RECA CERTIFICATION- Complete Study
Guide *Q&A* (100% Correct) 2025/2026
|VERIFIED|
What are the legal implications for a real estate professional who fails to disclose a significant material
defect in a property that they are selling?
The real estate professional can be held liable for misrepresentation, breach of fiduciary duty, and
negligence. They may face disciplinary action from RECA, legal lawsuits from the buyer, and financial
penalties.
In what ways can a real estate professional ethically handle a situation where a client wishes to enter
into a transaction that may not be in their best financial interest, such as purchasing a property they
cannot afford?
The agent must provide full disclosure of all financial implications, including ongoing costs and
potential risks, and advise the client to seek independent financial advice before proceeding. The agent
must act in the client’s best interest while respecting their autonomy.
Explain the difference between "economic obsolescence" and "functional obsolescence" in property
valuation and provide examples of each in the context of the Alberta real estate market.
Economic obsolescence occurs due to external factors like changes in the local economy or zoning
laws, whereas functional obsolescence stems from outdated property features or design flaws. An
example of economic obsolescence could be a decrease in property values due to nearby industrial
development, while functional obsolescence could involve a home with outdated plumbing or electrical
systems.
What is the ethical and legal responsibility of a real estate professional when advising clients who are
engaging in cross-border real estate transactions, particularly involving foreign investors in Alberta’s
market?
Real estate professionals must ensure that all legal requirements regarding foreign investment,
such as compliance with the Foreign Investment Review Act and any local property restrictions, are
clearly communicated to clients. The agent should also ensure proper documentation and due diligence
are conducted to avoid potential legal violations or complications in cross-border transactions.
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,How can real estate professionals mitigate potential conflicts of interest when representing clients with
competing interests in a transaction, particularly in a dual agency scenario?
In a dual agency situation, the real estate professional must disclose the potential conflict of
interest to all parties involved and obtain their informed consent in writing. The agent should act with
full transparency, ensuring that they do not favor one party over another and that all fiduciary duties are
fulfilled equally.
Describe the concept of “constructive fraud” in real estate transactions and provide an example of how
this might occur in an Alberta real estate transaction.
Constructive fraud occurs when an agent or party makes a misrepresentation without intent to
deceive but does so recklessly or negligently, leading to financial harm. An example in Alberta could be
an agent failing to disclose a material issue with a property, like water damage, which the agent should
have known about through routine inspections, but did not disclose to the buyer.
What steps must a real estate professional take to ensure full compliance with anti-money laundering
(AML) regulations during a real estate transaction, particularly in high-value deals?
The real estate professional must conduct thorough due diligence, including verifying the identity
of the buyer and seller, understanding the source of funds, and reporting suspicious transactions to the
Financial Transactions and Reports Analysis Centre of Canada (FINTRAC). They must also maintain
detailed records of these procedures.
Discuss the potential consequences and remedies for a real estate professional who is found guilty of
discriminatory practices under the Alberta Human Rights Act in the context of real estate transactions.
A real estate professional found guilty of discriminatory practices can face serious legal
consequences, including civil penalties, fines, and potential suspension or revocation of their license by
RECA. Remedies for the affected parties could include compensation for damages, such as emotional
distress or financial losses, and a possible court order for the agent to cease discriminatory behavior.
What are the legal requirements for a real estate professional to act as a property manager in Alberta,
and what regulatory oversight does RECA provide in this area?
To act as a property manager, a real estate professional must complete the required licensing and
education programs specific to property management, including a property management exam. RECA
oversees the conduct of property managers through its regulatory framework, ensuring adherence to
the Real Estate Act and consumer protection standards.
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, Explain how a real estate professional can ethically manage a transaction involving a property that is
subject to a long-term lease agreement that could impact the value of the property being sold.
The agent must fully disclose the terms of the lease agreement to all potential buyers, including
any rent control clauses, lease expiration dates, and renewal options. The agent should also advise the
seller to consult a lawyer regarding the implications of the lease on the sale price, ensuring the buyer is
fully informed.
What are the implications of "leasehold estates" versus "freehold estates" for real estate transactions in
Alberta, and how can these differences affect buyers’ financing options?
Leasehold estates involve ownership of property for a specific period, but not the land itself,
which can limit the buyer's ability to secure financing compared to freehold estates, where full
ownership of both land and structure is granted. Leasehold properties often have shorter terms and may
require more specialized financing options or lead to reduced property values over time.
What is the role of an escrow agent in Alberta real estate transactions, and how do they ensure a neutral
third-party process in complex deals?
An escrow agent holds funds and documents in trust until all contractual conditions are met. In
complex deals, such as those involving contingencies or large sums, the escrow agent ensures that no
funds or documents are released prematurely, thus protecting both buyer and seller by guaranteeing the
completion of agreed terms before closing.
What is the process for handling disputes between a buyer and seller regarding the condition of the
property after the sale has closed, and how can a real estate professional mediate such issues?
The real estate professional should assist in facilitating communication between the buyer and
seller, reviewing any contractual clauses related to property condition, and advising both parties on their
legal rights. If the issue involves a breach of contract or undisclosed defects, the agent should encourage
mediation or arbitration to resolve the dispute before resorting to litigation.
In the context of RECA regulations, what responsibilities do real estate professionals have in ensuring
that all marketing materials, including advertisements and property listings, are truthful and not
misleading?
Real estate professionals must ensure that all marketing materials accurately represent the
properties being advertised, including truthful descriptions of features, pricing, and any relevant legal
considerations, such as zoning or encumbrances. Misleading advertising can result in disciplinary action
from RECA, as well as legal and financial penalties for the agent.
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