement which are
necessary to maintain the regular flow of income.
Included: Appraisers include most expenses associated with maintenance of the
property. For example, management costs, utility bills, property taxes, maintenance
contracts, free suites to superintended and/or janitor, etc.
Not Included: Appraisers exclude the business taxes, depreciation, mortgage interest
and capital improvement expenses from the operating statement.
Capitalization
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The Capitalization of Net Operating Income is done by an appropriate Capitalization
Rate to arrive at an estimate of value.
Direct Capitalization is based on a single year’s Projected Income and Expenses.
Yield Capitalization refers to estimate of value based on Forecasted Operations and
Future Sale Proceeds.
Return ON Investment (Discount Rate): Return on the investment with regular
operations and sale proceeds. Return on money invested in land and buildings.
Return OF Investment (Recapture Rate): Return of the initial investment at a future
date. Return of money invested in building which is a wasted asset.
12.2 Analyzing a Typical Operating Statement
Step 1: Estimate Annual Gross Potential Income
Step 2: Less Vacancy and Bad Debt Loss
Step 3: Add Other Income
Step 4: Effective Gross Income = Potential Income – Loss% + Other Income
Step 5: Less Annual Operating Expenses
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Step 6: Net Operating Income = Effective Income – Operating Expenses
Step 7: Estimate of Value = Net Operating Income ÷ Capitalization Rate.
Cap Rate = Net Operating Income ÷ Sale Price X 100
► Tip: All amounts must be Annual. If any amount is given as Monthly, multiply by 12.
12.3 Calculation Examples
Example1: Value per Square Foot
A small commercial retail building has a total area of 21,000 square feet. It has an annual
effective gross income of $285,000. If the annual operating expenses are estimated to be
$190,000 and a capitalization rate of 11.5% is used, what would be the estimated value and value
per square foot?
Net Operating Income = 285,000 – 190,000 = $95,000
Estimated Value = 95,000 ÷ 11.5% = $826,087
Value Per Square Foot = 826,087 ÷ 21,000 = $39.34
Example 2: Net Operating Income
Estimate the Net Operating Income of a rental apartment building with the following
details. There are 20 one bed room units, 32 two bedroom units and 15 three bed room units. The
monthly potential rent is $750, $925 and $1075 for one bedroom, two bedroom and three bedroom
units respectively. The one and two bed room units pay $25 per month for parking. All units pay
$20 per month for laundry machines. The estimated vacancy and bad debt loss is 4.5% of all
income. The estimated annual operating expenses are $342,700.
Annual Gross Potential Rental Income
One Bed Room Units = 20 x 750 x 12 = $180,000
Two Bed Room Units = 32 x 925 x 12 = $355,200
Three Bed Room Units = 15 x 1,075 x 12 = $193,500
Parking = (20 + 32) x 25 x 12 = $15,600
Laundry = (20 + 32 + 15) x 20 x 12 = $16,080
All Income = $760,380
Vacancy and Bad Debt Loss = 760,380 x 4.5% = $34,217
Annual Effective Gross Income = 760,380 – 34,217 = $726,163
Operating Expenses = $342,700
Net Operating Income = 726,163 – 342,700 = $383,463
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13. MORTGAGE FINANCING
13.1 Mortgage Fundamentals
Mortgage Terminology
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Mortgagor: The party that gives the mortgage and gets mortgage loan i.e. the debtor or
the borrower.
Mortgagee: The party to whom an interest in property is transferred as security of the
mortgage loan i.e. the creditor or lender.
Equity of Redemption: The right of the mortgagor (borrower) to reclaim clear title to the
property after the mortgage loan has been fully paid off.
Charge: The mortgage document registered on the title of the property in under Land
Titles Act. Charge identifies a debt against the property. Actual transfer of title to the
Mortgagee does not occur.
Mortgage Document: Refers to the document specifying the terms and conditions of
the mortgage. A copy of this document must be provided to the borrower with 30 days
of signing.
Legal Mortgage (First Mortgage): Historically, a Legal Mortgage used to directly
transfer the estate or interest in land to the mortgagee to ensure repayment of loan.
Equitable Mortgage (Second, Third, etc.): This historic term differentiates a mortgage
against equity from the legal mortgage. These are used when a mortgagor requires
additional funding but does not want to disturb the existing legal (first) mortgage. A
secondary lender may assume the risk of financing.
Chattel Mortgage: This is a lien against personal or movable assets of the property
owner (e.g. equipment, appliances, vehicles, boats, etc.). These liens may be removed
without disturbing the freehold estate. Chattel Mortgage is registered under Personal
Property Security Act.
Loan to Value Ratio (LTV): LTV ratios vary by lender and type of property. Institutional
lenders (financial institutions) can use a maximum of 75% LTV for financing
commercial properties.
Conventional Mortgage: When the LTV is 80% or more. This provides high equity
protection for the mortgagor. However, lenders may set more restrictive limits; e.g.
50% or 60% based on individual property and associated risk.
High Ratio Mortgage: This is a mortgage loan that exceeds 80% of LTV or the normal
limit for a conventional first mortgage.
13.2 Mortgage Priorities
Mortgage Priority
•
•
•
•
Mortgage priority is generally based on the date and time of registration, subject to
certain exceptions.
Typically, the first mortgagee has first priority and with subsequent (equitable)
mortgagees ranked second, third, etc.
These Subsequent Encumbrancers are also called Equity Lenders.
They have two basic rights –
(i) Right to be Notified - When the first lender takes some action against the property
(power of sale or foreclosure) in case of default, and
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(ii) Right to Prevent Default - By paying off the first mortgage on behalf of the
borrower.
Priority Exceptions
•
•
Many other legitimate claims may take priority over the first mortgagee.
Some examples are –
➢
➢
➢
➢
➢
Claim of the Crown,
Property taxes,
Condominium lien for non-payment of Common Expenses (Maintenance Fee),
Conditional sales lien,
Construction liens. Individual Lien may be registered by an individual when work is
done on one property under one contract. General Lien is registered when work is
done on many properties under one contract.
➢ Judgment registered before a mortgage have priority.
13.3 Rights and Privileges
Mortgagee (Lender) Rights
•
•
Right to Assign the Mortgage: The mortgage can be sold, transferred or assigned
without the consent of the mortgagor with notification of the assignment to the
mortgagor. The mortgagor must be notified of this assignment.
Right to be Paid: The mortgagee has the right to be paid the principal and interest
based on arrangements spelled out in the mortgage document. If all covenants are
fulfilled, a discharge is provided to the mortgagor.
Mortgagor (Borrower) Rights
•
•
•
Quiet Possession: Mortgagor has the right to quiet uninterrupted possession of the
property when not in default.
Redeem the Property Free of the Mortgage: Mortgagor retains the right to sell or
mortgage his/her interest. Any provision that the mortgagee has the option to purchase
the property is invalid. The mortgagor must never be prevented from redeeming the
property free of the debt.
Discharge the Mortgage: When the entire debt is paid off, the mortgagee executes a
discharge in favour of the mortgagor.
Privileges
•
•
Prepayment: Additional payments, other than scheduled regular payments, are not
permitted unless there is such a clause in the mortgage terms.
Renewal: This privilege normally does not exist. But, some mortgages may have a
built-in renewal privilege.
•
Postponement: This privilege given by second mortgagee permits the mortgagor to
renew or replace an existing first mortgage and retain its priority. This typically happens
when the first mortgage expired before the second mortgage. The second mortgagee
postpones its priority in favour of the first mortgagee.
•
Transfer of Mortgage (Mortgage Assumption): Three approaches exist in market –
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➢ The mortgagor may be able to transfer without the consent of the mortgagee, but
he/she may remain liable through the personal covenant.
➢ The mortgagee may insert an approval clause requiring approval of any person
who will be assuming the mortgage.
➢ The mortgagee may prohibit any transfer.
Implied Covenants
•
•
•
•
•
There are three Implied Covenants (obligations) of the mortgagor under the Land
Registration Reform Act.
These covenants apply when a Standard Charge Terms are not registered.
First Implied Covenant: The mortgagor will make payments of principal and interest,
the property will be insured, he has legal right to give mortgage, there are no other
encumbrances other than those registered, the mortgagee will have to take
possession and sell property to recover monies when the mortgagor is in default, etc.
Second Implied Covenant (Usual Covenants): The mortgagor has Fee Simple Interest
in the property.
Third Implied Covenant: It related to leased properties and the mortgagor covenants
that the lease is up-to-date.
13.4 Default Remedies
Default
•
•
•
•
Failure to fulfil obligations under the mortgage by mortgagor leads to default.
Default is most commonly associated with failure to make payments, but other
reasons may exist.
The mortgagee may sue for possession or simply take possession and sell the
property to recover monies.
If the mortgage is insured by Canada Mortgage and Housing Corporation (CMHC),
then the mortgagee must follow the given guidelines when taking action against the
mortgagor.
Power of Sale
• A Notice of Default is sent when the mortgagor is in arrears for 15 days.
• Redemption Period: This notice gives mortgagor 35 days or 45 days’ Redemption
Period to pay the mortgage. If funds are not received, the mortgagee may take
possession and sell the property.
• After sale, the mortgagee is entitled to take whatever money is owed plus expenses.
• The surplus money is paid to the next encumbrancer in priority or the mortgagor.
• Contractual Power of Sale: When the mortgage document contains a Power of Sale
provision. The redemption period in this case is 35 days.
• Statutory Power of Sale: When there is no Power of Sale provision in the mortgage
document. The redemption period in this case is 45 days.
Other Remedies
•
Foreclosure: This is a court action taken by a mortgagee. The mortgagor is given some
specified time to pay the loan and redeem, failing which the mortgagee forecloses. The
mortgagor forfeits any equity that he or she may have in the property.
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•
•
Judicial Sale: This is a court action taken by a mortgagee. The proceeds of the sale are
typically paid into the court with funds applied to amounts paid to encumbrancers
according to priority. Any surplus would be awarded to the mortgagor.
Quit Claim Deed: The mortgagor agrees to release any right in the mortgaged property
including the equity of redemption.
Mortgage Default Insurance
•
•
•
This provides default protection for the lender if the borrower fails to meet obligations
under the mortgage terms.
Typically, the high-ratio mortgage loans (where the LTV is 80% or more) are insured
through a mortgage loan insurance program.
Insurance is provided through a private source (Genworth Financial) or a government
source (CMHC - Canada Mortgage and Housing Corporation).
Creditor Life Insurance
•
•
This insurance is offered to the Mortgagor at the time of signing Mortgage
Commitment.
It provides protection to the borrower in case of disability, critical illness and death.
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14. MORTGAGE QUALIFICATION AND PRODUCTS
14.1 Borrower Qualification
Borrower Approval
•
•
•
•
•
Prime Borrowers: Those borrowers who have A or A Plus credit (excellent credit
rating). The risk for lender is low with these borrowers.
Sub-prime Borrowers are those who have B and C level credit. The lenders have
higher risk with these borrowers.
Pre-Approval: A pre-approved buyer is also called a Cash Buyer. Pre-approval is a
confirmation document setting out the maximum amount that can be borrowed, the
interest rate (guaranteed for a specific time) and monthly payments. The confirmation
is subject to an appraisal and verification of information provided by the borrower.
Origination Software: This Point of Sale software is used by Mortgage Brokerages to
prepare mortgage applications online. They can attach credit reports, perform
mortgage calculations, check default insurance premiums, submit applications and
receive approvals or commitments from the lenders. Borrowers can also review or
compare offers from various lender.
Mortgage Commitment: This refers to commitment of loan by lender after the buyer has
made an offer. The commitment is subject to certain terms and conditions. These
conditions typically include - evidence of fire insurance, payment of property taxes,
satisfactory clean title, survey of property, etc.
Required Documents
•
•
Documents required vary by the lender and the type of property being financed.
Typical documents required by lenders include –
➢ Employment and income supported by Notice of Assessment from Canada
Revenue Agency, T4’s, T4A’s, Income Tax Return, Employment Letter, Pay Stubs,
etc.
➢ Amount and source of down payment.
➢ Credit report or authorization to obtain credit report.
➢ Copy of Agreement of Purchase and Sale and MLS® listing.
➢ Property Appraisal report.
14.2 Borrower Credit
Five C’s of Credit
•
•
•
•
•
Character: Employment reliability and overall risk.
Capital: Available financial resources; assets/liabilities.
Capacity: Ability to pay; Mortgage qualification using GDS/TDS ratios.
Collateral: Condition of property to be mortgaged. Provides additional security to
lender.
Credit: Credit record or Consumer Report of the borrower.
Credit Bureau (Credit Investigating Agency)
•
The Credit Bureaus (Equifax Canada and TransUnion): They receive information from
lenders and public record sources (judgments, bankruptcies, etc.).
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•
•
•
•
Consumers have the right to verify the information that is being collected, stored and
provided to a lender. They can get altered any incorrect information stored by credit
unions.
Credit Information (Consumer Report): The credit report provides personal information
about the individual such as address and employment, bank accounts, credit history,
status of revolving accounts, bankruptcies and/or proposals, judgments, wage
garnishments, etc.
Personal Information: May be Factual and Opinions. Credit bureaus may not provide all
personal information about an individual.
Credit Score (Beacon Score or FICO Score): This is a number between 300 and 900
that the lenders use in assessing an applicant’s credit rating. The higher the credit
score, the better.
14.3 Mortgage Market
Primary and Secondary Markets
•
•
Primary Market: New loans for property financing, new construction, renovations, etc.
Secondary Market: Existing mortgage instruments are traded based on future cash
flows.
Property Specifics
•
•
•
•
•
Mortgage approval depends on the qualification of the borrower as well as the
condition of the property such as its age, condition and other associated risks.
In case the risk to the lender is high, the borrower may be asked for more down
payment or even may be refused any financing.
Physical Detractions and Legislative Inadequacies are also considered by lenders to
estimate risk.
Physical Detractions: These are related to inadequate or outdated systems in the
property (e.g. 60 amperes electrical service), dug well or insufficient quantity of water,
dirt floor in basement, drug lab or grow house, mould in the house, etc.
Legislative Inadequacies: These are related to non-compliance with zoning by-laws,
building or fire codes, etc.
Sources of Mortgage Funding
•
•
Financial Institutions, Credit Unions, Trust Companies, Retirement Funds, etc. are
primary sources of mortgage financing
Alternate sources include Seller Take Back (seller financing his own property and
taking back mortgage), Private Investors, Sale/Leaseback, etc.
Negotiations
•
•
•
Increasing Amortization: Increasing the amortization period reduces monthly payments
and, hence, a lower income borrower may qualify for the loan.
Refinancing or Debt Consolidation: Combining many short term loans into one
consolidated loan with increased amortization lowers monthly payments and may help
qualify a lower income borrower.
Using Leverage: Leverage is used for wealth building wherein borrowed funds are
used for investment in commercial properties. While positive leverage may help
increase the overall yield, a negative leverage may have a reverse effect.
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•
Including a Guarantor: When a person co-signs as a guarantor, the risk to the lender
reduces because the personal covenant (obligation) of the guarantor is attached.
14.4 Mortgage Products
•
•
•
•
Interest Only: The borrower does not repay principal, but only pays interest at regular
intervals. The entire principal is due at the end of term.
Interest Accruing: No payment is made during the term. Both are due at the end of
term.
Interest Plus Specified Principal: The borrower repays a fixed principal amount and
interest at specified times during the term.
Blended (Amortized): Equal Blended (Principal and Interest) payments are made at
regular specified intervals. Payment is based on the Amortization schedule and
payment frequency (monthly, bi-weekly, etc.). This product plan is most common and
dominates the residential market.
Special Mortgage Products
•
•
•
•
•
Fixed and Variable Interest Rate: The standard blended mortgage is generally referred
to as a fixed mortgage. Long-term fixed rates are popular when the rates are
increasing. Variable rate mortgages fluctuate with the applicable bank prime rate.
Capped Variable rate mortgages set limits on rate increase or decrease. Lock-in
provision provides for conversion to fixed rate.
Open and Closed Term: Lenders may offer both open (payable before maturity) and
closed (not payable before maturity) provisions.
Fully Closed Mortgage: This mortgage does not permit principal repayment before
maturity (other than regularly scheduled payments).
Open Mortgage: May not be really fully open. The lender may require at least some
notice and/or a penalty such as 3 month’s interest or Interest Rate Differential (IRD),
whichever is higher.
The 15 plus 15 Mortgage: This privilege permit the borrower to pay 15% of the
outstanding principal on each anniversary, as well as he can increase the periodic
payments by 15%.
14.5 Commercial Mortgages
Commercial Financing Considerations
•
•
Debt Coverage Ratio: The debt coverage ratio is calculated by dividing Net Operating
Income (NOI) by Debt Service (mortgage principal and interest payments). Lenders
typically require a debt coverage ratio of 1.2 or higher.
Safety Margin: The safety margin serves as a financial cushion for the lender.
Specialized Products
•
Bridge Loan: An interim form of financing. Bridging may occur when a buyer is
committed to completing the purchase of a property on a specific date, but will not have
sufficient funds until a later time (i.e. his current property has not closed yet).
•
Development Loan (Construction Loan): Given for servicing and improving land up to
the point of building construction.
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•
Gap Loan: A gap loan is an interim financing vehicle that provides funding between
construction advances and the placement of permanent financing.
•
Letter of Guarantee: Used in development projects involving a municipality. It assures
existence of financing for completing a public project.
•
Wraparound Mortgage: A new mortgage that wraps around existing mortgages. The
Wrap mortgagee collects payments from the mortgagor and makes payments to the
original mortgagees. The wrap mortgage sits in subsequent priority to other mortgages.
•
Blanket Mortgage: A single mortgage for two or more properties. No property can be
sold without consent of the lender and the mortgagee can take legal action against any
of the properties if default occurs.
•
Participation Financing: The lender directly participates in the profits (Income
Participation) or has ownership share (Equity Participation) in the financed venture.
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15. AGENCY RELATIONSHIPS
15.1 Agency Relationships
Terminology
•
•
•
•
•
•
Real Estate Trading: Any activity related to acquisition or disposition of real property
such as sale, purchase, lease, rental, exchange, etc.
Principal (Client) is an individual who authorizes an agent to act on his/her behalf. It is
the party with whom the brokerage (as agent) has signed an agreement.
The Real Estate and Business Brokers Act 2002 (REBBA 2002) is a special type of the
Agency Law.
In real estate, the equivalent of an Agent is the real estate brokerage. Salespersons
and Brokers are considered employees of the brokerage for trading purposes.
Agency Relationship: A legal relationship in which the agent represents the client for
dealing with a third party. Under REBBA 2002, it is known as Representation
Relationship.
Sub Agency is authorization by one agent (brokerage) to another agent (brokerage) to
assist the client in selling or purchasing real estate with the written consent of the
client. The sub agent has same obligations to the client as the agent.
Agency Creation
•
•
•
•
Express Agreement: Which may be written, oral or implied. As per REBBA 2002, the
brokerage must have a written agreement as an evidence to claim commission.
For Example, a buyer signs a Buyer Representation Agreement with a brokerage.
Ratification: When the agent acts either without authority or in excess of authority
granted and the principal accepts the benefit of agent’s unauthorized act.
For example, a salesperson is shows a seller’s property to a buyer without authority
and brings an offer. The seller accepts the offer ratifying the agency relationship.
Estoppel (Conduct): When the principal gives impression that someone is acting as his
agent. It is very uncommon but is legally possible in real estate.
By Law: A court may appoint an agent for a principal/client when it becomes necessity,
e.g. in emergency situations
Agency Termination
•
•
•
•
•
•
•
By mutual agreement of the agent and the client.
When the agency is revoked by the principal/client. If revocation is unlawful, the
principal may be liable for damages.
When the agreement expires.
When the job is performed or completed (e.g. property is sold and title is transferred).
When it is impossible to complete the job (property damaged in fire).
Death or mental incapacity.
Bankruptcy of brokerage or cancellation of brokerage registration by RECO.
Limits on Authority of Brokerage
•
•
The authority given to a real estate brokerage is limited.
The brokerage cannot sign contracts (offers) on behalf of the client. Brokerages sign
documents only as witnesses.
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•
•
•
The agency relationship cannot be delegated to other brokerages without express
consent of the client.
The brokerage can only receive a deposit related to purchase.
The brokerage cannot incur expenses on behalf of the client without express authority.
Non-Agency Relationships
•
•
•
Customer: A party not represented by the brokerage but is being provided limited
services as specified in the Customer Service Agreement.
Third Party: A party that is not directly connected to the transaction but may be affected
by it. For example, if seller is the client, the buyer may be a third party and vice-versa.
The terms Third Party and Customer are used interchangeably because the duties
owed to them by the brokerage are similar.
Negligent Misrepresentation
•
•
•
This happens when a party seeks information from a registrant who is trusted for
his/her skills.
The registrant giving the advice knows that reliance is being placed on his/her advice.
If the party subsequently suffers economic loss due to false information, the registrant
can be sued for damages under negligent misrepresentation.
15.2 Client’s Duties
General Obligations
•
•
Indemnification: The principal has an obligation to compensate the agent for liabilities
incurred when carrying out duties. The client provides indemnity if a damage or loss
occurs to client during agreement period, except when the damage/loss is due to gross
negligence of duties by brokerage. In real estate, the duty to reimburse the brokerage
for expenses typically does not apply because the brokerage is paid commission.
Remuneration: The client has an obligation to pay commission to the brokerage for the
services provided.
Obligations in Representation Agreement
•
•
•
•
The brokerage has the right hold the deposit in Real Estate Trust Account.
The client agrees to pay of taxes on commission.
The client agrees to refer of all enquiries to the brokerage during agreement period.
The client has to pay commission if the sale does not close due to client’s default.
•
Holdover Period: The client has to pay commission if a property is shown by the agent
during agreement period but is sold privately to the same buyer during holdover period.
The holdover period starts after expiry of the agreement period.
15.3 Duties to Clients and Customers
General Obligations
•
•
•
The agent must use Due Care & Skill in providing information.
The agent must perform agreed functions and ensure privacy.
Agent must be honest and should not mislead the client.
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Duty of Care
•
•
•
•
•
Clients: The Duty of Care includes everything done for the client.
Customers: The Duty of Care is limited to honesty, exercising reasonable care and
skills when providing information and performing agreed functions. The agent must
ensure that there is no misrepresentation.
Standards: The standards for Duty of Care are objective (based on facts) and not
subjective (no regard to personal interpretations).
Limited Disclosures: Information related to the agency relationships and material facts
about the property/trade.
Material Facts about the property must be disclosed to both clients and customers.
15.4 Agency Duties
Fiduciary Duties
•
•
•
•
•
•
•
•
Fiduciary Duties are based on Trust and Confidence, Best Interests and Loyalty.
A written agreement is not required for fiduciary obligations.
These duties exist even if the brokerage is acting gratuitously (free).
Loyalty: Agent must place interest of the Principal above all (Except Law).
Avoid Conflicts of Interest: Arising from representing two clients in a trade (multiple
representation) or by having direct/indirect interest in property.
Disclose Conflicts: At the earliest practical opportunity but before an offer is made.
Disclose Referral Fees: The registrant must not make secret profits at the expense of
the principal.
Protect Confidential Information: Personal or motivational information of the client must
be kept confidential and must not be misused so as to harm the principal.
15.5 Regulatory Obligations
•
•
•
•
•
•
Accountability: The agent must account for and safeguard money, documents and
property entrusted by the client. The obligation of a brokerage to maintain a Real Estate
Trust Account is based on this duty.
Commission: The commission charged may be a percentage of sale price, a fixed amount
(flat fee) or a combination of both. Several percentages may also be used but the
percentage must be in descending order (decreasing) as the sale price goes up.
Promises: The brokerage must not induce anyone into signing a contract or make anyone
breach their contract with another brokerage. If a promise is made to a party, it must be in
writing and delivered to that party.
Delivery of Documents: Documents related to trade such as offers, representation
agreements, notices, waivers, amendments, etc. must be delivered in a timely manner.
Agency Relationships: Agreements must have a date of commencement and an expiry
date. The forms used by the brokerage must be current.
Disclosure of Representation: Brokerages must disclose agency relationships to all parties
in a transaction before entering into any relationship. Written acknowledgement and
consent must be taken from the parties.
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16. CLIENT REPRESENTATION
16.1 Types of Representation
Terminology
•
•
•
•
•
Single Representation: A relationship where the brokerage represents only one client
(buyer or seller) in a transaction and the other party is a third party or a Customer.
Sequential Representation: This happens when the same client first sells a property
through the brokerage and then buys another from the same brokerage.
Concurrent Representation: This happens when the brokerage represents more than
one Client (buyer or seller) but not for the same trade. Conflict of interest may arise
when the same brokerage represents more than one party with competing interests,
but not for the same trade.
Multiple Representation: This happens when the same brokerage represents more
than one client for the same transaction. It may also occur when more than one buyer
is represented by the same brokerage for the same property.
Written Disclosure: REBBA 2002 Code of Ethics requires that a written disclosure of
representation capacity must be made and Informed Written Consent of clients be
obtained at the earliest practical opportunity but before an offer is made.
16.2 Representation Agreements
Information Before Representation Agreement
•
•
•
REBBA 2002 Code of Ethics requires that certain information must be provided to the
parties at the earliest practical opportunity but before an offer (of representation) is
presented.
A signed written acknowledgment must be obtained from the party.
The brokerage must provide certain information about service alternatives available
through brokerage.
