Real Estate Agents' Program
Review Test

1 RECA and AREA are two separate, although closely related bodies within the real estate industry. Which of the statements below best describes a significant difference between RECA and AREA?
a. RECA administers the Real Estate Act while AREA licenses real estate industry
    members in Alberta.
b. RECA licenses real estate industry members in Alberta while AREA represents
    members of local boards.
c. AREA manages investigations into consumer complaints while RECA authorizes
     the use of the REALTOR trademark.
d. AREA develops pre-licensing education for agents and brokers while RECA is
    a government agency in the department of Municipal Affairs.

2 Carl (an agent) is trusted to handle the affairs of the Mr. and Mrs. Green (seller) and owes certain fiduciary duties to them. Examine the items listed below and indicate which one(s) Carl is responsible to the Greens to provide?
        I.   marketing strategy
        II.  loyalty
        III.  full accounting
a. I only
b. II and III
c. I and II
d. I, II, and III

3 Fiduciary duties, the backbone of an agency relationship, form a common thread throughout real estate transactions. As reflected in the Real Estate Act Rules, fiduciary duties are not to be taken lightly. Examine the statements below and determine whether one, any or all of them Carl (agent) must do that would fit the definition of his fiduciary duty to the Greens.
        I.   Carl must keep an accurate record of money or other property
              received or expended on behalf of Mr. and Mrs. Green
        II.  Carl must place the interests of the Greens above all else
              except the law.
        III. Carl must follow strictly the Green's lawful instructions.
a. I only
b. I and II
c. II and III
d. I, II and III

4 Dual agency represents a special aspect of an agency relationship. Which of the situations below is an example of dual agency?
a. McPherson Realty's agent represents the seller; Renowned Realty's agent
    represents the buyer.
b. McPherson Realty's agent represents the seller; the buyer represents himself.
c. Renowned Realty's agent represents the seller; McPherson Realty's agent
    represents the buyer.
d. A McPherson Realty agent represents the seller; another McPherson Realty
     agent represents the buyer.

5 What information listed below would be considered confidential in a dual
agency relationship?
        I.    the price the seller would be willing to accept
        II.   the price the buyer would be willing to pay
        III.  the reason the seller is selling
        IV.  the reason the prospective buyers are buying
a. I and III
b. I, II, III and IV
c. I and II
d. III and IV

6 The courts will not enforce contracts made for illegal purposes. Contracts cannot contravene regulatory statues or public policy. Examine the statements below. Decide whether each is TRUE or FALSE. All statements must be TRUE to answer TRUE. If at least one statement is FALSE, you must choose FALSE as the answer to this question.
        All parties to the contract must intend by their actions to create
        a legally binding obligation.
        Contracts involve consideration. Consideration may be in the form
        of value and must be lawful.
        A binding contract involves mutual agreement expressed in the
        agreement and acceptance that must be genuine and real.
        Legal seals make a contract without consideration binding.
a. TRUE
b. FALSE

7 A contract consists of six essential elements. Which of the terms listed below best describes a contract that has one or more missing elements?
a. breached
b. frustrated
c. void
d. unfulfilled

8 A contract is an agreement between two or more competent parties to do or refrain from doing specified acts with the intent that the contract be legally binding upon them. Examine the statements below. Decide whether each is TRUE or FALSE. If all statements are TRUE, then entire question is TRUE. If at least one statement if FALSE, you must choose FALSE as the answer to this question.
        Certain individuals are not legally competent to enter into a contract.
        Contracts cannot be made on Sundays as it violates the Lord's Day Act.
        Consideration must be lawful.
        Acceptance of a contract must be made in the manner required by the offer.
a. ALL BUT ONE IS TRUE
b. TRUE
c. FALSE

9 After Carl (a real estate agent) listed Mr. Banthod's property, Carl decided to buy the property. What must Carl do to comply with the Real Estate Act?
a. make his position known to the seller in writing
b. wait until the listing expires
c. offer a price higher than prospective buyers
d. wait 30 days then offer the full listed price

10 Carl (a real estate agent) is entitled to fees for services rendered as outlined in the Real Estate Act. Which of the following would allow Carl to receive compensation under the terms of the Real Estate Act?
a. difference between listed price and sale price forms the basis of fee charged
b. registration in AREA's Real Estate Agents' Program
c. listing residential property and charging 6% of the property value
d. Carl must request payment from his broker
e. charging an agreed upon amount on the sale of residential land

11 The Real Estate Council has been set up as a corporation under the Real Estate Act. The Council has the capacity, the rights, powers and privileges of a mature person. The Council is not an agent of the Crown. Examine the statements below. Indicate which statement(s) reflect(s) the purpose of the Real Estate Council.
        I.    to set and enforce standards of conduct for the industry
        II.   to administer rules, regulations and the bylaws as provided
              by the Real Estate Act
        III.  to provide services that, in the opinion of the executive director,
              enhance and improve the industry
a. I only
b. I and II
c. I, II and III
d. II and III

