Real Estate Prelicensing

68 A legal description states: "Starting at the corner of 1st Street go 100 feet east to Main Street then 60 feet south to Adams Ave. then 100 feet west to 2nd Street and then 60 feet to the point of beginning." According to the legal description, approximately how many acres are in the lot? Review Later 0.0138 Acres 0.1377 Acres 0.2296 Acres 1.3774 Acres

-0.1377 Acres The area of a lot is determined by taking the length and multiplying by the width. To calculate acreage, divide the square footage by 43,560, which is the number of square feet in an acre.Lot Square Footage: 60 X 100 = 6,000Lot Acreage: 6,000 / 43,560 = .1377

70 Aiden purchased a property where tax rates are per $100 of assessed value. The market value of the home is $475,560 and the assessed value is 85% of the market value. The city tax rate is $0.45, and the county tax rate is $0.90. What is Aiden's month tax liability? Review Later 303.17 356.67 3638.03 4280.04

-303.17 It is important to read the problem to determine what you are solving for, in this case the monthly tax liability. For a property located in the county, the owner will pay only County taxes. When a property is located in the city, the owner will pay city and County taxes. Taxes are paid based on the assessed value. Tax Year = AV ÷ 100 X Rate. The monthly amount is calculated when you divide by 12. Assessed Value: $475,560 X 85% = $404,226 Tax for Year: $404,226 ÷ 100 X $0.90 = $3,638.03 Monthly Tax: $3,638.03 ÷ 12 = $303.17

69 Aiden purchased a property that is located in Orange County, North Carolina. The market value of the home is $475,560. The assessed value is 85% of the market value. The City tax rate is $0.45 and the County tax rate is $0.90. What is Aiden's annual tax liability? Review Later 303.17 356.67 3638.03 4280.04

-3638.03 It is important to read the problem to determine what you are solving for, in this case the monthly tax liability. When a property is located in the County the owner will pay only County taxes. When a property is located in the city, the owner will pay city and County taxes. Taxes are paid based on the assessed value. Tax Year = AV ÷ 100 X Rate. The monthly amount is calculated when you divide by 12. Assessed Value: $475,560 X 85% = $404,226 Tax for Year: $404,226 ÷ 100 X $0.90 = $3,638.03

36 Which of the following would violate the Sherman Antitrust Act? Review Later A licensee that sends unsolicited faxes to a business without a prior business relationship. A broker that does not recommend a home inspector A licensee that makes an unsolicited call to a registered number A broker that tells other brokers not to use a particular attorney Comments

-A broker that tells other brokers not to use a particular attorney The Sherman Antitrust Act outlaws price-fixing, boycotting, and market allocation. A licensee is not required to recommend someone's service. They can choose not to use the services of a particular vendor. The licensee cannot collude with other brokers to boycott the vendor. The Do Not Call law does not permit unsolicited phone calls to a registered number. The Do Not Fax law outlaws sending unsolicited faxes without a prior business relationship.

55 Which of the following statements regarding special assessments is CORRECT? Review Later A lien for an unpaid special assessment is a lien against the property itself rather than against the property owner. A special assessment lien takes priority over property tax liens and all other liens. A seller of property subject to an unpaid special assessment continues to be personally liable for payment of the special assessment after the sale. A special assessment on a residential lot may be made only by a properly established homeowner's association. Comments

-A lien for an unpaid special assessment is a lien against the property itself rather than against the property owner. A special assessment lien is a specific lien against the property, not a general lien against all property owned by the current owner. Special assessment liens can be public or private. Public special assessments receive special treatment and are paid first along with local property taxes. Private special assessments are levied by a homeowner's association to cover the cost of maintenance, amenities, etc.

39 Which of the following individuals / entities would be required to obtain a real estate license? Review Later An S-Corporation officer enters into a 10-year lease for a large space that will be sublet to multiple tenants An individual acting as a W-2 employee of a corporation in the purchase, sale, or lease of property owned by the corporation A tenant that receives a $200 voucher for referring a new tenant to their apartment complex A family member that helps a relative locate, finance, and purchase a property without compensation

-A tenant that receives a $200 voucher for referring a new tenant to their apartment complex It is against the law for a licensee to offer a tenant compensation if they locate a new tenant for an apartment complex. What is the licensed triggering event? Earning compensation on behalf of another. Since the current tenant is not a party to the lease transaction, they need to have a license on active status to receive the $200 lawfully.

59 A seller hires a broker under an Exclusive Right to Sell listing agreement. The seller is completing the Residential Property Disclosure and Mineral Oil and Gas Disclosure. Which of the following can the listing broker legally perform? Review Later Fill out the form based on representations made by the seller. Make disclosures about material facts that the broker is aware. The broker can tell the seller how to respond to questions on the disclosure. Advise the seller about his/her obligation to complete the disclosure.

-Advise the seller about his/her obligation to complete the disclosure. A broker shall advise and assist the seller about the completion of the disclosure forms, however cannot tell the seller how to answer or complete the form even at the sellers direction. RPOADS and MOG are seller disclosures - the agent does not make any disclosures on these forms. The broker must advise the seller if a representation that the seller has made is not accurate. The seller can select "yes" something is wrong, "no" nothing is wrong, or "no representation" something may or may not be wrong, and I am not going to tell. The seller can be held liable if they lie on the form or aware of a latent defect and fail to disclose it. A broker is responsible for disclosing what they know or reasonably should have known about the property, just not on the seller's disclosure form.

19 Cortney lists a property for sale where the seller does not authorize dual or designated agency. Alex, an agent affiliated with the same firm, has a buyer interested in seeing the property and possibly making an offer. Which one of the following statements is FALSE? Review Later The seller must agree to dual and/or designated agency in writing so long as the buyer agency agreement is in writing. Cortney and Alex would not be allowed to represent the buyer or seller under designated agency if they have personal or confidential information about the other party. The seller may orally authorize dual or designated agency so long as the buyer agency agreement is oral. Alex will not be able to show the property, and his only option is to refer the buyer to another real estate firm.

-Alex will not be able to show the property, and his only option is to refer the buyer to another real estate firm. A seller or buyer can subsequently agree to dual or designated agency. It is important to know what must be done when the seller subsequently agrees. If the buyer's agency agreement is in writing, the seller's authorization must be in writing. If the buyer's agency agreement is oral, then the seller's authorization may be oral, however, must be reduced to writing before presenting the offer.

8 A licensee measures a standard two-story brick home. Under the Residential Square Footage Guidelines prepared by the North Carolina Real Estate Commission, which of the following is TRUE? Review Later A bonus room accessible from a staircase in the garage is included in the living area square footage. An agent would add 6" to any outside wall. An agent must include space with five feet of headroom or greater so long as it is heated, finished, and directly accessible. An agent must make an adjustment to the second floor if the opening for the stairway is larger than the stairs.

-An agent must make an adjustment to the second floor if the opening for the stairway is larger than the stairs. When measuring a property using the NCREC residential square footage guidelines, space must be heated, finished, and directly accessible. Ceilings should be 7 feet tall (6'4" under ducts or beams); however, in a room with a sloped ceiling, the height can go down to 5 feet so long as 50% or more of the ceiling height is 7 feet.

62 An easement is granted to a utility company to run utility cable under a farm. This type of easement is known as: Review Later An easement by necessity A freehold right An easement appurtenant An easement in gross

-An easement in gross A commercial easement in gross runs with the land and does not terminate by death or sale. An appurtenant easement occurs between two adjoining lots, often for ingress/egress. An easement does not grant ownership in the property, just the right to use another's property. An easement by necessity occurs when a property is landlocked. The courts can permit the landlocked owner to cross the property of another for compensation.

42 Which of the following statements regarding land use controls is TRUE? Review Later An owner would seek a zoning amendment when they desire to change the use of the property. A special use exemption allows a use to be "grandfathered" when the zoning board changes the zoning rules. A variance changes a property from single-family to multi-family. A non-conforming use is provided for in the city/county plan, often in the public good.

-An owner would seek a zoning amendment when they desire to change the use of the property. When a significant change or change in use is desired, the owner must seek a zoning change or amendment (residential to commercial / single-family to multi-family). A minor change is not a change in use - lesser setback, more parking spaces, parking garage, etc. A legal non-conforming use occurred when a use was permitted, and then the zoning is changed. The use is grandfathered in and allowed to continue unless the use is abandoned. A special use exemption is often in the public good, something that has been provided under current zoning/planning, which allows a developer to obtain permission to build without having to go through the normal rezoning process.

37 A seller has offered to leave the washer and dryer, which the listing agent has advertised in the MLS. The buyer's agent wrote an offer to purchase that does not address the washer and dryer. Is the seller obligated to leave the washer and dryer for the buyer? Review Later No. The seller is never obligated to leave the washer and dryer as they are UCC fixtures. No. The buyer must specifically ask for the washer and dryer in the offer to purchase. Yes. The washer and dryer are considered fixtures as they are attached to the home's plumbing and electrical system. Yes. Since the washer and dryer are offered on the MLS, the seller is obligated to leave them.

-No. The buyer must specifically ask for the washer and dryer in the offer to purchase. Washer, dryers, refrigerators are considered personal property in North Carolina. The seller is obligated to leave them when mutually agreed to in an offer to purchase and contract. The seller has made an offer, and the buyer needed to ask for them in the contract. UCC Fixture Filings keep what would typically be a fixture as personal property until the amount loaned is paid in full. Recall that fixtures remain with the property and are tested under the Total Circumstance Test - IRMA - intention, relation, method, and adaptation. Agreement in a contract supersedes the Total Circumstance Test.

Which of the following statements is TRUE regarding licensure in North Carolina?

-Only the Commission may suspend or revoke a real estate license. This Question Is Tricky. A licensee must report a conviction or guilty plea for a felony crime within 60 days; however, it is not required to report a charge. A licensee must notify the Commission of a change in address or name within ten days. A licensee on inactive status is not required to complete postlicensing or continuing education.

53 Rohan, a provisional broker, is hired by Cassandra as her exclusive buyer's agent without approving dual/designated agency. Rohan's broker-in-charge lists a property that meets all of Cassandra's needs. Which of the following statements is FALSE? Review Later Rohan cannot show the property unless the buyer and seller agree to dual agency representation. Cassandra may orally agree to dual agency representation if the buyer's agency agreement is oral. Rohan may obtain subsequent approval and act as a designated dual agent in the transaction. Cassandra must authorize dual agency in writing if the buyer's agency agreement is in writing. Comments

-Rohan may obtain subsequent approval and act as a designated dual agent in the transaction. A BIC and PB cannot act as designated agents in a transaction - No BIC and PB and no P&C. A BIC and PB can act as dual agents in a transaction - when the buyer and seller have agreed and the firm practices dual agency. A buyer or seller can subsequently agree to dual/designated dual agency representation. The buyer's agency agreement will control. If the buyer's agency agreement is written, then the subsequent authorization must be in writing. If the buyer's agency agreement is oral, then the subsequent permission may be oral.

49 Samantha grants Sophie an appurtenant easement for a driveway that runs through Samantha's property. Which of the following statements is TRUE? Review Later The only way for the easement to be terminated would be the release of the easement by Sophie Appurtenant easements are limited to shared driveways Samantha is the dominant estate, and Sophie is the servient Samantha is the servient estate, and Sophie is the dominant estate

-Samantha is the servient estate, and Sophie is the dominant estate An appurtenant easement means that there are two adjoining properties. They are often used for ingress and egress - such as a driveway. There is a dominant and servient estate that is created. The dominant estate gets the benefit while the servient estate gets the burden. The easement runs with the land and will be binding on subsequent purchasers. It may help to draw the two lots to answer the question. The keyword in the statement that makes it false is "only." There are very few definitive statements in real estate - often, definitive statements are distractors. An easement may be terminated by mutual agreement, released by the dominant estate, expiration of the time agreed to in the easement, abandonment (non-use does not equal abandonment), or the reason for which it was created no longer exists.

69 A lot has dimensions of 425 feet by 680 feet. There is a 4-foot wide hedge that surrounds the entire lot and detracts from the usable space. How many acres of usable space exist on this lot? Review Later 6.43 6.63 6.99 7.65

-6.63 The area of a lot is determined by taking the length and multiplying by the width. To calculate acreage, divide the square footage by 43,560, which is the number of square feet in an acre. No adjustment is made for the hedge as it can be removed.Lot Square Footage: 425 X 680 = 289,000Lot Acreage: 289,000 / 43,560 = 6.634

67 Tim, a licensed broker in North Carolina, is writing an offer to purchase for Sherri, his buyer client. Which of the following statements is FALSE? Review Later Earnest money may be paid with an offer to purchases, however, it is not required. A broker should reference a bonus paid by the seller to the buyer in the contract. A licensed broker must deliver the offer within three calendar days to the listing agent. Only a licensed REALTOR can use the standard 2-T Offer to Purchase and Contract. Comments

-A broker should reference a bonus paid by the seller to the buyer in the contract. Compensation to the broker cannot be referenced in an offer to purchase as the broker is not a party to the agreement - it is between the buyer and the seller. Compensation must be disclosed when paid by the third party and would be accomplished by using the Confirmation of Compensation form. The REALTOR 2-T NCAR/NCBA Offer to Purchase can only be used by members of NCAR. A brokerage does not have to use the 2-T form and can hire an attorney to create a standard offer that meets Real Estate Commission Rules. A client can elect to hire an attorney to draft an offer unique to the particular transaction or can draft language in a standard offer to purchase. A broker is not permitted to draft unless the broker is an attorney or is a party to the contract. Offers should be delivered immediately but no later than three calendar days. It is essential to read carefully as the 3-day rule is not related to business or banking days. While earnest money is recommended, it is not required in a contract. May is a tricky word, which means something "may" or "may not" be required.

74 Which of the following statements is FALSE regarding real property? Review Later A manufactured home is built according to the standards set by the Department of Housing and Urban Development. Real property ownership may be affected by both financial and non-financial encumbrances. A modular home is considered personal property until the wheels are detached, it is placed on a permanent foundation, and delisted from the DMV. The total circumstance test helps determine if an item of personal property has become a fixture.

-A modular home is considered personal property until the wheels are detached, it is placed on a permanent foundation, and delisted from the DMV. A modular home is considered real property once assembled. A manufactured home becomes real property once the wheels are detached, it is placed on a permanent foundation and is on land that belongs to the owner and delisted from the DMV. Manufactured homes are built to standards set by HUD. Real property can have financial encumbrances (liens) or non-financial encumbrances (easements, encroachments, restrictive/protective covenants, etc.). The Total Circumstance Test determines if an item is real or personal property - IRMA - intention, relationship, method, and adaptation. An agreement takes precedence over IRMA - whatever is agreed to in the offer to purchase and contrac

27 Lynn opened a coffee shop in a small town. The town later zoned the area as single-family residential. Seven years later, Lynn sells the property to Austin, who operates the coffee shop for another fifteen years. Which of the following statements is CORRECT? Review Later Lynn's use of the property became a legitimate conforming use after five years. Austin's use of the property is allowed as it is a legal non-conforming use. Lynn's use of the property was illegal. Austin acquired the right to use the property as an antique shop by adverse possession. Comments

-Austin's use of the property is allowed as it is a legal non-conforming use. Lynn's use of the property is grandfathered in as the use was not restricted at the time the coffee shop opened. When the town changed the use to single-family, only the coffee shop became a non-conforming use. Lynn is permitted to will, sell, or transfer the use to another when the use is not abandoned. No additional approval is required from the town

61 Jenna wants to open a real estate brokerage. Assuming she meets the requirements to elect herself broker-in-charge, which of the following statements is TRUE? Review Later A separate firm license will be required if Jenna elects to operate as a sole proprietorship. Jenna will not require a firm license if she elects to operate the business as a partnership. Should Jenna operate as an S-corporation, she will need a firm license as well as the appointment of a qualifying broker. Jenna must operate independently, without any other affiliated brokers, should she decide to operate as a sole proprietorship.

