Chapter 10 - part 1

Which of these is not a true statement regarding the cancellation of a Short Sale contract?

Either party may terminate the contract until the buyer provides the seller with notice of the lienholder's acceptance.

Is it normal to use a verbal agreement to sell real estate in North Carolina?

No, agreements must be in writing, must include specific information, and must be signed by all parties.

If a residential dwelling was designed in 1977 and erected in 1979, would the Lead-Based Paint Addendum be necessary for the contract?

No, the addendum is only required if the dwelling was constructed before 1978.

When does the due diligence period start?

On the contract effective date.

Who is entitled to the interest earned on the earnest money while it's in escrow?

The escrow agent.

Who typically signs the sales contract first?

The offeror (buyer) signs the contract first, listing the terms of their offer, before submitting it to the seller for review.

For which of these properties would you use the "Offer to Purchase and Contract - Vacant Lot/Land" form?

Unimproved real property that the buyer is purchasing for personal use with no immediate plans to subdivide it.

If the property includes one or more manufactured homes, the home(s) should be identified in Item 5 of the Additional Provisions Addendum. Which of the following are acceptable ways to identify each mobile home?

VIN number or, if unknown, a description including the year and model.

At what point does the sales contract become legally binding on the parties?

When all parties have signed it.

When are due diligence fees payable under the Back-Up Contract Addendum?

When are due diligence fees payable under the Back-Up Contract Addendum?

The seller is obligated to provide certain notifications and information under the Lead-Based Paint Addendum. Which of these is not a notification requirement?

When the last coat of paint was applied on the property.

The Additional Provisions Addendum includes five numbered items. What should the parties do if one of the provisions does not apply to their situation?

Write "N/A" on the line next to the item number

Are real estate licensees allowed to help clients select and complete pre-printed contract forms?

Yes. Although real estate rules prohibit licensees from providing legal services, there is an exemption for helping clients fill out pre-printed forms.

Which of the following expenses is not something the seller is responsible for paying during the term of the agreement?

insurance to cover property damage

Which of these is not a common type of investigation that buyers typically complete during the due diligence period?

Criminal background investigation of the seller.

How are "days" calculated under the OPC?

Days means consecutive calendar days, including weekends and holidays.

Which of the following is not listed as a risk of lead poisoning for children in the italicized warning statement?

An increased risk of cancer.

Addendums are often used with sales contracts. Which of the following is a true statement about addendums?

Addendums are attached to, and become part of, the sales contract.

Which of the following best describes the Buyer Possession Before Closing Agreement?

An addendum to the OPC designed to address short-term occupancy by the buyer.

Ideally, when should a licensee review and become familiar with the standard sales contract form?

Before helping a potential purchaser submit an offer or helping a potential seller review submitted offers.

Which of the following is a true statement?

Before wiring money, contact the closing attorney's office at a number obtained independently to verify the legitimacy of the arrangement.

Which of the following is NOT a true statement regarding Item 1 of the Additional Provisions Addendum, used to document the date and time the offer will expire?

By default, the expiration date is 10 business days from the date of the written offer.

North Carolina statutes and Real Estate Commission rules prohibit licensees from providing legal advice or services. Which of the following could a licensee do without breaking the rules?

Help a client select and complete pre-printed forms.

Which of these is NOT a true statement regarding the buyer's rights to cancel the Back-Up Contract?

If the buyer terminates the contract after it becomes the primary contract and after the expiration of the due diligence period, they are only entitled to receive a refund of one-half of their earnest money.

In addition to the parties' names and the property description, which of the following must be included for a pre-printed Offer and Sales Contract to be valid, according to North Carolina Real Estate Commission Rules?

Itemized list of personal property included in the sale.

When authorized or directed by a client to do so, which of the following may a real estate licensee draft for a client?

Pre-printed sale or lease contract forms.

Section 1(d) of the OPC lists the purchase price. Which of the following is not included in this section?

Proposed and confirmed assessments.

What happens if there is a conflict between the terms of the Additional Provisions Addendum and the OPC, related to one of the specific provisions numbers 1-5?

The Addendum controls.

Which of the following is NOT true regarding the Additional Provisions Addendum?

The Addendum includes sections for Short Sales and Vacation Rental Property.

If section 5(a) of the OPC is completed with details about the loan(s) the buyer is applying for, what happens if the loan is not approved and the buyer cannot pay cash for the property?

The OPC is not contingent on the buyer's ability to obtain financing. However, if the buyer learns of the rejected loan application during the due diligence period, she can cancel the agreement without penalty.

Which of these statements is true regarding the buyer's due diligence rights under this Vacation Rental Addendum?

The buyer has the right to review copies of existing rental agreements and to terminate the contract without penalty during the due diligence period.

Which of the following is NOT true regarding the buyer's obligations to tenants with existing rental agreements?

The buyer is obligated to honor existing vacation rental agreements that extend beyond 180 days from closing.

A buyer using VA financing learns that the appraised value was significantly less than expected. The buyer decides to proceed with the purchase, making up the difference in cash. Which of the following statements is true?

The buyer must disclose the source of the cash to the DVA.

What does this addendum say about the buyer's right to conduct due diligence on the property?

The buyer waives the right to conduct further due diligence after the Commencement Date and agrees to accept the property in its condition on that date.

What does the "Contingency" clause in the Short Sale Addendum state?

The sale is contingent on obtaining written approval from all the lienholders.

When the Short Sale Addendum is used, which of these is NOT a true statement regarding other offers and additional contracts?

The sales contract covered by this Addendum becomes null and void if the seller closes on another sales contract. In that case, nobody is entitled to a return of the earnest money.

Which of these is a true statement about the FHA/VA Financing Addendum?

The sections of the form to be completed depend on which financing option the buyer is pursuing.

If the buyer decides to cancel the contract based on the inspection reports, what happens to the due diligence fee?

The seller keeps the due diligence fee.

What happens if a buyer is in breach of their responsibilities under a sales contract using the Buyer Possession Before Closing Addendum?

The seller may evict the buyer using the North Carolina Summary Ejectment Proceeding.

All of these are potential reasons a buyer might enter into a seller possession after closing agreement with the exception of:

The seller may not vacate the premises at the end of the term

Who bears the risk of loss or damage by fire or other casualty before closing?

The seller.

Which of these is not a potential benefit for a seller who enters into a seller possession after closing agreement?

They don't have to pay the buyer rent until the end of the agreement term.

Which of these is not a disclaimer or important statement included on the FHA/VA Financing addendum?

This addendum is deemed legally valid by the NC REALTORS Association and the NC Bar Association.

Who is legally and financially responsible for liability claims, lawsuits, costs and expenses related to property damage, personal injury or death that may occur as the result of the seller's occupancy after the closing date?

the buyer, although the seller agrees to indemnify and hold the buyer harmless

Who is responsible for maintenance and repairs during the term of a seller possession after closing agreement?

the seller

When would you use the FHA/VA Financing Addendum?

when a buyer intends to obtain mortgage loan financing from the U.S. Department of Housing and Urban Development's Federal Housing Administration or from the Veteran's Administration