Unit 3: Sales Contract Preparation: Major Paragraphs of Standard Form 2-T

If there is no resolution to an earnest money dispute, the broker may then proceed to write a check from his trust account to the clerk of superior court of the county where the property is situated within which time period?

After the 90-day period

According to the Offer to Purchase and Contract, once the parties go beyond the 7-day delay in settlement,

"then the Delaying Party shall be in breach."

What action should the buyer take if it appears they may not be able to obtain financing on terms acceptable to them?

The buyer must exercise the right to terminate the contract before the expiration of the due diligence period.

Which of the following statements regarding a broker who is making an offer for an undisclosed buyer-principal is TRUE?

A broker acting as a dual agent for both the buyer and seller may not act as the agent for an undisclosed buyer-principal.

A buyer client wants to make an offer on a home, but there is a small repair to the front door she would like the seller to agree to fix before she will feel comfortable going under contract. The defect in the door was disclosed by the listing agent. Which contract amendment form should be used to make the request?

Additional Provisions Addendum

Which of these items are NOT fixtures?

All appliances

Which of the following statements regarding the disposition of earnest money is TRUE?

All earnest monies must be credited to the buyer at closing unless the contract is terminated.

Which of the following statements regarding the identification of parties of the contract is TRUE?

All parties should be identified by their current individual legal names.

In the Offer to Purchase and Contract, the seller agrees to deliver which form of title?

Fee simple marketable and insurable title

Regarding the completion of the names of the sellers, who are married, which of the following is considered good practice?

Using "John Doe and spouse Mary Doe"

Which of the following statements describes a requirement that applies to the deposit of earnest money?

Whenever a real estate broker is acting as the escrow agent, the broker must deposit the earnest money into a properly identified trust or escrow account.

The total purchase price may be

comprised of several smaller amounts paid to settlement, such as the due diligence fee, initial earnest money, and financing.

According to the Offer to Purchase and Contract, the seller will provide all of the following documents to the closing attorney EXCEPT

copies of wills and other estate documents.

A person selling their property has an obligation to perform all of the following EXCEPT

delivering to the closing attorney copies of all settlement statements from the original purchase.

In the event of a dispute between the seller and the buyer over the disposition of the earnest money deposit held in escrow, a broker or North Carolina attorney holding the earnest money may

deposit the disputed monies with the appropriate clerk of court.

Once a contract is formed, the broker or firm named as the escrow agent must

deposit the earnest money check into a trust or escrow account within three banking days of contract formation.

The two dates in the Offer to Purchase and Contract that are described as time being of the essence are the dates associated with

due diligence and additional earnest monies.

In a sales contract, a formal, legal description, as required in deeds or mortgages (deeds of trust), is

highly desirable and should be included, if available.

The guidelines for completing the Offer to Purchase and Contract caution brokers that if a counteroffer alters any of the numbers in Paragraph 1(d), then the parties must

initial and date all altered figures.

Escrow accounts

may be interest bearing.

If a property is damaged by fire or casualty before closing, the buyer

may choose to go forward with the transaction and be entitled to receive, in addition to the property, the proceeds of any insurance claim filed by the seller on account of any damage or destruction to the property.

The responsibilities of the buyer and seller under the Offer to Purchase and Contract

may not be assigned without the written consent of all parties.

The initials lines at the bottom of each page of a contract are

merely evidence of having reviewed the terms of each page.

The amount and date of any additional earnest monies are

negotiable by the parties and filled in by the broker.

The settlement date is established by ______________, and the place and time of settlement is designated by the _________________.

negotiation between the parties; buyer

Before depositing any disputed monies with the clerk of court, the broker must first

notify all parties claiming ownership of or entitlement to the monies, in writing, that the broker intends to pay the monies to the clerk of court.

To determine whether a dispute exists, the broker holding the earnest money deposit should first

notify the party of the broker's intent to release the money to the buyer or seller.

When brokers are dealing with heirs, devisees, or trusts who wish to convey property, brokers should

obtain competent legal advice from a North Carolina attorney before inserting the seller's name.

If a party files a special proceeding with the clerk within _____________________________, then the clerk will proceed to hear the case, determine rightful ownership, and disburse the funds.

one year of the funds being deposited

The buyer's due diligence

should include investigating the availability of any desired or required financing.

The North Carolina Offer to Purchase and Contract Form is also commonly referred to as

the 2-T form.

