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Humber College Exam 4: Invigilated Theory Sample Questions:

1. The cost approach is one method of real estate evaluation that an appraiser may use to estimate the value of a commercial property. Which of the following is NOT an accurate statement regarding the cost approach?

A) The cost approach is typically used to appraise income-generating properties.
B) The cost approach is useful for the appraisal of property types for which sales and income data are scarce, such as industrial and special-purpose properties.
C) The cost approach is preferred for older construction properties, as calculating depreciation on them is fairly straightforward.
D) The cost approach is preferred for newer construction properties, as the appraiser would not need to make a subjective estimation of the accrued depreciation of the building.

2. A salesperson includes a well-drafted condition in an agreement of purchase and sale for their buyer client to arrange a new first mortgage for an industrial property. The buyer later changes their mind and does not want to borrow money for the purchase. What should the buyer's salesperson use to remove the condition?

A) Mutual release
B) Acknowledgment
C) Waiver
D) Notice of fulfillment

3. A salesperson has a buyer client in the metal fabrication industry, which requires outdoor storage and involves substantial noise and smells. The salesperson sees a listing that says "24,000-square-foot light industrial property, multi-uses permitted." Is this a suitable property for their client? Why or why not?

A) Yes, the property is suitable since the client is already in the metal fabrication business, and does not need to get any permits from the municipality prior to moving in and using the property.
B) Yes, the property is suitable, as the listing says the property is light industrial and multi-uses are permitted.
C) Yes, the property will be suitable if the client states they will change the zoning to allow their type and classification of business to operate at this location.
D) No, the property is not suitable, as the client's business type and classification require heavy industrial zoning.

4. An agreement of purchase and sale for an industrial building is accepted conditional on financing with the expiry date of May 14. On May 11, the bank informs the buyer the mortgage cannot be approved until May
17. The salesperson for the buyer then prepares an amendment to the agreement of purchase and sale for the extension of the condition. Which of the following is NOT correct?

A) The buyer can still waive the condition before the expiry date if the seller refuses to sign the amendment, provided there is a waiver provision in the condition.
B) The salesperson should prepare the amendment with midnight, May 17 as the irrevocable time.
C) The buyer can use the same amendment to ask for a change of the closing date.
D) To play it safe, the salesperson should amend the condition with May 18 as the expiry date.

5. A salesperson is representing a commercial tenant client who is interested in leasing a property for their business. The salesperson and their client are inspecting a property that includes a few accessory buildings.
This is ideal for the tenant, as the accessory buildings can serve as storage for their business. The tenant asks their salesperson to find out the measurements of the accessory buildings. Why is it important for the tenant to know the total area of the accessory buildings included on the property?

A) It is important for the tenant to know the total area of the accessory buildings as it will contribute to their rentable area.
B) It is important for the tenant to know the total area of the accessory buildings as they will have to share the use of them with other tenants.
C) It is important for the tenant to know the total area of the accessory buildings as it will be deducted from their rentable area.
D) It is important for the tenant to know the total area of the accessory buildings as it will be considered within the tenant's usable area.

Solutions: