Chapter 21 - Quiz - Part 2

What is the one exception to the rules regarding commingling?

If a trust account charges a service fee, the brokerage may deposit up to $100 over the fee to prevent client money from being deducted.

What should a broker do if there is a dispute between the buyer and seller in between an escrow payment being made and the close of the deal?

Keep the funds in escrow until the dispute if mediated.

Which of the following statements about kickbacks is NOT true?

Kickbacks are not required to be disclosed. Kickbacks refer to a broker receiving significant compensation for referring a service to a client. Any kickbacks a broker receives MUST be disclosed to clients. The Commission is very strict on disclosure rules when it comes to kickbacks.

Which prohibited behavior is a broker guilty of if he or she tells a client that a landlord will repaint a unit without first verifying it with the landlord beforehand?

Making false promises

How long before the anticipated settlement date is the broker permitted to disburse funds to the seller?

No more than 10 days.

Which of the following is NOT an improper brokerage commission?

Paying another broker a fee for assisting in a deal. Paying another licensed broker a fee for assisting in a deal is permitted by the Commission and not considered an improper brokerage commission. Accepting cash payments or any form of payment without a license is prohibited, as is paying a non-licensed associate a brokerage fee.

In which of the following circumstances is a property disclosure form not required?

Property is being transferred due to a court order.

Who may not perform a BPO for a fee?

Provisional brokers.

Who is not allowed to represent more than one brokerage at a time?

Provisional brokers. Non-provisional brokers are permitted to represent more than one brokerage at a time if both firms consent to the arrangement. However, provisional brokers are not permitted to represent more than one brokerage at a time.

What must a broker possess to conduct a BPO for a fee?

Requisite knowledge of local real estate prices and access to sales data.

Which of the following statements describes self-dealing?

Self-dealing is when a broker counsels a client to make a decision that significantly benefits the broker. Self-dealing occurs when a broker advises a client to do something that significantly benefits the broker without disclosing that interest. It is a behavior that is considered a conflict of interest.

Which of the following statements about a BIC's license is true?

The BIC status is an additional designation of the same license every residential broker in North Carolina is required to obtain. The BIC license is an additional designation any non-provisional broker can obtain by taking an additional 12-hour course. It does upgrade the status of the license to qualify the broker to become a BIC, but it is not considered a separate license.

Whose responsibility is it to approve advertisements?

The BIC.

Which of the following is not required on a BPO that was performed for a fee?

The appraiser's license number. BPOs are performed by brokers, not appraisers; therefore, an appraisal license number is not required. However, the broker's license number and firm name are required.

What happens if a broker places a blind ad?

The broker may face disciplinary action.

How does a broker become BIC eligible once he or she has the requisite experience?

The broker must apply for BIC eligibility with the Commission to become eligible. To become eligible for BIC designation, a broker must submit an application to the Commission. If the broker has the required experience and an active license, the Commission will approve the application, which allows the broker to take the 12-hour broker-in-charge course.

What must happen if a building owner offers a broker a bonus for selling a certain amount of units in a year?

The broker must disclose this bonus to buyers. Bonuses awarded in a real estate transaction must be disclosed. It creates a conflict of interest if a broker is not entirely honest about all their agency relationships. Even if the client chose the unit independent of the broker's recommendation, it still must be disclosed to avoid potential conflict.

What if a property is already under contract and another offer is submitted?

The broker must disclose this offer to the client.

What if the seller and the broker neglect to provide a property disclosure form to a buyer in a situation where one is required?

The buyer may cancel the contract without penalty within three calendar days.

What happens if a purchaser of a timeshare decides to cancel the contract within the five-day cancellation period?

The developer must return any payments held in escrow and allow the purchaser to walk away without penalties.

Why are brokers required to disclose any third-party payments?

The fee will inevitably impact their decisions to recommend particular services and failure to do so creates a conflict of interest.

What must a broker have to collect as commission for brokerage activities?

an active license. Brokers must have an active license to collect commissions on a real estate transaction. Affiliating with a brokerage gives a broker implied permission from the BIC to collect a commission, so a written statement isn't needed. A business entity and degree in real estate may be beneficial but aren't required

When must a buyer's agent get an agency disclosure form signed?

as soon as possible but definitely before an offer is submitted

How long after being granted BIC eligibility does the broker have to complete the required 8-hour BIC training?

120 days. Once a broker is granted BIC eligibility by the Commission, he or she has 120 days to complete the required 12-hour broker-in-charge and be designated by the affiliated brokerage. Failure to do so will result in termination of BIC eligibility.

Which of the following is an example of neglectful misrepresentation?

A broker tells a client that a broken window will be fixed, not knowing the buyer is offering the property as-is. Neglectful misrepresentation is unknowingly making a false statement regarding a material fact in a deal. Knowingly failing to disclose this fact would be a willing misrepresentation.

Which of the following is an example of a willing misrepresentation?

A broker tells a client that a mold problem has been dealt with, knowing it hasn't. Willing misrepresentation is the act of intentionally lying or misconstruing important facts about a property. Failing to disclose important material facts is known as an omission.

Which of the following properties is unlikely to offer a timeshare?

A commercial storefront.

Which of the following must appear on a BPO performed for a fee?

A disclaimer that a BPO is an estimate of a probable sales price, not an appraisal or valuation. All BPOs ‒ especially those created for a fee ‒ must contain a disclaimer that the document should not be considered an appraisal or any kind of valuation.

Which of the following statements about referral fees is true?