-Should Jenna operate as an S-corporation, she will need a firm license as well as the appointment of a qualifying broker. An entity (Partnership, LLC, or Corporation) must obtain a separate firm license and appoint a qualifying broker and broker-in-charge. A sole proprietorship is not required to obtain a separate firm license; however, all other business forms must obtain a separate firm license. Sole proprietorship refers to one owner, and so long as the firm has a broker in charge, additional brokers can affiliate.

64 C is purchasing a property located outside the city limits. The street signs in the subdivision do not state that the roads are private. Which of the following statements is TRUE? Review Later The agent must determine if the roads are public or private and disclose this to potential buyers as this is a material fact. If the roads are privately maintained, regardless of when the subdivision was built, the developer must establish a road maintenance agreement prior to selling lots. The agent is not responsible for disclosing public vs. private streets as the attorney will determine this before closing. Since the signs do not state that they are private, an agent can assume that the streets are publicly maintained.

-The agent must determine if the roads are public or private and disclose this to potential buyers as this is a material fact. It is a material fact that must be disclosed - whether roads are public or private, who will pay to install the roads and who will pay to maintain the roads. In a new subdivision, the agent must ensure that the developer discloses the status of the roads. One cannot assume that roads are public because the sign does not state private. For roads to become public, they must be built to DOT standards, dedicated to DOT, and accepted by the DOT.

47 Taylor is purchasing a property located at 5009 Buck Horn Road. She did not want to hire a buyer's agent to represent her, opting for seller sub-agency. Which of the following statements is FALSE regarding the transaction? Review Later The broker must disclose if the property is currently or was previously clad with synthetic stucco. The broker can provide Taylor with unadjusted sales data about recently sold properties so that she can determine an offer price. The broker must disclose to Taylor that a registered sex offender resides near th The broker will not be permitted to determine if Taylor can build a storage shed on the property under the neighborhood's restrictive or protective covenants.

-The broker must disclose to Taylor that a registered sex offender resides near the property. It is not a material fact that a sex offender lives in the neighborhood; therefore, a broker would not be held liable for failing to disclose this. Also, if a seller is behind on the mortgage payments is not a material fact unless the lender sends foreclosure notice. It is a material fact that a property is subject to restrictive/protective covenants. Still, the broker would not be required to help the buyer determine if their desired use will be allowed. The broker should refer the buyer to an attorney. A broker, acting as a subagent of the seller, is not permitted to prepare a CMA, however, they can provide unadjusted sales data. It is also a material fact that a property is clad or was previously clad in synthetic stucco.

3 Failure to provide the Residential Property and Owner Association Disclosure Statement in a transaction where it is required may result: Review Later in a voidable contract on behalf of the seller. in a reprimand issued by the courts against the listing agent. in a $500 fine per day assessed to the seller. in termination of the contract by the buyer without penalty. Comments

-in termination of the contract by the buyer without penalty. The buyer can terminate the contract and receive a refund of due diligence and earnest money, the earlier of three calendar days from receipt, three calendar days from the effective date of the contract, or settlement or occupancy by the buyer. Only the Commission can reprimand a licensee. The courts can assess guilt and charge fines. A timeshare developer is required to pay a $500 fine per violation of the timeshare act.

42 A salesperson pays a "bird dog fee" to a friend that works for a large corporation. The friend has advanced knowledge when an employee will relocate to the area or out of the area. This payment: Review Later is not permitted as it violates the Connor Act. is not permitted as prospecting requires an active real estate license. is permitted when it is of nominal value, less than $100. is permitted when disclosed to the referral.

-is not permitted as prospecting requires an active real estate license. A licensee cannot pay the commission to an unlicensed person for acts that required an active real estate license. Prospecting/solicitation and negotiations require an active real estate license. For a list of unlicensed salaried employee activities, see pages 3-4 of License Law Commission Rule Comments. NOTE: "An unlicensed employee can record and deposit earnest money deposits, tenant security deposits and other trust money and otherwise maintain records of trust account receipts and disbursements...:", "assist a licensee in assembling documents for closing," and "compute commission checks for licensees affiliated with a broker or firm and act as the bookkeeper for the firm's bank operating account." The Connor Act protects against third party transfers when a deed is recorded.

47 A seller refuses to pay compensation to the listing broker in a transaction that has closed. The listing broker is holding a $5,000 earnest money deposit. The listing broker:

-should give the money to the buyer and sue the seller for the earned commission. The earnest money deposit belongs to the buyer since the buyer purchased the property. Compensation for the sale is due from the seller based upon the agency contract. The listing broker must refund the money to the buyer and then decide to sue the seller for the commission.

61 A listing broker enters into an exclusive right to sell listing agreement with the owner. Without informing the listing broker, the owner agrees to an installment land contract to be paid over 20-years. In this instance: Review Later the seller is not obligated to pay compensation as the listing broker is not the procuring cause. the seller is obligated to pay compensation based on the amount initially collected but not for the installment payments. the seller is obligated to pay compensation outlined in the exclusive right to sell listing agreement. the seller is not obligated to pay compensation as the contract is not a true sale.

-the seller is obligated to pay compensation outlined in the exclusive right to sell listing agreement. The seller is obligated to pay compensation to the listing broker no matter how the property is sold, optioned, exchanged, conveyed, or transferred. The seller owes compensation as outlined in the listing contract, which is typically based on the sales price. NOTE: The seller would not be liable for compensation to the listing broker if the seller signs an exclusive or open listing agreement.