Examples - Representation Agreement (with Client), Customer Service Agreement
(with Customer) or Multiple Representation (when both parties are clients).
Agreements in Writing
•
•
•
•
•
•
•
•
All agreements related to trading in real estate must be in writing to be effective.
The Real Estate Council of Ontario (RECO) does not provide any representation forms.
A Seller Representation relationship is created when a Listing Agreement is signed.
A Buyer Representation relationship is created when a Buyer Representation
Agreement is signed
Minimum Content: The agreement must include information such as –
the Effective Date (date of commencement), one definite Expiry Date, services to be
provided, total commission, commission to co-operating brokerage and how the
commission is to be calculated.
More than 6 Months: If the agreement is for a period of more than six months, the party
must give their consent using initials on the first page of agreement.
Copies of Agreements: Copies of representation agreements must be delivered
immediately upon signing.
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16.3 Multiple Representation
•
•
•
•
•
When more than one client is represented by the same brokerage and for the same
transaction/trade. For example, when both the seller and the buyer have
Representation Agreements with the same brokerage and for the same property.
Both parties are clients of the same brokerage and the brokerage must act impartially.
This situation may be created by Informed Written Consent (Express Authority) or it
may happen unintentionally (Implied Consent).
Multiple representation must be disclosed in writing to all parties and Informed Written
Consent must be obtained at the earliest practical opportunity but before an offer is
presented.
The brokerage may avoid the multiple representation situation and avoid conflicts of
interest by providing Client Services to one party and Customer Services to the other
party.
•
Imputed Knowledge refers to a legal assumption that knowledge of confidential matters
about clients is transferred (imputed) to all salespersons/brokers of the brokerage.
•
Implied Multiple Representation mostly happens in open houses when a third party
believes that an agent is working on its behalf.
16.4 Acquisition/Disposition of Real Estate by Registrants
Disclosure of Interest
•
•
•
Registrants must disclose any existing interest (sale) or contemplated interest
(purchase) in real estate.
The disclosure must be in writing and signed acknowledgement must be obtained at
the earliest practical opportunity but before an offer is made.
Disclosure statement must include ➢
➢
➢
➢
•
That the party selling or buying is a registrant under REBBA 2002.
That the registrant is a Salesperson, Broker or a Brokerage.
Whether the interest in property is direct or indirect.
The material facts about the property known to the registrant that may affect the
value.
The registrant must also disclose details of any agreement for subsequent sale of the
property to a third party.
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PART II – PRACTICE QUESTIONS
SAMPLE EXAM 1
Take a blank sheet of paper to write your answers. The Quick Answer Key is located after the
last question followed by Detailed Answers.
1. Which of the following statements is correct about life estates?
A. The life estate holder has the right to write a will for the estate.
B. Life estate continues if the estate reverts to granter after death of life estate
holder.
C. Life estate holder decides inheritance of the estate after death.
D. Life estate interest is smaller than the freehold interest.
2. Which of the following statements is correct about surveys?
A.
B.
C.
D.
Any visual description of property can be treated as a survey.
A survey must have a certification by the surveyor.
An acceptable survey is typically prepared by an Ontario Land Surveyor.
All surveys are registered in land registry office.
3. Which of the following statements is true about the Registry Act?
A. The abstract books were the sole source of information for buyers about a parcel
of land.
B. The land registrar did not guarantee that the title information was accurate or
verified.
C. Title search was conducted by buyer’s lawyer for last 20-year history.
D. There was no need for title search because there is no guarantee of accuracy of
information.
4. Which of the following statements is correct about the Land Registration Reform Act?
A. Implied covenants of land applied to mortgage liens when Standard Charge
Terms were not registered.
B. This Act standardized the Agreement of Purchase and Sale and associated
schedules.
C. The Document General form is used for registration of all interests on land
except when a Power of Attorney is involved.
D. This Act provided for decontrol of standard registration documents.
5. In which of the following situations, an owner would find horizontal ridges in the roof of a
residential structure?
A.
B.
C.
D.
When the rafters are spread more than 24 inches apart.
When the sheathing thickness is more than standard for the structure.
When the edges of the sheathing do not have adequate support.
When factory built trusses are used instead of rafters.
6. Which of the following statements is correct about asphalt shingles?
A. These shingles have a life expectancy of more than 20 years.
B. They are most commonly used and are classified by weight.
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MiniCram Real Estate Exam Course 2
C. These shingles are the only solution for large warehouses and office buildings.
D. These shingles do not need flashings because of their unique design.
7. Which of the following statements correctly describes the reason of heat loss from a
building?
A. The main sources of heat loss by conduction are foundation walls and ceiling
materials.
B. Heat loss from a building is not caused by conduction or convection but by
radiation only.
C. Unsealed service entrance points are the only source of heat loss.
D. Heat loss by radiation is through glass panes of windows and doors.
8. The effective date of an appraisal is:
A.
B.
C.
D.
The date when the property value is the highest.
Always a past date, regardless of the purpose of appraisal.
The date on which the value estimate applies.
Always the date when municipal assessment of value is done.
9. Which of the following rights are NOT provided to mortgage lenders under the current
legislation?
A. A mortgagee can transfer the mortgage to another mortgagee without the
consent of the mortgagor.
B. The mortgagee can stop the mortgagor from making regular payments anytime
during the term, provided that appropriate notice is given to the mortgagor.
C. The mortgagee can take appropriate action to recover money in case of default
by the mortgagor.
D. A mortgagee typically requires the mortgagor to get insurance coverage for the
property being financed.
10. The term ‘Agent’ under the Common Law of Agency:
A. Refers to all salespersons and brokers employed by a real estate brokerage in
Ontario.
B. Refers to a brokerage involved in sale/purchase of properties but not for leasing.
C. Does not have any equivalent term in REBBA 2002.
D. Refers to a real estate brokerage involved in real estate trading and representing
a client.
11. Which of the following statements is incorrect about different types of representation?
A. Concurrent representation occurs when the same brokerage represents more
than one buyer or seller for different transactions.
B. Multiple representation occurs only when a brokerage represents both the buyer
and the seller in the same transaction.
C. Single representation may refer to a situation when the same brokerage is
working with the seller as a client and buyer as a customer for the same trade.
D. Sequential representation occurs when a single client works with the same
brokerage, first for selling and then, for buying another property.
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MiniCram Real Estate Exam Course 2
12. Both the life estate and the future estate may have an interest in a property. Which of
the following statements is correct in this regard?
A. The interest of future estate starts after the end of life estate.
B. Both the life estate and the future estate have the right of possession at the same
time.
C. If the life estate holder decides to sell the estate during the tenure, the future
estate comes to an end.
D. Life estate and future estate together make up the entire fee simple estate.
13. Concurrent ownership of a property may be as joint tenancy or as tenancy-in-common.
Select the correct statements regarding joint tenancy.
1.
2.
3.
4.
5.
Any two or more persons can have joint tenancy of a property.
Joint tenancy is only meant for matrimonial homes.
The interest of each joint tenant is based on their proportionate share of investment.
Joint tenancy has to be specifically created at the time of registration.
The right of survivorship provides that the interest of the deceased joint tenant does
not become his/her estate.
A.
B.
C.
D.
Only statements 2 and 5 are correct.
Only statements 2 and 3 are correct.
Only statements 1, 4 and 5 are correct.
Only statements 1, 3 and 4 are correct.
14. The Family Law Act defines a matrimonial home and rights of the spouses. Which of the
following statements is correct regarding a matrimonial home?
A. The principal residence of a family is a deemed matrimonial home.
B. A family cannot have more than one matrimonial home because there can only
be one principle residence.
C. If the title of a matrimonial home is in the name of one spouse only, the other
spouse does not have any interest in the property.
D. If a property is purchased before marriage, the family must designate it as
matrimonial home.
15. The Expropriation Act sets out land expropriation procedures under the right of eminent
domain. Which of the following statements best describes this process?
A. Owners can dispute expropriation of their property in case it is held in fee simple.
B. The expropriating authority becomes owner of the property upon delivery of
expropriation notice.
C. Expropriation procedures permit property owners to request a hearing after a
notice of expropriation is sent.
D. In case of a dispute regarding compensation, the decision of the board of
negotiations is final.
16. Historically, land was first divided into counties and then into townships, concessions
and lots respectively. Which of the following statements is correct in this regard?
A. Townships were made within concessions of land and they were all shaped as
perfect rectangles.
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MiniCram Real Estate Exam Course 2
B. Concessions consisted of 100 chains wide lots and each lot had an area of 200
acres.
C. In the sectional township system, there were 1000 lots, each with an area of 100
acres.
D. In the double front township system, lots with 200-acre area were patented into
half lots of 100 acres each.
17. A reference plan is widely accepted as an accurate measurement of property
boundaries. Which of the following is a benefit of a reference plan?
A. A reference plan is sufficient to create a small subdivision of less than 10 lots and
a draft plan is not required.
B. A reference plan is a substitute for the old complicated process of metes and
bounds description, which did not provide visual description of land.
C. A reference plan prepared by an Ontario Land Surveyor enables a land owner to
sever the land without any approval.
D. A reference plan when prepared by an Ontario Land Surveyor is registered in
land registry office.
18. Salesperson Mini of Cram Realty Inc. is checking the description of seller Smart’s
property. She has only an older metes and bounds description, which says that the lot is
rectangular in shape. It is fronting on the westerly limit of the road allowance. The four
boundary lines are described as follows:
▪
▪
▪
▪
Thence South 65 degrees 45 minutes 30 seconds West, 172 Feet
Thence South 24 degrees 15 minutes 10 seconds East, 73.5 Feet
Thence North 75 degrees 20 minutes 30 seconds East, 190.75 Feet
Thence North 25 degrees 5 minutes 20 seconds West, 67 Feet more or less to the
point of commencement.
There seems to be an error in the said description. Which of the following statements
correctly describes this error?
A.
B.
C.
D.
The property description does not make up a rectangular lot.
The bearings of the second description are reversed.
One of the four descriptions must also state the fronting of the property.
The words more or less should be added to description of all boundary lines.
19. The Metes and Bounds method was used to describe parcels of land many decades
ago. Based on these measurements, land surveyors could easily describe property
boundaries. Which of the following statements is incorrect about this method of land
surveying?
A.
B.
C.
D.
Metes and bounds uses only North as angle bearing shown on a Survey.
The written land description could use either North or South as angle bearing.
Metes and bounds descriptions were more complex than Reference Plans.
Metes and bounds description essentially makes up the entire survey of the
land.
20. Land registry in the province of Ontario is currently done under the Land Titles Act,
which is based on three principles. Which if the following is a correct statement in this
regard?
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MiniCram Real Estate Exam Course 2
A. The Mirror Principle assures the buyer that the title information in the parcel
register is reliable and reflects true facts and current status of the property.
B. The Insurance Principle makes it mandatory for all buyers to obtain title
insurance before the date of possession.
C. The Curtain Principle states that the buyers must hire a lawyer to conduct a title
search for a period of 40 years or more.
D. The Act provides that at least two out of the three principles must be satisfied at
the time of purchase.
21. Power of attorney is a delegated written authority given by someone to another person.
Which of the following statements is incorrect in this regard?
A. The attorney cannot sign documents on behalf of anyone except the donor.
B. For trading in real estate, the Continuing Power of Attorney for Property is
required.
C. A Power of Attorney is granted under the Delegated Authorities Act for trading in
real estate.
D. Once the Power of Attorney is granted for trading in real estate, it must be
registered in the land registry office.
22. Which of the following statements is/are correct regarding the Land Registration Reform
Act?
1. The only purpose of this Act was to reduce the number of standard forms for
registration of an interest in land.
2. The Land Transfer Tax Affidavit is mandatory as part of Form 1: Transfer/Deed of
Land.
3. The Act introduced Implied Covenants of Charge/Mortgage when the standard charge
terms are not registered.
4. The Act provided that all agreements related to sale/purchase or lease of land must
be on OREA® forms.
5. The Act provided that every transaction must be completed using electronic
registration procedures.
A.
B.
C.
D.
Only statements 1 and 5 are correct.
Only statements 2 and 3 are correct.
Only statements 1, 3 and 4 are correct.
Only statements 1, 4 and 5 are correct.
23. A small building located in a residential subdivision has two stores on the ground level
and an apartment upstairs. The owner wishes to expand this building in order to
accommodate an additional store. The commercial use of the property existed before the
municipality passed a zoning by-law, prohibiting any commercial use in this neighbourhood.
Which of the following government agencies the owner would have to approach in order to
get an approval for expansion?
A.
B.
C.
D.
Ontario Municipal Board
Ministry of Municipal Affairs and Housing
Committee of Adjustment
Land Division Committee
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MiniCram Real Estate Exam Course 2
24. Builder Bob has acquired a rundown property, which is wants to convert into a small
commercial plaza. The approval of his project is conditional on certain requirements
stipulated in an agreement with the municipality. These requirements relate to parking
spaces, soil conditions, grading, tree lines, curbs, walkways, minimum distance to nearby
residential areas, etc. Which of the following documents typically contain these
requirements?
A.
B.
C.
D.
The Site Plan Control Agreement with the municipality.
The Official Plan enacted by the municipality.
The site-specific deed restrictions.
The zoning by-law applicable to that zone.
25. Most townships are divided into zones and sub-zones in order to maintain conformity of
uses. Which of the following is a correct statement in this regard?
A. Zoning is created by the provincial Ministry of Municipal Affairs and Housing to
ensure that all municipalities have similar zones.
B. Zoning by-laws permit or restrict the use of properties in different zones and
specify building structure standards.
C. Zoning by-laws place specific deed restrictions on properties so that the owners
have to get permission from municipality if that use is being altered.
D. Zoning by-laws are strictly enforced and no owner is permitted to alter the use in
a manner which is not in compliance.
26. Which of the following statements is incorrect about watercourse controls and
restrictions on property development in flood prone areas?
A. Owners whose land falls within regulated areas must get permit for any
development work.
B. If the property falls within a floodway no development is normally permitted.
C. All owners whose land falls within regulated areas get Conservation Land Tax
Incentive.
D. If the land falls within a flood fringe, owners may be permitted restricted
development.
27. Which of the following statements is correct regarding footings in a residential
structure?
A. Footings prevent the basement areas from moisture damage when water leaks
from the foundation walls.
B. Footings transmit the weight of the foundation and above grade walls to the soil.
C. Footings provide lateral strength to foundation walls and prevent them from
deflecting inwards.
D. Footings provide a solid base on which wall framing is installed.
28. The statement given below relates to the structural components and contains some
blank spaces.
Footings transmit the weight of the house to _______ and when footings on a particular
side fail, the structure may tilt on that side. Basement leakage problems can be remedied
by ___________ improvements and by properly installing __________ and ___________.
Owners usually install a _________ to remedy moisture problems in the basement.
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MiniCram Real Estate Exam Course 2
Pick the terms from the given options to fill up the blank spaces in order.
A.
B.
C.
D.
Soil; Evestroughs; Downspouts; Sump Pump; Exterior Grading.
Evestroughs; Downspouts; Soil; Sump Pump, Exterior Grading.
Sump Pump; Exterior Grading; Evestroughs; Soil; Downspouts.
Soil; Exterior Grading; Evestroughs; Downspouts; Sump Pump.
29. Which of the following is a correct statement regarding roofing structures?
A. Roof is supported by roof rafters in flat roofs or by roof joists in sloped roofs.
B. The purpose of a knee wall is to prevent sagging of roof when the rafter span is
large.
C. Moisture or condensation problems rarely occur in the attic area because it is
adequately insulated.
D. Roof rafters take the live loads of snow, ice and wind and transmit them directly
to the foundation walls.
30. Windows are made up of glass panes. One of the primary function of windows is to
reduce heat loss from the property. Which of the following statements is correct in this
regard?
A. The insulation value of windows may be increased by using thick glass and
double glazing.
B. U-value of glass is generally kept high in order to increase the efficiency rating
(ER) of windows.
C. Low emissivity is rarely a factor when the efficiency rating of windows is
calculated.
D. The CSA standards for rating of windows include its water tightness and air
tightness but does not include wind resistance.
31. Which of the following statements is correct regarding heating systems in residential
properties?
A. The main components of an electric furnace include a combustion chamber, a
blower consisting of fan and motor and a chimney.
B. A gravity furnace is also known as an octopus furnace but it is rarely used these
days due to its low efficiency.
C. Gas furnace is commonly used for most rural residential properties and it
consists of a combustion chamber, a blower and ducting system.
D. A hot water tank is used in conjunction with radiant heaters and it uses steam to
produce heat in the structure.
32. Owner Smart hires an appraiser to estimate the market value of his home in Cram City.
Which of the following statements correctly describes the effective date of appraisal?
A. The effective date of appraisal is the date to which the value estimate applies
and is always a current date.
B. For settling a fire damage claim, the insurance company would typically ask for a
past effective date and it is the date when the property was damaged by fire.
C. For refinancing a property, a lender would typically ask for the past effective date
and it is the date of purchase.
D. The effective date is the date of writing a Will when an estate of deceased is to
be settled.
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MiniCram Real Estate Exam Course 2
33. Mortgage default is a major concern for any lender and the current legislation provides
different remedies for the lenders to recover their monies. Which of the following statements
is correct in this regard?
A. In a Power of Sale action, the lender typically gets a court order to take
possession of the property and sell it.
B. In a Judicial Sale action, the lender simply takes possession of property and sells
it without the need to proceed through court.
C. In a Foreclosure action, the lender approaches the court, which grants certain
time to the mortgagor to pay off the debt, failing which the mortgagee can sell the
property.
D. In both power of sale and foreclosure, any surplus amount after the sale is given
back to the mortgagor.
34. Mortgage priority is typically decided on the basis of date and time of registration, with a
few exceptions. Which of the following is NOT one of the exceptions?
A.
B.
C.
D.
A construction lien registered on title.
A condominium lien registered on a unit.
A Crown claim against the property.
A judgment after mortgage registration.
35. Certain special financing options are available with lenders for satisfying the needs of
borrowers. Which of the following is a correct statement in this regard?
A. A Wrap Around mortgage refers to a single mortgage loan against more than one
property, wherein the lender may place a lien on all properties.
B. A Bridge Loan refers to an interim mortgage loan when the borrower must close
a deal before the closure of his earlier deal.
C. The Gap Loan refers to a mortgage loan where there is a big gap of time
between expiry of an existing mortgage and its renewal.
D. A Letter of Guarantee is typically required by lenders when the borrower has B or
C level credit and the risk to lender is high.
36. Seller Smart has signed a Listing Agreement with salesperson Mini of Cram Realty Inc.
for a period of three months. In doing so:
A. Smart has hired salesperson Mini as his agent for selling the property.
B. Smart has established a dual agency with salesperson Mini and Cram Realty Inc.
C. Smart has established an agency relationship with Mini and an implied agency
with Cram Realty Inc.
D. Smart has established an agency relationship with Cram Realty Inc.
37. As per REBBA 2002, the duty of care is owed to both clients and customers. Which of
the following statements correctly explain this duty?
A. The duty of care relates only to performing the agreed functions with due care
and skill but does not expect the brokerage or its employees to have
competence.
B. The brokerage and all its employees must perform the agreed functions with
reasonable care, skills and judgment.
C. The duty of care essentially includes the duty of the agent to obey all lawful
instructions of the client.
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MiniCram Real Estate Exam Course 2
D. Keeping the personal or motivational information of the client confidential is
included in the duty of care.
38. Salesperson Mini of Cram Realty Inc. sold a beautiful 3-bedroom bungalow to Mr. and
Mrs. Smart, who had signed a Buyer Representation Agreement with the brokerage. The
listing brokerage was Power Realty Inc. The Agreement of Purchase and Sale was
conditional upon satisfactory home inspection report and arrangement of mortgage
financing by the buyers. These conditions were waived later and the agreement became a
legally binding contract. Just before the closing date, the Smarts come to know that the
bank has refused to provide them the mortgage because their employment and income
information could not be verified. As a result, Mr. and Mrs. Smart could not complete the
transaction. Which of the parties would be liable for paying commission and why?
A. Mr. and Mrs. Smart would be liable to Cram Realty Inc. because it was their default
that the transaction did not close.
B. The sellers would be liable to Power Realty Inc. because that brokerage fulfilled its
obligation by bringing the sellers an offer that they accepted.
C. Mr. and Mrs. Smart would be liable to Power Realty Inc. because only they were
responsible for not closing the transaction.
D. The sellers would be liable to Cram Realty Inc. for the payment of their share of the
commission as Cram Realty Inc. was the co-op brokerage in the transaction.
39. Salesperson Mini of Cram Realty Inc. has just signed a Listing Agreement with sellers
Mr. and Mrs. Bright, who wish to sell their 2-storey home in Cram City. According to the
provisions of Real Estate and Business Brokers Act 2002, at what point of time salesperson
Mini must provide the sellers with copies of the listing agreement?
A.
B.
C.
D.
Within 24 hours of signing.
Within 30 days of signing.
Within 5 business days.
Immediately upon signing.
40. Salesperson Kim of Cram Reality Inc. listed a property at 123 Cram Crescent. Another
salesperson from the same brokerage submits an offer for the property from a buyer who is
a customer of the brokerage. Is this a multiple representation situation and why?
A.
B.
C.
D.
No, because the buyer and the seller are using different salespersons.
Yes, because both have signed written agreements with the same brokerage.
No, because the brokerage is representing the seller but not the buyer.
Yes, because the brokerage owes fiduciary duties to both the seller and the
buyer.
41. Appraiser Erin wants to check the price trend in a neighbourhood for making time
adjustments to selected comparable sales. She has found a property which was sold six
months ago for $287,300 and was resold two months ago for $302,700. What percentage
change per month in price is indicated by these sales?
A.
B.
C.
D.
+ 1.34%
+ 1.27%
― 0.83%
― 1.27%
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MiniCram Real Estate Exam Course 2
42. Site values in a neighbourhood have been declining at an even rate of 1.25% per month
during the past year. A comparable site was sold in this neighbourhood four months ago for
$167,900. If this site is considered 2% inferior to the subject site, what two adjustments
should be made to arrive at fully adjusted sale price?
A.
B.
C.
D.
$7,349; ― $9,850
― $8,395; $3,358
$1,287; ― $4,379
― $8,028; $5,100
43. Investor James is considering purchase of a 28,000 square feet rental apartment
building located in Cram City. The owner corporation has provided the last years operating
statement, which shows annual gross potential income of $785,600. The applicable
vacancy and credit loss is 4.5% of gross potential income. The annual operating expenses
are $527,850. What is the per square foot value of this property if a cap rate of 9.5% is
used?
A.
B.
C.
D.
$78.90
$12.82
$34.72
$83.61
44. Appraiser Maryam is working on an assignment to estimate the value of an apartment
building. The building has 35 one bed room units, 28 two bedroom units and 15 three
bedroom units. The monthly market rent for these units are $835, $950 and $1,125
respectively. Monthly parking costs are $35 for one and two bedroom units and $45 for
three bedroom units. Every unit owner must also pay $25 per month for laundry facilities.
The vacancy and credit loss for the building is 5% of all income and the annual operating
expenses amount to 55% of the gross operating income. Based on this information what is
the net operating income of the property? Answer may be round to nearest 100 dollars.
A.
B.
C.
D.
$397,700
$883,800
$458,300
$594,000
45. You have been assigned a job to estimate the value of vacant site using the Cost
Approach. You have found three good recent comparable sales in the neighborhood.
Sale 1: This site is located 2 blocks away from the subject site and was sold three months
ago for $242,600. The site is in a high demand area, which adds $9,500 to its value.
Sale 2: This site is located one block away from subject site and was sold two months ago
for $248,500. This site is in a deteriorating neighborhood reducing its value by $4,500.
Sale 3: This site is located 3 blocks away from the subject. It was sold five months ago for
$238,600. The site is similar to the subject, except that it is much deeper and irregular
shaped, which adds $3,600 to its value.
Site values in this neighborhood have increased steadily and evenly by 8% in 10 months
during the past year. What are the adjusted sale prices of the three comparable sales and
your estimate of value for the subject site?
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MiniCram Real Estate Exam Course 2
A. The fully adjusted prices for Sale 1, Sale 2 and Sale 3 are $228,450; $256,976 and
$244,000 respectively. The estimated value of subject Site is $256,976; based on
Sale 2 which is the most recent sale.
B. The fully adjusted prices for Sale 1, Sale 2 and Sale 3 are $238,922; $250,600 and
$244,000 respectively. The estimated value of subject Site is $238,922; based on
Sale 1 which is the most recent sale.
C. The fully adjusted prices for Sale 1, Sale 2 and Sale 3 are $238,922; $256,976 and
$244,544 respectively. The estimated value of subject Site is $256,976; based on
Sale 2 which is the most recent sale.
D. The fully adjusted prices for Sale 1, Sale 2 and Sale 3 are $238,922; $250,600 and
$244,544 respectively. The estimated value of subject Site is $244,544; based on
Sale 3 which has least amount of feature adjustment.
46. You have been asked to estimate the Replacement Cost New (RCN) and Depreciation
of the property located at 43 Newton Crescent in Cram City. This two storey house has
dimensions of 8.95 metres by 13.10 metres on each of the two floors. There is a single
storey additional structure with dimensions of 6.15 metres by 8.40 metres. The double
garage measures 20 feet by 24 feet 6 inches. The cost of construction for the house is
$107.50 per square feet, $95.45 per square foot for the additional structure and $55.40 per
square foot for the garage.
