Sample questions: Real estate associate exam

1. Under the Real Estate Act Rules, when must a licensee tell a client how the licensee will be paid for their services?

1. Once an accepted offer has become firm and binding on the parties
2. At the earliest practical opportunity in the relationship
3. When the brokerage issues its final commission invoice
4. Before the first open house is held for the property

Rule 41(c) requires licensees to disclose to their clients, at the earliest practical opportunity, how they will be paid for their services. Waiting for a firm deal, an invoice or a marketing event delays information the client needs from the start. (Real Estate Act Rules, Rule 41(c))

2. Under Rule 57, to whom must a seller's sole agent disclose the material latent defects affecting the property that are known to the licensee?

1. To all buyers, whether or not they are represented by a licensee
2. To buyers who first sign a customer status acknowledgement form
3. To the seller, who then decides whether buyers should be told
4. To buyers' agents, and not to buyers who have no representation

Rule 57(i): a seller's sole agent must disclose to all buyers all material latent defects affecting the property known to the licensee. The duty does not depend on the buyer's representation status or on the seller's permission (see also Rule 41(j)). (Real Estate Act Rules, Rule 57(i))

3. Under Rule 44(1), a licensee may disclose information regarding a client, property or transaction to another person when:

1. the information has been in the brokerage file for over a year
2. the other person is a licensee registered with any brokerage
3. the client authorizes it or the disclosure is required by law
4. the broker approves it as being in the interests of the trade

Rule 44(1) states that, in addition to the requirements of privacy legislation, a licensee must not disclose information regarding a client, property or transaction to another person unless (a) authorized by the client or (b) required by law. (Real Estate Act Rules, Rule 44(1))

4. A buyer's sole agent learns from the listing agent that two other offers have been received on the home her client wants. What does Rule 58 require her to do?

1. Keep it to herself unless the listing agent consents
2. Wait for the seller's response before telling the buyer
3. Mention it if the buyer asks directly about other interest
4. Tell her buyer client that competing offers exist

Rule 58(n) requires a buyer's sole agent to disclose to the buyer the existence and terms of any competing offers known to the licensee for a property in which the buyer is interested. Rule 58(j) also requires timely disclosure of all relevant facts affecting the transaction (Real Estate Act Rules, Rule 58(j), (n)).

5. A home's actual RMS size is 150.0 m². Under RMS Principle 2, within what range must a licensee's calculated size fall?

1. Between 142.5 m² and 157.5 m², a 5% tolerance
2. Between 148.5 m² and 151.5 m², a 1% tolerance
3. Between 135.0 m² and 165.0 m², a 10% tolerance
4. Between 147.0 m² and 153.0 m², a 2% tolerance

Principle 2 says measurements must be calculated to within 2% of the RMS size. 2% of 150.0 m² = 3.0 m², so the range is 150.0 − 3.0 = 147.0 m² to 150.0 + 3.0 = 153.0 m² (Guide to the RMS, Principle 2, p.12).

6. A commission is 7% on the first $100,000 and 3% on the balance. On a $750,000 sale, what is the commission as a single percentage of the price (before GST)?

1. an effective rate of 3.93%
2. an effective rate of 3.53%
3. an effective rate of 5.00%
4. an effective rate of 3.00%

7% x $100,000 = $7,000; 3% x $650,000 = $19,500; total $26,500. $26,500 / $750,000 = 3.53%. Averaging 7% and 3% (5.00%) ignores how much of the price falls in each tier; charging 3% on the full price on top of the $7,000 gives $29,500, or 3.93%; 3.00% ignores the higher first tier.

7. A client wants exposure to commercial real estate but needs to be able to sell quickly at a transparent, daily price. Which market best fits that goal, and why?

1. The private market, as direct ownership gives the quickest exit
2. The public market, as listed REIT units trade daily on an exchange
3. The public market, as municipal assessments are published yearly
4. The private market, as negotiated sales reveal prices every day

Public markets, such as REIT units listed on a stock exchange, offer liquidity and observable daily prices. Private markets (direct ownership of buildings) involve negotiated, infrequent transactions, longer selling periods and less price transparency. Assessments are not market prices. (PCRE Blueprint 1.1.2.16)

8. Under Alberta's Residential Tenancies Act (RTA), how is a property manager who rents out a unit as agent for the owner treated?

1. As a landlord, with the duties that the Act places on landlords
2. As the tenant's agent whenever the manager collects the rent
3. As a third party who falls outside the scope of the Act entirely
4. As an employee of the owner, with no duties under the Act itself

The RTA defines "landlord" to include a property manager who acts as agent for the owner, and any other person who, as agent for the owner, permits occupation under a residential tenancy agreement (RTA s.1(1)(f)(ii)). The manager therefore carries the landlord's obligations on notices, deposits and inspections.