When the ownership is tenants in common:

-there is no right of survivorship. Property is inheritable by the heirs when owned as tenants in common. Joint tenancy and tenancy by the entirety ownership have survivorship's rights, meaning that the title passes to the other co-owners rather than to heirs. NOTE: You don't pass a joint to your kids. A tenant in common may sell his/her share of the property without permission from the other co-owners; however, it cannot sell the entire property without all owners' consent.

8 An employing broker who hires a broker/salesperson as an employee must: Review Later contribute to employee's retirement fund. give the associate a paid vacation. withhold Social Security taxes. pay a minimum wage of $12 per hour.

-withhold Social Security taxes. An employer is required to withhold payroll taxes from an employee. Benefits may be negotiated but are not required.

A client is purchasing a property located in a new subdivision. Which of the following statements is TRUE?

-The agent should obtain a copy of the disclosure regarding the subdivision streets to determine if roads are public or private. New construction properties are exempt from providing the Residential Property and Owners Association Disclosure Statement. The developer would have to sign the Mineral, Oil, and Gas Disclosure. The broker is required to disclose if the roads will be public or private, as this is a material fact. An agent must have proper skill, care, and diligence and would need to be aware of restrictive/protective covenants and other laws/rules that could impact the property, such as impervious surface rules (a limited percentage of the lot can be built upon).

9 An agent is listing a property for sale on behalf of her client. Which of the following MUST be agreed to at the time the listing agreement is signed?

-The method of calculating commission that will be paid to the listing firm in total as well as any amount paid, if any, to a buyer's agent. While the seller should authorize dual agency at the time of listing, it is not required. The seller can later change his/her mind and subsequently authorize dual agency. It is important to note that when a buyer represented by the firm becomes interested in the property, and the seller decides to consent to dual agency, the authorization does not need to be in writing if the buyer's agency agreement is oral. The subsequent seller authorization of dual agency must be in writing if the buyer's agency agreement is in writing. A standard listing agreement in North Carolina must be written from inception, contain a definite end date, including the prescribed non-discriminatory language, and disclose the broker's license number.

A landowner has been using his property as a restaurant for the past twenty years. The city recently rezoned the landowner's property to multi-family residential. Which of the following statements is TRUE? Review Later The owner must seek a special use permit to continue the use after the zoning change. The owner may need to seek a rezoning in order to sell the property to another. The owner must seek a variance prior to selling the property to another. The owner may continue the use or sell the property as a legal non-conforming use.

-The owner may continue the use or sell the property as a legal non-conforming use. A legal nonconforming use may continue so long as the use is not abandoned. It may be sold, inherited, or otherwise transferred without impacting this status. The owner does not need to seek a variance, special use permit, or rezoning as the use is grandfathered when the city made the change.

31 Who can sign a listing agreement on behalf of a corporation? Review Later The Board of Directors for the corporation The person named in a corporate resolution Qualifying Broker Broker-in-Charge

-The person named in a corporate resolution The Board of Directors makes corporate decisions; however, they lack the authority to sign on the Corporation's behalf. The Board of Directors will sign a CORPORATE RESOLUTION that grants an officer or employee to sign on behalf of the entity. Qualifying broker and broker-in-charge relate to real estate licensing.

46 Kim signed a listing agreement with R.O.A.R Realty for her expansive home located on a golf course lot. Which of the following would NOT terminate her listing agreement? Review Later When under contract, the property officially closes per the Standard Offer to Purchase and Contract terms. The seller breaches the agreement and fails to correct the breach in the time outlined in the Exclusive Right to Represent Seller. The home is destroyed when a forest fire burned it to the ground. The provisional broker that listed the property dies in a tragic bicycle accident.

-The provisional broker that listed the property dies in a tragic bicycle accident. The listing agreement is between the client and the firm. While the death of the provisional broker is tragic, it would not terminate the listing agreement. The brokerage can appoint another agent.

16 On April 10th, a contractor began remodeling a kitchen and completes the work on June 17th. The Closing occurred on September 23rd. The previous owner did not pay for the remodel, and no funds were paid at closing. All other debts of the seller are paid in full at the time of closing. Which party would have a superior lien? Review Later The first mortgage lien holder assuming it was the first recorded lien following the closing The tradesman through a mechanics' lien assuming they met the statutory requirements The IRS that recorded a lien against the seller one day following closing A judgment against the new owner obtained one week after closing

-The tradesman through a mechanics' lien assuming they met the statutory requirements Lien priority is determined by the date and time the lien is recorded. A mechanics lien may jump in priority back to the first day labor or materials are provided when the statutory requirements are met. Property taxes and public assessments will always have the highest priority over all other recorded liens. It is a common misconception that IRS judgments have the highest priority. Based on the above, the first mortgage lien was recorded after the first day labor or materials were provided. In this instance, the mechanic's lien has a higher priority than the mortgage lien.

40 Which of the following TRUE regarding agency relationships? Review Later A broker can always act as a designated agent if both clients agree in writing. A designated agent can advocate for his or her client. A broker owes fiduciary duties to a potential buyer visiting an open house. A subagent represents the buyer in a real estate transaction. Comments

-The tradesman through a mechanics' lien assuming they met the statutory requirements Lien priority is determined by the date and time the lien is recorded. A mechanics lien may jump in priority back to the first day labor or materials are provided when the statutory requirements are met. Property taxes and public assessments will always have the highest priority over all other recorded liens. It is a common misconception that IRS judgments have the highest priority. Based on the above, the first mortgage lien was recorded after the first day labor or materials were provided. In this instance, the mechanic's lien has a higher priority than the mortgage lien.