The house was built 25 years ago and effectively appears to be 20 years old with remaining
economic life of 35 years. The additional structure was built 20 years ago; its effective age
is 17 years and has life expectancy of 50 years. The garage was added to the property 20
years ago but, due its rough usage, its effective age appears to be 15 years. The remaining
economic life of the garage is 30 years.
Calculate the Replacement Cost New (RCN) and Depreciation of the house, the addition
and the garage. Answers may be rounded to nearest dollar.
(1 square metre = 10.76 square feet)
A. The RCN of the House: $261,560, Addition: $153,263 and the Garage: $6,300. The
depreciation of the house: $98,200; the Addition: $51,000 and the Garage: $1,721
B. The RCN of the House: $271,235, Addition: $53,057 and the Garage: $27,146. The
depreciation of the house: $98,631; the Addition: $18,039 and the Garage: $9,049
C. The RCN of the House: $261,560, Addition: $153,263 and the Garage: $6,300. The
depreciation of the house: $98,631; the Addition: $31,750 and the Garage: $1,721
D. The RCN of the House: $271,235, Addition: $53,057 and the Garage: $27,146. The
depreciation of the house: $98,200; the Addition: $31,750 and the Garage: $9,049
Case Study – 4 Parts
Direct Comparison – Sales Analysis
Salesperson Mini of Cram Real Inc. is trying to estimate a reasonable listing price for the
property located at 310 Queen Street in Cram City using the Direct Comparison Approach.
She has compiled the following information:
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MiniCram Real Estate Exam Course 2
Subject Property: This three-bedroom bungalow is situated on a 55 X 110 feet lot. The total
living area of this bungalow is 1,105 square feet; it has one 4-piece and one 2-piece
washroom. There is a double car garage and a finished recreational room. There is a
fireplace worth $2,800 in the recreational room. The bungalow does not have a family room.
The overall condition of the home is excellent.
Market Facts: Property prices in the neighbourhood have declined steadily by 4% over the
past six months. Lots in the area sell for $1,850 per front foot. Construction costs are $185
per square foot. A 4-piece washroom is worth $3,500 and a 2-piece washroom adds $2,500
to the value. Double car garage is worth $2,500 more than a single car garage. An extra
bedroom has a market value of $5,200. Family Room adds $9,500 to value.
The following data is available on comparable sales:
Sale #1: This property at 170 Kennedy Road was sold for $330,000 three months ago. It is
a 3-bedroom bungalow built on a 50 X 110 feet lot with total living area of 1,190 square
feet. There are two washrooms – one 4-piece and one 2-piece; a family room but no
fireplace. There is a recreational room worth $6,000. This home has a single car garage
and its overall condition is good. This bungalow is similar to the subject in all other respects.
Sale #2: This property located on 140 South Park Blvd was sold last week for $318,500.
This 4-bedroom bungalow is built on a 58 X 100 feet lot with a total living area of 1,065
square feet. The neighbourhood where this property is located is considered superior to the
subject and requires an adjustment of $9,555. This property has two 4-piece washrooms, a
double garage but there is no recreation room. The overall condition is good which is
considered $4,500 less than a property in excellent condition. This bungalow is similar to
the subject in all other respects.
Sale #3: This property located on 255 Kirkland Street was sold two months ago for
$323,800. It is a 3-bedroom bungalow with average overall condition which is considered
$8,500 less than a property in excellent condition. The lot size is 60 X 100 feet, total living
area is 1,160 square feet and there is a single car garage. There is no fireplace in the
property. This bungalow is similar to the subject in all other respects.
Based on the information provided, complete the Direct Comparison Approach calculations
and answer the following 4 questions.
47. What is the time adjusted sale price of comparable sale #1?
A. $318,500
B. $319,800
C. $323,400
D. $326,100
48. What is the amount of total adjustments for comparable sale #2?
A. $3,045
B. ― $3,405
C. $1,054
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MiniCram Real Estate Exam Course 2
D. ― $7,400
49. What is the amount of totally adjusted sale price for comparable sale #3?
A. $313,858
B. $319,483
C. $320,459
D. $318,045
50. What is your estimate of value for the subject property and why?
A. $313,858 based on comparable sale #3 because this sale is most similar to the
subject and has least amount of adjustments.
B. $315,395 based on average of totally adjusted sale price of three comparable
sales.
C. $317,225 based on comparable sale #1 because this sale is most reliable.
D. $315,095 based on comparable sale #2 because this sale is the most recent
sale.
-----------------Back to Sample Exam 1
Detailed Answers
Back to Table of Contents
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QUICK ANSWER KEY
SAMPLE EXAM 1
1. D
2. C
3. B
4. A
5. C
6. B
7. A
8. C
9. B
10. D
11. B
12. D
13. C
14. A
15. C
16. D
17. B
18. A
19. D
20. A
21. C
22. B
23. C
24. A
25. B
26. C
27. B
28. D
29. B
30. A
31. B
32. B
33. C
34. D
35. B
36. D
37. B
38. A
39. D
40. C
41. A
42. B
43. D
44. A
45. C
46. B
47. C
48. B
49. A
50. D
-----------------Back to Sample Exam 1
Detailed Answers
Back to Table of Contents
MiniCram Notes
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MiniCram Real Estate Exam Course 2
SAMPLE EXAM 2
Take a blank sheet of paper to write your answers. The Quick Answer Key is located after the
last question followed by Detailed Answers.
1. Which of the following is correct about joint tenancy?
A.
B.
C.
D.
Joint tenancy can be created when the tenants have different interests.
Joint tenancy must be created specifically at the time of registration.
Joint tenants must get possession according to their proportionate share.
Any joint tenant can write a will for his/her interest.
2. In measurement of land using the chains and links system:
A.
B.
C.
D.
There was a road allowance of 1 chain between concessions.
Each concession was 66 chains in width.
One chain had 80 links and was ¼ mile long.
The standard lot was always 20 chains wide.
3. Owner Bright wants to divide his 8-acre land into three parcels. For this:
A.
B.
C.
D.
Bright must approach the Ontario Municipal Board to get approval.
Bright must approach the Conservation Authority to get approval.
Bright must make a severance application to the local Committee of Adjustment.
Bright must apply to Ministry of Municipal Affairs and Housing for approval under
the Planning Act.
4. If a parcel of land is registered under the Land Titles Act:
A. The buyer’s lawyer must perform a title search on at least three previous
ownerships.
B. The parcel register contains all previous interests on land which can be verified.
C. The land registrar does not provide any assurance for accuracy of title
information.
D. The buyer can assume that the title information in the parcel register is reliable.
5. Which of the following statements is correct about different types of fire classifications?
A.
B.
C.
D.
Class A fire can be easily put out using water.
Class B fire burns in electrical equipment, whether or not they are operating.
Class C fire burns in flammable materials such as petroleum products.
Class D fire can only be extinguished by a blanketing effect.
6. Roof pitch in residential structures:
A.
B.
C.
D.
Determines the type of rafters that would be used.
Is referred to as the slope of the roof.
Is ‘six in twelve’ for all types of properties.
Has no effect on the life of the roof.
7. Which of the following statements is NOT a correct statement regarding the electrical
distribution panel in a residential or a commercial building?
A. It is mainly used for even distribution of power in different parts of the structure.
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B. Distribution panels with circuit breakers are considered better for modern
appliances.
C. The purpose of distribution panel is to boost the power levels when a large
number of appliances are switched on.
D. The auxiliary panel does not bring more power to the building but is used to
create branch circuits.
8. For the purpose of appraisals, the effective age of a building structure is:
A.
B.
C.
D.
The age as of the date of appraisal based on its care and maintenance.
Always the chronological age if the building is less than five years old.
The number of years remaining in the economic life of the building.
Determined based on the type of appraisal being performed.
9. Which of the following is a correct statement about a Power of Sale action?
A. Power of sale action is taken by the lender through a court order.
B. A Notice of Default and Intention to Sell is issued 15 days after the payment was
due.
C. The mortgagor is provided with 15 days’ time to pay all the monies due.
D. Any surplus monies after the sale are usually forfeited by the lender.
10. Which of the following is a correct statement regarding duties of a client under the
Agency Law?
A. The client must compensate the brokerage for all expenses incurred when
performing its duties.
B. The duty of remuneration refers to the duty of the client to pay commission for
completing the transaction.
C. The duty of indemnification applies only to the brokerage and not to the client.
D. The duty of disclosing facts about the transaction is for the agent and not for the
client.
11. When a brokerage is in multiple representation situation:
A. The first party to become client of the brokerage has definite advantage over the
other client.
B. The second client must give written consent because this client created the
situation for the brokerage.
C. The brokerage must make a written disclosure and get consent of both parties in
order to proceed with the transaction.
D. The first client must give written consent because this party first became a client
of the brokerage.
12. Which of the following statements best describes the historic Feudal System of Tenure?
A. This system was based on ownership given to selected people known as Lords
of Land, who owned the land given to them.
B. The Lords of Land used to hold land for the King but without any ownership.
C. This system gave much more rights to Lords of Land that exist in a fee simple
estate today.
D. Since the Lords of Land were not owners of land, they could not sublet the land
to anyone.
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13. One of the two types of concurrent ownership is Tenancy-in-Common. Which of the
following statements is correct in this regard?
A. Tenancy-in-common must have the unity of interest, wherein all tenants have
equal interest in the property.
B. Tenancy-in-common could only be terminated with mutual consent of all tenants.
C. Any tenant-in-common can deal with his/her interest in any manner he/she
wishes.
D. The possession of the property is based on the proportionate share of investment
made by a tenant.
14. Salesperson Mini of Cram Realty Inc. is showing a rural property to one of her buyer
clients. The owners inform the salesperson that they have a registered easement on the
property with their neighbour. Curious buyer asks the salesperson to explain the basics of
an easement. The salesperson gives the following statements:
1. An easement is a right of one land owner over the land of another owner.
2. There must be separate ownership of land in order to create an easement.
3. When you buy the property, the easement would come to an end because it is
registered in seller’s name.
4. Since easement is always granted by express consent of owners, you can terminate
it anytime.
5. If you buy your neighbour’s property in future, the easement will cease to exist.
The statements given by Mini are not entirely correct. Identify the statements that are
correct?
A.
B.
C.
D.
Only statements 1 and 3 are correct.
Only statements 2, 3 and 4 are correct.
Only statements 2, 4 and 5 are correct.
Only statements 1, 2 and 5 are correct.
15. Which of the following is a correct statement regarding equity co-operative housing?
A. The buyer of a unit gets an ownership interest in the unit.
B. The buyer is not required to pay Land Transfer Tax upon acquiring interest in a
unit.
C. The corporation keeps ownership of the entire complex and the buyer only gets a
lease for the unit.
D. Since the title of the unit is not transferred to the buyer, he is not liable for any
payment except the lease amount.
16. Various types of surveys are used to describe property boundaries. Which of the
following statements is incorrect in this regard?
A. A Plan of Subdivision is required to divide a parcel of land into many parcels and
it creates a new geographic identity for each lot.
B. A compiled plan is acceptable as a survey plan, provided it is prepared by an
Ontario Land Surveyor and shows all property boundaries.
C. A Plan of Survey typically shows only one parcel of land and may not be certified
by the surveyor.
D. A Surveyor’s Real Property Report consists of two parts – the Plan of Survey and
a Written Report.
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17. A surveyor is attempting to determine property boundaries using the metes and bounds
land description method. He has determined that the property is fronting on the northerly
limit of the road allowance, having a bearing of North 58 degrees 20 minutes East. He
selects a point of commencement on the northerly limit of road and takes a measurement
by walking 150 feet. Which of the following is a correct bearing for this first boundary line?
A.
B.
C.
D.
North 58 degrees 20 minutes East 150 feet.
North 31 degrees 40 minutes West 150 feet.
South 31 degrees 40 minutes West 150 feet
South 58 degrees 20 minutes East 150 feet.
18. A condominium is created under the Condominium Act. Which of the following is a
correct statement in this regard?
A. Once the corporation is registered, individual unit buyers assume a proportionate
share of the blanket mortgage.
B. The mortgage on the property is a blanket mortgage and only the corporation is
responsible for it.
C. The entire property is registered in land registry office as opposed to registration
of individual units.
D. Unit owners only own their respective units but do not have any interest in the
common elements.
19. Which of the following statements is correct with respect to registration of an interest in
land in Ontario?
A. Wherever available in a land registry office, a parcel of land must be registered
under both the Registry Act and the Land Titles Act.
B. The Land Registry Act is the older of two registry systems and provides
guarantee of accuracy of title information in Abstract Books.
C. A 40-year search on the history of titles is required if the land is registered under
the Registry Act.
D. The Land Titles Act introduced certain reforms to reduce the number of standard
registration documents.
20. The Land Registry Reform Act has provision for certain implied covenants for
charge/mortgage of land. Which of the following statements is incorrect with regards to the
first implied covenant?
A. The borrower covenants that he will make payments according to the mortgage
document.
B. The borrower will keep the property in good repair and provide insurance on the
building.
C. The mortgagee has the right to take possession and sell the property in case of
default.
D. The borrower assures that the land held in fee simple is owned with good title.
21. Which of the following statements is correct regarding Provincial Interests under the
Planning Act?
A. The Provincial Interests are mainly the responsibility of the Ontario Municipal
Board.
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B. Protection of public health and safety is excluded from the Provincial Interests
because it falls under the jurisdiction of Health Canada.
C. The Ministry of Municipal Affairs and Housing, the Ontario Municipal Board and
the municipalities must be consistent in regards to the Provincial Interests.
D. Reduction of significant cultural, architectural and historical resources is included
in the Provincial Interests.
22. Which of the following statements is correct regarding division of land under the
provisions of the Planning Act?
A. When the local Committee of Adjustment does not have the authority to grant
Consent to Sever land, the owner must submit a draft plan for a subdivision.
B. The authority to divide land into two or three parcels is sometimes granted to the
regional Land Division Committee.
C. The local Committee of Adjustment has the authority to grant Consent to Sever
land even if the severance does not comply with zoning by-laws or the official
plan.
D. If the land falls within a registered plan of subdivision, there is no need for any
approvals for subsequent division of land.
23. Which of the following statements is correct regarding the Ontario Fire Code?
A. Renovation work in older properties and finishing of previously unfinished parts of
a structure do not require any fire inspection or electrical inspection.
B. Smoke detectors and audible alarms are mandatory in all commercial buildings
but not in residential.
C. Recreational properties are exempted from the requirements of the fire code
because retrofit standards are not addressed in the code.
D. The size of a building and its use dictate which section of the fire code is
applicable to that particular building.
24. Owner Bright has just purchased a house. The basement is unfinished and he wants to
convert it into an apartment. He hopes that this will help him in his monthly mortgage
payments. Bright must meet certain requirements under the current provincial and
municipal legislations before he can do so. Which of the following is one of them?
A. He must first apply to the Landlord and Tenant Board to get approval for a rental
apartment.
B. He must meet requirements of the Residential Tenancies Act regarding
establishment of Lawful Rent before starting construction work.
C. The construction work must be in compliance with the retrofit standards given in
the Fire Code.
D. He must hire professional appraisers to establish a fair market value of the
property to set the monthly rent.
25. Which of the following is a correct statement regarding properties located in flood prone
areas?
A. Flood proofing refers to techniques that prevent or reduce the effects of flood,
and the technique used may be wet flood proofing or dry flood proofing.
B. The Ministry of Natural Resources designates areas where the flood controls or
conservation of land may be affected by means of placing or dumping fill.
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C. Passive flood proofing involves an action taken at the time of advance warning of
a flood.
D. Active flood proofing involves construction activity to reduce the effects of flood.
26. Examine the following statements related to framing in residential structures?
1. Wall framing is the rough work of the structure and mainly consists of steel studs on
which wall sheathing is installed.
2. In platform framing, wall studs are built for each floor and this provides extra
strength to the structure.
3. The purpose of lintels is to support the load over windows and doors.
4. Balloon framing is used in modern structures and has proven to provide more
strength to the structure and is cost effective.
5. Roof trusses perform the same function as roof rafters but they are pre-built using
wood.
Which of the above statements is/are correct?
A.
B.
C.
D.
Only statements 2 and 4 are correct.
Only statements 2, 3 and 5 are correct.
Only statements 1, 2 and 5 are correct.
Only statements 1, 4 and 5 are correct.
27. New structures may have volatile organic compounds which cause sick building
syndrome conditions for occupants of the structure. Which of the following is not a correct
statement regarding this?
A. Sick building syndrome conditions may be permanent in a structure due to lack of
proper ventilation.
B. Volatile organic compounds are completely banned in all new structures in the
revised Ontario Building Code.
C. Volatile organic compounds are the only source of sick building syndrome and it
is rarely caused by interior air quality.
D. Installation of air purification equipment completely solves the sick building
syndrome problem in a structure.
28. The statements given below regarding mechanical systems in a structure contains
some blank spaces.
Mechanical systems in residential properties are mainly grouped under electrical,
________, insulation and plumbing. Most new homes have _______ service while _______
service is found in structures dating from 1960’s. Heating systems include, forced air,
________, radiant and electrical baseboard. Heating systems in commercial properties are
known as ________ systems.
Use the terms from the given options that fill up the blank spaces respectively.
A.
B.
C.
D.
HVAC, 100 or 200 amperes; heating; 60 amperes; hot water.
Heating; 100 or 200 amperes; 60 amperes; hot water; HVAC.
100 or 200 ampere; hot water; 60 amperes; HVAC, heating.
Heating, hot water; 60 amperes; 100 or 200 amperes; HVAC
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29. Energy audit in a residential property may reveal several sources of energy loss. This
computer driven analysis examines various components of the structure. Which of the
following is NOT one of them?
A. The electrical distribution panel and even distribution of power inside the
structure.
B. Sources of air leakage from the structure; windows and other openings; and
humidity levels.
C. Effectiveness of insulation and its general condition within walls and ceilings.
D. Furnace and duct distribution system; water heater system; and openings.
30. During evaluation of a residential property, appraisers not only consider the actual age
of a structure but also its effective age and the economic life. Which of the following
statements correctly describes the economic life of a building structure?
A. It is the estimated age in years that the structure would keep adding value to the
property from the effective date of appraisal.
B. It is the actual age in years that have passed from the date of construction until
the effective date of appraisal.
C. It is the estimated age of the structure in years based on amount of care,
maintenance, renovations or upgrading.
D. It is the estimated age of years the structure would be habitable and add value to
the property without any major upgrading, renovations or modernization.
31. In case of mortgage default, the lender typically has the right to sell the property under
Power of Sale in order to recover the monies. Which of the following is a correct statement
in this regard?
A. A Notice of Default and Intention to Sell is sent to the mortgagor immediately
upon default.
B. The mortgagor is typically given 60 days to pay off the loan and redeem the
property free of mortgage debt.
C. Under a Statutory Power of Sale, the mortgagee gives 45 days’ time to the
mortgagor to pay off the debt.
D. The mortgagee must wait at least 15 days after the default and then approach
the court to get an order for possession and sale of property.
32. Which of the following statements is correct regarding high-ratio mortgage loans?
A. A loan to value ratio (LTV) of 80% or more is known as high ratio mortgage and
the mortgagor must get Mortgage Default Insurance.
B. A loan to value ratio of 80% or less is known as high ratio mortgage and the
mortgagee is responsible to insure it against any default.
C. Financial institutions are not permitted under the current legislation to provide
high ratio mortgages unless the mortgagor provides a guarantor or co-signer.
D. The mortgagee may get either mortgage default insurance or creditor life
insurance to qualify for a high ratio mortgage.
33. In recent years, lenders have come up with several different types of products for
residential mortgages. Which of the following is a correct statement in this regard?
A. The blended mortgage is most common and dominates the residential mortgage
market.
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B. According to the Mortgage Brokers Lenders and Administrators Act, every lender
must offer a 15 plus 15 privilege.
C. The interest only mortgage is given only to commercial borrowers when the
lenders feel that their risk is high.
D. Even if the term of the mortgage is fixed a borrower still can repay the loan
before term by paying just a three-month interest as penalty.
34. Commercial lenders use Debt Service Coverage Ratio to assess their risk when
providing loans for proposed commercial projects. This ratio is based on the operating
statement of the borrower, which shows the net operating income after deducting all
expenses. Which of the following statements is correct in this regard?
A. When the ratio moves closer to 1, the risk to the lender is greatly reduced and
the investment becomes safe.
B. Most lenders prefer a lower Debt Service Coverage Ratio to reduce their risk.
C. A ratio of 1.2 means the borrower has to pay one dollar annually to service the
debt and his net annual income is $1.20.
D. Higher the Debt Service Coverage Ratio, higher is the risk for the lender.
35. Salesperson Mini of Cram Realty Inc. has sold a property at 120 High Street, which was
listed by XYZ Real Estate Ltd. She referred her buyer client to Cram City Financials Inc. for
arranging a mortgage loan. Cram City Financials Inc. will be paying a referral fee to Mini’s
real estate brokerage.According to REBBA 2002, what is salesperson Mini’s legal obligation
concerning the referral fee?
A. Written disclosure of the referral fee must be given to both the seller and the
buyer at the earliest practical opportunity.
B. If Mini has given conscientious and competent service to the buyer client, no
disclosure of the referral fee is required.
C. Mini must disclose the referral to the buyer client in writing at the earliest
practicable opportunity.
D. Prior to receiving any referrals, Mini must inform both the listing brokerage and
selling brokerage in writing.
36. Salesperson Mini of Cram Realty Inc. obtained a listing from seller Smart for selling his
property at 62 Cram Crescent. The sellers told Mini that they did not want to hold any open
houses because of some bad experience in the past. Mini explains the benefits of open
houses to sellers but they do not agree. Two weeks after the listing agreement is signed,
sellers leave the town in the weekend for camping. In their absence, salesperson Mini finds
an excellent opportunity and holds an open house on Saturday. Sellers return from camping
Sunday evening and come to know from neighbours about the open house. They are very
upset and make up their mind to take action against the salesperson and the brokerage.
Based on the given scenario, which of the following statements is correct?
A. Mini has a duty of loyalty towards her client and she tried to protect that by
holding the open house.
B. The sellers are not justified in giving instructions to the brokerage or its employee
regarding open house.
C. Salesperson Mini should have taken permission from her broker of record before
holding the open house.
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D. Salesperson Mini has a duty of obedience towards seller clients and should not
have done the open house.
37. Last week, salesperson Kim of Power Realty Inc. listed seller Bright’s bungalow for
sale. This weekend, a buyer called Kim and wanted more information about the property.
After talking for a while on phone, the buyer told Kim that he is interested to inspect the
property. The showing is scheduled later in the evening. The buyer is impressed and wants
to make an offer on the property.
Which of the following, the salesperson must do before she prepares the offer for the buyer
and submits it to her seller client?
A. Kim should explain the benefits of client relationship and ask the buyer to sign a
Buyer Representation Agreement.
B. Kim should explain the agency relationships to the buyer and ask him whether he
would like to be a client or a customer of the brokerage.
C. Kim must avoid multiple representation by requiring the buyer to sign a Buyer
Customer Service Agreement.
D. Kim must not sign any agreement with the buyer except the Agreement of
Purchase and Sale.
38. According to the Agency Law, the agent owes its clients certain fiduciary obligations,
including the obligation of accounting. Which of the following statements best describes this
obligation?
A. The agent must keep complete records of all monies that will be claimed as an
income or expense.
B. The agent must safeguard and be accountable for all monies, documents and
properties being held or managed on behalf of the principal.
C. The agent must account for all the time spent in promoting the client best
interest.
D. The agent must be qualified in accounting and financial matters to provide advice
to the principal.
39. Salesperson Mini is the listing salesperson for the property at 123 Power Street. The
sellers are desperate to sell because of their financial problems. The property is listed for
$379,000, but the seller is willing to take anything above $340,000. Salesperson Mini holds
an open house during the weekend and a buyer named Bright comes to see the property.
Bright tells Mini that he is ready to put an offer through her but he has already signed a
Buyer Customer Service Agreement with another brokerage. Mini explains agency
relationships, gets an acknowledgement and signs a second Buyer Customer Service
Agreement with buyer Bright. At that point, Mini informs buyer Bright that the sellers would
be willing to take an offer for even $340,000 as they are anxious to sell.
What violation of the REBBA 2002 Code of Ethics has just occurred?
A. Mini has interfered with the customer of another brokerage.
B. Mini has created a multiple representation situation by signing a Customer
Service Agreement with Bright.
C. Mini has failed to protect the best interests of her seller clients by disclosing their
personal information.
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D. Buyer Bright has been encouraged to breach the representation agreement with
his brokerage.
40. As per regulations of the Real Estate and Business Brokers Act 2002, when a registrant
has an existing or contemplated interest in a property, it must be disclosed to the other
party involved in the transaction. Which of the following is NOT a part of this disclosure?
A.
B.
C.
D.
The number of years the registrant has been registered.
The registration status of the registrant.
The nature of interest held in the property.
The facts about the property known to the registrant.
41. An appraiser needs to estimate the price trend in a neighbourhood. He has found a
residential property which was sold and resold recently. This property was sold seven
months ago for $424,500 and resold one week ago for $398,000. What monthly percentage
change in prices is indicated by these sales?
A.
B.
C.
D.
+ 9.50%
― 0.89%
+ 8.25%
― 0.75%
42. The subject site is backing on to a busy highway, which reduces its value by $11,000. A
comparable site is backing on to ravine, which adds $7,500 to its value. What would be the
amount of location adjustment for the comparable site?
A.
B.
C.
D.
