Copyright 2010 OREA OREA Ontario Real Estate Association. February 2010

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2 Copyright 2010 OREA OREA Ontario Real Estate Association February 2010 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form, or by any means, mechanical, electronic, photocopying, recording or otherwise, without the prior written consent of the Ontario Real Estate Association (OREA).

3 The OREA Real Estate College has expanded the use of multiple choice examinations for all registration education courses. This testing format has a number of advantages for you our customer. The use of scantron technology allows the College to process examination results quickly. This provides students with added flexibility to plan their progress through the program. Students who answer questions incorrectly will be provided with feedback highlighting both the chapter and topic related to these questions. This feedback is being provided to all students for all incorrectly answered questions whether or not a passing mark was achieved on the examination. It is important that students be made aware of all topics which require additional review. Changes in the real estate marketplace occur frequently and are incorporated into course curriculum. The College is able to easily introduce new questions to ensure that students are examined on up to date course material. Knowledge of current practices is vital to a successful career as a real estate sales professional. This publication has been developed as a guide to help you understand the types of multiple choice questions and the distribution of marks which you can expect to see on OREA Real Estate College examinations. The following information is provided for your benefit: There are four types of multiple choice questions asked on examinations. They are referred to as Levels 1 4. For each level you will find an explanation of the question type, sample questions, correct answers and an example of the feedback should the question not be answered correctly. A chart showing the types of questions, number of questions on each examination, marks per question and total marks.

4 Table of Contents What is a Level 1 Question?... 1 What is a Level 2 Question? What is a Level 3 Question? What is a Level 4 Question? Exam Templates Real Estate as a Professional Career Land, Structures and Real Estate Trading The Real Estate Transaction General The Residential Real Estate Transaction The Commercial Real Estate Transaction Real Property Law Principles of Appraisal Principles of Mortgage Financing Principles of Property Management Real Estate Investment Analysis Real Estate Broker Course... 10

5 What is a Level 1 Question? Questions require students to recall and demonstrate their understanding of facts and concepts. Questions typically ask students to define, describe, identify, list, outline, recall, recognize, select, distinguish, estimate and summarize. Sample Questions Correct Answer Feedback A principal's obligation to protect the agent from any action brought against the agent in the lawful fulfillment of the agent's duties is known as: a. remuneration b. duty of care c. indemnification d. delegation c Please Refer to Land, Structures and Real Estate Trading Chapter 15: Trading and Agency Relationships, Topic: Agency Relationships Principal Indemnification Identify one of the essential elements that must be present in every contract for it to be enforceable. a. There must be past or future consideration. b. A seal must be present in the contract. c. The acceptance of the offer must be communicated to the offeror. d. The consideration must have reasonable value. c Please Refer to The Real Estate Transaction - General Chapter 1, Understanding Contract Law, Topic: Offer and Acceptance (Mutual Agreement) 1

6 What is a Level 2 Question? Questions require students to use their knowledge of facts and understanding of concepts to solve problems or complete a task. Questions typically ask students to apply, demonstrate, predict, prepare, solve, distinguish, identify, illustrate, outline, calculate and select. Sample Questions Correct Answer Feedback 1. Salesperson Lee of ABC Realty Inc. has listed a property at a rate of 6% commission. Salesperson Lee is compensated based on a 60/40 commission split with the brokerage (Note: brokerage retains the smaller portion). Salesperson Martin of XYZ Real Estate Ltd. sells the property. All salespeople within XYZ Real Estate Ltd. have a commission split of 55/45 with the brokerage. The commission distribution between listing and selling brokerages is 50/50. The property sells for $145,000. Calculate the amount of commission payable to each party. a. ABC Realty Inc.: $4,050; Salesperson Lee: $2,430; XYZ Real Estate Ltd.: $1,822.50; Salesperson Martin: $2, b. ABC Realty Inc.: $1,740; Salesperson Lee: $2,610; XYZ Real Estate Ltd.: $2,392.50; Salesperson Martin: $1, c. ABC Realty Inc.: $1,740; Salesperson Lee: $2,610; XYZ Real Estate Ltd.: $1,957.50; Salesperson Martin: $2, d. ABC Realty Inc.: $2,610; Salesperson Lee: $1,740; XYZ Real Estate Ltd.: $2,175; Salesperson Martin: $2,175. c Please Refer to Real Estate as a Professional Career Chapter 1 A Career in Real Estate Topic: A Career in Real Estate Salesperson Remuneration The Commission Sales Model 2

