Free BC MB Practice Questions: Statements, Appraisal, and Completion

Use this page to isolate Statements, Appraisal, and Completion before returning to mixed BCFSA Mortgage Brokerage BC practice.

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These are original Finance Prep practice questions aligned to this topic area. They are not official exam questions, copied live-exam content, or exam dumps. Use them for self-assessment, scope review, and deciding what to drill next.

Question 1

Topic: Statements, Appraisal, and Completion

A submortgage broker is preparing a lender submission for a borrower purchasing a 12-unit apartment building in Kelowna. The property is fully leased, the borrower has provided current rent rolls and operating expense records, and the lender is mainly concerned with whether the property’s cash flow supports the requested loan. Which valuation approach should the broker expect to be most relevant for the appraisal?

• A. Direct comparison approach, using recent sales of owner-occupied single-family homes nearby
• B. Income approach, using the building’s net operating income and market capitalization evidence
• C. Cost approach, using land value plus depreciated replacement cost as the primary indicator
• D. Municipal assessment, using the most recent assessed value as the lender’s valuation basis

Best answer: B

What this tests: Statements, Appraisal, and Completion

Explanation: For income-producing property, the income approach is usually the most relevant appraisal method because purchasers and lenders focus on the property’s ability to generate income. The appraiser would consider rent, vacancy, operating expenses, net operating income, and market capitalization evidence. Comparable sales may still be useful as a reasonableness check, but sales of owner-occupied single-family homes do not directly measure the value of a multi-unit rental building. The cost approach is more useful where improvements are new, unique, or there is limited income or sales evidence. A municipal assessment may provide background information, but it is not a substitute for a current appraisal prepared for mortgage underwriting.

• Owner-occupied residential sales do not provide the strongest valuation evidence for a leased apartment building.
• The cost approach may assist in some cases, but it is not usually the primary method when reliable rental income and expense data are available.
• A municipal assessment is not designed to replace a lender’s appraisal for a mortgage decision.

For a leased apartment building, value is primarily supported by the income the property can generate for an investor.

Question 2

Topic: Statements, Appraisal, and Completion

A borrower is making an offer on a condominium in Victoria and asks a submortgage broker to “guarantee that the lender’s appraisal will support the $735,000 purchase price” before the appraisal has been ordered. The borrower says they will remove their financing condition only if the broker gives that assurance. What is the broker’s best response?

• A. Use the municipal assessed value as the guaranteed market value because it is an independent public record.
• B. Tell the appraiser the value needed for financing so the report can be prepared to match the contract price.
• C. Decline to guarantee the value, explain that market value must be supported by appropriate valuation evidence, and advise the borrower not to rely on an appraisal outcome that has not been reviewed.
• D. Guarantee the purchase price if recent nearby sales appear similar and the borrower has a strong down payment.

Best answer: C

What this tests: Statements, Appraisal, and Completion

Explanation: A mortgage broker may discuss valuation concepts and available evidence, but should not guarantee that a property will appraise at a particular amount before the appraisal is completed and reviewed. Market value for lending purposes depends on acceptable valuation evidence and the lender’s underwriting requirements. Giving an unsupported assurance could mislead the borrower, create professional liability, and encourage the borrower to remove a financing condition without adequate information. The proper response is to be clear about the uncertainty, avoid influencing the appraiser, and recommend that the borrower wait for the lender’s appraisal review or obtain suitable independent advice before making a binding decision.

• Strong borrower qualifications do not prove the property’s market value or make a guarantee appropriate.
• Telling an appraiser the value needed for financing improperly pressures the valuation process and undermines independence.
• Municipal assessment may be useful background information, but it is not a guarantee of current market value for mortgage lending.

A broker should not represent or guarantee an unsupported value before reviewing reliable valuation evidence such as the lender’s appraisal.

Question 3

Topic: Statements, Appraisal, and Completion

A purchaser is completing the purchase of a strata lot in Vancouver. The conveyancer has already calculated the prorated adjustment amounts as the purchaser’s share from the adjustment date onward. Ignore property transfer tax, GST, legal fees, and disbursements.