+ $3,500
― $5,300
+ $7,500
― $18,500
43. Buyer Bright is purchasing a 9,500 square feet commercial building. The owner's
operating statement shows an annual effective gross income of $364,500 with annual
operating expenses amounting to $276,200. If a cap rate of 13.25% is used, what is the
estimated value per square foot?
A.
B.
C.
D.
$27.62
$70.15
$76.58
$83.36
44. An apartment building located at 24 Hawkins Avenue has 20 studio, 28 one bedroom
and 22 two bedroom apartments. The monthly rent is $760 for studio, $875 for one
bedroom and $1,050 for the two bedroom apartments respectively. The studio and one
bedroom unit owners pay an extra $20 per month for parking space and every unit owner
pays $30 per month for laundry. The applicable vacancy and bad debt rate for this type of
building in the market is 4% of all income. If the annual operating expenses are estimated
to be $453,792, what would be the annual net operating income of this property?
A.
B.
C.
D.
$297,312
$328,608
$304,915
$439,248
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45. Salesperson Mini is attempting to estimate the value of a site at 125 Bramalea
Road using the Cost Approach. She had found three similar sites in the area that were sold
recently.
Sale 1: 68 Bramalea Road, sold 5 months ago for $282,700. This site has the same size as
the subject but is irregular in shape, which reduces its value by $7,600.
Sale 2: 146 Mayfield Road, sold 3 months ago for $295,000. This site has same dimensions
as the subject but it is next to a big shopping centre, which positively affects its value by
$12,000.
Sale 3: 170 Dixie Road, sold 30 days ago for $302,500. This site is next to heavy industrial
area, which negatively affects its value by 2%.
Site values in this area have risen by 6% over 8 months during the past year. What is the
fully adjusted sale price of each site and what is your estimate of value for the subject site
at 125 Bramalea Road. Round your answer to nearest dollar.
A. The fully adjusted prices for Sale 1, Sale 2 and Sale 3 are $296,230; $289,638 and
$306,500 respectively. The estimated value of the subject Site is $306,500; based
on Sale 3 which is the most similar to the subject.
B. The fully adjusted prices for Sale 1, Sale 2 and Sale 3 are $296,230; $289,638 and
$306,500 respectively. The estimated value of the subject Site is $289,638; based
on Sale 2 which is the most recent sale.
C. The fully adjusted prices for Sale 1, Sale 2 and Sale 3 are $296,230; $289,638 and
$308,550 respectively. The estimated value of the subject Site is $296,230; based
on Sale 1 which is most similar to the subject.
D. The fully adjusted prices for Sale 1, Sale 2 and Sale 3 are $300,901; $289,638 and
$308,550 respectively. The estimated value of the subject Site is $308,550; based
on Sale 3 which is the most recent sale.
46. A professional appraiser is working on an assignment to evaluate the property located
at 18 Forward Lane in Cram City. This two storey house measures 10.55 metre by 12.60
metre on each of the two floors. The current cost to construct this house is $82.50 per
square foot. There is a single storey addition to the property measuring 7.15 metre by 8.95
metre The cost to construct this addition is $78.85 per square foot. The attached garage
measures 18 feet 3 inches by 13 feet 6 inches. The cost of construction is $35.30 per
square foot.
The house was built 32 years ago and effectively appears to be 25 years old with estimated
remaining economic life of 30 years. The single storey addition is has an actual age of 20
years, effective age of 12 years with estimated economic life of 50 years. The garage was
built 6 years ago and the effective age appears to be the same as its actual age. It has
remaining economic life of 42 years.
Calculate the Replacement Cost New (RCN) and Depreciation of the house, the addition
and the garage. Answers may be rounded to nearest dollar.
(1 square metre = 10.76 square feet)
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A. The RCN of the House: $236,004; The Addition: $48,430 and the Garage: $7,896.
The Depreciation of the House: $105,300; the Addition: $13,030 and the Garage:
$1,247
B. The RCN of the House: $236,004; The Addition: $54,293 and the Garage: $8,697.
The Depreciation of the House: $107,275; the Addition: $13,030 and the Garage:
$1,087
C. The RCN of the House: $242,728; The Addition: $48,430 and the Garage: $8,697.
The Depreciation of the House: $105,300 the Addition: $13,030 and the Garage:
$1,087
D. The RCN of the House: $242,728; The Addition: $54,293 and the Garage: $9,786.
The Depreciation of the House: $107,275; the Addition: $13,030 and the Garage:
$1,247
Case Study – 4 Parts: Direct Comparison – Sales Analysis
Salesperson Mini is attempting to estimate the value for the property located at 18 Forward
Lane in Cram City using the Direct Comparison Approach. She has compiled the following
information:
Subject: This two-storey, 3 bedroom home in excellent condition is situated on a 60 X 100
feet lot and has 1,850 square feet area. It has two 4-piece washrooms and one 2-piece
washroom. There is a recreation room, a family room with a walkout to deck. The main floor
laundry room adds $4,000 to value. The house has a double car garage.
Market Facts: The following information has been collected from the market:
•
•
•
•
•
•
•
Property values in the neighbourhood have risen steady and evenly by 3% over
the past five months.
Lots in the area sell for $2,000 per front foot.
Construction costs are $235 per square foot.
Recreation room adds $11,000 to value.
A 2-piece washroom adds $3,500 to value.
Double garage is worth $11,000 and single garage adds $8,200 to vale.
A home in good condition is worth $5,000 less than a home in excellent condition.
The following data has been compiled for the comparable sales:
Sale #1: This 3 bedroom, two-storey house located at 10 Straight Lane was sold one week
ago for $402,000. It has one 4-piece washroom and one 2-piece washroom and is 1,910
square feet in area. The lot size is 58 X 100 feet and there is a single car garage. The
property is in good condition. There is no walkout to deck. Everything else in the property is
similar to the subject.
Sale #2: This 3 bedroom, two-storey house located at 37 Curvy Crescent was sold three
weeks ago for $408,200. It has two 4-piece washrooms and one 2-piece washroom but no
main floor laundry room. The lot size is 60 X 120 feet and total living area is 1,875 square
feet. The family room adds $12,000 to the value. The walkout to the deck adds $4,500 to
value. There is a double car garage. Everything else in the property is similar to the subject.
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Sale #3: This 3 bedroom, two-storey house located on 6 Runners Avenue was sold three
months ago for $398,800. The lot size is 62 X 100 feet and total living area is 1,820 square
feet. The property is located on a ravine lot which adds $7,000 to its value. The house has
three 4-piece washrooms each worth $5,500. There is a main floor laundry room but no
recreation room. Everything else in the property is similar to the subject.
Based on the information provided, complete the Direct Comparison Approach calculations
and answer the following questions.
47. What is the time adjusted sale price of comparable sale #3?
A. $405,978
B. $402,000
C. $406,500
D. $399,350
48. What is the amount of total adjustments for sale #2?
A. + $4,530
B. + $1,578
C. ― $1,875
D. ― $5,875
49. What is the totally adjusted sale price for comparable sale #1?
A. $402,700
B. $406,325
C. $410,028
D. $409,700
50. What is your estimate of value for the subject property and why?
A. $409,700 based on comparable sale #1 because this sale is the most recent sale.
B. $406,325 based on comparable sale #2 because this sale is most similar to the
subject among the two recent sales.
C. $411,028 based on comparable sale #3 because this sale is most similar to the
subject and is most reliable.
D. $408,200 based on comparable sale #2 because this sale has least amount of total
adjustments.
-----------------Back to Sample Exam 2
Detailed Answers
Back to Table of Contents
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QUICK ANSWER KEY
SAMPLE EXAM 2
1. B
2. A
3. C
4. D
5. A
6. B
7. C
8. A
9. B
10. B
11. C
12. B
13. C
14. D
15. C
16. B
17. B
18. A
19. C
20. D
21. C
22. B
23. D
24. C
25. A
26. B
27. A
28. B
29. A
30. D
31. C
32. A
33. A
34. C
35. C
36. D
37. B
38. B
39. C
40. A
41. B
42. D
43. B
44. C
45. D
46. B
47. A
48. C
49. D
50. B
-----------------Back to Sample Exam 2
Detailed Answers
Back to Table of Contents
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SAMPLE EXAM 3
Take a blank sheet of paper to write your answers. The Quick Answer Key is located after
the last question followed by Detailed Answers.
1. Which of the following is a correct statement regarding rights in a fee simple ownership?
A. Fee simple ownership is considered absolute ownership without any limitations.
B. Only government limitations affect the bundle of rights in fee simple.
C. Deed restrictions are only found in a condominium Declaration but not in a
property held in fee simple.
D. The bundle of rights in fee simple ownership is subject to certain government and
private limitations.
2. The geographic information system (GIS) does not:
A.
B.
C.
D.
Display data, except in image format.
Provide any administrative advantages in compiling maps and related data.
Only show boundary lines but also bit mapped images.
Help the municipal planners in land development process.
3. Which of the following is a correct statement regarding the Ontario Municipal Board?
A.
B.
C.
D.
It is a judicial tribunal under the Planning Act.
It is appointed by the local municipality.
It has the authority to approve all types of development projects.
It does not hear any appeals related to loss of property.
4. Which of the following statements is correct regarding power of attorney?
A. A simple power of attorney is sufficient to trade in real estate on behalf of the
owner.
B. The Continuing Power of Attorney for Property continues even after the death of
the registered owner.
C. Power of attorney can sign real estate documents on behalf of both spouses.
D. Power of attorney must be registered in land registry office to be effective.
5. Which of the following is NOT a function of the Committee of Adjustment?
A.
B.
C.
D.
To grant minor variances related to zoning by-laws.
To approve a small subdivision of no more than 5 lots.
To approve continuation of non-conforming use.
To approve land severance, conditionally or unconditionally.
6. In a one-zone flood plain:
A.
B.
C.
D.
Private property owners are permitted to undertake any development work.
Agricultural work is never permitted due to risk of soil erosion.
The entire flood plain is considered a floodway.
Owners of existing structures can make any alteration to their properties.
7. Which of the following statements is correct regarding sub-flooring?
A. Subfloors rest directly on sills and support the foundation wall.
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B. Subfloors are not damaged due to water penetration because the floor finish
absorbs all liquids.
C. Uneven surface of the subfloor floor is a concern but not a serious defect of
installation.
D. The main reason for a squeaky floor is that the subfloor is not property fixed to
the joists.
8. The gravity furnaces used for heating in residential buildings:
A. Have the highest capacity and efficiency as compared to other types of heating
systems.
B. Have become obsolete now due to their inefficiency.
C. Use radiation to force hot air into the structure.
D. Use heavy duty fans to force hot air into the structure.
9. Which of the following statements is correct regarding appraisal reports?
A. A form report provides reliable value estimate but most lenders do not accept it.
B. A narrative report does not provide a comprehensive study of all aspects of the
property.
C. Both the form report and the narrative report are based on comparison of sale of
similar properties.
D. The narrative report is lengthy and is not accepted by courts because it is time
consuming.
10. Which of the following statements is correct about mortgage priority?
A. A mortgage that is registered first on title always has priority without exceptions.
B. The mortgagee at first priority does not have to inform other subsequent
mortgagees when it takes an action upon default.
C. The current mortgage legislation does not permit mortgagees to have any
priority.
D. The mortgage priority is subject to certain exceptions such as Crown claims and
property taxes.
11. A development loan advanced by a lender is:
A.
B.
C.
D.
An interim loan between sequential advances by a permanent lender.
Typically for the purpose of servicing land up to the point of construction.
Provided to developers for municipal projects only.
Provided as a gap loan to residential buyers who are waiting for closing of their
current home.
12. Which of the following situations best describes a sub-agency?
A. When one brokerage is working with another brokerage to help the client and
owes same duties to the client as the primary brokerage.
B. When a brokerage is co-operating with another brokerage and protecting the
interests of its own client.
C. When a primary brokerage works with another brokerage to help the client
without the knowledge or consent of the client.
D. When a brokerage provides referrals to another brokerage to help a client locate
a suitable property.
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13. Which of the following is a REBBA 2002 requirement before a brokerage enters into a
representation agreement or a customer service agreement with a party?
A. The brokerage must ask the party to become a client of the brokerage for
providing better services.
B. The brokerage must provide information about agency relationships and service
alternatives, and get a signed acknowledgement.
C. The brokerage must ask a party to become a customer when the other party is
already a client.
D. The brokerage must explain the contents of a representation agreement before
asking the party to sign.
14. Several different types of estates have evolved over the past hundreds of years. Which
of the following is a correct statement in this regard?
A. A ‘fee simple estate with conditions’ is rarely found these days because the
conditions may be contrary to existing laws or public interest.
B. A ‘leasehold estate’ is an interest in land which is greater than the estate from
which it flows.
C. The ‘life estate’ interest for a surviving spouse automatically starts when a
spouse dies without writing a will.
D. The highest form of ownership is the ‘fee simple estate’, which provides the
bundle of rights but is entirely different from freehold ownership.
15. Which of the following statements are correct regarding joint-tenancy and tenancy-incommon?
A. Joint-tenancy provides equal interest and undivided possession to all tenants but
tenancy-in-common provides only equal interest.
B. The only common element in joint-tenancy and tenancy-in-common is the right of
survivorship.
C. Both joint-tenancy and tenancy-in-common provide equal right of possession to
every tenant.
D. Tenancy-in-common must be created specifically with consent of all tenants
while joint tenancy is automatically created when two spouses are registered on
title.
16. Salesperson Mini of Cram Realty Inc. listed seller Smart’s property. After a number of
showings, it was sold to buyer Bright by salesperson Skinny of Power Realty Inc. After the
closing, the buyers discovered that the stainless-steel dishwasher had been removed by
sellers. Bright immediately calls the brokerage and demands that he needs the dishwasher.
He threatens action because this was one of the attractions when he inspected the
property. Which of the following statements is correct in this regard?
A. The buyer can sue both the listing brokerage and his own brokerage and
demand compensation.
B. The seller always has the right to take the dish washer as it is a chattel and is
considered personal property.
C. Only the listing brokerage is responsible for this act and the buyer can pursue
action against Cram Realty Inc.
D. It is the negligence of salesperson Skinny who failed to include dish washer in
the Agreement of Purchase and Sale.
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17. A business may be owned by a partnership; which provides certain benefits as well as
has limitations for the partners. Which of the following statements is correct regarding
ownership in partnership?
A. A Limited Partnership has definite benefits to the limited partner who is not
responsible for any liability of the business.
B. Partners are jointly and severally liable for obligations of the business regardless
of the type of partnership.
C. Partnership has a disadvantage that all partners may be personally liable for the
debts of the business.
D. Partnership business is easy to start as the business can be started immediately
after the partners sign the agreement.
18. A plan of subdivision registration is required for dividing one parcel of land into several
parts. Which if the following are correct statements in this regard?
1.
A plan of subdivision legally divides the parcel of land once the survey is
prepared by an Ontario Land Surveyor.
The plan of subdivision legally divides land into individual parcels after the draft
plan and the final plan are approved.
The approval of draft plan permits the developer to start the process of dividing
land and construction of roads.
The approval of the final plan requires that any conditions imposed in the draft
plan have been fulfilled.
The final plan of subdivision must be approved by the Ministry of Municipal
Affairs and Housing for approval.
2.
3.
4.
5.
A.
B.
C.
D.
Only statements 1 and 4 are correct.
Only statements 2, 3 and 4 are correct.
Only statements 1, 2 and 5 are correct.
Only statements 1, 3 and 5 are correct.
19. A Reference Plan (R-Plan) provides a visual description of a parcel of land. Which of
the following is a correct statement in this regard?
A. Reference plan is only deposited in land registry office as a support document
and is assigned a plan number.
B. Once the reference plan is approved, it is assigned a registration number such as
99R-580 by the land registrar.
C. The letter ‘R’ in plan number 99R-580 indicates that it is a registration number.
D. Reference plans are rarely prepared these days because the Planning Act
requires that land must be divided after approval of a plan of subdivision.
20. Which of the following statements is incorrect about the Geographic Information System
(GIS)?
A. GIS lowers administrative costs and helps in better management of maps and
related data.
B. GIS interactively uses aerial photographs, satellite images and computer
systems.
C. GIS displays maps using raster method only because bit-mapped images stored
as in the system.
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D. GIS helps overcome the problem of redundant data.
21. Which of the following statements is correct regarding standard registration forms
under the Land Registration Reform Act?
A. The form Discharge of Charge/Mortgage is typically used by a lender for
registration of a mortgage lien.
B. The Document General form has a provision for the buyer to declare the value of
consideration in order to pay the Land Transfer Tax.
C. Every lender must register a Standard Charge Terms form when a mortgage lien
is registered.
D. Just paying off the mortgage loan is not sufficient; the mortgagor must also
register a Discharge of Charge/Mortgage to remove the lien.
22. Which of the following statements is correct regarding registration of an interest in land?
A. All leasehold interests must be registered in land registry office.
B. Native lands are reserved and owned by native people under The Aboriginal
Peoples Act.
C. A power of attorney is of three types, but for trading in real estate only the
Continuing Power of Attorney for Property is used.
D. The estate of a deceased is always administered by an estate trustee who must
be appointed by a court.
23. The Planning Act is for orderly division, development and use of land in the province of
Ontario. This Act:
A. Provides more powers to the province and restricts the role of municipalities in
the planning process.
B. Has provisions that ensure that the provincial government and regional
municipalities keep control of the entire land development process.
C. Ensures that the federal government has no role in any provincial land
development matter.
D. Provides that the activities of Ministry of Municipal Affairs and Housing, the
Ontario Municipal Board and the municipalities are consistent when
implementing the Act.
24. As per Section 50 of the Planning Act, no one is permitted to convey land or lease it for
a period of more than 21 years. There are certain exceptions to this when such conveyance
is permitted. Which of the following would be one of these exceptions?
A. When the person granting the conveyance is related to the person acquiring the
land.
B. When the person granting the conveyance is severing a parcel of land that falls
within a registered plan of subdivision.
C. When the property is one of the two semi-detached homes within a registered
plan of subdivision and the person granting wants to keep one of them.
D. When the person granting a parcel of land holds fee simple interest.
25. Owner Smart has a freehold bungalow in the downtown area. The lot size is quite big
where he has been running his home-based lawn furniture business for the past several
years. Recently, the local municipality passed a new zoning by-law that prohibits any type
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of business from residential properties. How does this by-law affect Smart’s lawn furniture
business?
A. Smart must stop his business because it became illegal when the new zoning bylaw was passed.
B. Smart can appeal against the new by-law to the Ontario Municipal Board.
C. Smart can apply to the local Committee of Adjustment for continuation of nonconforming use because he was running his business before passage of the bylaw.
D. The new zoning by-law will not affect Smart in anyway because he has freehold
ownership of land, which does not restrict any business activity.
26. Buyer Bright has recently acquired a large bungalow in Cram City. The house is built on
a lot with 58.5 feet frontage. He would like to add a carport for parking his boat and trailer.
He checks with municipal zoning by-laws and finds out that the minimum setback
requirement for side yard is 5 feet after making the carport. The side yard is 14 feet wide
and the carport he has planned is 10 feet wide. What does Bright need to do to go ahead
with this construction?
A. Bright can approach the local Committee of Adjustment for approval of minor
variance.
B. Bright will have to reduce the size of the carport to comply with the setback
requirements.
C. Bright can dispute the setback requirement by making an appeal to the Ontario
Municipal Board.
D. Bright must apply for zoning by-law amendment so that his plan is approved.
27. Owner Smart runs a small repair business in his rural home, which is in a flood prone
area. The house also has a small basement, which he wants to use for additional storage.
The basement needs some renovation work before it can be used. He needs a mortgage
loan for this work but the lender has many concerns. Which of the following would NOT be
one of them?
A. That the basement will be used for repair work or habitation instead of being
used only as a storage facility.
B. That the main level meets all regulatory requirements set out by the municipality
for properties that fall in flood prone zones.
C. That the electrical, mechanical or heating systems will be located in the
basement area.
D. That the owner must apply for a building permit under the Ontario Building Code.
28. Which of the following statements is correct regarding the Environmental Protection
Act?
A. The purpose of the Act is to prevent air pollution and soil contamination but it
does not address hazardous waste.
B. A party involved in spill of chemicals or other hazardous substances is held liable
only if fault or negligence of that party is proved.
C. The Act empowers local municipalities to issue various industrial or commercial
licenses, permits and certificates of approval for activities that impact the
environment.
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D. The Ministry of Environment may issue orders to property owners to prevent,
control or stop a discharge of pollutant that is an immediate threat to human
health and life.
29. The Bright family is concerned that their heating bills are increasing every month. When
they check with their neighbor, they are surprised to know that their bills are nearly 50%
more than their neighbour. The Bright family decides to get an energy audit done. The audit
reveals that heat is mainly lost from the house due to convection. Which of the following
parts of a structure cause heat loss due to convection?
A.
B.
C.
D.
Roof and attic areas.
Windows and doors.
Basement floor and foundation walls.
Absence of flashings in the roof.
30. In most modern building structures, the ground fault circuit interrupter is used:
A. In basement areas only for protection against leakage of current due to moisture.
B. Where electrical equipment draws more than 1 ampere of current.
C. In areas near water, where there are chances of even a small amount of current
leakage.
D. In basements of those structures, which usually remain dry and where
humidifiers are installed.
31. Which of the following statements is correct about standard practices for appraisal
procedures and reporting?
A. Form reports are short, have mainly pre-printed information but still provide a
systematic analysis of the subject and the comparable properties.
B. The first step for conducting an appraisal is to collect information on comparable
properties.
C. Narrative reports are typically lengthy and are rarely used for legal proceedings.
D. The property inspection date must be the same as the effective date of appraisal.
32. Which of the following is a correct statement regarding rights and obligations of the
mortgagees and mortgagors under the provincial legislation?
1. The mortgagor has the right to transfer the mortgagor without the consent of the
mortgagee, provided a notice is given to the mortgagor.
2. In case of default, the mortgagee always has the right to immediately take
possession of property and sell it to recover monies.
3. The mortgagee has the right to assign the mortgage to another mortgagee without
the consent of the mortgagor but the mortgagor must be notified.
4. The mortgagee has the right to defer regular payments and delay the redemption of
property free of debt if so provided in the mortgage document.
5. The mortgagee must provide a copy of the mortgage document to the mortgagor
within 30 days of signing.
A.
B.
C.
D.
Only statements 1, 4 and 5 are correct.
Only statements 2, 3 and 4 are correct.
Only statements 1, 2 and 5 are correct.
Only statements 3 and 5 are correct.
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33. Owner Bright is facing significant financial problems this year. There seems to be no
way he can continue to make regular mortgage payments to keep the property. He and his
wife decide to let the lender take over the property and recover their loan. They are also
ready to lose their equity in the property and release all their rights to the lender. This
includes releasing even the right to redeem the property. But they need an assurance that
the lender will not take any legal action against them after they are released. Which of the
following best describes this type of action?
A.
B.
C.
D.
Power of Sale
Quit Claim Deed
Notice of Equity Release
Judicial Sale.
34. Consumer reporting agencies (credit unions) collect and provide information to
businesses with respect to credit rating of specific consumers. This includes a credit score,
which is a primary indication of credit standing of a consumer. Which of the following
statements is correct in this regard?
A. A high credit rating is a guarantee to the lender that the borrower will never
default on mortgage payments.
B. A high credit score is a guarantee to the borrower that his loan application will be
approved.
C. A high credit score is only one of the many items the lenders will consider when
assessing the credit worthiness of the borrower.
D. When the borrower’s equity in the property falls within the limits of conventional
mortgage, the credit score goes up.
35. Which of the following is a correct statement regarding standard lending practices
followed by most financial institutions?
A. Verification of employment and income is rarely required when the appraisal
report verifies the market value of the property being financed.
B. A pre-approved buyer is also called a cash buyer, who has a guarantee from the
lender that the loan would be approved.
C. When the accuracy of income and employment information is verified, the
lenders do not require the borrower to provide evidence of down payment or its
source.
D. Mortgage commitment by a lender may be subject to evidence of fire insurance
and assurance that the borrower will not default on tax payments.
36. REBBA 2002 Code of Ethics requires that a registrant must provide a buyer with certain
information before the buyer signs a representation agreement or a service agreement with
the brokerage. Which of the following statements correctly describe this requirement?
1. The type of service alternatives available with the brokerage, i.e. client or customer.
2. The nature of services that the brokerage would provide to a client or to a customer.
3. If the brokerage were to represent two clients in the same trade, the nature of
restricted services it would provide to each client.
4. The number of years the brokerage has been registered and in service.
5. The brokerage is required to get acknowledgement of information provided to the
buyer.
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A.
B.
C.
D.
Statements 1, 2, 3 and 5 are correct.
Only statements 1 and 4 are correct.
Statements 1, 3 and 4 are correct.
Only statements 2 and 3 are correct.
37. Multiple representation occurs when a brokerage represents more than one party in the
same transaction. This fact must be disclosed to all parties and informed written consent
must be obtained at the earliest practical opportunity but before an offer is presented.
Identify which of the following would be considered multiple representation?
1. The uptown office of Cram Park Realty Inc. represents the buyer of the property at
32 Power Street while the downtown office of Cram Square Realty Inc. represents
the seller of the same property.
2. The uptown office of Cram Park Realty Inc. represents both the buyer and seller of
the property at 32 Power Street.
3. The uptown office of Cram Park Realty Inc. represents two buyers making an offer
on a property listed by Cram Square Realty Inc.