On April 10th, a contractor began remodeling a kitchen, which was completed on June 17th. The Closing occurred on September 23rd. The previous owner did not pay for the remodel, and no funds were paid at closing. All other debts of the seller were paid in full at the time of closing. Which party would have a superior lien?

-The tradesman through a mechanics' lien assuming they met the statutory requirements Lien priority is determined by the date and time the lien is recorded. A mechanics lien may jump in priority back to the first-day labor or materials were provided, so long as the statutory requirements are met. Property taxes and public assessments will always have the highest priority over all other recorded liens. It is a common misconception that IRS judgments have the highest priority. Based on the above, the first mortgage lien was recorded after the first-day labor or materials were provided. In this instance, the mechanic's lien has a higher priority than the mortgage lien.

44 A broker that lists the property for sale and rent decides to hire an unlicensed assistant to help her fulfill the duties owed to her clients. Which of the following statements is TRUE? Review Later The unlicensed assistant can show a property that is listed for rent to prospective tenants. The unlicensed assistant can sign a preprinted property management agreement. The unlicensed assistant can a show property that is for sale to prospective buyers. The unlicensed assistant can fill out a preprinted offer based on the buyer's instructions.

-The unlicensed assistant can show a property that is listed for rent to prospective tenants. An unlicensed assistant performing property management duties can show property for rent and fill out preprinted lease forms; however, they cannot negotiate. They are not permitted to sign property management agreements. An unlicensed assistant performing duties outside of property management is very limited, as they cannot show the property to buyers or fill out preprinted offer forms. They can answer phones, enter information into the MLS provided by the licensed agent, hang signs, and fill flyer boxes.

65 Detra is representing a buyer in the purchase of a new home. One of the properties she is about to show is offering a $10,000 bonus paid by the seller in addition to the 3% buyer agency fee. When would be the latest time that Detra can disclose the bonus and still comply with License Law and Commission Rules? Review Later Upon first showing When the buyer is considering an offer Disclosure is only required when a 3rd party makes the payment; therefore, no disclosure is required The Closing Meeting

-When the buyer is considering an offer The latest time to disclose a bonus paid by a 3rd party is when the buyer is considering an offer. The latest time to reduce the disclosure to writing is before writing the offer to purchase. While it may be best practice to disclose 3rd party bonus prior to showing the property, that is not typically the answer the test is looking for. Many questions relate to the latest point a disclosure can be made.

25 Which of the following is an example of government powers? Review Later Suit to Quiet Title Zoning Ordinance Adverse Possession Easement by Prescription

-Zoning Ordinance An easement by prescription is adverse possession - the hostilely taking of another's property. Recall HI OCEAN - hostile, intentional, open, continuous, exclusive, adverse, and notorious. The government does not need to take property through adverse possession as they can condemn property through eminent domain. Escheats occur when a person dies without heirs, so the property passes to the state. Eminent domain is the right to take property for public use, and condemnation is the action. The owner is compensated fair market value. Zoning ordinances set the permitted use of a property.

1 A licensee typically represents owners that want to sell a property. The licensee enters into a property management agreement with one owner. Under the property management agreement, the licensee will act as: Review Later a univeral agent. a dual agent. a general agent. a special agent.

-a general agent. The property management agreement grants the licensee a broad scope of authority to perform certain defined tasks. PM agreements create a general agency relationship. The PM can sign lease agreements on behalf of the owner/landlord, collect rent, screen tenants, enforce rules, etc. Universal agency occurs when a person is granted power-of-attorney or attorney-in-fact and can legally stand in legally for the person. Special agency arises when a licensee represents a buyer, seller, or tenant in a real estate transaction. Special agents have no decision making authority, thus cannot sign on behalf of the client.

17 A licensed broker working for a subdivision developer is holding an open house in a model home. A potential buyer wants to make a deposit to reserve a lot in Phase II. The preliminary approved plat for Phase II is posted in the model; however, the plat has not been approved and recorded. The agent may: Review Later show Phase II lots and close on the sale with lender approval. accept and hold a deposit check without cashing it until the Phase II plat is approved and recorded. accept the deposit and reserve a particular lot for the buyer. add the prospective buyer's name to a list of prospects for Phase Il. Comments

-accept the deposit and reserve a particular lot for the buyer. The developer may offer lots for sale since preliminary approval is received. The buyer cannot close on the lot until final approval is received and recorded. The developer has to make the buyer aware that the city/county has not granted final approval and may never grant final approval.

51 A real estate salesperson is representing a seller. A buyer asks if the heating system functions properly. The salesperson: Review Later should ask the seller if the system works properly. advise the buyer to seek the services of an HVAC specialist. inform the buyer that "everything is fine." perform extensive testing of the heating unit.

-advise the buyer to seek the services of an HVAC specialist. A licensee should not make representations about a system without actual knowledge. The best course of action is for the buyer to seek the advice of a qualified HVAC specialist

60 An office assistant in a real estate office who does NOT have a real estate license can: Review Later help negotiate a Sales Contract as long as she explains that she is unlicensed. answer basic questions limited to MLS data from callers about one of the firm's listings. sign a Listing Contract for a broker as long as she has the broker's permission. schedule an appointment where she will be showing one of the firm's listings.

-answer basic questions limited to MLS data from callers about one of the firm's listings. An unlicensed assistant can answer basic questions, fill flyer boxes, type up agreements at the direction of a licensed agent, and show a property that is available for rent. The unlicensed assistant cannot be involved in contract negotiations, sign listing contracts, or show a for-sale property.

