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| Section | Objectives |
|---|---|
| Commercial Real Estate Transactions | - Regulatory and professional obligations
|
1. 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?
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 for tax sheltering possibilities for the investor is an advantage of owning commercial real estate.
D) Potential to recover capital through refinancing is an advantage of owning commercial real estate.
2. Audited and unaudited statements provide the financial status of a business to potential buyers. What is the main difference between audited and unaudited financial statements?
A) Unaudited financial statements are prepared by accounting students; audited financial statements are completed by accountants who have received their professional designation.
B) Unaudited financial statements are prepared by Chartered Professional Accountants; audited financial statements are prepared by senior Chartered Professional Accountants.
C) Audited financial statements comply with Generally Accepted Accounting Principles (GAAP); unaudited financial statements do not comply with GAAP.
D) Audited financial statements provide an accurate picture of the financial status of a business; unaudited financial statements may only contain partially reviewed information.
3. 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?
A) They are normally less expensive than pieces of land smaller than two acres in the same neighborhood.
B) They can be used for newly planned subdivisions.
C) They are a good size for modern 18-hole golf courses.
D) The developer cannot find a building lot to build a detached home.
4. A brokerage negotiates the sale of a business on behalf of a seller. Which of the following documents must the brokerage provide to the buyer?
A) A profit and loss statement for the real estate brokerage for the preceding 12 months
B) A list of chattels excluded in the sale
C) A list of fixtures included in the sale
D) A statement of the assets and liabilities of the brokerage
5. 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 buyer can use the same amendment to ask for a change of the closing date.
C) The salesperson should prepare the amendment with midnight, May 17 as the irrevocable time.
D) To play it safe, the salesperson should amend the condition with May 18 as the expiry date.
Solutions:
| Question # 1 Answer: A | Question # 2 Answer: C | Question # 3 Answer: B | Question # 4 Answer: C | Question # 5 Answer: C |
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