Purchase price:                         $640,000
Deposit already paid to brokerage:       $32,000
First mortgage advance to conveyancer:  $512,000
Property tax adjustment:                  $1,420
Strata fee adjustment:                      $180
Other prepaid expense adjustment:             $90

Which treatment and cash-to-close amount is correct for the purchaser’s completion statement?

• A. Debit the price and all three adjustments; credit only the mortgage advance; balance due is $129,690.
• B. Debit the price, deposit, and all three adjustments; credit only the mortgage advance; balance due is $161,690.
• C. Debit the price and all three adjustments; credit the deposit and mortgage advance; balance due is $97,690.
• D. Debit the price; credit the deposit, mortgage advance, and all three adjustments; balance due is $94,310.

Best answer: C

What this tests: Statements, Appraisal, and Completion

Explanation: On a purchaser’s completion statement, debits increase the amount the purchaser must provide, and credits reduce it. The purchase price is a debit. A deposit already paid is a credit because it has already been contributed toward the purchase. A mortgage advance received by the conveyancer is also a credit because it supplies funds for closing. When the seller has prepaid expenses that benefit the purchaser after the adjustment date, the purchaser reimburses the seller, so those prorated amounts are debits to the purchaser. Here, total debits are $640,000 + $1,420 + $180 + $90 = $641,690. Total credits are $32,000 + $512,000 = $544,000. The balance due is $97,690.

• Crediting the tax, strata fee, and prepaid expense adjustments reverses the treatment of seller-paid expenses that benefit the purchaser after adjustment.
• Debiting the deposit treats an amount already paid as if it were still owing at completion.
• Omitting the deposit credit overstates the cash needed because the deposit is already part of the purchaser’s contribution.

The purchaser is charged for the price and seller-paid prorated expenses, while the deposit and mortgage advance reduce the cash needed to close.

Question 4

Topic: Statements, Appraisal, and Completion

A purchaser in Burnaby has an accepted contract with a $720,000 purchase price and has already paid a $36,000 deposit to the seller’s brokerage. The lender has approved a $576,000 mortgage, to be advanced to the purchaser’s lawyer on completion. The draft statement of adjustments shows a $1,450 debit to the purchaser for prepaid property taxes, and the lawyer estimates $3,200 for legal fees, title insurance, and registration costs. The purchaser asks the submortgage broker how these amounts affect the cash needed to complete. What is the best professional response?

• A. Advise the purchaser to deduct the property tax adjustment from the cash required because the seller already prepaid the taxes.
• B. Tell the purchaser that the deposit and mortgage proceeds cover all amounts except the difference between the purchase price and the mortgage amount.
• C. Prepare binding completion instructions for the lawyer showing the exact cash to close and advise the purchaser to rely on the broker’s calculation.
• D. Explain that the deposit reduces the balance of the purchase price, mortgage proceeds are applied through the lawyer, prorated taxes adjust the purchaser-vendor balance, and closing costs are additional cash requirements confirmed by the lawyer’s final instructions.

Best answer: D

What this tests: Statements, Appraisal, and Completion

Explanation: In a purchase completion, the purchase price is the starting obligation. A deposit already paid is normally credited against the amount due from the purchaser. Mortgage proceeds are funds advanced by the lender, usually to the lawyer or notary under lender instructions, and are applied toward the price on completion. Statement-of-adjustment items, such as prepaid property taxes, allocate expenses between purchaser and seller as of the adjustment date; a debit to the purchaser increases the amount required. Closing costs such as legal fees, registration charges, and title insurance are separate from the purchase price and also require cash. A mortgage broker may help the client understand these categories, but the lawyer or notary provides the final cash-to-close figure and handles professional completion instructions.

• Treating only the price less mortgage as cash required ignores the deposit credit, adjustments, and closing costs.
• Deducting a purchaser debit reverses the effect of the property tax adjustment; it increases the purchaser’s required funds.
• Issuing binding completion instructions is not the broker’s role; final completion figures and undertakings are handled by the lawyer or notary.