4. The uptown office of Cram Park Realty Inc. represents the buyer of the property at
32 Power Street while the downtown office of Cram Park Realty Inc. represents the
seller of the same property.
5. The uptown office of Cram Park Realty Inc. represents the sellers of the property at
32 Power Street while the far end office of Cram Park Realty Inc. is working with a
buyer customer of the same property.
A.
B.
C.
D.
Only the situation given in 1 and 3
Only the situation given in 2 and 4
Only the situation given in 2, 3 and 4
Only the situation given in 2, 4 and 5
38. Under an agency relationship, the client has certain duties towards the agent. Which of
the following is a correct statement regarding the duty of Indemnification?
A. The client must compensate or indemnify the agent under all circumstances.
B. The client must indemnify the agent when the agent is carrying out its duties in a
lawful manner.
C. The client must compensate the agent for all expenses incurred when carrying
out agency duties.
D. The client must compensate the agent when the agent is working in excess of
the authority granted.
39. Investor Ingrid is interested to make an offer on a commercial property, which is listed
by salesperson Mini of Cram Realty Inc. Salesperson Skinny of the same brokerage has
signed a Buyer Customer Service Agreement with Ingrid. When inspecting the property,
salesperson Skinny observes that there are certain electrical deficiencies in the building
and it would be difficult for buyer Ingrid to obtain fire insurance. Skinny does not inform the
buyer as she is keen to close this deal as soon as possible. Buyer Ingrid makes an offer
and it is accepted by the sellers. Which of the following statements is correct with respect to
legal obligations of the salespersons?
A. Salesperson Skinny has fulfilled her duty of confidentiality to the seller client of
her brokerage by not disclosing the facts about the property.
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B. Buyer Ingrid is a customer and none of the salespersons is required to disclose
material facts to her.
C. Only salesperson Mini would be held responsible because it was her duty to
disclose this fact in the listing.
D. The duty to disclose material facts about the property applies to clients as well as
customers and both salespersons may be held liable.
40. Developer Don wants to work with only one brokerage to market homes in new
subdivisions, which are located in several towns. He contacts Cram Realty Inc. for the
purpose due to its good track record of providing best services in recent years. Cram Realty
Inc. does not have branch offices in other towns and developer Don has given his written
consent to Cram Realty Inc. for working with local brokerages. Don has only one concern
that the local brokerages must owe him same fiduciary duties as owed by Cram Realty Inc.
Which of the following is a correct statement for the agency relationships in the given
situation?
A. Cram Realty Inc. is the agent of the developer and local brokerages will be acting
in sub-agency capacity.
B. Cram Realty Inc. is the listing brokerage and the local brokerages will be treated
as co-operating brokerages.
C. The given situation clearly points out that it is a concurrent representation by
local brokerages.
D. Cram Realty Inc. would be treated as principal brokerage while the local
brokerages would be treated as subsidiary brokerages.
41. A vacant parcel of land was sold five months ago for $180,000 and resold last month for
$191,800. What is the percentage change per month in value for this parcel of land?
A.
B.
C.
D.
+ 1.31%
― 1.07%
+ 1.64%
― 1.89%
42. A study of a particular neighbourhood indicates that site values have risen by 8% over
the past six months. A comparable site sold five months ago for $176,400 is located next to
a golf course which adds 3% to its value. What two adjustments would be applied to this
comparable sale and what would be the fully adjusted sale price?
A.
B.
C.
D.
$11,760; ― $5,292; $182,868
$9,347; $5,922; $182,688
$5,682; ― $5,299; $190,108
$11,760; ― 5,922; $190,108
43. Salesperson Mini of Cram Realty has found sale of some comparable commercial
buildings in order to estimate the value of a 27,530 square feet subject building. The
analysis of these properties provides a range of capitalization rates varying from 9.5% to
12.75%. The subject building has annual effective gross income of $525,200 and annual
expenses of $315,700. If salesperson Mini decides to use a range of values, what would be
the lower and higher value per square foot?
A. $47.05; $89.78
B. $52.60; $67.98
C. $62.50; $87.28
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D. $59.69; $80.10
44. A high-rise apartment building at 38 Island Road has 52 one bedroom units, 44 two
bedroom units and 30 three bedroom units. The market rents per month for these units are
$795, $895 and $1,150 respectively. All units pay $35 per month for parking spaces. One
and two bedroom units also pay $20 per month for laundry machines. The vacancy and bad
debt rate applicable to this type of apartment building is 4.5% of all income. The annual
operating expenses shown in the financial statements of the owners are $845,988.
Based on this information what is the estimated annual net operating income derived from
this commercial building?
A.
B.
C.
D.
$457,832
$546,975
$612,612
$675,300
45. Broker of Record Binny has given an appraisal assignment to salesperson Mini to
estimate value of the subject site at 2108 Rutherford Road. Mini has found recent sale of
three similar sites in the neighborhood.
Sale 1: 150 Rutherford Road sold one month ago for $173,500. This site is similar to the
subject site but has inferior soil quality, which reduces its value by 2.5%.
Sale 2: 316 Archdekin Drive sold six months ago for $178,900. This site has the same size
and dimensions as the subject site.
Sale 3: 315 Kennedy Road sold four months ago for $176,000. This site is similar to subject
in area but it is a treed lot, increasing its value by $7,800.
Site values in the neighborhood have declined evenly by 1.25% per month over the last
year. What is the adjusted sale price of three sites and what is your estimate of value for
the subject site at 2108 Rutherford Road?
A. The fully adjusted prices for Sale 1, Sale 2 and Sale 3 are $175,665; $165,482 and
$159,400 respectively. The estimate of value of subject site is $175,700; based on
Sale 1, which is the most recent sale.
B. The fully adjusted prices for Sale 1, Sale 2 and Sale 3 are $175,665; $159,800 and
$153,100 respectively. The estimate of value of subject site is $153,100; based on
Sale 3, which is the most similar to subject.
C. The fully adjusted prices for Sale 1, Sale 2 and Sale 3 are $185,445; $165,482 and
$153,100 respectively. The estimate of value of subject site is $185,445; based on
Sale 1, which is the most recent sale.
D. The fully adjusted prices for Sale 1, Sale 2 and Sale 3 are $185,445; $165,000 and
$159,400 respectively. The estimate of value of subject site is $165,000; based on
Sale 2, which is the most similar to the subject.
46. Appraiser Adam is working on an assignment to evaluate the property located at 24
Duncan Street in Cram City. This two storey house measures 8.75 metre by 12.04 metre.
The current cost to construct this house is $78.35 per square foot. There is a single storey
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MiniCram Real Estate Exam Course 2
addition to the property measuring 6.45 metre by 9.85 metre The cost to construct this
addition is $47.80 per square foot. The attached garage measures 22 feet by 12 feet 3
inches. The cost of construction is $33.50 per square foot.
The house was built 22 years ago and effectively looks 15 years old with estimated
remaining economic life of 35 years. The single storey addition is has an actual age of 15
years, effective age of 10 years with estimated economic life of 40 years. The garage was
added to the property 18 years ago and the effective age appears to be 12 years. It has
remaining economic life of 32 years.
Based on this information what would be the total Replacement Cost (RCN) and total
Accrued Depreciation of the house, the addition and the garage? Answers may be rounded
to nearest dollar. (1 square metre = 10.76 square feet)
A. The total RCN of the House, the Addition and the Garage is $229,113 and the total
Accrued Depreciation is $69,230.
B. The total RCN of the House, the Addition and the Garage is $219,335 and the total
Accrued Depreciation is $69,230.
C. The total RCN of the House, the Addition and the Garage is $219,335 and the total
Accrued Depreciation is $63,920.
D. The total RCN of the House, the Addition and the Garage is $229,113 and the total
Accrued Depreciation is $63,920.
Case Study – 4 Parts
Direct Comparison – Sales Analysis
Salesperson Mini is attempting to estimate the value for the property located at 105
Bramalea Road in Cram City using the Direct Comparison Approach. She has compiled the
following information:
Subject: This 3 bedroom, 180 square metre bungalow is located on a 50 X 110 feet lot. It
has a recreation room and a family room with walkout to deck. The cost of deck as of date
of appraisal is $4,000. There are two 4-piece washrooms and a double garage. There is a
swimming pool which decreases the value of the house by $10,000. The overall general
condition of the house is good.
Market Facts: House prices in this neighbourhood have declined at an even rate of 8% over
the past year. Lots in the area sell for $1,975 per front foot and the construction prices are
$925 per square metre. Family rooms add $8,000 to value while a Rec room adds $10,000.
A double car garage has a value of $11,500 and a single car garage costs $6,000. A 4 piece washroom has a value of $5,000 and a 2 -piece washroom has a value of $3,200.
Each extra bedroom adds $6,500 to the value. Homes in excellent condition sell for $8,500
more than homes in good condition.
The following data has been compiled for the comparable sales:
Sale #1: This 3 bedroom bungalow located at 190 Dixie Road was sold four months ago for
$357,800. The lot size is 55 X 100 feet with a total covered area of 175 square metres. The
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house has one 4-piece washroom and two 2-piece washrooms. There is a single car
garage worth $7,500 but no swimming pool and no walkout to deck. Everything else is
similar to the subject property.
Sale #2: This 4 bedroom bungalow located at 370 Mayfield Avenue was sold three months
ago for $354,200. The lot size is 47 X 100 feet with a total living area of 185 square metres.
There is no swimming pool and no walkout to deck. There is a rec room but no family room.
There are two 4-piece washrooms. The overall condition of the house is excellent.
Everything else is similar to the subject property.
Sale #3: This 3 bedroom bungalow located at 288 Fishing Crescent was sold last month for
$348,700. The property is located on an irregular lot which is much deeper than the subject
and this feature adds $6,000 to its value. The total living area is 190 square metres. It has
one 4-piece washroom and one 2-piece washroom. The walkout to deck adds $4,800 to
value. There is no rec room in the house. The overall condition of the house is good.
Everything else is similar to the subject property.
Based on the information provided, complete the Direct Comparison Approach calculations
and answer the following questions.
47. What is the totally adjusted sale price for comparable sale #1?
A. $346,409
B. $350,475
C. $348,059
D. $340,409
48. If sale #1 had sold 30 days ago instead of 4 months ago, what would be its totally
adjusted sale price?
A. $348,259
B. $349,950
C. $352,890
D. $357,800
49. If comparable sale #3 was not an irregular lot but similar to the subject what would have
been the amount of total adjustments?
A. ― $6,000
B. ― $8,550
C. + $2,550
D. + $3,450
50. What is your estimate of value for the subject property and why?
A. $342,925 based on comparable sale #3 which is the most recent sale and is most
reliable.
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B. $340,409 based on comparable sale #1 because this sale is most similar to the
subject property.
C. $347,116 based on the time adjusted sale price of comparable sale #2.
D. $348,700 based on the time adjusted sale price of comparable sale #3 because
this is the most recent sale.
-----------------Back to Sample Exam 3
Detailed Answers
Back to Table of Contents
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QUICK ANSWER KEY
SAMPLE EXAM 3
1. D
2. C
3. A
4. D
5. B
6. C
7. D
8. B
9. C
10. D
11. B
12. A
13. B
14. A
15. C
16. D
17. C
18. B
19. A
20. C
21. D
22. C
23. D
24. C
25. C
26. A
27. B
28. D
29. B
30. C
31. A
32. D
33. B
34. C
35. D
36. A
37. C
38. B
39. D
40. A
41. C
42. A
43. D
44. B
45. A
46. C
47. D
48. B
49. C
50. A
-----------------Back to Sample Exam 3
Detailed Answers
Back to Table of Contents
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SAMPLE EXAM 4
Take a blank sheet of paper to write your answers. The Quick Answer Key is located after
the last question followed by Detailed Answers.
1. Which of the following statements is NOT true with respect to bundle of rights in a fee
simple ownership?
A. The bundle of rights in fee simple ownership provides the most rights as
compared to other estates.
B. The ownership rights in a fee simple estate are without any limitations of use.
C. A fee simple interest may have deed restrictions limiting the use of property.
D. The bundle of rights includes the right to refrain for using rights.
2. The Family Law Act provides that:
A. A family must designate at least one property as a matrimonial home.
B. A family can have only one matrimonial home.
C. Both the owner and the non-owner spouse have equal right of possession of a
matrimonial home.
D. The owner spouse must get spousal consent for selling a home, whether or not it
is a matrimonial home.
3. In order to create an easement, it is not required that:
A.
B.
C.
D.
There must be separate ownership of land.
It must be created by Express Grant only.
There must be a dominant tenement and a servient tenement.
The land that enjoys the benefit of easement must have a clear purpose.
4. A parcel of land which provides riparian rights to the owner must be located on the
borders of:
A.
B.
C.
D.
Industrial zone
Managed forest
Watercourse
Residential zone
5. Someone takes possession of the land of another person, with his knowledge but without
his consent, and ignores the rights of the actual owner. This type of possession is best
described as:
A.
B.
C.
D.
Adverse Possession
Abandonment
Encroachment
Eviction
6. Restrictions on use of land by government agencies under the Planning Act, the Official
Plan, the zoning by-laws, etc. are examples of:
A.
B.
C.
D.
Power of Escheat
Deed Restriction
Bundle of Rights
Police Power
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7. When a parcel of land is under Expropriation:
A. The land owner can dispute the amount of compensation.
B. Salespersons need not disclose it to potential buyers as it is for public benefit.
C. The municipality becomes owner of land when an expropriation notice is served
to the owner.
D. The amount of compensation is based on market value of the property as of the
date of payment.
8. A Reference Plan prepared by a land owner:
A.
B.
C.
D.
Is sufficient to divide, sell and transfer a parcel of his land.
Is always required when selling a property.
May be required with a Consent to Sever application.
Is the only option for describing rural residential lots.
9. A Certificate of Title is issued for a parcel of land under:
A.
B.
C.
D.
The Land Titles Act
The Land Registry Act
The Land Registration Reform Act
The Indian Act
10. A Consent to Sever is granted by the local Committee of Adjustment only if:
A. The land is to be divided into at least 3 parts.
B. The severance will not have any major impact on orderly development of the
municipality.
C. The municipality does not have authority to approve a Plan of Subdivision.
D. The owner agrees to sell the severed part of land within one year of approval.
11. Under which of the following circumstances, a builder may not be required to have a
Site Plan Control Agreement?
A. When the development project involves a commercial plaza consisting of less
than 20 units.
B. When the development project is for an industrial building, which includes at least
15% office area.
C. When the development project is for detached and semi-detached single family
homes.
D. When the development project is for a 3-storey high office building.
12. Land adjacent to watercourses are subject to certain development and use restrictions.
In a particular flood prone area, a land owner is permitted very limited development work
due to flood hazards. His property is most likely located in a zone known as:
A.
B.
C.
D.
Flood Fringe
Floodway
Seismic Zone
Unregulated Zone
13. Which of the following statements is incorrect about walls and framing in a typical
structure?
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A. In a brick veneer wall, the brick is only exterior finish and does not carry any load
of the floors, beams or the roof.
B. Most modern structures consist of balloon framing because of its proven strength
and reliability.
C. Concrete blocks or built up walls are popular for exterior wall finish in industrial
buildings.
D. Walls may cause serious structural problems if they are not built as per Ontario
Building Code specifications.
14. Which of the following statements correctly describes windows and its components?
A. The term glazing is synonymous with lamination, which is used to increase the
strength of glass.
B. Casement windows can be opened or closed by sliding up or down.
C. Aluminum metal frames are considered more energy efficient than other
materials.
D. Double glazed vinyl windows are a popular choice as replacement windows.
15. Which of following mortgage products permits the borrower to make no payments of the
principle during the term?
A.
B.
C.
D.
Interest Accruing.
Amortized Mortgage.
Interest Only Mortgage.
Interest plus Specified Principle.
16. A buyer who has been pre-approved by a lender:
A.
B.
C.
D.
Has a guarantee that the loan will be provided when he purchases a property.
Is also called a Cash Buyer for purchasing a property.
Sets limits on minimum amount of mortgage loan.
Provides the buyer with up to six months of fixed interest rate.
17. Which of the following statements is incorrect about duties of a brokerage to a
customer?
A.
B.
C.
D.
The brokerage must not provide any inaccurate information to the customer.
The brokerage owes the duty of competence to the customer.
The brokerage must protect the confidential information of the customer.
The brokerage owes fiduciary duties under the Agency Law to the customer.
18. Written disclosure of an interest in a real estate applies in a situation when:
A. A registrant is making an offer to buy a property for his brother.
B. A registrant is an employee of a brokerage where the broker of record is his
close relative.
C. The registrant is trading in real estate for a close family friend.
D. The other party is a client of the other brokerage and not a customer.
19. Which of the following statements is not an example of duty of care?
A. The salesperson advises a buyer client that they should get home inspection
done even though the home they are buying is fairly new.
B. The salesperson asks several questions from a seller about the property.
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C. A salesperson makes further enquiries to verify the information provided by the
seller client.
D. A salesperson provides information to a customer based only on his personal
knowledge.
20. A mortgage lender paid an amount of 1% of purchase price to the buyer's brokerage as
referral. This must be disclosed to:
A.
B.
C.
D.
The seller of the property
The buyer of the property
Both the buyer and the seller
Real Estate Council of Ontario
21. Private limitations on use of property are also known as Restrictive Covenants. Which
of the following statements is incorrect in this regard?
A. Restrictive covenants are commonly found in subdivisions where all owners are
obliged to conform to certain limitations on use of property.
B. These covenants run with land and are transferred to subsequent owners upon
sale of the property.
C. Owners are not permitted to opt out of restrictive covenants at the time of
purchase.
D. Covenants are generally positive in nature because they must not be contrary to
public policy.
22. Mr. and Mrs. Bright own a small home in Cram City. Mr. Bright had purchased this
property four years before his marriage. His is wife had moved into this home after their
marriage. Due to changes in their circumstances, the marriage is now in trouble and they
have filed for divorce. Which of the following statements is correct regarding division of the
net family property?
A. Mrs. Bright will get only half of the net increase in the value of home since their
marriage.
B. Since both spouses have equal interest in a matrimonial home, each will get one
half of the value.
C. Since Mrs. Bright is not on title, she has no right to claim a share of the value of
the home.
D. Since the property was purchased before marriage and was never designated as
a matrimonial home, Mrs. bright has no interest whatsoever in this property.
23. There are tangible and intangible aspects related to a property and these are referred to
as Real Estate or as Real Property. Which of the following statements is correct in this
regard?
A. Real property refers to the intangible aspects of the property and includes
fixtures and chattels installed in the property.
B. Real estate refers to tangible aspects of the property but excludes any chattels or
fixtures installed in the property.
C. Real estate refers to all physical aspects of the property including any chattels
and fixtures installed in the property.
D. Real property includes the physical elements of the property and the rights of
ownership but excludes chattels, which are deemed movable personal property.
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24. A precise legal description of land is required to accurately identify property boundaries.
Which of the following statements is correct in this regard?
A. If a survey is not available, the legal description provided by tax assessment
notice may be treated as reliable document.
B. Surveys are rarely available for rural residential lots because of possible rights of
way on the property.
C. The deed or title of the property is a reliable document that provides accurate
legal description.
D. Any parcel of land can have more than one legal description depending on how
many times it has been divided.
25. Which of the following statements are correct regarding the Land Titles Conversion
Project under the POLARIS system?
A. Properties converted under the POLARIS system are assigned a unique 9-digit
PIN, which consists of a 4-digit block number and a 5-digit property number.
B. The POLARIS system not only converted Land Registry documents to the newer
Land Titles system but also converted documents to electronic format.
C. The Teraview gateway software enables property owners to easily sell properties
and transfer titles to buyers.
D. Indexing of properties converted under the POLARIS systems project is based
solely on the land description.
26. After the introduction of the Land Titles Act, certain measures were taken by the Ontario
government to transfer land registry office records under the Land Titles Conversion
Project. Which of the following statements is/are correct in this regard?
1. The project was introduced to transfer land registry records from the Registry
system to the Land Titles system
2. The traditional First Application Process did not have any provision to conduct title
search before conversion.
3. The First Application Process was quite successful and 80% of land registry offices
in Ontario were converted in a short span of few years.
4. The Large Scale Administrative Conversion replaced the traditional First Application
Process to streamline the conversion process.
5. Titles qualified for conversion are given LTCQ initials and are insured under the
Land Titles Assurance Fund.
A.
B.
C.
D.
Only Statements 1, 4 and 5 are correct.
Only Statements 1, 2 and 3 are correct.
Only Statements 3 and 5 are correct.
Only Statements 2, 3 and 4 are correct.
27. Peter and his girlfriend Lisa decide to buy a home close to their workplace. Peter
contributes $75,000 and Lisa, who has saved more money than Peter, contributes
$150,000 for the purchase. They register the property as joint-tenants. Lisa becomes sick
soon after the purchase. She had to be hospitalized and dies within a year of their
purchase. Based on this information, who will be the owner of the property after Lisa’s
death?
A. Peter will own one-third and Lisa’s estate will own two-thirds.
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B. Peter will become the sole owner of the property.
C. Ownership will depend on the terms included in Lisa’s Will and testament.
D. Peter will own 50% of the property and the remaining 50% will be owned by Lisa’s
estate.
28. Owner Smart has made the last payment to the lender for the full amortization of the
mortgage loan. Which of the following statements correctly describes the status of the
mortgage lien on the title of the property?
A. Since the mortgage loan has been paid off in full, the mortgage lien is now
removed from the title.
B. The lender is now required to register a discharge of the mortgage lien by using
the Document General.
C. The mortgage lien will remain on the title of the property until a Discharge of
Charge/Mortgage is registered on the title.
D. The owner now must discharge the mortgage lien using a Schedule to the
Charge/Mortgage of Land earlier registered on the title.
29. Owner Bright has a home on a 50 feet by 130 feet lot. On one side of the home, the
clearance from the fence is 13 feet where he wants to build an attached garage. He checks
the side yard setback requirements under the zoning by-laws. The by-law requires a
minimum of 4 feet side yard after building the garage but Bright would be left with only 3
feet. Which of the following government agencies would generally be approached to get
approval for this construction work?
A.
B.
C.
D.
Land Division Committee
Ontario Municipal Board
Upper Tier Municipality
Committee of Adjustment
30. Which of the following statements is correct regarding land severance process under
the provisions of the Planning Act?
A. When a parcel of land is to be divided into two or three parts, the owner typically
approaches the local Committee of Adjustment for Consent to Sever.
B. Severance of land is may be approved by the regional Land Division Committee
if the Committee of Adjustment rejects the severance application.
C. All appeals related to land severance are heard by the Ministry of Municipal
Affairs and Housing.
D. Land severance only depends on numbers of severed parcels and approval is
granted if it does not exceed two.
31. Under Section 50 of the Planning Act, any transfer of land must first be approved. In
which of the following circumstances, an approval would not be required?
A. When the owner wants to divide land into two parcels and has received Consent
to Sever for a previous severance four years ago.
B. When the owner of two adjoining semi-detached homes in a registered
subdivision wants to sell one home and keep the other.
C. When the owner of 20 acres of land in a registered subdivision wants to sell one
half of his land.
D. When a developer wants to divide one parcel of land described by a Reference
Plan into 15 small lots.
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32. Which of the following is a correct statement about floors and subfloors in a residential
structure?
A. Joists sit directly on foundation walls and are rarely supported by beams.
B. Both cross bridging and solid blocking must be used to prevent twisting of joists.
C. The squeaking noise in subfloors is caused by improper installation of sills and
beams.
D. Subfloors rest directly on floor joists and support the floor covering.
33. The statements given below are related to plumbing systems in a structure and contain
some blank spaces.
The two aspects of plumbing systems in a residential structure are ________ side and
_______ side. While ________ pipes are used for distribution of water for drinking, washing
and cooking purposes, the water drainage system typically uses ________ pipes. In rural
properties water is supplied from wells and ___________analysis of water is necessary to
ensure that water is not contaminated.
Use the terms from the given options that fill up the blank spaces respectively.
A.
B.
C.
D.
Copper; Bacteriological; Supply; PVC; Waste
PVC; Waste; Copper; Bacteriological; Supply
Supply; Waste; Copper; PVC; Bacteriological
Bacteriological; Supply; PVC; Waste; Supply
34. Which of the following statements is/are correct about wall framing in residential
structures?
1. Wall framing is the rough work of the structure and mostly consists of steel studs on
which wall sheathing is installed.
2. In platform framing, wall studs are built for each floor and this provides extra
strength to the structure.
3. The purpose of lintels is to support the load over windows and doors.
4. Balloon framing is used in modern structures, is cost effective and has proven to
provide more strength to the structure.
5. Roof trusses perform the same function as roof rafters but they are factory-built
engineered systems.
A.
B.
C.
D.
Only statements 2 and 4 are correct.
Only statements 2, 3 and 5 are correct.
Only statements 1, 2 and 5 are correct.
Only statements 1, 4 and 5 are correct.
35. CSA standards for testing efficiency of windows include many factors except:
A.
B.
C.
D.
Water tightness
Air tightness
Wind resistance
Manufacturing cost
36. Appraisers use several methods of reporting to provide an estimate of value to the
client. Which of the following reporting methods is most comprehensive and complete?
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MiniCram Real Estate Exam Course 2
A.
B.
C.
D.
Narrative report
Letter of opinion
Form report
Short form report
37. In Direct Comparison Approach to value, the appraiser would typically use three
comparable sales of similar properties in the neighbourhood. Which of the following would
not be considered a good comparable?
