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Humber College Exam 4: Invigilated Theory Sample Questions:

1. 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?

A) Depreciation
B) Supervision
C) Repairs
D) Operations


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) Audited financial statements provide an accurate picture of the financial status of a business; unaudited financial statements may only contain partially reviewed information.
C) Audited financial statements comply with Generally Accepted Accounting Principles (GAAP); unaudited financial statements do not comply with GAAP.
D) Unaudited financial statements are prepared by Chartered Professional Accountants; audited financial statements are prepared by senior Chartered Professional Accountants.


3. Finish the sentence: When a commercial tenant enters an agreement to lease, the covenant to pay rent specifies that the tenant:

A) Cannot pay rent to the property manager and must pay directly to the property owner.
B) Cannot withhold rental payments even if the landlord does not comply with their obligations under the lease.
C) Agrees to pay additional rent for a gross lease.
D) Agrees to pay any percentage rent a landlord demands, regardless of sales revenue.


4. 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 preferred for newer construction properties, as the appraiser would not need to make a subjective estimation of the accrued depreciation of the building.
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 typically used to appraise income-generating properties.
D) The cost approach is preferred for older construction properties, as calculating depreciation on them is fairly straightforward.


5. A salesperson sells an office building using the Commercial Agreement of Purchase and Sale along with a schedule that lists all the fixtures, chattels, and rental items of the office building. After closing the real estate transaction, a dispute arises between the seller and the buyer about which chattels, fixtures, and rental items of the office building were to be included and which were to be excluded. Which of the following is NOT an accurate statement regarding the salesperson's actions related to negotiating chattels, fixtures, and rental items?

A) The salesperson should specifically exclude all fixtures that are not a part of the transaction since fixtures are considered a part of the property and are normally included in the purchase price.
B) The salesperson should specifically exclude all chattels that are not a part of the transaction since chattels are considered a part of the property and are normally included in the purchase price.
C) The salesperson should clearly describe and list the fixtures and chattels in the Agreement of Purchase and Sale and mark each item as an exclusion or inclusion.
D) The salesperson should clearly list all rental items and service contracts, as these will not be included in the purchase price of the real property being purchased.


Solutions:

Question # 1
Answer: A
Question # 2
Answer: C
Question # 3
Answer: B
Question # 4
Answer: D
Question # 5
Answer: B

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