This correctly separates the purchase-price credit, lender advance, statement-of-adjustment item, closing costs, and the lawyer’s role in confirming completion funds.

Question 5

Topic: Statements, Appraisal, and Completion

A submortgage broker is preparing a lender submission for a borrower purchasing a townhouse in Victoria.

• Contract purchase price: $950,000
• Requested first mortgage: $760,000
• Rate quote: 5-year fixed at 5.49%, 25-year amortization
• Estimated payment: $4,640 per month
• Debt service: within the lender’s stated limits
• Title note: no unusual charges or priority issues noted
• Appraisal summary: market value opinion of $900,000, with recent comparable sales supporting the lower value
• Lender policy: maximum conventional first mortgage is 80% of the lower of purchase price or appraised value

What is the best interpretation of the appraisal’s effect on the financing request?

• A. The broker should ask the appraiser to revise the value to the contract price so the lender can approve the requested loan amount.
• B. The appraisal supports the request because the borrower’s debt service is within the lender’s stated limits at the quoted payment.
• C. The appraisal supports a maximum conventional first mortgage of $720,000, so the requested $760,000 loan exceeds the lender’s security limit by $40,000.
• D. The appraisal does not affect the request because the $760,000 loan is exactly 80% of the $950,000 purchase price.

Best answer: C

What this tests: Statements, Appraisal, and Completion

Explanation: An appraisal helps the lender assess whether the property provides adequate security for the requested mortgage. Even when the borrower qualifies on income and payment capacity, the lender still needs sufficient property value to support the loan. Here, the lender’s policy is 80% of the lower of purchase price or appraised value. The lower amount is the $900,000 appraised value, so the maximum conventional first mortgage is $900,000 × 80% = $720,000. The requested $760,000 exceeds that by $40,000. The broker should recognize that the appraisal affects the financing structure, such as requiring a larger down payment, a lower loan amount, a different lender or product, or another acceptable solution. The broker should not pressure an appraiser to match the contract price.

• Using the purchase price alone ignores the lender’s stated rule to use the lower of purchase price or appraised value.
• Debt service capacity is relevant to borrower qualification, but it does not replace the lender’s need for adequate security.
• Pressuring an appraiser to change a value conclusion is improper and does not solve the valuation support issue.

The lender uses 80% of the lower appraised value of $900,000, which limits the conventional first mortgage to $720,000.

Question 6

Topic: Statements, Appraisal, and Completion

A mortgage broker is reviewing a draft statement of adjustments for a Vancouver purchase closing on August 15. The contract uses August 15 as the adjustment date, and the purchaser is responsible for property expenses from August 15 through December 31, inclusive.

Relevant completion note:

• Annual municipal property taxes: $4,380 for January 1 to December 31
• Taxes have already been paid by the seller to December 31
• Use a 365-day year and count the adjustment date in the purchaser’s responsibility period

What property tax adjustment should appear on the statement of adjustments?

• A. Credit the purchaser and debit the seller $1,668.
• B. Debit the seller and credit the purchaser $2,712.
• C. Debit the purchaser and credit the seller $1,500.
• D. Debit the purchaser and credit the seller $1,668.

Best answer: D

What this tests: Statements, Appraisal, and Completion

Explanation: Proration allocates an annual expense based on the period each party is responsible for it. Because the seller has already paid the full year’s property taxes, the purchaser must reimburse the seller for the portion covering the purchaser’s responsibility period. Counting August 15 through December 31 gives 139 days: 17 days in August, 30 in September, 31 in October, 30 in November, and 31 in December. The daily amount is $4,380 ÷ 365 = $12, so the adjustment is 139 × $12 = $1,668. On a statement of adjustments, this is a debit to the purchaser and a credit to the seller because it increases the purchaser’s cash required to close and reimburses the seller for taxes prepaid beyond the seller’s responsibility period.

• Crediting the purchaser reverses the direction of the adjustment; the seller prepaid the expense and is owed reimbursement.
• Using $1,500 reflects an incorrect day count or partial-period calculation, not the stated inclusive responsibility period.
• Using $2,712 allocates the seller’s portion of the year, not the purchaser’s reimbursement period.