A.
B.
C.
D.
A property sold last week after 25 days on the market.
A property sold within 7 days because the seller was running out of time.
A property sold two months ago and it was very similar to the subject.
A property sold 1 month ago but it was 2 blocks away.
38. Over a period of time, the components in a building structure lose their value due to
aging, wear and tear, usage, general deterioration, etc. This is known as:
A.
B.
C.
D.
Economic Life
Remaining Economic Life
Depreciation
Replacement Cost
39. For approval of a loan and the mortgage underwriting process, lenders require a
number of documents from the borrower. Which of the following is a correct statement in
this regard?
A. When the borrower has provided a copy of the accepted agreement of purchase
and sale and a copy of survey, the appraisal report is not required.
B. In all cases, the borrower must pay the application fee, appraisal fee and the cost
of mortgage default insurance.
C. All conventional mortgages now require a loan to value ratio of 80% or less.
D. Depending on the type of property and risk involved, the lender may set more
restrictive limits on conventional mortgage.
40. A method by which a lender can retain the last portion of the loan amount subject to
fulfilment of certain conditions, is known as:
A.
B.
C.
D.
Sequential advance
Basic holdback
Finishing holdback
Completion holdback
41. Sandy has contacted salesperson Kim to discuss the sale of her large bungalow in
Cram City. The bungalow is located in a high end community and is currently valued at $1.2
million. During negotiations of the commission for the sale, Kim gives many options to the
seller. Which of the following commission arrangements would be prohibited under REBBA
2002?
A.
B.
C.
D.
3% percent of sale price plus an additional $15,000.
4.5% of the sale price; payable upon completion of the transaction.
3% of first $400,000; 4% of next $400,000 and 5% of the balance.
A flat fee of $20,000; payable upon completion of the transaction.
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42. The Real Estate and Business Brokers Act 2002 requires mandatory disclosures by
registrants when acquiring and interest in a real estate. Which of the following statements is
(are) correct regarding the content of the required disclosures?
1. The registration status such as brokerage, broker or salesperson.
2. Full disclosure of all facts, within the registrant’s knowledge, that may affect value.
3. Particulars of any negotiation, offer or agreement for subsequent disposition of the
real estate to any other person.
4. The registrant’s method of financing the purchase of the property.
5. The numbers of years the registrant has been registered under REBBA 2002.
A.
B.
C.
D.
Only statements 1, 2 and 3 are correct.
Only statements 1 and 2 are correct.
Only statements 2 and 4 are correct.
Only statements 3 and 4 are correct.
43. Duty of care is owed to both clients and customers. Select the following statements in
which the salesperson has performed this duty.
1. A salesperson advising the buyer that home inspection of the property is necessary
to make sure the structure has no defects or deficiencies.
2. A salesperson assuring a buyer that title search of the property is not necessary
because the Land Titles Assurance Fund under the Land Titles Act protects buyers
of real property.
3. A salesperson, in an open house, explaining the role of brokerage and agency
relationships to a prospect, who is interested to buy the property.
4. A salesperson working with the buyer client advises that a condition regarding well
water inspection is necessary when buying a rural property.
5. A salesperson verifying the information given by the seller when listing the property.
A.
B.
C.
D.
Only statements 1, 3 and 5 are correct.
Only statements 2, 4 and 5 are correct.
Only statements 1 and 5 are correct.
Only statements 1, 4 and 5 are correct.
44. If a registrant has a direct or indirect interest in a property, this fact must be disclosed to
the other party:
A.
B.
C.
D.
Within 5 business days of acceptance of the offer.
At the earliest practical opportunity but before an offer is presented.
Before the deposit cheque is given or received.
At the earliest practical opportunity but before completion of transaction.
45. A real estate brokerage has 30 salespersons working as independent contractors. They
are currently working with many buyers and sellers who have signed representation
agreements with the brokerage. This type of representation is best known as:
A.
B.
C.
D.
Single representation
Multiple representation
Concurrent representation
Sequential representation
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46. A property was sold 5 months ago for $340,000 after 3 weeks on the market. The same
property was sold last week for $382,500. What monthly percentage change in value is
indicated by these two sales?
A.
B.
C.
D.
+ 3.75%
+ 2.5%
+ 1.45%
+ 0.50%
47. Site values in the neighbourhood have declined by a total of 5% over the last 8 months.
A site was sold four months ago for $160,000. This site backs on a busy highway, which
negatively affects its value by $5,000. What would be the fully adjusted sale price of this
site?
A.
B.
C.
D.
$151,000
$161,000
$165,000
$171,000
48. Appraiser Anna is working on an assignment to evaluate the property located at 33
Cram View Street.
•
•
•
The house was built 22 years ago and effectively looks 15 years old, with estimated
remaining economic life of 35 years. Its replacement cost is $177,630.
The single storey addition to the house has an actual age of 15 years and effective
age of 10 years; with estimated economic life of 40 years. Its replacement cost is
$32,677
The garage was added to the property 18 years ago and its effective age appears to
be 12 years. It has remaining economic life of 32 years. Its replacement cost is
$9,028
Based on this information, what would be the Accrued Depreciation of the house, the
addition and the garage? Answers may be rounded to nearest dollar.
A.
B.
C.
D.
$63,920
$67,380
$30,866
$77,848
49. A residential apartment building was sold two weeks ago for $1,560,000. Its annual
gross potential rental income is estimated to be $620,000; with vacancy and credit loss rate
of 5% of potential income. The net operating income of this property is estimated to be 55%
of the annual gross operating income. Based on above information, what capitalization rate
was agreed between the seller and the buyer.
A.
B.
C.
D.
14%
19%
17%
22%
50. This question is based on Income Approach to value. The subject apartment building is
located at 12 Square Street. This building has 20 studio apartments, 16 one bedroom
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apartments and 10 two bedroom apartments. The potential rental rates in the current year
are as follows:
•
•
•
Studio apartment: $825 per month
One bedroom apartment: $975 per month
Two bedroom apartment: $1,100 per month
All units pay an additional $30 per month for parking and storage spaces. The applicable
vacancy and bad debt is 3.5% of all income. The operating expenses of the property are
56.5% of annual effective income. Estimate the annual net operating income of this
apartment building.
A.
B.
C.
D.
$515,550
$370,804
$156,300
$224,059
-----------------Back to Sample Exam 4
Detailed Answers
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QUICK ANSWER KEY
SAMPLE EXAM 4
1. B
2. C
3. B
4. C
5. A
6. D
7. A
8. C
9. A
10. B
11. C
12. A
13. B
14. D
15. C
16. B
17. C
18. A
19. D
20. B
21. D
22. A
23. D
24. C
25. B
26. A
27. B
28. C
29. D
30. A
31. B
32. D
33. C
34. B
35. D
36. A
37. B
38. C
39. D
40. B
41. C
42. A
43. D
44. B
45. C
46. B
47. B
48. A
49. C
50. D
-----------------Back to Sample Exam 4
Detailed Answers
Back to Table of Contents
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DETAILED ANSWERS
SAMPLE EXAM 1
1. D. A life estate interest is typically granted from fee simple (freehold) interest. The extent
and scope of this estate is smaller than the freehold estate from where it has flown.
Life estate holder cannot write a will for this interest and, hence, cannot decide who will
inherit the estate. Moreover, the tenure of a life estate ends upon death of the life estate
holder.
2. C. A survey prepared by an Ontario Land Surveyor is acceptable as a valid survey
because the surveyor is governed by the Surveys Act as well as the Surveyors Act.
Any visual description of property cannot be treated or accepted as a survey. It is not
necessary that a survey must be certified by the surveyor. Not all surveys are registered in
land registry office. Certain surveys such as a Reference Plan or Plan of Survey are for
reference purposes only.
3. B. Under the Registry Act, the land registrar did not guarantee that the title information
registered in Abstract Books was accurate or verified.
The buyer’s lawyer would perform a title search for at least 40 years’ history of titles. It is
not correct to state that title search was not required under the Registry Act.
4. A. The Land Registration Reform Act included a provision for implied covenants of land
when the lender did not register standard charge terms.
This Act did not standardize the standard agreement of purchase and sale. The form
Document General is used for registration of certain non-ownership interests in land and
can be used for registration of a power of attorney. The purpose of the Act was not to
decontrol registration documents but to standardize them.
5. C. When the edges of roof sheathing panels do not have sufficient support, the panels
may have differential movement due to weather changes. This causes horizontal ridges in
the roof to appear.
The thickness of roof sheathing or span between rafters is not a reason for horizontal ridges
in the roof. More thickness of the sheathing panels actually prevents movement of panels. It
does not matter whether rafters are used or trusses are used. Ridges may appear in both
cases if the sheathing panels do not have adequate edge support.
6. B. Asphalt shingles are a popular choice for roof covering and their classification is
based on weight. For example, a weight of 235 pounds ‘per square’ means that 235 pounds
shingles are required to cover every 100 square feet of roof.
Other options are incorrect. The life expectancy of asphalt shingles is typically between 12
to 15 years. These shingles are not used for large warehouses and office buildings. Asphalt
shingles do need flashings wherever the roof changes direction or there is a joint in
materials.
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7. A. Conduction refers to transfer of energy through some material. The main cause of loss
of heat energy from a building by conduction is through foundation walls and the ceiling
materials.
It is incorrect to say that conduction and convection do not cause heat loss from a building.
Loss of heat is not just caused by unsealed service entrance points as there may be
several other leakage sources. Radiation does not need a medium for transfer of energy
and, hence, loss of heat is not through glass panes of windows and doors.
8. C. The effective date of an appraisal is the date on which the value estimate applies.
Effective date of appraisal is not the date when prices are at their highest; it is not always a
past date and it is not the date when the municipal assessment is done.
9. B. The mortgage lenders cannot stop the mortgagor from making regular payments
based on mortgage document. The mortgagor must not be stopped from making payments
in order to discharge the mortgage.
Other statements are correct. The mortgagee (lender) can transfer the mortgage to another
mortgagee but the mortgagor must be informed. They can take appropriate action to
recover money when mortgagor is in default. Typically, the mortgagee requires the
mortgagor to get insurance cover for the property.
10. D. The term Agent under the common law of agency refers to the real estate brokerage
involved in real estate trading and representing a client.
Other statements are incorrect because the term agent does not refer to salespersons and
brokers employed by a brokerage. The brokerage, as an agent, is involved in
sale/purchase, leasing or any other type of real estate transaction on behalf of its client.
11. B. Multiple representation does not occur only when both the buyer and the seller are
represented by the same brokerage. It may also occur when a brokerage is representing
more than one buyer client, who are making an offer for the same property.
Other statements regarding types of representation are correct.
12. D. When a grantor gives an estate to someone for life (life estate) and, also gives rights
to a third party after the death of the life estate holder, it becomes a future estate for that
third party. The fee simple estate in this case is divided into two parts – life estate and
future estate.
It is incorrect to say the interest of the future estate holder starts after the death of life
estate holder. The interest of both the life estate holder and the future estate holder start at
the same time. The future estate holder gets possession only after the end of the life estate.
The life estate holder cannot sell the estate during the tenure without express consent of
the future estate holder.
13. C. Only statements 1, 4 and 5 are correct. Any two persons can have joint tenancy of a
property. No joint tenant can write a will for his/her interest due to the Right of Survivorship,
which provides that upon death of one joint tenant, the interest passes on to the surviving
joint tenant.
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It is incorrect to state that joint tenancy is only meant for a matrimonial home. Every joint
tenant has equal interest in the property and it is not based on proportionate share of
investment.
14. A. The primary residence of a family is a deemed matrimonial home and does not have
to be designated as such. Additional properties owned by the family may be designated as
matrimonial home.
It is incorrect to say that a family cannot have multiple matrimonial homes because other
properties owned by the family may be designated as matrimonial homes. Even if only one
spouse is on the title of the property, the non-owner spouse has the right of possession of a
matrimonial home. If a property is purchased before marriage, it does not have to be
designated as a matrimonial home in case it becomes the primary residence of the family.
15. C. The expropriations procedures set out in the Expropriations Act permit owners of the
properties under expropriation to request a hearing with an Enquiry Officer.
Owners cannot dispute expropriation of their land because expropriation is done in public
interest. The expropriating authority becomes owner of land on the date of registration of
survey and not upon delivery of notice. The decision of the Board of Negotiations for a
compensation dispute is not final. The owners may go for Arbitration or approach a court.
16. D. In the double front township system, each lot was 30 chains by 66.67 chains, with an
area of 200 acres. These lots were patented into half lots, each having an area of 100
acres.
Townships were not within concessions but concessions of land were within townships.
Moreover, not all townships were perfectly rectangular in shape. In the sectional township
system, a section of land was 1000 acres, containing 10 lots of 100 acres each.
17. B. A Reference Plan may be used as a substitute for the older metes and bounds
description of land. The metes and bounds description of land used to be written
descriptions only and did not provide a visual description of land. This written description of
land was complicated and was difficult to understand.
A Reference Plan is only used as a reference document to describe the property
boundaries. It is not adequate for severance of land without necessary approvals and it
does not eliminate the approval of a Draft Plan for a subdivision, regardless of the number
of lots. A Reference Plan is not registered in land registry office but is only deposited for
reference as part of some other set of documents.
18. A. The description given does not make up a rectangular lot because a rectangular lot
must have perpendicular sides and the opposite sides must be equal and parallel. In the
given description, the first and third boundary lines are not equal. Further, the second and
fourth boundary lines are also not equal.
The given bearings for second line are correct and not reversed. The description of
boundary lines does not show fronting of the property. The words ‘more or less’ are typically
used with last boundary line to cover minor discrepancies in measurement. These words
cannot be used with all four bearings.
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19. D. The metes and bounds description of land was only a written description and did not
make up the entire survey. An acceptable survey is a visual description of the property
boundaries and is typically prepared by an Ontario Land Surveyor.
Other options are correct statements. Only North is shown as angle bearing on a survey but
the description must show North and South, whichever is required. Metes and bounds
description of land was complex, difficult to understand and was more complicated than the
reference plans.
20. A. The Mirror Principle states that the Parcel Register (Land Titles Register) contains
accurate information about a parcel of land and any interests registered on it. The buyer
can rely on this information because if anyone has an interest in the land, the parcel
register must show it.
The statement regarding Insurance Principle is incorrect because this principle enables a
buyer to make a claim from Land Titles Assurance Fund in case the buyer suffers a loss
after closing due to someone else claiming an interest in land, documentation errors or
fraud. The Curtain Principle states that buyers (or buyers’ solicitor) need to conduct a title
search only on current records in Parcel Register and it is reliable as the sole source of title
information. There is no such provision in the Act that any two of the three principles must
be satisfied.
21. C. This is an incorrect statement as there no such Act. The power of attorney for trading
in real estate is known as Continuing Power of Attorney for Property and it is granted under
the Substitute Decisions Act.
Other options are incorrect choices because these statements are true with respect to
power of attorney.
22. B. Only two statements 2 and 3 are correct. The Land Registration Reform Act makes it
mandatory that the Land Transfer Tax Affidavit be submitted by the buyer along with Form
1: Transfer/Deed of Land. This enables the land registrar to collect Land Transfer Tax from
the buyer. This Act also introduced certain implied covenants of charge/mortgage of land
when standard charge terms are not registered by the lender.
Other statements 1, 4 and 5 are incorrect. The purpose of this Act was not just to reduce
the number of registration forms. This Act also did not make OREA® forms mandatory for
all sale/purchase and lease transactions. Electronic registration was not mandated by this
Act.
23. C. The local Committee of Adjustment must be approached for the purpose. Depending
on the nature of expansion, the Committee of Adjustment may not approve the expansion
of the building because this expansion will create a new non-conforming use.
Other options are incorrect because typically the authority to approve continuation of nonconforming use is granted to the Committee of Adjustment which is appointed by the local
municipality. The Ontario Municipal Board, the Ministry of Municipal Affairs and Housing
and Land Division Committee are all incorrect options.
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24. A. The Site Plan Control Agreement contains these requirements in which the
municipality wants the owners of a parcel of land to develop the property in a specific
manner.
Other answers are incorrect because development of commercial properties typically
requires the developer to enter into a Site Plan Control Agreement.
25. B. The purpose of zoning and zoning by-laws is to maintain conformity of uses in
different zones within a municipality. Zoning by-laws permit specific uses of the property
and set building structure standards for a particular zone.
Zoning by-laws are enacted by the municipalities and not by the Ministry of Municipal
Affairs and housing. Deed restrictions are placed by subdivision developers and not by
zoning by-laws. Owners who want to alter the use of property which is not in compliance
with zoning by-laws may make an application to get it altered.
26. C. It is incorrect that all owners of land within regulated areas get Conservation Land
Tax Incentive. This tax incentive is for owners of wet lands subject to certain qualifications.
Other options are not valid answers because these statements are correct.
27. B. Footings are at the base of the foundation wall and they transmit the weight of
foundation wall and the structure above it to the soil.
It is incorrect that footings have a role in prevention of moisture in basement areas.
Providing lateral strength is the function of foundation. Wall framing is installed on top of
foundation walls and is supported by sills.
28. D. The terms that go into the blank spaces in order are:
Soil; Exterior Grading; Evestroughs; Downspouts; Sump Pump.
Footings transmit the weight of the house to soil and when a footing fails the structure may
tilt to one side. Many basement leakage problems can be remedied by exterior grading
improvements and by properly installing evestroughs and downspouts. Owners usually
install sump pump to remedy influx of water or moisture problems in basement.
29. B. A knee wall is installed in the attic areas to provide extra strength to roof rafters. This
is an important part of a structure where rafters have a large span. The position and
spacing of the knee wall is also important.
Roof joists are used for flat roofs while roof rafters are used for sloped roofs. The attic area
is not insulated and moisture or condensation problems do exist. Roof rafters transmit live
loads to wall framing or beams and not directly to foundation walls.
30. A. Thick glass is a good insulator and insulation values of windows are increased by
double glazing or triple glazing.
The U-value is reciprocal of R-value and is kept low to have high insulation value or Rvalue. Emissivity refers to ability of surface to reflect radiation is typically a factor when
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calculating efficiency rating of windows. The CSA standards for windows include its wind
resistance also.
31. B. A gravity furnace uses gravity to push hot air into the structure and return of cold air
back to the furnace. These systems were not efficient and have become obsolete now.
An electric furnace does not have a combustion chamber. A gas furnace is commonly used
in urban residential properties. Hot water tank is used to heat water for consumption, not for
heating the property. Instead, boilers and radiators are used for heating purposes.
32. B. A past effective date is used by the insurance company when settling a fire damage
claim. This date is the actual date when the fire occurred.
The effective date is the date to which the value estimate applies. It may be a current date
or a past date depending on the purpose of appraisal. This date is current date in case of
refinancing the property. In case of settlement of a Will, the actual date of death is used as
effective date of appraisal.
33. C. In foreclosure, the lender typically approaches a court. The court may give certain
time to the mortgagor to pay off the debt. If the debt is not paid off, the lender sells the
property and the mortgagor loses even the equity in the property.
Power of sale is typically a direct action taken by the lender and there is no need not
approach the court. In judicial sale, the lender has to proceed through a court. The surplus
amount is paid back to the mortgagor in case of power of sale but not in case of
foreclosure.
34. D. A judgment registered against the owner of the property, after the registration of
mortgage lien, does not have a priority over the registered mortgage. This cannot be stated
as an exception to mortgage priority. Only a judgment, which is registered before mortgage
registration, has a priority over the mortgage lien.
Other options are incorrect because these are valid exceptions to mortgage priority.
35. B. A bridge loan is a temporary or interim loan, given in situations when a borrower
must close a deal and the closing date of his previous deal is little later. Base on the
documentary evidence, the lender may provide a bridge loan.
A Wrap mortgage is on a single property and wraps around existing mortgages. The
borrower makes one payment to the wrap mortgagee, which in turn, makes payments to
previously registered mortgagees. A gap loan is an interim loan given to developers when
there is a gap between construction advances and placement of permanent financing. A
letter of guarantee is typically required for municipal or other public projects.
36. D. In real estate, the agent of the client is the brokerage. The Listing Agreement
establishes an agency relationship between the seller and the brokerage. This relationship
is known as Representation Relationship under the Real Estate and Business Brokers Act
2002. The salesperson is considered a representative or employee of the brokerage for real
estate trading purposes.
This explanation makes all other options incorrect.
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37. B. The objective standard of duty of care is established in court and is based on
circumstances. As a general rule, the duty of care includes reasonable care and skills,
reasonable judgment and use of competence in performing the agreed functions.
The duty of honesty is typically related to the duty of loyalty to the client. The duty of
confidentiality is not the same as the duty of care.
38. A. Mr. and Mrs. Smart are responsible for commission because they were client of this
brokerage and it was their fault due to which the transaction did not close. The brokerage
fulfilled its obligations under the Buyer Representation Agreement.
Sellers are not responsible to pay commission for non-completion of the transaction either
to their brokerage or to the co-operating brokerage because it was not their fault. Moreover,
sellers had no Privity of contract with the co-operating brokerage. Mr. and Mrs. Smart would
also not be liable to pay commission to Power Realty Inc. because there was no Privity of
contract between them and the listing brokerage.
39. D. Copies of representation agreements, including the Listing Agreement, must be
provided to the clients immediately upon signing.
Other options are incorrect because REBBA 2002 does not permit 24 hours or 5 days or 30
days to deliver copies of representation agreements. Copies of representation agreements
must be delivered immediately upon signing.
40. C. No, it is not a multiple representation situation because only the seller is represented
and is a client of the brokerage. The buyer is a customer and is not represented. Multiple
representation occurs when both the seller and the buyer are clients of the same
brokerage.
This explanation makes other options incorrect.
41. A. + 1.34%
(302,700 – 287,300) ÷ 287,300 X 100 ÷ 4 = + 1.34%
42. B. ― $8,395; +$3,358
Time Adjustment = 167,900 X 4 X 1.25% = ― $8,395
Feature Adjustment = 167,900 X 2% = + $3,358
43. D. $83.61
Net Operating Income = 785,600 – 4.5% ― 527,850 = $222,398
Value = 222,398 ÷ 9.5% = $2,341,032
Value per Square Foot = 2,341,032 ÷ 28,000 = $83.61
44. A. $397,700
Annual Potential Income
One Bedroom Units = 35 X 835 X 12 = $350,700
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Two Bedroom Units = 28 X 950 X 12 = $319,200
Three Bedroom Units = 15 X 1,125 X 12 = $202,500
Parking Income = [(35 + 28) X 35 X 12] + (15 X 45 X 12)
= 26,460 + 8,100 = $34,560
Laundry Income = (35 + 28 + 15) X 25 X 12 = $23,400
Add: All Income = $930,360
Less: Vacancy and Bad Debt Loss = 930,360 ― 5% = $883,842
Net Operating Income = 883,842 ― 55% = $397,729
Round to Nearest $100 = $397,700
45. C. The ully Adjusted Prices for Sale 1, Sale 2 and Sale 3 are $238,922; $256,976 and
$244,544 respectively. The estimated value of subject Site is $256,976; based on Sale 2
which is the most recent sale.
Sale 1:
Time Adjustment = 242,600 X 3 X (8% ÷ 10) = + 5,822
Feature Adjustment = ― 9,500
Fully Adjusted Sale Price = 242,600 + 5,822 – 9,500 = $238,922
Sale 2:
Time Adjustment = 248,500 X 2 X (8% ÷ 10) = +3,976
Feature Adjustment = + 4,500
Fully Adjusted Sale Price = 248,500 + 3,976 + 4,500 = $256,976
Sale 3:
Time Adjustment = 238,600 X 5 X (8% ÷ 10) = + 9,544
Feature Adjustment = ― 3,600
Fully Adjusted Sale Price = 238,600 + 9,544 – 3,600 = $244,544
46. B. The RCN of the House: $271,235, Addition: $53,057 and the Garage: $27,146. The
depreciation of the house: $98,631; the Addition: $18,039 and the Garage: $9,049
RCN:
House: 8.95 X 13.10 X 2 X 107.50 X 10.76 = $271,235
Addition: 6.15 X 8.40 X 10.76 X 95.45 = $53,057
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Garage: 20 X 24.5 X 55.40 = $27,146
Depreciation:
House: 271,235 X 20 ÷ 55 = $98,631
Addition: 53,057 X 17 ÷ 50 = $18,039
Garage: 27,146 X 15 ÷ 45 = $9,049
Case Study – 4 Parts
Direct Comparison – Sales Analysis
► Note: Please See the fully completed Sales Analysis Chart on the following page.
47. C. Time adjusted sale price of comparable sale #1 = $323,400
48. B. Total adjustments for comparable sale #2 = ― $3,045.
49. A. Totally adjusted sale price for comparable sale #3 = $313,858
50. D. Estimate of Value for Subject Property is $315,095 based on comparable sale #2
because this sale is the most recent sale.
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Case Study – 4 parts
Direct Comparison – Sales Analysis
-----------------Back to Sample Exam 1
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DETAILED ANSWERS
SAMPLE EXAM 2
1. B. Joint tenancy must be specifically created at the time of registration, with clear
intention of all joint tenants to do so.
Joint tenancy provides equal interest to all joint tenants and undivided possession of the
entire property. The Right of Survivorship in joint tenancy provides that no joint tenant can
write a Will for his/her interest because the interest of the deceased passes automatically to
the surviving joint tenants.
2. A. Townships were divided into concessions of land and there was a road allowance of 1
chain or 66 feet between concessions.