7 Sample Questions Correct Answer Feedback 2. Appraiser Leung is working on an appraisal for 44 Rabble Road. Leung is trying to determine the price trend in the neighbourhood in order to make the necessary time adjustments to comparable sold properties. He has come across a property in the area that sold seven months ago for $269,500 and resold one month ago for $291,200. Based on these two sales, what is the monthly percentage that Leung would use when calculating time adjustment (rounded to 2 decimal places)? a % b % c % d % a Please Refer to Land, Structures and Real Estate Trading Chapter 10 Direct Comparison Approach, Topic: Adjustment Calculations Time Resale Analysis 3

8 What is a Level 3 Question? Questions require students to review a series of questions in a case study and to use their knowledge of facts and understanding of concepts to critique, make judgments and/or build solutions to problems. Questions typically ask students to appraise, calculate, compare, conclude, contrast, criticize, critique, defend, describe, evaluate, explain, interpret, justify, summarize and support. Sample Questions Correct Answer Feedback Tom and Ellen O'Leary and their two young daughters have recently moved into town and have signed an offer to lease on a house at 147 Edgeware Road for one year, commencing February 1st. When the offer is presented to the owners, they are satisfied with all of the terms but make a counter offer to the O'Learys in which they include a no pet clause because they are concerned about any possible damage being done to their property by a pet. The O'Learys have no pets and do not object to the clause being included. As a result, they accept the counter offer, sign a lease with the owners and move into 147 Edgeware Road on February 1st. Please answer the following three questions based on the information provided above and in the questions themselves. 1. It is now the 15th of June and the O Learys have just bought a dog for their daughters. The owners have found out and are furious. They remind the O'Learys of the no pet clause in the lease and demand that they get rid of the dog. According to the Residential Tenancies Act, can the owners legally enforce their demand that the dog be removed from the home? a. Yes. The O Learys are bound by their lease which has a no pet provision and must remove the dog. b. No. The O Learys cannot be forced to get rid of the dog. A no pet clause in a lease agreement is void. c. Yes. The no pet provision is valid because at the time the O Learys signed the lease, they did not have a dog. d. No. A no pet clause can only be enforced if they had a pet at the time the lease was signed but neglected to inform the owners of that fact. b Please Refer to The Residential Real Estate Transaction Chapter 3 Topic: Residential Tenancies Act Pet Provisions 4

9 Sample Questions Correct Answer Feedback 2. On the 20th of November, the O'Learys receive a written notice on the approved form by mail from the owners informing them that there is going to be an increase in rent starting on the 1st of February of next year. Based on the information provided and the provisions of the Residential Tenancies Act, are there any problems with this notice of rent increase? a. No. Notice has been given more than the required 60 days prior to the end of the lease. b. Yes. The notice must be given to the tenant at least 90 days prior to the end of the lease. c. No. Provided that the amount of rent increase does not exceed what is permitted under the Act, the notice can be given as little as 30 days prior to the end of the lease. d. Yes. In order to be effective, the written notice must be hand delivered to the tenant at least 60 days prior to the end of the lease. b Please Refer to The Residential Real Estate Transaction Chapter 3 Topic: Residential Tenancies Act Rent Increase General Provisions 3. On December 10th, the owners decide to sell their property at 147 Edgeware Road and list it with salesperson Ward of ABC Realty Inc. At 3 p.m. on December 14th, Ward phones the O'Learys to tell them that there will be a showing of the property at 8:30 p.m. on December 15th. The O'Learys are not happy about this. Based on the provisions of the Residential Tenancies Act, do you have any concerns with this showing? a. Yes. Written notice is required for the showing and the showing must take place before 8 p.m. b. No. Provided the showing takes place before 9:00 p.m., there is no problem. c. Yes. The O'Learys are entitled to quiet enjoyment of the property and showings for sale can only take place at the end of the lease. d. No. Ward has complied with the Act by giving the tenants 24 hours notice prior to the showing. a Please Refer to The Residential Real Estate Transaction Chapter 3 Topic: Residential Tenancies Act Landlord Right of Entry 5

10 What is a Level 4 Question? Requires the same cognitive skills as used in level 3, except that the concepts and topic matter are explored to a greater degree in a case study that makes use of additional questions. Questions typically ask students to appraise, calculate, compare, conclude, contrast, criticize, critique, defend, describe, evaluate, explain, interpret, justify, summarize and support. Sample Questions Correct Answer Feedback This case study explores the relationships with sellers and buyers that brokerages and salespeople encounter on a regular basis. You are required to apply the common law of agency to this situation, along with the statutory requirement of REBBA 2002, including the Code of Ethics, and procedures followed in the normal course of business as reflected in the standard forms used by salespeople on a regular basis. Read the scenarios described below and answer the five questions based on the scenarios. Choose the answer that best applies the legal principles involved. 1. A salesperson is holding a Saturday Open House on a property the salesperson has recently listed and a young couple stop in to view the property. After the couple complete their walk-through of the property, they catch the attention of the salesperson and state that they like the property very much and would like to make an offer. From the four choices listed below, select the first thing the salesperson should say in response to this young couple: a. Have you signed any agreement to work with any other salesperson to find a property? b. Before we discuss the terms of your offer, I need you to enter into a representation agreement with me. c. "Do you have the financing in place to make a cash offer? d. There is a lot of interest in this property and if you don t want to lose it, you should make an offer as soon as possible. a Please Refer to Real Property Law Chapter 4, Agency Representation, Topic: Agency Disclosure 6