The purchaser owes the seller reimbursement for 139 days of prepaid taxes: $4,380 ÷ 365 × 139 = $1,668.

Question 7

Topic: Statements, Appraisal, and Completion

A submortgage broker is arranging financing for a borrower purchasing a townhouse in Kelowna for $775,000. The lender orders an appraisal and then advises that the appraised market value is $735,000, based partly on recent comparable sales in the same complex. The borrower says the appraiser must have missed a recent kitchen renovation and asks the broker to “get the value changed” so the approved loan-to-value ratio will work.

What is the broker’s most appropriate response?

• A. Tell the appraiser the purchase price is the best evidence of market value and request that the report be revised to match it.
• B. Ask the borrower to order a second appraisal directly and submit only the higher valuation to the lender.
• C. Advise the borrower that the lender must use the contract price because it was agreed to by a willing buyer and willing seller.
• D. Submit factual, verifiable information about the renovation to the lender or appraiser through proper channels, and explain to the borrower that the lender may still rely on the appraised value for loan approval.

Best answer: D

What this tests: Statements, Appraisal, and Completion

Explanation: When a lender questions value, the broker should treat valuation support as evidence, not advocacy for a desired number. Market value is normally supported by an appraisal process that considers relevant data such as comparable sales, property condition, and improvements. If the borrower has factual information that may not have been considered, such as invoices, permits, photos, or details of a significant renovation, the broker can pass that information to the lender or appraiser in an appropriate and transparent way. The broker should not pressure an appraiser, promise a higher value, withhold an unfavourable appraisal, or tell the lender to ignore its valuation evidence. The borrower should also understand that a lower appraised value may affect loan-to-value calculations, down payment requirements, or loan approval.

• Treating the purchase price as conclusive ignores the lender’s need for independent valuation evidence.
• Shopping for a higher value and suppressing the lower appraisal is not transparent and may create fraud or misrepresentation risk.
• A contract price may be relevant evidence, but it does not require a lender to accept that amount as market value.

A broker may help correct or supplement valuation evidence with relevant facts, but must not pressure the appraiser or represent that the value will be changed.

Question 8

Topic: Statements, Appraisal, and Completion

A submortgage broker is reviewing a draft purchaser’s statement of adjustments for a BC strata-lot purchase. The worksheet uses debits for amounts the purchaser must pay or reimburse, and credits for amounts already paid by or available to the purchaser. The purchaser has paid a deposit to the brokerage trust account, and the purchaser’s new mortgage advance will be sent to the conveyancer on completion. The vendor has prepaid the current year’s property taxes, the current month’s strata fees, and a municipal utility charge, each covering time after the completion date. How should these items be treated on the purchaser’s statement?

• A. Credit the deposit and mortgage advance; debit the purchaser for the post-completion property tax, strata fee, and prepaid utility adjustments.
• B. Debit the deposit and mortgage advance; credit the purchaser for the post-completion property tax, strata fee, and prepaid utility adjustments.
• C. Credit the deposit only; debit the mortgage advance and all post-completion prepaid adjustments.
• D. Debit the post-completion property tax adjustment, but credit the post-completion strata fee and prepaid utility adjustments.

Best answer: A

What this tests: Statements, Appraisal, and Completion

Explanation: On a purchaser’s statement of adjustments, the key question is whether the item increases the purchaser’s amount payable or reduces it. A deposit already paid by the purchaser is a credit because it is applied against the purchase price. A mortgage advance is also a credit because it provides funds available for completion. By contrast, when the vendor has prepaid an expense that benefits the property after completion, the purchaser must reimburse the vendor for the purchaser’s share. That reimbursement is a debit to the purchaser and a credit to the vendor. This treatment applies to prepaid property taxes, strata fees, and similar prepaid municipal or property-related charges, assuming the prepaid period extends beyond completion.