12 If Carl, an industry member, commits an act of fraud or breach of trust, the injured party is entitled to make a claim for losses. To which one of the following bodies would the injured party make a claim?
a. Assurance Fund
b. Real Estate Insurance Exchange
c. Real Estate Foundation
d. Errors and Omissions Insurance Fund

13 In addition to the Real Estate Act, sections of federal, provincial and municipal legislation also affect the real estate industry. From the statements below, choose the one(s) that connect(s) the circumstances to the appropriate legislation.
        I.    The Dower Act does not apply to corporations on title even
               if a married individual owns all of the shares of the corporation.
        II.   The Municipal Government Act encompasses all aspects of land use.
        III.  The Competition Act applies to all sections of the economy and all
               facets of the real estate business.
a. I only
b. I and III
c. I, II and III
d. II and III

14 The Real Estate Act outlines in detail the responsibilities of a broker. The broker may wish to delegate his/her responsibilities to another person in the brokerage. Examine the statements below and determine which one best illustrates the conditions under which this delegation of authority can occur.
a. The owner of the brokerage gives his/her permission for the responsibilities to
    be delegated
b. RECA gives written permission for the delegation
c. Only the broker is licensed to operate the brokerage
d. The person to whom the responsibilities are to be delegated is registered with
    the brokerage and qualified to carry out the responsibilities.

15 Carl (an agent) passed the Provincial Qualifying Examination. Under the Real Estate Act Rules, what is required before he can trade in real estate?
a. Carl must find a brokerage with which to work.
b. RECA must register Carl with a brokerage.
c. Carl must be able to financially support himself for four months.
d. Carl must have business cards approved and printed.

16 Examine the statements below. Under which of these circumstances is a broker responsible for the conduct of an associate broker, agent or employee?
        I.    if the broker has knowledge of the misconduct
        II.   if the broker should have knowledge of the misconduct
        III.  if the broker fails to take reasonable steps to prevent or
              deal with such misconduct
a. I, II and III
b. I only
c. I and II
d. II and III

17 The Condominium Property Act specifies that a condominium plan must be created and registered. Examine the statements below. Decide whether each is TRUE or FALSE. All statements must be TRUE to answer TRUE. If at least one statement is FALSE, you must choose FALSE as the answer to this question.
        The plan is a multi-stage process. Once the framing stage is complete,
        the plan must express the size of all units in square meters.
        The prepared plan must include a land surveyor's certificate.
        Every plan presented for registration as a condominium must include
        a drawing illustrating the units.
        A plan presented for registration must be signed by the manager of the property.
a. TRUE
b. FALSE

18 Condominium living has increased in popularity over the last decade. There are advantages and disadvantages to this residential lifestyle. Examine the statements below. Decide whether each correctly represents a condominium corporation.
        I.    A condominium corporation is a mini-government with the means to
              enforce its own bylaws.
        II.   A condominium corporation allows the board of directors to set the
              corporation's budget and issue annual financial statements.
        III.  A condominium corporation requires the board of directors to establish
              and maintain a reserve fund
a. I only
b. I and II
c. I, II and III
d. II and III

19 The Divine Condominium Corporation has a budget of $125,000 per year with unit factors per unit of 287. What are the monthly condominium fees per unit?
a. $278
b. $299
c. $287
d. $289

20 The condominium plan outlines the units owned by individual owners. Other areas in a condominium plan are referred to as 'common'. Who owns the common property on a condominium plan?
a. shared among unit owners according to the number of unit factors assigned to their units
b. the municipal government
c. the developer of the condominium project
d. shared equally among all unit owners in the condominium

21 Condominium sales, whether new or re-sales, involve documentation that an agent should provide to potential customers. Examine the list of documents below. Which of these documents must be provided to either the buyer or the seller?
        I.    a copy of the budget of the condominium corporation
        II.   an estoppel certificate
        III.  a copy of any recreational agreement
a. I only
b. I and II
c. I, II and III
d. II and III

22 Condominium re-sales add another dimension to the responsibilities of a real estate agent. Examine the statements below. Decide which one(s) identifies(y) relevant guidelines for an agent.
        I.    The agent should obtain a copy of the condominium plan.
        II.   The agent should know who to contact for detailed information
               about insurance coverage and to obtain a copy of the insurance policies.
        III.  The agent should request condominium documents once a listing
               is obtained.
a. I only
b. I and II
c. II and III
d. I, II and III

23 The Condominium Property Regulation provides for a reserve fund study to be conducted by a qualified person. Once the reserve fund study is approved, how many years is it legally in force?
a. 2 years
b. 5 years
c. 3 years
d. 7 years

24 In which of the following circumstances would a landlord be allowed to terminate a tenancy agreement under the Regulation of the Residential Tenancies Act?
a. the landlord dislikes the tenant
b. a relative of a landlord wants to move in
c. the landlord wants to charge higher rent
d. the tenant complained about poor plumbing