35 Protective covenants: Review Later are enforced by a complaint to the Sherrif. are enforced by the local housing authority. are enforced by court action. are enforced by the local planning board.

-are enforced by court action. From the answer choices provided, the courts enforce restrictive/protective covenants. The lawsuit used to stop a violation of CC & R's (Covenants, Conditions, and Restrictions) is an injunction. NOTE: Had one of the answer choices been "are enforced by the HOA," it would be the best answer. The courts should be the last resor

15 Covenant, conditions, and restrictions (CC&Rs) differ from zoning laws: Review Later as CC&R's are often more restrictive than zoning laws. as CC&R's are enforced by the housing authority, while zoning laws are enforced by the planning board. as CC&R's are established by the city/county, and zoning laws are established by the state. as CC&R's are for residential property, and zoning laws apply to commercial businesses. Comments

-as CC&R's are often more restrictive than zoning laws. CC&Rs / Restrictive Covenants are often more restrictive than building code or zoning laws. CC&Rs are private restrictions that transfer with the property. NOTE: The most restrictive law or rule applies.

34 The Mineral, Oil, and Gas disclosure is signed: Review Later by the seller. by the buyer and the seller. by the seller and the listing agent. by the listing agent and buyer's agent.

-by the buyer and the seller. The seller and the buyer sign the Mineral, Oil, and Gas disclosure. The seller signs the disclosure when the property is listed, and the buyer signs the disclosure to acknowledge receipt. NOTE: MOG is required in new construction sales even if RPOADS is not.

30 A broker violates the Do Not Call Registry when contacting a seller on the registry by: Review Later calling a FSBO whose number is on the sign to seek a listing appointment. sending unsolicited emails without a prominent opt-out provision. making a call to a past client 17-months after closing. returning a call to a prospect that inquired without a past business relationship 2-months after the initial call.

-calling a FSBO whose number is on the sign to seek a listing appointment. A licensee/broker cannot solicit a listing when the potential client is on the Do Not Call Registry, even when the number is published. The exemptions to Do Not Call include an 18-month prior business relationship, a 3-month inquiry about services, or a personal relationship. Unsolicited emails without a prominent opt-out violate the CAN-SPAM Act.

29 A broker on provisional status may perform all of the following for compensation, EXCEPT: Review Later earning commission from the sale of a timeshare property under the supervision of a project broker. receiving payment of a referral fee for a commercial transaction that occurred in North Carolina. earning compensation for a broker price opinion performed under the supervision of a broker-in-charge. receiving payment of a referral fee for a residential transaction that occurred in a state other than North Carolina.

-earning compensation for a broker price opinion performed under the supervision of a broker-in-charge. A provisional broker cannot be compensated for preparing a broker price opinion or comparative market analysis. They can receive a commission for selling the property. It is a duty to provide a comparative market analysis to a buyer or seller client to determine the offer or listing price. The project broker supervises licensed brokers selling timeshares.

47 A man has a qualified estate in a property that will automatically terminate if he uses the property for any purpose other than its current use. He has a: Review Later fee simple absolute estate. fee simple subject to condition subsequent. life estate. fee simple determinable estate.

-fee simple determinable estate. The deed contains a restriction that will cause the automatic loss of the property. Thus it is a fee simple determinable estate. Fee simple conditional estates require the prior owner or heir to take court action to regain the property. Fee simple determinable and conditional estates are defeasible estates as they can be "defeated." Life estates may be conventional, marital, or pur autre vie. Conventional and marital estates are not inheritable. Fee simple absolute ownership has no deed restrictions that make ownership defeasible.

73 Airborne asbestos is considered: Review Later friable. dangerous at 4.0 picocuries. innert. naturally occurring and not a risk.

-friable. Asbestos is found in insulation, ceiling and floor tiles, and siding. When it becomes airborne, it is considered "friable." Asbestos can cause cancer (mesothelioma). Radon is dangerous at 4.0 picocuries or higher.

23 A buyer's agent is told by the listing agent that there are no defects with the property. The buyer's agent views the property and notes several problems. The buyer's agent: Review Later has a duty to disclose this to the buyer. has a duty to disclose this to the seller and buyer. has a duty to advise the buyer to obtain inspections without disclosing the issues found. is not obligated to disclose defects that may be found by a licensed home inspector.

-has a duty to disclose this to the seller and buyer A licensee must disclose material facts to all parties to the transaction. The buyer's agent should disclose the defects to his/her client and the listing agent. A broker is responsible for discovering and disclosing material facts that are known or should reasonably be known.

24 A listing agent is aware of standing water in the crawlspace after heavy rain. The listing agent: Review Later -has an obligation to disclose unless the property is sold "as-is." -should conceal this information as it could weaken the seller's bargaining position. -has an obligation to disclose the information as it is a material fact. -should advise the seller to answer "no representation" on the property disclosure

-has an obligation to disclose the information as it is a material fact. Standing water in a crawlspace, missing shingles on the roof, or similar property defects are considered a material fact. A licensee is required to disclose what they know or what they reasonably should have known. A licensee cannot instruct the seller how to answer questions on the property disclosure. The disclosure requirement does not change when the property is sold as-is.