Other statements are incorrect because the concessions were 100 chains wide, one chain
had 100 links and the standard lot was not always 20 chains wide.
3. C. An application for dividing land (Consent to Sever) is typically made to the local
Committee of Adjustment.
Other statements are incorrect because the authority for approval of land severance is
typically granted to the Committee of Adjustment, appointed by the local municipality. The
Ministry of Municipal Affairs and Housing keeps this authority with itself only if there is no
local Committee of Adjustment and no Land Division Committee at the regional level.
4. D. Under the Land Titles Act, the information in the parcel register accurately and
completely reflects the current status of a parcel of land and buyers can rely on it.
Moreover, there is a guarantee of verification of information under this Act.
Title search is performed by buyer’s lawyer on current records in parcel register because it
contains only current and valid interests registered on land. It is incorrect that all valid
previous interests registered on title are found in parcel register because these are
removed from the register. The land registrar provides assurance that the information in
parcel register is accurate and valid.
5. A. Class A fire generally burns in materials which catch fire very easily. Such materials
include wood, cloth, rubber, plastic, etc. Water can be used to put out this type of fire.
Class B fire burns in flammable products such as oil, gas and other petroleum products.
Class C fire burns in energized equipment but is rare when the equipment is not operating.
A blanketing effect is not required to extinguish a Class D fire.
6. B. The pitch of the roof is, in fact, the slope of the roof. This is typically the relationship
between ‘rise and run’ of the roof, where the run is always 12 feet as a standard.
Pitch is not used to decide whether roof trusses would be used or roof rafters would be
used. Different structures may have different pitch and it is not always six in twelve for all
residential properties. Roof pitch does affect the overall life of the roof. A high pitch roof
helps in easy water runoff during rain and when ice melts.
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7. C. It is incorrect to state that the purpose of a distribution panel is to boost or increase
electrical power inside a structure when modern appliances are switched on. The purpose
of this panel is to evenly distribute electrical power to different parts of the house and
ensure electrical safety in the building.
Other statements regarding the electrical distribution panel are correct.
8. A. The effective age of a building is the age depending on the care and maintenance it
has received up to the date of appraisal.
Effective age is not the chronological or actual age even if the structure is less than five
years old. Effective age is not the same as remaining economic life and it is not dependent
on the type or purpose of the appraisal.
9. B. The Notice of Default and Intention to Sell is given to the mortgagor 15 days after the
payment was due.
Other statements are incorrect. A power of sale action is generally taken by the mortgagee
without the involvement of a court. The mortgagor is provided 35 or 45 days to repay the
loan and this Redemption Period is not just 15 days. The surplus money from the sale is not
forfeited by the mortgagee but is returned to the mortgagor.
10. B. The duty of remuneration under Agency Law refers to payment for services
rendered. In real estate, it is equivalent to payment of commission by the client to a
brokerage.
The client is not required to compensate the brokerage for expenses incurred while
performing duties. The duty of indemnification and the duty to disclose material facts about
the transaction apply to both the agent and as well as the client.
11. C. When more than one party in a transaction is represented by the same brokerage,
the brokerage is in a multiple representation situation. The brokerage must disclose this fact
to both parties at the earliest practical opportunity but before an offer is presented.
It does not matter which party became the client first and which party later. Written
disclosure must be made by the brokerage to both parties at the earliest practical
opportunity but before an offer is presented. Moreover, it is incorrect to say that only the
first client must give their consent for multiple representation.
12. B. The Lords of Land under the historic Feudal System of Tenure were principal tenants
to the King. They were given land to hold and sublet it but they were not the owners of the
land.
This makes option A incorrect. The Feudal System of Tenure did provide certain rights to
the Lords of Land but these rights were not more than the rights in the modern fee simple
estate. The Lords of Land were permitted to sublet the land to others under the system.
13. C. If a property is held in tenancy-in-common, any tenant-in-common can decide how to
deal with his/her interest. He/she can sell, lease or a write a will for his/her interest.
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Tenants-in-common can have different interests and may acquire them at different times.
There is only one unity of possession wherein every tenant has equal right of undivided
possession of the entire property. The right of possession is not based on the investment
made by the tenant.
14. D. Only statements 1, 2 and 5 are correct. An Easement is the right enjoyed by one
land owner over the land of another owner. There must be separate ownership of land to
create an easement. If the buyer purchases the neighbour’s property, the easement would
come to end because the ownership will merge into one.
Once an easement is registered on title, it runs with land and does not terminate when the
property is sold. Easement is not always granted by mutual consent (Easement by Express
Grant) of owners. There are other methods such as necessity of a land owner (Easement
by Implication), use of a right-of-way over a long period of time (Easement by Squatter’s
Rights), easements for public utilities (Easement by Statute), etc.
15. C. The buyer of a unit in an equity co-operative is, in fact, buying shares of the
corporation equivalent to the value of the unit. The title of the unit remains with the
corporation and the buyer gets a lease (occupancy permit) for the unit.
This makes statement A incorrect. The buyer is required to pay land transfer tax because
he is acquiring an interest in land in terms of shares in the corporation. The buyer is not
only liable for payment of proportionate share of corporation’s blanket mortgage but also for
other obligations such as maintenance fee for the unit.
16. B. A compiled plan is used only to clarify a written metes and bounds description of
property and give it a visual diagrammatic presentation. It is not accepted as a survey
regardless of who prepared it.
Other options are correct statements regarding various types of surveys.
17. B. North 31 degrees 40 minutes West, 150 feet. The property is fronting on the north
side of the road, which has a bearing of North 58 degrees 20 minutes East. The first
boundary line must be 31 degrees 40 minutes with respect to North and between North and
West. (90 degrees – 58 degrees 20 minutes = 31 degrees 40 minutes).
This explanation shows that all other descriptions are incorrect.
18. A. When the units are sold in a condominium building, individual unit buyers assume
the applicable proportionate share of the blanket mortgage of the corporation and arrange
their own first mortgage.
Other statements are incorrect. The condominium corporation is not responsible for the
blanket mortgage once the units are sold. Individual units are registered separately in land
registry office in addition to the registration of the condominium corporation. Unit owners not
only own their units exclusively but also have interest in the common elements as tenantsin-common.
19. C. Since the information contained in Abstract Books was not verified by the land
registrar to be accurate, the buyer’s lawyer would conduct a title search on at least 40-year
history of titles.
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Option A is incorrect because registration is done only under one Act and not under both. B
is incorrect because there is no guarantee of verification of information under the Registry
Act. D is incorrect because the reforms for land registration were introduced in the Land
Registration Reforms Act and not in the Land Titles Act.
20. D. This statement is incorrect because this assurance is in Second Implied Covenant
and not in the First Implied Covenant. These covenants were introduced in the Land
Registration Reform Act.
Other options are incorrect answers because the given statements regarding Implied
Covenants of Charge/Mortgage of land are true.
21. C. Under the provisions of the Planning Act, the Ministry of Municipal Affairs and
Housing, the Ontario Municipal Board and the municipalities must be consistent when
carrying out their duties regarding provincial interests.
It is incorrect to say that the responsibility only lies with the Ontario Municipal Board.
Protection of public health and safety is included in the Provincial Interests. Significant
cultural, architectural and historical resources must be protected and conserved and the
Planning Act does not have any requirement to reduce them.
22. B. The authority to grant Consent to Sever land is sometimes granted to the Land
Division Committee at the regional level.
It is incorrect that the owner must submit a draft plan for creating a subdivision when the
local Committee of Adjustment does not have the authority to grant consent for severance.
The Committee of Adjustment will most likely not approve an application for severance if it
does not conform to zoning by-laws and the official plan. Even if a parcel of land falls within
an approved plan of subdivision, dividing a single parcel of land needs consent to sever.
23. D. The size of the building and its use dictates which sections of the Fire Code are
applicable to that building. Different occupant safety standards and inspection requirements
are given in the fire code.
Renovation work and finishing previously unfinished areas may require appropriate permits
and inspections. A combined smoke detector and audible system is required for all building
types. Retrofit standards of buildings are given in Section 9 of the Fire Code.
24. C. Any construction work in an existing structure requires compliance with the retrofit
standards given in the Fire Code for safety of the occupants. In addition to the building
permit, the construction work may require electrical and fire inspections.
The Landlord and Tenant Board is not involved here because this board is a judicial tribunal
for landlord and tenant disputes. It is not required that an appraiser be hired to establish the
market value of the property and establish monthly rent.
25. A. The term flood proofing refers to techniques used for prevention of floods or to
reduce the effects of flood. Flood proofing of properties ensures that the damage to the
property is minimized in case of flooding.
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The Conservation Authority regulates flood prone areas. Active Flood Proofing involves an
action taken at the time of advance warning of flood. Passive Flood Proofing involves
construction activities to reduce any possible damage from future flooding.
26. B. Statements 2, 3 and 5 regarding platform framing, lintels and roof trusses are
correct.
Other statements are incorrect answers.
27. A. Sick Building Syndrome symptoms are typically caused by poor air quality in a
structure and these symptoms may be temporary due to smoke entering the structure or
may be permanent due to poor internal air quality, combined with lack of ventilation.
Use of volatile organic compounds in modern buildings are controlled but are not
completely banned. These are not the only source of sick building syndrome symptoms,
which may be caused by other factors as well. Merely installation of air purifiers does not
completely solve the problem of sick building syndrome symptoms.
28. B. The terms that fill up the blank spaces correctly are:
Heating; 100 or 200 amperes; 60 amperes; hot water; HVAC.
Mechanical systems in residential properties are mainly grouped under electrical, heating,
insulation and plumbing. Most new homes have 100 or 200 ampere service while 60
ampere service is found in structures dating from 1960’s. Heating systems include, forced
air, hot water radiant and electrical baseboard. Heating systems in commercial properties
are known as HVAC systems.
29. A. The electrical distribution panel and associated systems are not a part of the energy
audit.
Other options are incorrect answers because all these systems are typically a part of the
energy audit.
30. D. The Economic Life or Life Expectancy of a structure is an estimated age in years the
structure would be useful/habitable and will add value to the property given that there are
no major upgrades, renovations or modernization.
The estimated number of years from the effective date of appraisal that the structure will
keep adding value is known as Remaining Economic Life. The estimated age based on
care and maintenance of the structure as of the appraisal date is known as Effective Age.
31. C. Under a Statutory Power of Sale, the mortgagor is given 45 days to pay off the debt
and redeem the property. This is known as Redemption Period. This time is given to the
mortgagor in the Notice of Default and Intention to Sell, which is given 15 days after the
default. In Contractual Power of Sale, the Redemption Period is 35 days.
The Notice of Default and Intention to Sell is not given immediately but the mortgagee must
wait at least 15 days after the default has occurred. The mortgagor is given either 35 days’
or 45 days’ Redemption Period to pay off the debt and not 60 days. The power of sale
action can be taken without the involvement of court.
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32. A. When the loan to value ratio (LTV) is 80% or more, it is called a high ratio mortgage.
The mortgagor is required to insure a high-ratio mortgage loan through a mortgage default
insurance provider.
A loan to value ratio (LTV) of 80% or less is known as a conventional mortgage and, in
most cases, it need not be insured. Moreover, the mortgagee is not responsible for the
insurance. Mortgage default insurance is different from creditor life insurance. The former is
for the protection of the lender while the latter is for the protection of the borrower.
33. A. The most common mortgage product for residential properties is the blended or
amortized mortgage. The borrower pays a fixed amount of principal and interest based on
the amortization schedule and on fixed payment frequency such as monthly or bi-weekly.
The Mortgage Brokers Lenders and Administrators Act does not mandate 15 plus 15
mortgage privilege. The interest only mortgage is not just for commercial borrowers but for
other borrowers as well where the risk to lender is low. The borrower of a fixed term
mortgage loan may have to pay three months’ interest or interest rate differential as penalty
if the loan is paid before maturity of the term.
34. C. The Debt Service Coverage Ratio is the relationship between annual net operating
income and the annual debt payments. A ratio of 1.2 means that the borrower must pay $1
as annual debt and his annual net income is $1.20. Higher Debt Service Coverage Ratio is
preferred by the lenders because their risk is reduced when the net income increases. A
low ratio means greater risk for the lender.
The above explanation makes other options incorrect.
35. C. A written disclosure of any referral fee must be made to the buyer client at the
earliest practical opportunity.
Just providing competent service to a client does not fulfill the obligation of disclosing
referral fees. Moreover, the salesperson is required to disclose the referral fees to the buyer
client and not to the brokerages.
36. D. The duty of obedience is one of the fiduciary duties owed to clients under the Agency
Law. In the given scenario, the salesperson should not have done the open house as that
was a clear instruction from the seller clients.
It is incorrect to say that by holding the open house, the salesperson has protected the
interests of her client while the duty of obedience is being violated. The sellers are clients of
the brokerage and have the right to give lawful instructions to the brokerage or its
employees. Just getting permission from broker of record would not fulfill the duty of
obedience to the client, which in fact, is owed to the clients of the brokerage.
37. B. REBBA 2002 Code of Ethics requires that a brokerage must explain agency
relationships to parties and then give them the option to choose how they want to work with
the brokerage.
Other options are incorrect because the party must be given an option how they would like
to get services from a brokerage. The brokerage or its employee salespersons cannot force
anyone to become a client or a customer of the brokerage.
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38. B. The fiduciary duty of accounting is not merely related to financial accounting. This
duty includes obligations of the agent (brokerage) to be responsible and accountable for all
monies, documents and properties, which are held or managed by the brokerage on behalf
of the client.
39. C. The salesperson has failed to protect the best interests of seller clients by disclosing
confidential information related to their anxiousness to sell quickly. The salesperson should
not have disclosed the fact to the buyer that the sellers are desperate and would take any
low offer below the asking price.
A Customer Service Agreement is non-exclusive and a buyer can sign it with more than one
brokerage. This is not a multiple representation situation because the buyer is a customer.
Buyer Bright has not been encouraged to breach the representation agreement with the
other brokerage because he had signed a Customer Service Agreement with that
brokerage.
40. A. The registrant does not have to disclose the number of years he/she has been
registered. This is not a part of the disclosure statement.
Other options are incorrect because the registrant must include the information in the
disclosure statement.
41. B. ― 0.89%
(398,000 – 424,500) ÷ 424,500 X 100 ÷ 7 = ― 0.89%
42. D. ― $18,500
(― 11,000 ― 7,500) = ― $18,500
►Tip: The subject is already more than normal. First bring the comparable to normal level
by subtracting $11,000 and then subtract $7,500 more to take it to the subject level.
43. B. $70.15
Net Operating Income = 364,500 – 276,200 = $88,300
Value = 88,300 ÷ 13.25% = $666,415.09
Value per Square Foot = 666,415.09 ÷ 9,500 = $70.15
44. C. $304,915
Annual Potential Rental Income
Studio = 20 X 760 X 12 = $182,400
One Bedroom = 28 X 875 X 12 = $294,000
Two Bedroom = 22 X 1,050 X 12 = $277,200
Parking Income = (20 + 28) X 20 X 12 = $11,520
Laundry Income = (20 + 28 + 22) X 30 X 12 = $25,200
Add All Income = $790,320
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Net Operating Income = $790,320 ― 4% ― 453,792 = $304,915
45. D. The Fully Adjusted Prices for Sale 1, Sale 2 and Sale 3 are $300,901; $289,638 and
$308,550 respectively. The estimated value of the subject Site is $308,550; based on Sale
3 which is the most recent sale.
Sale 1: 68 Bramalea Road
Time Adjustment = 282,700 X 5 X 6% ÷ 8 = + 10,601
Feature Adjustment = + 7,600
Fully Adjusted Sale Price = 282,700 + 10,601 + 7,600 = $300,901
Sale 2: 146 Mayfield Road
Time Adjustment = 295,000 X 3 X 6% ÷ 8 = + 6,638
Feature Adjustment = ― 12,000
Fully Adjusted Sale Price = 295,000 + 6,638 – 12,000 = $289,638
Sale 3: 170 Dixie Road
Time Adjustment = Nil
Feature Adjustment = 302,500 X 2% = +6,050
Fully Adjusted Sale Price = 302,500 + 6,050 = $308,550
46. B. The RCN of the House: $236,004; The Addition: $54,293 and the Garage: $8,697.
The Depreciation of the House: $107,275; the Addition: $13,030 and the Garage: $1,087
RCN:
House: 10.55 X 12.60 X 2 X 82.50 X 10.76 = $236,004
Addition: 7.15 X 8.95 X 78.85 X 10.76 = $54,293
Garage: 18.25 X 13.50 X 35.30 = $8,697
Depreciation:
House: 236,004 X 25 ÷ 55 = $107,275
Addition: 54,293 X 12 ÷ 50 = $13,030
Garage: 8,697 X 6 ÷ 48 = $1,087
47. A. The time adjusted sale price of comparable sale #3 = $405,978
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48. C. The amount of total adjustments for sale #2 = ― $1,875
49. D. The totally adjusted sale price for comparable sale #1 = $409,700
50. B. The estimate of value for the subject property is $406,325 based on comparable sale
#2 because this sale is most similar to the subject among the two recent sales.
Case Study – 4 Parts
Direct Comparison – Sales Analysis
► Note: Please See the fully completed Sales Analysis Chart on the following page.
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Case Study – 4 Parts
Direct Comparison – Sales Analysis
-----------------Back to Sample Exam 2
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DETAILED ANSWERS
SAMPLE EXAM 3
1. D. The bundle of rights in a fee simple ownership is subject to government limitations and
private deed restrictions. The limitations restrict the way a property can be used.
It is incorrect to say that fee simple is absolute ownership and has no limitations because
both the government and private limitations affect these rights. Deed restrictions are
commonly found in subdivisions and not just in condominium declarations.
2. C. The Geographic Information System (GIS) does not only show boundary lines (vector
method) but also displays maps using bit-mapped images (raster method).
Other statements are incorrect because the GIS provides many administrative advantages
in compiling maps and related data. It is incorrect to say that GIS does not help the
municipal planners in land development activities.
3. A. The Ontario Municipal Board (OMB) is a judicial tribunal under the Planning Act and
works at the provincial level to implement portions of the Act.
OMB is not appointed by the local municipality and it does not have authority to approve all
development projects. It is also incorrect to say that it does not hear any appeals related to
loss of property. When a land owner loses a part of property due to expropriation, he can
approach the OMB for settlement of a compensation related dispute.
4. D. Power of attorney must be registered in the land registry office. Only then the attorney
can sign documents on behalf of the registered owner.
A conventional power of attorney is no longer valid under the Substitute Decisions Act for
trading in real estate. The Continuing Power of Attorney for Property continues even after
subsequent legal incapacity of the donor but it does not continue after death. The attorney
cannot sign documents on behalf anyone other than the donor.
5. B. The Committee of Adjustment is appointed by the local municipality and does not
have the authority to approve plans of subdivision. This authority typically lies with the
upper tier (regional) municipality.
Other options are correct statements because all these functions are within the jurisdiction
of the local Committee of Adjustment.
6. C. The entire one-zone flood plain is considered a floodway due to high risk of floods.
Private property owners are not permitted to undertake any development work because of
flood risk. Agricultural work is generally permitted and owners of existing structures are not
permitted to perform any type of alterations they want.
7. D. Squeaky sound is produced in floors when the subfloor is not properly fixed to the
joists. Using more nails or screws to fix the subfloor to joists may help prevent this problem.
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Other options are incorrect because subfloors do not rest directly on sills but they rest on
joists. Subfloors may be easily damaged by water penetration because water passes
through the floor finish. Uneven surface of the subfloor is caused by improper installation
and it is irritating to occupants.
8. B. Gravity furnaces have now become obsolete due to their inefficiency.
These furnaces did not have high efficiency or good capacity. They use convection (and not
radiation) whereby hot air rises itself by gravity into the structure and returns to the furnace
when it cools down and becomes heavy. There was no fan or motor to force the hot air into
the structure.
9. C. Both the form report and the narrative report are based on analysis of comparable
sales and making appropriate adjustments in the. Both reports provide a systematic
analysis of comparable sales.
A form report is generally accepted by most lenders for mortgage financing. It is incorrect to
say that a narrative report does not provide a comprehensive analysis of all aspects of the
property or this report is not accepted by courts only because they are lengthy and time
consuming.
10. D. The mortgage priority for lenders is subject to certain exceptions such as any Crown
claims, unpaid property taxes, judgment, etc.
It is incorrect to say that mortgage priority is without exceptions. The first mortgagee must
inform the subsequent lenders in case some action is being taken against the property
upon payment default. The current mortgage legislation does not prohibit the lenders from
having priority because mortgages can have priority based on the date and time of
registration.
11. B. A development loan is provided to developers and construction companies for the
purpose of servicing land. It is also known as a construction loan but it is generally used
prior to the actual start of construction work.
The interim loan given to builders in between sequential advances is known as a gap loan.
It is incorrect to say that development loan is provided for municipal projects only.
Development loan is for builders and developers and is not meant for residential buyers.
12. A. The term sub-agency refers to a situation where a primary brokerage hires another
brokerage to help the client in a real estate transaction with the consent of the client. In this
situation both brokerages owe similar duties to the client.
When a brokerage co-operates with another brokerage and protects the interests of its own
client, it is referred to as co-operating brokerage. Sub-agency must have the consent of the
client. Just providing referrals to another brokerage does not create a sub-agency situation.
13. B. REBBA 2002 requires that a brokerage must provide written explanation of agency
relationships and service alternatives available with the brokerage to a consumer. The
brokerage must also get a written acknowledgement to this effect. The party is then free to
choose the type of service they require from the brokerage.
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The brokerage cannot require a consumer to become a client or a customer regardless of
an earlier relationship with another party to the transaction. The brokerage cannot just
explain the benefits of representation relationship to the consumer. The consumer must be
explained types of agency relationships and offered service alternatives.
14. A. The fee simple estate with conditions refers to an interest in land granted to
someone with conditions on its use. This is a historic type of land ownership and may be
considered contrary to existing laws or against public policy. These estates rarely exist
today.
The leasehold estate is smaller than the estate from which it flows. The rights of the lessor
(landlord) are more than the rights of a lessee (tenant). A life estate does not automatically
start for a surviving spouse after the death of the other spouse, but must be specifically
granted by the owner. The fee simple estate and freehold estate are synonymous terms.
15. C. A common aspect of interests in joint tenancy and tenancy-in-common is the right of
equal undivided possession of the entire property.
This makes option A incorrect because the interest in tenancy-in-common may not be
equal. The right of survivorship does not exist in tenancy-in-common but is only in joint
tenancy. Joint tenancy (and not tenancy-in-common), must be created specifically while
satisfying four unities and with specific consent of the joint tenants. It is not created
automatically.
16. D. A dish washer is such an item that can easily be disputed by any party as a chattel or
as a fixture. Instead of depending on any assumptions, salesperson Skinny should have
included the dishwasher in the Agreement of Purchase and Sale.
Other options are not correct. The buyer cannot take any action against the listing
brokerage because that brokerage is not directly a party to the agreement in this
transaction. The buyer, however, can take action against his own brokerage for failing to
protect his interests. It is also incorrect to say that the seller always has the right to remove
an item which cannot be decisively termed as a chattel or as a fixture.
17. C. Partnership business suffers from a disadvantage that all partners may be personally
liable for the debts of the business.
It is incorrect to say that the limited partner has no liability at all because the limited partner
also shares liability according to the investment. This makes option C incorrect. Partnership
business cannot be started right after the partners sign the agreement, it must also be
registered under the Business Partnerships Act.
18. B. Only statements 2, 3 and 4 are correct. The Plan of Subdivision legally divides the
land into many lots after the draft plan and the final plan have been approved. Upon
approval of the draft plan the developer can start division of land and construction of roads.
If any conditions were imposed in the draft plan, they must be fulfilled before the final plan
is approved.
Other statements are incorrect. Preparation of a survey by an Ontario Land Surveyor is a
part of the process. It does not legally divide the land unless required approvals are
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granted. The approval authority is typically the upper tier municipality and the Ministry of
Municipal Affairs and Housing does review the plan sent by the municipality.
19. A. A Reference Plan is only deposited in the land registry office as a support document
and it is assigned a plan number. For example, an application for severance may require a
reference plan for the subject property.
Other statements are incorrect because a Reference Plan is not registered but only
deposited in land registry office. The letter ‘R’ in the plan number 99R-580 is a prefix. It
does not indicate ‘Registered’ but indicates ‘Reference’. The Planning Act does not require
every property owner to register a Plan of Subdivision unless the owner intends to divide
land into several parcels.
20. C. It is incorrect to say that the Geographic Information System (GIS) only shows maps
in image formats. The two methods to display maps are the raster method and the vector
method. Raster method shows bit-mapped images while the vector method shows only
boundary lines but no images.
Other statements regarding GIS are correct and not a valid answer.
21. D. The mortgagor must register a discharge of charge/mortgage after paying off the
mortgage debt, otherwise the mortgage lien would not be removed from the title.
Other options are incorrect because the form Discharge of Charge/Mortgage is used for
discharge of mortgage lien and not for its registration. The Land Transfer Tax is based on
the value of consideration (purchase price) given in the Land Transfer Tax Affidavit. This
affidavit is a part of Form 1: Transfer/Deed of Land. It is not mandatory for every lender to
register Standard Charge Terms.
22. C. For trading in real estate on behalf of another person, a Continuing Power of
Attorney for Property is required to be registered in the land registry office. This is one of
the three types of power of attorneys in Ontario.
