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Exam 4: Invigilated Theory Exam Question and Answers

Exam 4: Invigilated Theory Exam

Last Update Feb 14, 2025
Total Questions : 120

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Questions 1

When calculating the total purchase price of farmland with improvements on it, which of the following items is NOT included?

Options:

A.  

Goodwill

B.  

Fixed equipment

C.  

Residence

D.  

Barns and sheds

Discussion 0
Questions 2

In regard to Environmental Site Assessments (ESAs), which of the following is NOT accurate?

Options:

A.  

An ESA is intended to determine if a property has been contaminated or is facing any environmental threats.

B.  

Every new commercial property must undergo an ESA prior to construction.

C.  

ESAs are regulated under the Canadian Environmental Protection Act.

D.  

Local building departments use ESAs as the basis for changes to municipal zoning bylaws.

Discussion 0
Questions 3

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?

Options:

A.  

Acknowledgment

B.  

Notice of fulfillment

C.  

Mutual release

D.  

Waiver

Discussion 0
Questions 4

A buyer is purchasing a farm and all the animals are included in the sale price. The buyer is worried the animals could become infected with disease prior to closing, so the salesperson inserts a clause in the agreement of purchase and sale to address that issue. Which of the following should NOT be included in the clause to protect the buyer?

Options:

A.  

The number of animals based on type, gender, and health; if the number is not the same at closing, the price will be adjusted.

B.  

A condition requiring a check-up of each animal by a predetermined veterinarian during due diligence.

C.  

State that the buyer is assuming all animals on an "as is" basis.

D.  

State that the seller will continue the day-to-day farm operations until closing.

Discussion 0
Questions 5

Asset sale and share sale are two different ways to sell a business. Which statement describes an asset sale?

Options:

A.  

The buyer replaces the seller as the owner of the corporation.

B.  

The buyer assumes all assets and accepts all liabilities of the business.

C.  

The buyer is eligible for tax deductions and benefits by claiming capital cost allowance on depreciable property.

D.  

The seller benefits from a tax standpoint since any gain to the seller on the sale will be considered under the capital gains tax exemption.

Discussion 0
Questions 6

A salesperson is assisting both the tenant and the landlord in a commercial property rentaltransaction. Which of the following statements about calculating the remuneration for this transaction is correct?

Options:

A.  

The tenant may be required to pay the deficiency between the contracted amount in the tenant representation agreement and the amount actually paid by the landlord.

B.  

Salespersons are prohibited from indicating directly that remuneration is fixed by any association but can indicate it indirectly.

C.  

Remuneration can be calculated based on the difference between the listing price and the actual rental price.

D.  

Remuneration can be an agreed amount or a percentage of the rental price, but not a combination of both.

Discussion 0
Questions 7

A seller provides you with architectural drawings of their building. Which statement is NOT correct?

Options:

A.  

Architectural drawings are source documents.

B.  

A photocopy of a source document can be used to verify information.

C.  

If changes are made to source documents, they are still valid if you have the original document.

D.  

Other types of source documents include surveys and tax records.

Discussion 0
Questions 8

A salesperson is representing a seller of a pet food store and is preparing the marketing materials. Which of the following is a document the salesperson is required to provide to prospective buyersof the business?

Options:

A.  

A list of customers who have purchased products in the last 60 months or since the business was acquired.

B.  

A statement of the expenses for the business for the past year or since the business was acquired.

C.  

A list of equipment, chattels, and fixtures that are included with the business.

D.  

An income statement for the past 12 months or since the business was acquired.

Discussion 0
Questions 9

What is the best indicator of a strong office market?

Options:

A.  

The absorption rate, net absorption rate, and rising rental rates

B.  

When tenants have lots of options because of the amount of available space at favorable rates

C.  

Low rental rates and many concessions

D.  

The number of free months given to new and renewing tenants by landlords in the office marketplace

Discussion 0
Questions 10

Different clauses can be used for each transaction to address the unique needs of buyers and sellers. Which of the following may be used in an agreement of purchase and sale to buy a commercial property?

Options:

A.  

A clause for the buyer to review the leases only after all conditions have been waived and accepted

B.  

A clause to confirm the remuneration payable to the brokerages will be as stated in the seller representation agreement

C.  

A clause for the seller to disclose all information verbally without providing supporting documents to verify that information; documents to be provided on closing

D.  