If the parties agree to a change in the purchase price or the amount the seller agrees to pay toward the buyer's expenses associated with the purchase of the property,

the Agreement to Amend Contract form, or one similar to it, should be completed and signed by the parties to reflect the change.

The Offer to Purchase and Contract form is jointly approved by

the North Carolina Association of REALTORS®, Inc., and the North Carolina Bar Association.

The Loan Assumption Addendum states that

the buyer intends to assume the unpaid principal balance of the seller's existing loan for the remainder of the loan term at the interest rate described, with the buyer paying all mortgage loan assumption costs and discount points.

If the property is not in the same or better condition at closing as on the date of the offer, then

the buyer may terminate this contract by written notice delivered to the seller, and the earnest money deposit must be refunded to the buyer.

If any of the seller's representations are inaccurate, the seller may be liable to

the buyer.

Entities selling or purchasing property should be identified by

the complete legal name of the entity.

The due diligence period is a period commencing on

the effective date of the contract and ending at 5:00 pm on whatever date is inserted in the blank in that subparagraph.

Any additional earnest money is made payable and delivered to

the named escrow agent.

Any notice or communication required to be given to either party in connection with the contract may be given to any of the following EXCEPT

the party's title company

If the buyers sue the seller for the return of the earnest money deposit, due diligence fee, or other reasonable costs,

the prevailing party in the proceeding must be entitled to recover from the nonprevailing party reasonable attorney fees and court costs incurred in connection with the proceeding.

Closing would be characterized by any of the following EXCEPT

the proper execution and delivery to the closing attorney of all documents necessary to complete the transaction, including the deed, Settlement Statement, deed of trust, and other loan or conveyance documents, and the closing attorney's receipt of all funds necessary to complete such transaction.

The difference between settlement and closing is that settlement involves

the proper execution and delivery to the closing attorney of all documents necessary to complete the transaction, including the deed, Settlement Statement, deed of trust, and other loan or conveyance documents, and the closing attorney's receipt of all funds necessary to complete such transaction.

If any of the funds by the buyer are not paid as promised,

the seller must give the buyer written notice that the buyer has one day to provide cash or immediately available funds, or the seller will terminate the contract.

Communication of a signed offer to establish the effective date can be done by all of the following EXCEPT

the seller telling his agent that he has signed the offer.

In the Offer to Purchase and Contract, the risk of loss or damage by fire or other casualty before closing is on

the sellers.

All parties to the contract should be identified by

their full first name and last name plus a middle initial, if available, and any suffix, such as Sr. or Jr.

When brokers cooperate on providing information on the notice section of the contract,

they make it possible for the parties to communicate with each other.

The buyer has the right to unilaterally terminate the contract by

timely delivering written notice of termination to the seller before the expiration of the due diligence period.

In the Offer to Purchase and Contract, the buyers must represent

whether they need a new loan, as well as whether they have to sell or lease another property to purchase this property.

Which party is responsible for repairing any damage to the property caused by the removal of an exempted item of personal property?

The seller

The seller must pay in full at settlement

all confirmed special assessments.

If a party abandons a claim to the disputed funds, the broker should

disburse the money to the other claim.

A proposed special assessment

is under formal consideration but has not been approved before settlement.

Which of the following activities would be an example of compliance with good brokerage practice when it comes to completing the Offer to Purchase and Contract?

Having the buyer and seller initial and date every change, addition, or deletion to an offer or contract

Before settlement, the buyer does a final walk-through of the property and notices that a moveable children's plastic playground set is no longer on the property. The buyer insists that the playground set is a fixture because it was in the property photos of the exterior. According to the Offer to Purchase and Contract, is the playground set a fixture?

No. The Offer to Purchase and Contract refers to play equipment that is permanently attached or in-ground as a fixture.

This portion of the Sales Contract addresses where the appropriate place to send communications to the Borrower and their representatives.

Notice Information

Which of these has to be provided by the buyer to the seller in the Offer to Purchase and Contract form?

Purchase price

A buyer who cannot qualify for a traditional mortgage wishes to make an offer asking the seller to take back a first mortgage, which would be paid back over a 10-year period at 5% interest. If the proposal should be accepted, the brokers involved should make sure that which addendum is attached?

Seller Financing Addendum

Which of the following would NOT fall under Prorations and Adjustments on an Offer to Purchase?

Taxes on commissions.

The buyer can withdraw from the contract before the expiration of due diligence for which reason and still expect a refund of earnest monies?

The buyer does not need to have a reason for withdrawing from the contract.

While using the Offer to Purchase and Contract, the buyer and seller agree upon a 45-day due diligence period. Which statement is TRUE?