11 Sample Questions Correct Answer Feedback 2. The salesperson realizes that before proceeding any further with this young couple, the salesperson must ensure they understand how agency works, the options open to them, and the services that will be provided with each option. The salesperson explains the various aspects of agency relationships to the buyers. Keeping in mind they have already stated they want to make an offer on the property, which of the following statements best describes how the salesperson should now proceed? a. The salesperson should ask them to enter into a representation agreement before they make the offer. b. The salesperson should tell them to find a different salesperson who can advise them and take their offer. c. The salesperson should arrange to have another salesperson in the office take their offer. d. The salesperson should explain to them that the salesperson represents the seller and can provide them with customer service and write up their offer. d Please Refer to Real Property Law Chapter 4, Agency Representation Topic: Agency Dual Agency 3. Assuming for now that the salesperson did decide to enter into a representation agreement with the buyers, which of the following statements would now apply to the salesperson s legal situation? a. By creating multiple representations, the salesperson has avoided creating a conflict of interest and this is a benefit for both the seller and the buyer. b. The salesperson must obtain the written consent of both seller and buyer for multiple representations. c. The salesperson s primary duty is to the seller client, but the salesperson must also be fair to the buyer. d. The sellers have already agreed to multiple representations when they signed the listing, so they cannot object to the salesperson s decision to also represent the buyers. b Please Refer to Real Property Law Chapter 4, Agency Representation Topic: REBBA 2002 Multiple Representation 7

12 Sample Questions Correct Answer Feedback 4. In fact, the buyers are not willing to commit to a representation agreement, therefore they enter into a customer service agreement with the salesperson and the salesperson proceeds with discussions to obtain the offer from them. The salesperson is interested in making a quick and easy sale and tells them (falsely) that there is already another offer on the property and if they do not want to lose it, they should make an offer with a large deposit and no conditions. The buyers agree to this suggestion and purchase the property. Unfortunately, after the sale is completed, the buyers discover a number of defects in the condition of the property and quickly become very unhappy with their purchase. Which of the following statements best describes the salesperson s conduct towards them when obtaining their offer? a. The buyers chose not to be represented so there is no reason for them to complain about the conduct of the salesperson. b. The standard Agreement of Purchase and Sale states they have had an opportunity to have a home inspection, so the salesperson is not in any way responsible if they chose not to do so. c. The common law principle of buyer beware applies to buyer customers and the buyers have no cause to complain. d. The salesperson owed the buyer, at the very least, a duty of care and may have breached this duty, as well as a duty of fairness as required by the REBBA 2002 Code of Ethics. d Please Refer to Real Property Law Chapter 4, Agency Representation Topic: Agent Duties to Third Parties 8

13 Sample Questions Correct Answer Feedback 5. The lawyer for the buyers writes a letter to the salesperson and one of the claims in the letter states that the buyers were clients when they purchased the property and their interests should have been adequately protected. Since the buyers signed a customer service agreement, the salesperson is confident there is no reason for the buyer to claim they were represented. Is there any basis at all for the claim the buyers should have been protected as clients? a. No, agency options were explained to them and they chose customer service. b. No, the only way to create agency obligations is to enter into a representation agreement. c. Yes, any time a buyer makes an offer through the listing salesperson, multiple representations is created. d. Yes, the salesperson may have created a fiduciary relationship by giving the buyers advice which the buyers acted on. d Please Refer to Real Property Law Chapter 4, Agency Representation Topic: Agency Types of Agency Undisclosed Dual Agency 9

14 Exam Templates Real Estate as a Professional Career Level Type of Questions # of Questions Marks per Question Total Marks 1 1 Sentence Narrative (2-3 sentences) Case-study Simulation Total: Land, Structures and Real Estate Trading Level Type of Questions # of Questions Marks per Question Total Marks 1 1 Sentence Narrative (2-3 sentences) Case-study Simulation Total: The Real Estate Transaction General, The Residential Real Estate Transaction, The Commercial Real Estate Transaction, Real Property Law, Principles of Appraisal, Principles of Mortgage Financing, Principles of Property Management, Real Estate Investment Analysis and Real Estate Broker Course Level Type of Questions # of Questions Marks per Question Total Marks 1 1 Sentence Narrative (2-3 sentences) Case-study Simulation Total:

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