A clause for the buyer to have the right to negotiate for specialized restaurant equipment that is not included in the property purchase price

Discussion 0
Questions 11

The operating costs of a commercial building are usually higher than those of buildings that do not have any common areas. Common area maintenance (CAM) is referred to as the landlord's operating costs attributable to factors that affect the common areas. Which of the following is NOT one of those factors?

Options:

A.  

Repairs

B.  

Supervision

C.  

Operations

D.  

Depreciation

Discussion 0
Questions 12

There are different requirements under REBBA and other legislation that affect the sale of a business. Which of the following is NOT correct?

Options:

A.  

A key consideration a salesperson must keep in mind when handling the sale of a business is operating licenses.

B.  

Depending on the business location, there are various municipal bylaws, zoning, permits, and other rules and regulations that could impact the sale of a business.

C.  

There are various municipal bylaws that could impact the sale of a business, depending on the business activity.

D.  

If a municipal license is associated with the business and it may be transferrable to the buyer, then it is of no concern to the sales representative.

Discussion 0
Questions 13

There are three primary items that require attention when countering an offer from a seller. Which of the following items does NOT need to be checked?

Options:

A.  

The date of the agreement of purchase and sale

B.  

The balance due clause

C.  

The irrevocability clause

D.  

The purchase price

Discussion 0
Questions 14

Issues that occurred prior to the closing of a transaction may be uncovered by title and non-title searches during due diligence. Which of the following is a non-title search concern?

Options:

A.  

Liens and encumbrances that are registered against the property

B.  

The property's use doesn't comply with municipal zoning bylaws

C.  

A registered right of way that blocks the buyer's intended use of the property

D.  

The seller is not entitled to transfer title to the property for some reason

Discussion 0
Questions 15

A retail property buyer must consider the parking requirements associated with the site. All of the statements below are considerations for parking, EXCEPT:

Options:

A.  

There may be minimum width and depth requirements for parking spaces.

B.  

Parking may be impacted by zoning requirements.

C.  

Parking may be impacted by the municipality’s parking bylaw.

D.  

Required parking for persons with disabilities is usually fixed as a ratio based on the number of disabled persons in the community.

Discussion 0
Questions 16

Land developers purchase land for commercial, industrial, and residential projects. Tracts of land larger than five acres but smaller than 10 acres may appeal to land developers for various reasons. Which of the following is one of the reasons?

Options:

A.  

They are a good size for modern 18-hole golf courses.

B.  

They can be used for newly planned subdivisions.

C.  

They are normally less expensive than pieces of land smaller than two acres in the same neighborhood.

D.  

The developer cannot find a building lot to build a detached home.

Discussion 0
Questions 17

Which of the following accurately describes a landlord's commercial property insurance coverage?

Options:

A.  

A landlord's commercial property insurance policy should cover the loss of the property's equity due to a change in market conditions or to a recession.

B.  

A landlord’s commercial property insurance policy should cover the loss of the tenant’s assets and income due to business interruption as the result of a fire or flood.

C.  

A landlord’s commercial property insurance policy should cover the loss of rental income in the event of a fire, for the period the premises is vacant while repairs are made.

D.  

A landlord's commercial property insurance policy should cover the loss of the tenant's assets due to theft from their employees or third parties.

Discussion 0
Questions 18

A salesperson, who is representing a tenant, has completed a comparative market analysis (CMA) of the management fees charged, assessed on a square footage basis, at the different office buildings that their client is interested in leasing. The management fees vary across the comparable office buildings, and the tenant is interested to know why there is a difference. Which of the following is an accurate statement the salesperson can make about the difference in management fees between the buildings?

Options:

A.  

The salesperson should tell their client that higher management fees charged for a building always indicates that the tenant is getting superior service and value.

B.  

The salesperson should explain that a tenant occupying a smaller rentable area in a building pays higher management fees per square foot compared to a tenant with an average or larger rentable area.

C.  

The salesperson should identify the reasons for high management fees charged for a building and determine the relative value it provides.

D.  

The salesperson should tell the tenant that the Condominium Authority of Ontario regulates management fees charged by buildings as per their size.

Discussion 0
Questions 19

A salesperson is negotiating a lease for a new retail tenant and reviewing the requirements and restrictions regarding the delivery of stock items. Which of the following is NOT a correct statement regarding stock delivery requirements and restrictions in a commercial lease?

Options:

A.  

The salesperson is responsible for negotiating the tenant's stock delivery window.

B.  

Should a delivery truck arrive during an emergency, the property manager must be available.

C.  

