Real Estate Council of Alberta Fundamentals Practice Exam

What motivates individuals to engage in Contract Kiting?

1. To improve property negotiation outcomes

2. To draw in legitimate buyers

3. To gain unauthorized mortgage amounts

4. To sell property quickly

The correct answer is: To gain unauthorized mortgage amounts

Contract kiting is a fraudulent practice where an individual uses multiple contracts for the same property to obtain more mortgage financing than is actually warranted. This strategy is motivated by the desire to secure unauthorized mortgage amounts by presenting different buyers and contracts to various lenders. The intention is to leverage the illusion of multiple legitimate deals to maximize borrowing beyond what the property truly justifies, leading to significant financial gains for the fraudulent individual. This phenomenon often involves manipulating documents and timelines, ultimately resulting in significant risks for both the lenders involved and the integrity of the real estate market. The other choices, while they address potential outcomes or goals in real estate transactions, do not align with the motivations behind the specific act of contract kiting. Thus, the primary driving force here is the ambition to exploit the system for increased, unauthorized financial leverage.