A party must be a licensed broker to receive a referral fee. Referring a client for a fee is considered a brokerage activity and therefore requires licensure.

What is the term for a broker used to oversee all the other brokers and employees involved in the sale or rental of timeshare units?

A project broker. The broker designated to oversee all broker and employees engaged in the sale or rental of timeshare units is known as a project broker. The developer must designate one project broker and submit official documentation to the Commission.

Which document are developers required to provide to purchasers of a timeshare?

A public offering statement. Timeshare developers are required to provide purchasers with a public offering statement upon purchase. This statement will describe the obligations that come with ownership of the timeshare.

Which of the following definitions of a timeshare is accurate?

A right to occupy a unit or units for five or more periods over five or more years. A timeshare is a legal interest in a unit or unit that grants the purchaser the right to use the property for a specific period. Timeshares can be used to subdivide ownership of a variety of different types of vacation properties.

Why must all trust accounts be specially designated as such as opposed to opening a regular business account?

A trust account can't be frozen or used to recoup funds if something happens to the broker or firm whose name is on the account. Specifically designating a bank account as a trust account will ensure that the funds can be frozen or withdrawn if something happens to the broker or brokerage. For example, if the broker dies or is subjected to a lawsuit, funds in a business account in his or her name would be vulnerable.

Which of the following actions is considered commingling?

Depositing client funds into a personal bank account. Commingling refers to the act of mixing client funds with personal or brokerage funds. This creates a serious conflict of interest and should be avoided at all costs. Brokers found guilty of commingling will likely lose their license.

What should you do if a client flat-out refuses to sell to a certain group that qualifies as a protected class?

Explain your duty to prevent discrimination and drop the client if he or she doesn't relent.

Which of the following is a willing omission?

A broker knows a property has a tax lien but doesn't disclose this fact to prospective buyers.

Why are a broker's name and firm required in an ad?

A broker must disclose his or her license status to any prospective clients, which includes advertising communications.

Who must receive a copy of a submitted offer?

All interested parties.

Who typically drafts the closing statement?

An attorney.

Who must give consent if a broker wishes to represent both parties in a transaction?

Both the buyer and the seller.

If a deal is unsuccessful, what is a broker required to do with the paperwork?

Brokers are required to retain all records for three years, including contracts that didn't close.

Why is a BPO or CMA not considered a valuation?

Brokers aren't trained to inspect all the facets of a property that affect its value in the same manner as an appraiser. Appraisers are specifically trained to analyze market conditions and can inspect the structural integrity of a property to determine its value. Brokers are trained to analyze sales data but are not necessarily equipped to diagnose other issues with a property that may impact its value.

Which of the following statements about trust money is true?

Brokers must keep trust money separate from personal or business money in a designated escrow account.

Which of the following statements about commingling is true?

Commingling is the act of storing any personal or business money in the same account as trust money.

Which of the following phrases would NOT be permitted on an advertisement?

This unit is perfect for couples.

Why must records be retained for at least three years?

To provide a record in the event of a dispute.

Which of the following statements about designated agents is true?

Two designated agents from the same firm represent both a buyer and a seller.

When does unworthiness or incompetence on the part of a broker violate license law?

When it becomes a danger to the public. Unworthiness or incompetence is never condoned. However, it becomes a serious offense if that incompetence becomes a danger to the public. The BIC or the Commision may take note if a broker is shirking any of his or her duties. But the law is officially broken when the broker's negligence endangers the public.

When is a property disclosure form necessary?

Whenever a residential property is being transferred, with a few exceptions.

Why are brokers not allowed to draft contracts?

Why are brokers not allowed to draft contracts?

When must trust money be deposited?

Within three days of receipt. Brokers are required to deposit trust money into an escrow account within three days of receipt. It should be deposited as soon as possible to avoid interference, but the Commission grants a three-day grace period to allow for delays.

Which of the following is required to form an agency relationship?

a written contract

When being paid by a third party for the referral of service to whom must the broker disclose the payment?

all interested parties

Which type of real estate frim is NOT required to appoint a BIC?

firms set up for the sole purpose of receiving compensation from another established firm with an appointed BIC

Which of the following circumstances would NOT result in the termination of BIC destination?

if the BIC does not own the brokerage he or she manages

What if a broker doesn't directly refer a client, but he still receives a fee for recommending a particular service?

it still must be disclosed. All referral fees must be disclosed regardless of whether the broker handles the actual money or not. If the client is in any way swayed by the broker's recommendation it creates a conflict of interest.

Which of the following is the exception to the rule regarding the expiration clause in an agency agreement?

landlords who hire brokers to continuously rent vacant apartments

If two brokers get into a financial dispute what should they do?

settle it between themselves or take it to the court. Brokers who get into a financial dispute should try to mediate the situation themselves first. If the problem is too serious one party may choose to file a lawsuit. The Commission does not mediate financial disputes between brokers.

Which of the following is not required to be included in an agency disclosure agreement?

the client's social security number

What duty does a seller's agent have to a buyer?

to disclose that the broker represents the seller in the transaction

Why is a fair housing statement necessary on a disclosure statement?

to make a broker's obligation to prevent discrimination apparent from the beginning. Fair housing statements must be present on a disclosure form because it is a problem in the real estate industry that needs to be addressed. Brokers and possibly the brokerage can still get in trouble if they are party to any discrimination. The fair housing clause is to make the laws apparent to those that are unaware.

What is the primary responsibility of the BIC?

to manage the brokerage and supervise any provisional brokers