Other statements are incorrect. It is not mandatory that all leasehold interests must be
registered in land registry office. But if the lease is for more than 3 years and the tenant
wants to protect its leasehold interest then registration is recommended. Native lands are
reserved for native people but they are held by Crown under The Indian Act. It is not true
that an estate trustee is always appointed by court. The deceased owner may have
appointed an estate trustee in his Will.
23. D. The actions of Ministry of Municipal Affairs and Housing, the Ontario Municipal Board
and the municipalities are consistent when implementing the provisions of the Planning Act.
This is ensured by means of Provincial Interests included in the Provincial Policy
Statements.
It is incorrect to say that the Act restricts the role of municipalities or that of the federal
government in land development process.
24. C. If a property lies within a Registered Plan of Subdivision, the owner does not need to
be concerned when selling or keeping the property. As per the scenario given in option C, if
someone owns two adjacent semi-detached homes in a registered subdivision, he can sell
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both, sell one and keep the other or keep both properties, without any concern for the
Section 50 of the Planning Act.
For other situations, the exception does not apply. Hence, these are incorrect options.
25. C. Smart can apply to the local Committee of Adjustment for continuation of a nonconforming use because the use of property for running business existed before passage of
the by-law.
Smart does not have to stop his lawn furniture business or appeal the by-law in Ontario
Municipal Board. It is also incorrect to say that freehold ownership of a property allows the
owner to use it for any purpose.
26. A. An owner may approach the local Committee of Adjustment if he needs some
improvement, such as construction of a carport, if there is a minor variance from the
setback requirements under the zoning by-laws.
Other options are incorrect because the owner need not approach the Ontario Municipal
Board for grant of minor variance unless he has a dispute with the Committee of
Adjustment. Also, the owner does not need an amendment to zoning by-law for this
purpose.
27. B. The only thing that would not be a concern for the lender is that the main level meets
all requirements set out by the municipality for properties in flood prone areas. This reduces
the risk for the lender as the property would be protected in case of flooding.
Other answers are incorrect because all these statements point out a valid reason of
concern for the lender.
28. D. The purpose of the Environmental Protection Act is to reduce the effect of soil, water
and air pollution. The Act covers a wide range of activities that impact the environment.
Since discharge of contaminants may be a threat to human health or life, the Ministry may
issue prevention order or require the owners to stop discharge of pollutants.
The Act covers the storage and handling of hazardous wastes. A party involved in a spill
may be held liable regardless of negligence or fault. The Ministry does not empower local
municipalities for issuing licenses, permits or certificates regarding activities that impact the
environment.
29. B. Windows and doors are typically the main source of heat loss from a structure. Loss
of energy from a structure due to convection is due to changes in density of a material.
Roof and attic area are not a cause of heat loss due to convection. Basement floor and
foundation walls lose internal heat due to conduction. Absence of flashings in the roof
causes water leakage from roof and not heat leakage from the structure.
30. C. The purpose of ground fault circuit interrupter (GFCI) is to shut off current in wet
areas where even a small amount of current may leak (0.005 amperes). This is to prevent
electrical short circuit which may cause a fire.
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Ground fault circuit interrupter is not only used in basement areas which have moisture
problems. The chances of current leakage due to moisture are less in basements which
remain dry or where dehumidifiers are used.
31. A. Form reports are short, consist of 5 to 10 pages and have pre-printed information.
They still provide systematic analysis of the subject property and the comparable sales.
The first step in appraisal process is to collect information on the type and purpose of
appraisal from the client. This includes property reference, type of value required,
determination of effective date of appraisal and an agreement with the client. Narrative
reports provide information and analysis in much more details and are typically used for
legal purposes or studies related to feasibility of land use where a form report would not
provide adequate analysis. The property inspection date need not be the same as effective
date of appraisal because in certain cases the effective date may be a past date.
32. D. Only statements 3 and 5 are correct. The mortgagee can sell, assign or transfer the
mortgage to another lender without the consent of mortgagor but a notice to this effect must
be provided to the mortgagor. The mortgagee must provide a copy of mortgage document
to the mortgagor within 30 days of signing.
This explanation makes other options incorrect.
33. B. A Quit Claim Deed is a quick legal remedy in case the mortgagor and the mortgagee
come to a conclusion that it is not possible for the mortgagor to make mortgage payments.
Once the mortgagee accepts the deed, the owners lose all rights on the property including
their equity of redemption. Further, the mortgagee cannot take any legal action against the
mortgagor.
A Power of Sale action is taken by the lender wherein surplus monies are returned to the
mortgagor after the sale. There is no such document as ‘Notice of Equity Release’. Judicial
sale is a court action taken the lender.
34. C. Although a high credit score (beacon score) is good for a borrower but this is not the
only criteria for approval of the loan. The lenders typically make their lending decisions
based on many other factors.
A high credit score is not a guarantee to the lender that the borrower will never default on
mortgage payments. It is also not a guarantee to the borrower that the lender will approve
the loan application. Increased equity in property means more down payment by the
borrower but it does not affect the credit standing.
35. D. Mortgage commitment is conveyed to the borrower after the borrower makes an
application and it is primarily approved. This approval is subject to certain conditions such
as evidence of fire insurance and assurance by borrower that property taxes will not be in
arrears.
Verification of income and employment information is a standard practice and is not waived
by lenders when the appraisal report verifies property value. A pre-approved buyer is also
called a cash buyer but the loan is not guaranteed unless a formal loan application is made
and the information provided by the borrower is verified by the lender. Source of down
payment is required by most lenders.
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36. A. Only statements 1, 2, 3 and 5 are correct. The brokerage must inform the party about
all these service alternatives and get an acknowledgement that the party has received
written information. The party then must be given an option to choose how they would like
to work with the brokerage.
The brokerage is not required to inform or disclose how many years it has been in
registered and in service.
37. C. The circumstances given in statements 2, 3 and 4 indicate a multiple representation
by Cram Park Realty Inc. Multiple representation occurs when the same brokerage
represents more than one party in the same transaction (for same property). It does not
matter whether it is the same salesperson working with the parties or different salespersons
from different branches of the same brokerage are working with both parties.
Statement 1 is not a multiple representation because two different brokerages are
representing the sellers and the buyers. Statement 5 is also not a multiple representation
because the buyer is a customer and is not represented by Cram Realty Inc.
38. B. The client has a duty to indemnify the agent when the agent is working lawfully and
within the authority granted to provide services to the client.
It is incorrect to state that the client must indemnify the agent under all circumstances. If the
agent is working in excess of the authority granted or is in breach of its duty, the client is not
obligated to indemnify the agent.
39. D. The duty to determine and disclose material facts about the property applies to both
clients and customers. The salesperson must have disclosed to the buyer that the property
has certain electrical deficiencies and obtaining fire insurance would prove to be expensive.
Skinny was more interested in making a deal and protect her own interests.
The duty of confidentiality is related to personal or motivational information but the material
facts about the transaction must be disclosed.
40. A. Sub-agency is created when a primary brokerage hires other brokerages with the
consent of the client. The given situation clearly indicates creation of a sub-agency
relationship. The developer has hired Cram Realty Inc., which has hired local brokerages
as sub-agents with the consent of the developer. The sub-agents will also owe the
developer same duties as the primary brokerage.
The local brokerages will not be treated as co-operating brokerages because a cooperating brokerage would owe duties to their own buyer clients and not to the developer.
The term concurrent representation does not apply to the given situation. There is no such
term as subsidiary brokerage.
41. C. + 1.64%
(191,800 – 180,000) ÷ 180,000 X 100 ÷ 4 = + 1.64%
42. A. + $11,760; ― $5,292; $182,868
Time Adjustment = 176,400 X 5 X 8% ÷ 6 = + $11,760
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Feature Adjustment = 176,400 X 3% = ― $5,292
Fully Adjusted Sale Price = 176,400 + 11,760 ― 5,292 = $182,868
43. D. $59.69; $80.10
Net Operating Income = 525,200 ― 315,700 = $209,500
Lower Value per Square Foot = 209,500 ÷ 12.75% ÷ 27,530 = $59.69
High Value per Square Foot = 209,500 ÷ 9.5% ÷ 27,530 = $80.10
►Tip: A low cap rate gives a high value while a high cap rate gives a low value.
44. B. $546,975
Annual Potential Rental Income
One Bedroom = 52 X 795 X 12 = $496,080
Two Bedroom = 44 X 895 X 12 = $472,560
Three Bedroom = 30 X 1,150 X 12 = $414,000
Parking Income = (52 + 44 + 30) X 35 X 12 = $52,920
Laundry Income = (52 + 44) X 20 X 12 = $23,040
Add All Income = $1,458,600
Vacancy Loss = 4.5%
Expenses = 845,988
Net Operating Income = 1,458,600 ― 4.5% ― 845,988 = $546,975
45. A. The Fully Adjusted Prices for Sale 1, Sale 2 and Sale 3 are $175,665; $165,482 and
$159,400 respectively. The estimated value of subject Site is $175,665 rounded to
$175,600; based on Sale 1 which is the most recent sale.
Sale 1: 150 Rutherford Road
Time Adjustment = 173,500 X 1 X 1.25% = ― 2,169
Feature Adjustment = + 173,500 X 2.5% = + 4,334
Fully Adjusted Sale Price = 173,500 – 2,169 + 4,334 = $175,665
Sale 2: 316 Archdekin Drive
Time Adjustment = 178,900 X 6 X 1.25% = ― 13,418
Feature Adjustment = Nil
Fully Adjusted Sale Price = 178,900 – 13,418 = $165,482
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Sale 3: 315 Kennedy Road
Time Adjustment = 176,000 X 4 X 1.25% = ― 8,800
Feature Adjustment = ― 7,800
Fully Adjusted Sale Price = 176,000 – 8,800 – 7,800 = $159,400
46. C. The total RCN of the House, the Addition and the Garage is $219,335 and the total
Accrued Depreciation is $63,920.
RCN: House: 8.75 X 12.04 X 2 X 78.35 X 10.76 = 177,630
Addition: 6.45 X 9.85 X 47.80 X 10.76 = 32,677
Garage: 22 X 12.25 X 33.50 = 9,028
Total RCN = $219,335
Depreciation: House: 177,630 X 15 ÷ 50 = 53,289
Addition: 32,677 X 10 ÷ 40 = 8,169
Garage: 9,028 X 12 ÷ 44 = 2,462
Total Accrued Depreciation = $63,920
Case Study – 4 Parts: Direct Comparison – Sales Analysis
► Note: Please See the fully completed Sales Analysis Chart on the following page.
47. D. The totally adjusted sale price for comparable sale #1 = $340,409.
48. B. The revised totally adjusted sale price for sale #1 = $349,950.
Sale Price = $357,000
Time Adjustment for 30 days = Nil.
Time Adjusted Sale Price is same as Sale Price = $357,000
Totally Adjusted Sale Price = 357,000 ― 7,850 = $349,950
49. C. Revised total adjustments for comparable sale #3 = + $2,550.
►Tip: Simply remove ― $6,000 and calculate the total adjustments again.
50. A. The estimate of value for the subject property is $342,925 based on comparable sale
#3 which is the most recent sale and is most reliable.
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Case Study – 4 Parts
Direct Comparison - Sales Analysis
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DETAILED ANSWERS
SAMPLE EXAM 4
1. B. It is incorrect that the Fee Simple estate does not have any limitations on use of
property.
Other statements are correct. Fee Simple ownership provides most rights with least
limitations as compared to other types of estates. In addition to using the bundle of rights,
the owner has the right to refrain from using any right.
2. C. The Family Law Act provides equal rights of possession to both spouses. It does not
matter whether only one spouse is on the title or both.
The primary residence of the family is a deemed matrimonial home and the family need not
designate it as such. The owner spouse must get spousal consent from the non-owner
spouse only if it is a matrimonial home. For other properties owned by the family, spousal
consent is not required.
3. B. Express Grant is not the only method by which an easement is created; there are
other methods as well. These include prescription, implication and by statute.
Other statements are correct as these are requirements for creating an easement.
4. C. Riparian rights are associated with watercourses such as rivers, lakes, ponds, and
streams of water. These rights are related to access of water, navigation, flood control, etc.
Other statements are correct because the land in these zones may not be on the shores of
water.
5. A. Adverse Possession occurs when someone, other than the owner, takes possession
of the land, with the knowledge but without the consent of the owner and ignores the rights
of the real owner.
Abandonment is the act of fully and finally leaving the property. Encroachment is intrusion
on to the land of another owner. Eviction is the process of evacuating the property.
6. D. Police Power refers to the right of different levels of government to exercise control
over division, development and use of land. The Planning Act, Official Plans and zoning bylaws are examples of this right.
7. A. The owner of a parcel of land under Expropriation has the right to dispute the amount
of compensation given by the municipality.
The amount of compensation is based on the date of survey registration and not on the
date of notice. The municipality becomes owner of land after the survey plan is registered.
Salespersons involved in sale of a parcel of land under Expropriation must disclose this
material fact to potential buyers.
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8. C. A Reference Plan (R-Plan) may be required to show property boundaries with an
application to sever land. This plan would provide a diagrammatic representation of the land
after severance.
Land severance must be approved by the municipality. Merely getting a Reference Plan
prepared is not sufficient to legally divide a parcel of land. A Reference Plan is not always
required when selling the property.
9. A. A Certificate of Title is issued to a parcel of land under the Land Titles Act. It is an
evidence of clean title to the buyer.
The above explanation makes other options incorrect.
10. B. The Consent to Sever is approved by the local Committee of Adjustment only if the
severance will not have a major impact on the orderly development of the municipality.
It is incorrect that the land must be divided into 3 parts. When approved, the owner is given
2 years from the date of approval to divide the land. After this time passes, Lapse of
Consent occurs.
11. C. A Site Plan Control Agreement is required under the Planning Act for most
development projects. Commercial, industrial and recreational property developers are
required to sign this agreement with the municipality.
Single family residential properties are excluded from this requirement.
12. A. Shoreline properties may fall under regulated areas. In some shoreline areas, the
entire Flood Plain is divided into two parts; the inner part is subject to flooding (floodway)
and the outer part being considered less hazardous (flood fringe). If a property falls within a
flood fringe, restricted development work may be permitted.
No construction work is permitted if the property falls within a floodway. Other given terms
are not related to the scenario.
13. B. Most modern structures consist of platform framing because it has proven to be
stronger and more reliable than balloon framing. Balloon framing was used in older
structures.
Other statements related to framing are correct.
14. D. Double glazed vinyl windows are widely used to replace the traditional aluminum
windows. These windows have two glass panes with an air space, which may be filled with
an inert gas for increased thermal efficiency.
Glazing and lamination are not synonymous terms. Casement windows are hinged at sides
and open inwards and outwards.
15. C. If the mortgage loan is Interest Only, the borrower pays only the interest at regular
intervals during the term. The entire principal amount is due after the term.
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In Interest Accruing mortgage, no payment of either the principal or the interest is made
during the term. In Interest plus Specified Principal, specified principal amount is paid along
with interest at regular intervals. In Amortized mortgage, the borrower makes regular
blended payments of principal and interest at regular intervals, as given in the Amortization
Schedule.
16. B. A pre-approved buyer is also called a 'Cash Buyer' for purchasing the property.
Pre-approval is not a guarantee of loan. An application must be made for approval of loan
when the buyer makes an offer on a property he wishes to purchase. In pre-approval, the
interest rate may be guaranteed by the lender for certain time but this time period is not
essentially six months.
17. C. The duty of safeguarding and confidential information is owed to clients of the
brokerage. This fiduciary duty is not owed to customers.
Other statements correctly describe the duties of a brokerage to a customer.
18. A. Registrants must disclose any direct or indirect interest in a transaction to the other
party. If the registrant is trading on behalf of his/her brother, this fact must be disclosed.
In other situations, described here, the disclosure is not required
19. D. Salespersons must verify facts before providing any information to clients and
customers. Due diligence is expected from all registrants when buyers and sellers ask for
information.
Other statements are good examples of a salesperson fulfilling his duty of care.
20. B. Referral fees received by a registrant must be fully disclosed to the client. In this
case, the client is the buyer and the disclosure must be made to the buyer.
The brokerage need not inform the Real Estate Council of Ontario, the seller or the other
brokerage. Referral fees need to be disclosed only to the client of the brokerage.
21. D. It is incorrect that Restrictive Covenants are positive in nature, though they must not
be contrary to public policy. A restriction or limitation on bundle of rights must be negative in
nature.
Other statements regarding Restrictive Covenants are correct.
22. A. According to the provisions of the Family Law Act, Mrs. Bright gets one half of the
net increase in value of the home after their marriage.
The property is a deemed matrimonial home. Though Mrs. Bright has equal right of
possession, she will not get half of the total value. It is also incorrect that she has no right,
whatsoever, in the matrimonial home.
23. D. The term Real Estate refers to tangible (physical) aspects of the property including
land and improvements on land (building). The term Real Property refers to both tangible
and intangible (rights of the owner) aspects.
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Chattels and fixtures are personal property of the owner. Chattels are movable while
fixtures are permanently fixed to the property.
24. C. Title or deed provides accurate and reliable legal description of a property.
A Tax Assessment Notice has the legal description of the property but it is not considered
reliable. It is incorrect that surveys are rarely available for rural properties. One parcel of
land has only one legal description even though it may have been severed from a larger lot.
25. B. Under POLARIS, land registry offices were converted from the Registry system to
the newer Land Titles system. In addition to this, the land registry office records were
converted to electronic format.
The Property Identifier Number (PIN) is unique for every property and consists of 5-digit
block number and 4-digit property number. The Teraview gateway software is given to law
firms and not to property owners. Indexing of properties under POLARIS is not based only
on land description.
26. A. Under the Land Titles Conversion project, land registry offices across Ontario were
converted from the older Registry system to the newer Land Titles system.
The traditional First Application Process had certain limitations and was replaced with Large
Scale Administrative Conversion. Titles were searched and qualified properties given LTCQ
initials for conversion. Titles thus converted were issues a Certificate of Title and insured
under the Land Titles Assurance Fund.
27. B. A property in joint-tenancy has the Right of Survivorship. Accordingly, after the death
of one joint-tenant, the entire interest is transferred to the surviving joint-tenant(s). The
interest of the deceased does not become the estate of deceased. Although, the jointtenants have invested different amounts at the time of purchase, each one has an equal
interest in the property.
Property held in joint-tenancy is outside the scope of estates. Even if one joint-tenant has
written a Will, it is not effective because the Right of Survivorship takes precedence over
the Will of the deceased.
28. C. When the mortgage loan is paid off in full, the mortgagee executes a discharge in
favour of the mortgagor. The mortgagor must register the Discharge of Charge/Mortgage in
land registry office to legally discharge the lien from the land registry records. Until that
time, the mortgage lien remains in the title of the property.
Merely paying off the mortgage loan is not sufficient. The lien must be registered in Land
Registry office using the Discharge of Charge/Mortgage form. The Document General form
and the Schedule form cannot be used for this purpose.
29. D. This may be considered a minor variance from setback requirements under the
zoning by-laws. An application for approval of minor variance for building the garage would
be made to the local Committee of Adjustment.
30. A. When a land owner wants to divide his land into two or three parcels, an application
for Consent to Sever is made to the local Committee of Adjustment.
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It is incorrect that when the severance is rejected by Committee of Adjustment, the regional
Land Division Committee has the authority to approve it. Appeals are typically made to
Ontario Municipal Board and not to the Ministry of Municipal Affairs and Housing.
Severance approval depends on many factors and dividing a parcel of land into only two
parts is not a guarantee that the application would be approved.
31. B. Two semi-detached homes in a registered subdivision are two distinct properties.
The owner does not need approval to sell any of these houses.
In other situations given here, the owner must get appropriate approval before the land can
be transferred.
32. D. Subfloors rest directly on floor joists and take the live load of people and furnishings.
Floor finishes such as carpet or hardwood are installed on top of subfloor.
Joists are not directly installed on foundation walls because sill is required on top of
foundation walls. Either cross bridging or solid blocking is required between each pair of
joists. Squeaking sound in floors is caused by improper installation of subfloors to joists and
not by joist installation.
33. C. Supply; Waste; Copper; PVC; Bacteriological.
The two aspects of plumbing systems in a residential structure are Supply side and Waste
side. While Copper pipes are used for distribution of water for drinking, washing and
cooking purposes, the water drainage system typically uses PVC pipes. In rural properties
water is supplied from wells and Bacteriological analysis of water is necessary to ensure
that water is not contaminated.
►Note: All options have the same words but only these words go into the blank spaces
respectively (in order).
34. B. Only statements 2, 3 and 5 are correct. Platform framing is used on most modern
residential structures. Lintels are used over window and door openings to support the load
of upper materials. Roof trusses and roof joists perform similar function of supporting the
roof sheathing and covering. Trusses are factory built engineered systems installed 24
inches apart.
Other statements are incorrect. The wall framing in most structures consists of wood studs
and not steel studs. Balloon framing was used in older structures but has mostly been
replaced by platform framing which is considered stronger and reliable.
35. D. CSA standard for testing efficiency of windows include air tightness, water tightness
and wind resistance.
The cost of manufacturing is not one of the factors.
36. A. A narrative report is the most comprehensive method of reporting an estimate of
value. It considers several different aspects of the property for which a value estimate is
required. This type of report can be used for all types of properties and for all purposes of
appraisal.
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A letter of opinion is not a method of value reporting and is not accepted by lenders. Form
report is a short report consisting of mainly pre-printed information. There is no such
method of reporting as 'short form report'.
37. B. Comparable sales selected by the appraiser should satisfy the assumptions of
market value. If the seller was under undue pressure, this would not be a good comparable
for the appraiser.
Other sales are acceptable for the purpose of comparison.
38. C. Depreciation refers to the loss in value of the building structure due to aging, wear
and tear and poor maintenance.
Other terms are not related to loss of value.
39. D. Lenders assess their risk on the basis of several factors. This includes the reliability
of the borrower as well as the physical property conditions. They may increase the limits for
loan to value ratio from the conventional 80%.
The requirement of property appraisal is not waived, though the lenders require a copy of
the accepted agreement of purchase and sale and survey. Application fee may be waived
by lenders in some cases.
40. B. The lender may hold 10% of the loan from the sequential advances until certain
conditions are fulfilled by the builders or property owners. This is known as basic holdback.
Sequential advances refer to the partial payments of the total loan advanced by the lenders
at pre-determined stages of construction. Finishing holdback is not the same as basic
holdback but is in addition to the basic holdback.
41. C. When several percentages are used for commission, the rate must be in descending
order. Commission must decrease as the sale price increases. The given option shows
commission rate in ascending order. Sandy can charge 5% of first $400,000; 4% of next
$400,000 and 3% of the balance.
Other commission arrangements are valid and in compliance with REBBA 2002.
42. A. Only statements 1, 2 and 3 are correct. Registrants must make a written disclosure
when acquiring an interest in real estate. The disclosure includes registrant's status with
RECO, disclosure of any facts that may affect value and particulars of any agreement for
subsequent sale of the same property to a third party.
The registrant does not have to disclose the method of financing the purchase or the
number of years he/she has been registered.
43. D. Statements 1, 4 and 5 are examples of a salesperson fulfilling his/her duty of care to
the client.
Explaining agency relationships is a requirement under REBBA 2002 and not merely a duty
of care. Discouraging the buyer from obtaining a title search is not a good example of duty
of care.
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44. B. If a registrant has a contemplated or existing interest in a property, whether direct or
indirect, the fact must be disclosed to the other party at the earliest practical opportunity but
before an offer is presented.
This explanation makes other options incorrect.
45. C. When a brokerage is representing many buyers and sellers for different properties,
the representation is known as 'concurrent representation'.
Single representation occurs when a brokerage is representing only one client in a
transaction. Multiple representation occurs when the same brokerage more than one client
in the same transaction. Sequential representation occurs when the same brokerage
represents a client first for selling a property and then represents the same client for buying
another property.
46. B. + 2.5%
►Percentage Change = (New Value - Old value) ÷ Old Value X 100 ÷ Months
= (382,500 - 340,000) ÷ 340,000 X 100 ÷ 5 = 2.5%
47. B. $161,000
Time Adjustment = 160,000 X 4 X 5% ÷ 8 = $4,000
Feature Adjustment = + $5,000
Fully Adjusted Sale Price = 160,000 - 4,000 + 5,000 = $161,000
48. A. $63,920
Depreciation = RCN X Effective Age ÷ Economic Life
House: 177,630 X 15 ÷ 50 = 53,289
Addition: 32,677 X 10 ÷ 40 = 8,169
Garage: 9,028 X 12 ÷ 44 = 2,462
Accrued Depreciation = $63,920
►Note: If ‘Remaining Economic Life’ is given, the add Effective Age and Remaining
Economic Life to get the Economic Life.
49. C. 17%
Net Operating Income = 620,000 - 5% - 55% = $265,050
Sale Price = $1,560,000
Cap Rate = 265,050 ÷ 1,560,000 X 100 = 17%
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50. D. Annual Potential Rental Income
Studio Apartments = 20 X 825 X 12 = $198,000
One Bedroom = 16 X 975 X 12 = $187,200
Two Bedroom = 10 X 1,100 X 12 = $132,000
Parking & Storage Income = (20 + 16 + 10) X 30 X 12 = $16,560
Add All Income = $533,760
Vacancy and Bad Debt = 3.5%
Annual Effective Income = 533,760 ― 3.5% = $515,078
Annual Expenses = 56.5% of Annual Effective Income
Net Operating Income = 515,078 ― 56.5% = $224,059
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