25 The Residential Tenancies Act covers all aspects of an agreement between a landlord and a tenant when a residential property is leased. Examine the statements below. Decide whether each is TRUE or FALSE. All statements must be TRUE to answer TRUE. If at least one statement is FALSE, you must choose FALSE as the answer to this question.
        A tenancy agreement can either be periodic or fixed term.
        The tenant will maintain the premises in a reasonably clean condition.
        A landlord or tenant may not change locks on any premises without
        mutual agreement.
        All security deposits must be deposited in an interest-bearing trust account
        within two banking days of collecting them.
a. ALL BUT ONE IS TRUE
b. FALSE
c. TRUE

26 Examine the statements below. Which one best describes the 'power of eminent domain'?
a. an owner dies without a will or heir
b. a property does not conform to fire regulations
c. restrictive covenants are placed on the title
d. the land interferes with a public works project

27 Determine the net operating income of a property with an indicated value of $3,854,800 and a capitalization rate of 9.5%.
a. $366,206
b. $329,970
c. $32,997
d. $28,911
e. $289,110

28 The Browns qualified for $180,000 loan. If they plan to put 20% down, what is the price of the houses they can consider?
a. $225,000
b. $216,000
c. $144,000
d. $236,000

29 The Direct Comparison Approach is being used to appraise a bungalow with a floor space of 115 m2. A comparable property, having only 105 m2, sold 6 months ago for $140,000. Houses in this area are selling for approximately $1,300 per square meter. If properties are currently selling for 5% more than they did a year ago, what is the adjusted value of the comparable property?
a. $156,500
b. $143,500
c. $153,000
d. $156,825

30 Which of the statements below best describes the use of the Direct Comparison Approach to place a valuation on a property?
a. estimating the price for new residential homes in a new subdivision
b. determining the value of a vacant lot
c. establishing the price of a non-profit hospital
d. determining the best price for an apartment building

31 A listing is both a contract and a process between the seller and the seller's brokerage. Certain relationships and rights occur when a listing contract is formalized. Examine the statements below. Decide whether each is TRUE or FALSE. All statements must be TRUE to answer TRUE. If at least one statement is FALSE, you must choose FALSE as the answer to this question.
        The listing process involves advising the seller on how to get the property in
        saleable condition.
        The listing contract creates an agency relationship between the seller and the
        seller's agent.
        The listing contract grants authority to a real estate brokerage to sell, exchange
        or lease seller's property for certain terms and conditions described in the contract.
        The listing process determines the price of the property.
a. ALL BUT ONE ARE TRUE
b. ALL BUT ONE ARE FALSE
c. TRUE
d. FALSE

32 The Residential Real Estate Listing Contract is a pre-printed form provided by AREA. Members of the real estate boards may use it. Examine the statements below and choose the one(s) which correctly refer(s) to the listing contract.
        I.    All the registered owners of property must be named preferably as
              they appear on the Certificate of Title.
        II.   Two criteria to distinguish between an attached and unattached good are:
              the degree to which it is attached and the purpose for attaching it.
        III.  The brokerage sets the commission fee
a. I only
b. II and III
c. I, II and III
d. I and II

33 Purchase contracts may refer to attached and unattached goods. Which of the following items is the best example of an attached good?
a. clothesline
b. electric garage door opener
c. gas barbeque
d. garden shed

34 Multiple offers on a property could be a fact of life in a hot market. What is the appropriate action that a seller should take upon the receipt of multiple offers?
a. Counter all offers with a higher price
b. Offers must be presented in the order they were received
c. Increase the price on the listing
d. Inform interested buyers of the best offer, giving them all the opportunity to match it
e. The seller should review all offers before deciding on one

35 Certain basic principles influence property value and methods used in its appraisal. One of these is the principle of highest and best use. From the statements below, choose the one that best describes the principle of highest and best use.
a. the use which creates and maintains a reasonable degree of conformity
b. the use most likely to produce the greatest net return to the land
c. the use that meets the highest demand
d. the property which offers the desired features at the lowest cost

36 Many factors influence the value of property. These factors may be physical, social and economic. Which of the following statements is an example of an economic factor that directly influences the price of a property?
a. the availability and the cost of mortgage money
b. the land use bylaws and building codes
c. the nature of the land such as soil conditions
d. the location of economic and cultural activity

37 The appraisal process involves using various methods to arrive at the correct valuation of a property. The Direct Comparison Approach is usually the first method used in valuation. Which of the following would be the best tool in using the Direct Comparison Approach?
a. competitive listings
b. capitalization
c. reproduction costs
d. accrued depreciation

38 Where would the following property be located in Alberta? NW1/4 10-26-5-W4
a. 30 miles west of the Alberta/Saskatchewan border
b. 30 miles north of the Canada/US border
c. 10 miles west of Edmonton
d. 30 miles west of Calgary

39 Canadian surveyors devised the legal description of land in Alberta. Consider the legal description of SW1/4 22-42-3-W5. What does the '22' in the legal description represent?
a. range
b. section
c. meridian
d. township

40 A property sale closes on September 14. Property taxes for the year are $980.00. Who receives the tax credit on closing?
a. seller
b. $287
c. buyer
d. $410

Check your ANSWERS!