Stock delivery cannot be restricted in a commercial agreement to lease.

D.  

The salesperson is responsible for addressing site access and exit in the tenant's agreement to lease.

Discussion 0
Questions 20

A tenant has an established business with good growth potential for the foreseeable future and wants to rent a retail property for expansion. If the landlord wants to have the opportunity to boost the rent when the tenant's sales are good, which type of lease would you recommend to the landlord?

Options:

A.  

Net lease

B.  

Percentage lease

C.  

Gross lease

D.  

Triple net lease

Discussion 0
Questions 21

A buyer client is discussing zoning bylaws of the municipality in relation to an industrial development site with their salesperson. Which of the following is NOT a correct statement with respect to zoning bylaws?

Options:

A.  

Zoning bylaws specify the permitted land uses throughout a municipality.

B.  

Municipal zoning bylaws overrule all other laws with respect to land uses and issuance of building permits in Ontario.

C.  

New commercial construction and redevelopment must comply with zoning bylaws.

D.  

Municipalities have zoning bylaws that divide the city into different land uses or zones.

Discussion 0
Questions 22

A salesperson is assisting the buyer of a retail condominium with the due diligence process. What is a leading practice they should recommend to the buyer?

Options:

A.  

Verify if there are any non-competition provisions that need to be satisfied as set out in thecondominium rules or bylaws.

B.  

Ensure there is parking and repair space available for commercial trucks.

C.  

Confirm that the contract of the condominium property management company has been renewed for at least 10 years.

D.  

Obtain the existing status certificate from the brokerage to verify all restrictions, including shared premises with other businesses in the commercial condominium.

Discussion 0
Questions 23

A salesperson is drafting an offer and discussing with the buyer the steps required for due diligencewhen purchasing a commercial condominium unit. All of the steps below are included in due diligence, EXCEPT:

Options:

A.  

Create a business plan

B.  

Gather, organize, and verify all pertinent information

C.  

Identify third-party professionals

D.  

Estimate time frames required for due diligence and other offer conditions

Discussion 0
Questions 24

A buyer client is interested in purchasing a 30,000 sq. ft. industrial building in an industrial park. The buyer's salesperson drafts an agreement of purchase and sale that includes an environmental site assessment condition that must be met at the buyer's own expense, and to the buyer's satisfaction. Which of the following is NOT an accurate statement regarding the environmental site assessment condition?

Options:

A.  

The environmental site assessment condition makes the offer conditional upon all possible court actions regarding environmental matters being thought of and reported.

B.  

The environmental site assessment condition makes the offer conditional upon the buyer determining that no limitations or restrictions affecting the continued use of the property exist.

C.  

The environmental site assessment condition makes the offer conditional upon the seller delivering documents, records, and reports relating to environmental matters to the buyer upon request.

D.  

The environmental site assessment condition makes the offer conditional upon the buyer determining that the property is free from hazardous conditions or substances.

Discussion 0
Questions 25

A buyer should consider the record of site condition (RSC) document when purchasing a commercial property. Which of the following statements regarding an RSC is correct?

Options:

A.  

Requesting an RSC is mandatory in all real estate transactions.

B.  

It is not a material fact; thus, it is a formality for the buyer to get it.

C.  

With other documents, it will inform the buyer of any legal issues attached to the title.

D.  

It contains records pertaining to a property's financial condition.

Discussion 0
Questions 26

A salesperson is helping a buyer client to purchase a piece of vacant land to develop in the future. The salesperson recommends that the buyer consult with a third-party professional because the salesperson cannot provide the service with reasonable knowledge, skill, judgment, and competence. Which of the following is NOT a professional the salesperson would likely recommend to the buyer?

Options:

A.  

A consultant in a financial institution

B.  

A zoning specialist in the city's planning department

C.  

An appraiser with Accredited Appraiser Canadian Institute (AACI) designation

D.  

A legal consultant who specializes in evicting residential tenants

Discussion 0
Questions 27

A salesperson is representing a tenant client who is opening a new pet food store in a local strip plaza. The salesperson meets with their tenant to discuss display signage and review the guidelines in their commercial lease agreement. Which statement is NOT accurate regarding the commercial lease agreement's signage clause?

Options:

A.  

The tenant's signage must be approved by the municipality and the landlord, and all associated costs shall be paid by the landlord.

B.  

The tenant's signage is considered a trade fixture and shall remain the tenant's property.

C.  

The tenant's signage shall be immediately removed at the end of their lease term(s) at the tenant’s expense.