• Treating the deposit or mortgage advance as debits reverses their effect; both reduce the purchaser’s remaining cash requirement.
• Crediting the purchaser for prepaid vendor expenses would be appropriate only if the vendor owed the purchaser, not where the purchaser receives the post-completion benefit.
• Separating strata fees or utilities from property taxes is a common trap; prepaid property-related charges benefiting the purchaser are generally adjusted the same way.

The deposit and mortgage advance reduce the cash the purchaser must bring, while prepaid vendor expenses benefiting the purchaser after completion are reimbursed by purchaser debits.

Question 9

Topic: Statements, Appraisal, and Completion

A submortgage broker is preparing a lender submission for a borrower refinancing a small rental property in Kelowna. The borrower provides a recent valuation report showing an estimated value of $875,000. The report includes comparable sales and an income summary, but the title search shows the borrower holds only a long-term leasehold interest, not fee simple title. The report does not state what legal interest was valued.

What is the best professional response before relying on the valuation?

• A. Use the valuation because recent comparable sales and an income summary are both recognized valuation evidence.
• B. Replace the valuation with the most recent BC Assessment value to avoid relying on an incomplete report.
• C. Submit the report and let the lender decide whether the legal-interest issue affects approval.
• D. Ask the appraiser to confirm whether the $875,000 value applies to the borrower’s leasehold interest and reflects the relevant lease terms.

Best answer: D

What this tests: Statements, Appraisal, and Completion

Explanation: A valuation is useful only if it matches the interest that will form the lender’s security. Market value is not just a dollar amount; it depends on the property rights being valued, the effective date, assumptions, and relevant property and market facts. Here, the title search shows a leasehold interest, while the valuation report does not say whether it valued the leasehold interest or assumed fee simple ownership. Before using the report in a lender submission, the broker should obtain clarification from the appraiser about the legal interest appraised and whether the lease terms were considered. Relying on a fee simple valuation for a leasehold security could misstate the property’s value and create suitability, disclosure, and professional liability concerns.

• Comparable sales and income evidence do not cure a missing legal-interest assumption.
• BC Assessment is not a substitute for appraisal clarification when the issue is what interest was valued.
• Passing the uncertainty to the lender without clarification does not address the broker’s duty to submit accurate, relevant information.

The legal interest being valued is decisive because a leasehold interest may have a different value and lender security quality than fee simple ownership.

Question 10

Topic: Statements, Appraisal, and Completion

A submortgage broker is reviewing valuation support for a requested $2,000,000 first mortgage on a six-unit rental apartment building in Nanaimo. The property is fully leased and there are reliable rent and expense records.

Using the midpoint cap rate of 5.50%, the income indication is $168,000 ÷ 0.055 = $3,054,545. Which appraisal interpretation is best?

• A. Give the cost approach the greatest weight because it produces nearly the same value as the income calculation.
• B. Give the income approach the greatest weight because the property is income-producing and reliable NOI and cap-rate evidence are available.
• C. Average all three approaches because each method produced a value near $3,000,000.
• D. Give the comparative approach the greatest weight because sales evidence should always override cost and income evidence.

Best answer: B

What this tests: Statements, Appraisal, and Completion

Explanation: The appropriate appraisal method depends on the property type and the quality of available evidence. A six-unit apartment building is purchased mainly for its income stream, so a reliable stabilized net operating income and market capitalization rate are strong evidence of value. Here, the income indication of about $3.05 million is directly supported by lease, expense, and cap-rate data. The cost approach may be useful as a check, but depreciation estimates can limit its reliability for an existing income property. The comparative approach is weaker because the available sales are limited, dated, and not closely comparable. A broker should not simply average appraisal methods; the better approach is to identify which method best matches the property and evidence.

• Sales comparison is important when there are recent, similar market sales, but the two sales here are weak evidence.
• Cost can support a value estimate, especially for newer or special-purpose properties, but matching the income value does not make it the primary method.
• Averaging methods ignores appraisal judgment and can give unreliable evidence the same weight as stronger evidence.

For a leased multi-unit rental property, the income approach is usually most persuasive when stabilized NOI and market capitalization rates are reliable.

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