The buyer has no obligation to purchase the property during the due diligence period and may be entitled to a full refund of any earnest money deposit paid.

If buyers have a property that must be sold before they can fulfill their promise to purchase one in North Carolina, how should this issue be handled on the Offer to Purchase and Contract?

The buyer should be advised to handle this issue as part of due diligence and ask for an appropriate due diligence period.

A broker found a buyer for a seller's house. The buyer put down an earnest money deposit with the broker, and the parties signed a sales contract. Before the sale was closed, a title search revealed a defect in the seller's title, making it impossible for the seller to deliver good title. Which of these statements is TRUE?

The buyer was entitled to cancel the sale without penalty.

Which of these fees or expenses is the buyer is responsible for paying?

The costs for an appraisal

Which of these BEST defines the effective date of a contract?

The date that the last of either the buyer or the seller has signed or initialed this offer or the final counteroffer, if any, and such signing or initialing is communicated to the party making the offer or counteroffer, as the case may be

Which of the following statements regarding the due diligence fee is NOT true?

The due diligence fee is a fee charged by the broker as compensation for services.

A fire/burglar alarm system in a home for sale is leased equipment. How should the alarm system be handled in the Offer to Purchase and Contract?

The listing broker should note that the alarm system is leased and cannot be conveyed with the property in the appropriate section of the contract dealing with fixtures.

Gabriel's grandparents decide to assign their rights to purchase a home to him, with the written consent of the seller. Which of these statements is TRUE?

The obligations under the contract are binding on Gabriel and his heirs.

What course of action is required if the buyer fails to deliver the initial earnest money deposit by their due date?

The seller must first provide the buyer with written notice of the default.

The sellers are under contract to sell their second home, which is vacant. They wish to disconnect their utilities after the buyers have completed their due diligence period. Which of these statements is true?

The sellers may not disconnect their utilities until closing or buyer possession whichever occurs first.

Should any personal property be negotiated as a part of the Offer to Purchase and Contract, the value of such items must be considered

as none or $0.

If interest is earned in a trust account, the interest

can be disbursed to the escrow agent monthly in consideration of the expenses incurred by maintaining the account.

To establish the effective date of the contract, the agreement between the parties must be

communicated in any reasonable manner.

If numerous changes are made, or if the same item (such as the purchase price) is changed more than once, the best practice would be to

complete a new contract form to avoid possible confusion or disputes between the parties.

Which characterization is synonymous with calendar days"?

Monday through Sunday, including holidays

Must a due diligence fee be paid?

No. It is a negotiated amount.

A charge that may become a lien against the property by a government authority or by a homeowners association for something other than dues is called

a special assessment.

Which of these statements regarding the section of the Offer to Purchase and Contract referred to as listing agent acknowledgment of receipt of due diligence fee is TRUE?

If any due diligence fee is delivered to the listing agent by whatever means, this section should be completed and signed by the individual listing agent or by some other authorized representative of the listing agent's firm.

Which of the following statements BEST describes why requiring the prospective purchaser to make a substantial earnest money deposit is practical?

If the purchaser defaults, the earnest money will be available to compensate the seller.

Where should earnest money be held?

In trust by an escrow agent while the transaction is pending

An owner who is selling a residential property build in 1972 must provide which addendum?

Lead-Based Paint or Lead-Based Paint Hazard Addendum

A listing broker sends a PDF copy of the offer signed by her seller, who has sent an electronic signature to the buyer's agent. Do the parties now have a valid contract?

Yes. Under the terms of the Offer to Purchase and Contract, if electronic means are used to sign and/or communicate information, a valid contract can be formed.

Brokers should always remember that __________________ should be consulted any time there is uncertainty regarding the proper completion of the Offer to Purchase and Contract form.

a North Carolina real estate attorney

There are legal situations where a real estate broker is making an offer for an undisclosed buyer-principal. An example of this includes a situation where

a buyer agent may have a client who does not want to be identified because disclosure of the buyer's identity may result in an increase in the asking price for the property.

A special assessment is defined as

a charge against the property by a governmental authority other than for taxes.

If the purchaser closes on the transaction, any earnest money deposit appears as

a credit to the buyer.

To have an enforceable contract, it must contain

a legal description of the property that would distinguish it from all other property.

An escrow agent is usually

a real estate firm, title company, or attorney.

If a contract is terminated due to the seller's breach, a buyer may be entitled to

a refund of any due diligence fee paid.