D.  

The tenant's signage, from approvals to installation and ongoing maintenance, shall be at thetenant's own expense.

Discussion 0
Questions 28

A salesperson is preparing to list an industrial building and wants to assess the availability and size of utilities, as these factors may prohibit a change in use for the potential buyer. Which of the following is correct?

Options:

A.  

If the information on the building's utilities is not available, the salesperson can determine it by finding out the specifications of the utilities of the neighbors.

B.  

If the information on the subject building’s utilities is available, then a potential buyer will not put a condition in the offer.

C.  

The salesperson should conduct a visual inspection of the building to determine the specifications of the utilities.

D.  

The seller may have up-to-date documentation about the utilities but, in some situations, a third-party professional assessment is still needed.

Discussion 0
Questions 29

When a farm is sold, there are exemptions to the payment of harmonized sales tax (HST). In which of the following circumstances is a farmer responsible to pay HST to the Canada Revenue Agency (CRA)?

Options:

A.  

The farm is sold to a corporation and the HST is included in the selling price.

B.  

The farm has been used for personal use.

C.  

The farmer uses a smaller portion of the farm for a residence.

D.  

The farmer sells the farm to a relative.

Discussion 0
Questions 30

What should a salesperson do if they are unable to secure documentation to verify the usable and rentable areas of a property?

Options:

A.  

Use the R/U factor to calculate the figures

B.  

Use a laser measuring tool to take the measurements and use the R/U factor to calculate the figures

C.  

Recommend that the landlord obtain the professional services of a measuring company to obtain the figures

D.  

Use a laser measuring tool to take the measurements

Discussion 0
Questions 31

A lender completes a financial statement analysis and calculation on various ratios that would indicate the financial performance of the commercial building. Which of the following is NOT correct?

Options:

A.  

The investor is afforded the opportunity to enhance yield.

B.  

The success of ventures often rests in the availability and suitability of financing.

C.  

Lenders will apply various financial ratios to get a solid understanding of the business's performance and the ability of the borrower to service debt.

D.  

It does not matter; mortgaging does not affect cash flow and yields.

Discussion 0
Questions 32

A buyer client and their salesperson are doing a visual check of the industrial property that the buyer is planning to purchase. When they get to the rear of the property, the salesperson observes a potential source of contamination. Which of the following factors is likely the cause of concern for the salesperson?

Options:

A.  

The office building next door has an overflow parking lot.

B.  

The neighboring property includes a restaurant, a dental clinic, and a law office.

C.  

There is vacant land nearby with a small pond with discolored standing water.

D.  

There is a residential neighborhood and playground nearby.

Discussion 0
Questions 33

While preparing to list a vacant retail site that allows new auto sales, the salesperson sees that there is an auto repair garage business next door with old and rusting metal storage tanks at the side of their building. Which of the following is the correct action for the salesperson to take?

Options:

A.  

The salesperson should attempt to identify signs of contamination on the property and recommend an appropriate third-party expert to the seller client.

B.  

The salesperson should include the information in the marketing material as it would be beneficial for an auto sales business to have a garage located nearby.

C.  

The salesperson should ask the owner of the garage for more information and what course of action they recommend to assist a future purchaser of the site.

D.  

The salesperson should ask the owner of the garage whether they have thought about selling their property at this time.

Discussion 0
Questions 34

A salesperson is discussing the advantages and disadvantages of owning commercial real estatewith their investor buyer client. Which of the following is NOT an advantage of owning commercial real estate?

Options:

A.  

Quick turnaround time to free up capital when needed is an advantage of owning commercial real estate.

B.  

Limited equity investment while gaining leverage through financing is an advantage of owning commercial real estate.

C.  

Potential to recover capital through refinancing is an advantage of owning commercial real estate.

D.  

Potential for tax sheltering possibilities for the investor is an advantage of owning commercial real estate.

Discussion 0
Questions 35

Location preferences and accessibility are important when matching a potential buyer client with an appropriate commercial property. Which of the following is NOT a location preference consideration?

Options:

A.  

Surrounding uses

B.  

Financial health of the company

C.  

Demographics

D.  

Traffic counts

Discussion 0
Questions 36

The balance sheet of a business helps investors understand its stability and assess financial risk. A balance sheet includes details about all of the following, EXCEPT:

Options:

A.  

Shareholder’s equity

B.  

Assets

C.  

Liabilities

D.  

Net operating income

Discussion 0