74 In 1990 a duplex was built in an approved area and allowed under the then enacted zoning. In 2005 the area was rezoned for single-family residential housing. In 2008 the home sold, and the new owner combined the units. In 2012 the property sold to an investor who reset the house to a duplex to attract higher rents. This is an example of a/an: Review Later overlay district. illegal nonconforming use. legal nonconforming use. spot zoning variance. Comments

-illegal nonconforming use. The property was a conforming use until 2005 until the area rezoning. It then became a legal nonconforming use (allowed to continue - grandfathered in) until 2008 when the units were combined. The property loses its grandfathered status and cannot be converted back once it reverts to the single-family conforming use. In 2012 the investor converted the property to an illegal nonconforming use as the area is zoned for single-family residential. Overlay districts add additional rules above current zoning - flood zone, aesthetic zoning, historic zoning, etc. Spot zoning is not favored, where the zoning is changed for one property owner rather than rezoning an area.

20 An owner enters into a listing contract with an agent to sell a specific parcel of real property. All the following will result in the termination of the agreement EXCEPT: Review Later Destruction of the property. death of an independent broker. insanity of the provisional broker. bankruptcy of the seller.

-insanity of the provisional broker. The listing agreement is between the seller and the brokerage, with the broker (agent) primarily responsible for fulfilling the firm's duties. If a provisional broker becomes insane or dies, the brokerage will appoint another broker to represent the seller.

48 Procuring cause: Review Later is most important to a brokerage and seller in an exclusive right to sell listing agreement. is a protection period for an agreed-upon number of days after the expiration of a listing. is determined by which broker has a signed buyer agency agreement. is most important to a brokerage and seller in an open listing.

-is most important to a brokerage and seller in an open listing. Procuring cause is the person that started the chain of events that resulted in a purchase contract. With an open/non-exclusive listing or exclusive listing, the brokerage and seller are competing to find the buyer. If the seller is the procuring cause (finds the buyer), the brokerage is not entitled to compensation. The seller owes compensation no matter how the buyer is procured under an exclusive right to sell listing agreement.

45 A licensee pays an unlicensed employee a fee for screening leads and scheduling listing appointments. This practice: Review Later is permitted under the direct supervision of a broker-in-charge. is not permitted under the Sherman Act. is not permitted as prospecting requires an active real estate license. is permitted under the direct supervision of the licensee.

-is not permitted as prospecting requires an active real estate license. A licensee cannot pay commission to an unlicensed person for acts that require an active real estate license. Prospecting/solicitation and negotiations require an active real estate license. For a list of activities, an unlicensed salaried employee can perform, see pages 3-4 of License Law Commission Rule Comments. NOTE: "An unlicensed employee can record and deposit earnest money deposits, tenant security deposits and other trust money and otherwise maintain records of trust account receipts and disbursements...:", "assist a licensee in assembling documents for closing," and "compute commission checks for licensees affiliated with a broker or firm and act as the bookkeeper for the firm's bank operating account." The Sherman Antitrust Act outlaws price-fixing, boycotting, and market allocatio

27 An easement by prescription is best defined as: Review Later acquiring the title for a public purpose through the power of eminent domain. obtaining title through a suit to quiet title. something that would be obtained if the owner of a property sells a landlocked lot. is similar to a license and, therefore, may be terminated at will.

-obtaining title through a suit to quiet title. An easement by prescription is adverse possession. The party adversely taking the property would file a suit to quiet title to acquire title to the property. The suit asks the courts to settle who has the highest claim on the property.

57 North Carolina Real Estate License Law prohibits a broker with an active license on provisional status from which of the following? Review Later receiving compensation for brokerage activities from any person other than his/her broker-in-charge. earning referral fees for sales transactions involving real property located outside of North Carolina. crying the sale at an auction of real property for a fee. acting as an agent in commercial brokerage transactions.

-receiving compensation for brokerage activities from any person other than his/her broker-in-charge. The BIC pays compensation to affiliated brokers. An active real estate license allows a licensee to perform many types of real estate brokerage. A prudent BIC may limit the kind of real estate that an affiliated broker can practice. Compensation can be earned on transactions outside of North Carolina with a referral to an active real estate agent in another state. There are no limitations that preclude a broker from being the crier of the sale at an auction.

58 John James left his estate, including his real property, to care for his son with disabilities. When his son dies, the estate, including the real property, will pass to his daughter. The daughter is known as a/an: Review Later subordinate inheritor. dower beneficiary. sublessee. remainderman.

-remainderman. The party that has an interest in a property at the end of a life estate is known as the remainderman. Dower is an old-fashioned term for the widow's share for the life of her husband's estate. A sublessee is a party that takes over the remaining lease term (with or without the release of liability).

71 An easement granted to Google for their new installation of Google Fiber in Cary: Review Later runs with the land as an encumbrance. is an easement by necessity. is a personal easement in gross. is an emblement.

-runs with the land as an encumbrance. An easement is considered an encumbrance against real property as the owner must permit Google access to maintain the fiber line. This is an example of a commercial easement in gross. Emblements are annual crops that are considered personal property of the person that planted the crops. An easement by necessity is granted when a property is land-locked and needs access.

40 The lien on real estate for ad valorem property taxes comes into existence on: Review Later the due date for the payment of the taxes (September 1). the first day of the government fiscal year (July 1). the day the tax collector issues a notice commencing foreclosure proceedings. the first day of the tax listing period (January 1).

-the first day of the tax listing period (January 1) The lien for ad valorem property taxes attaches January 1 of the current year. The bill is released in August and due September 1. Taxes are late if not paid by January 5th of the following year. NOTE: The municipality is not required to file a lien against the propert

12 All of the following are valid reasons to terminate an exclusive listing EXCEPT: Review Later the seller refuses to sell to minorities. the listing agent transfers to another brokerage company. the property is destroyed by fire or other casualty. the principal and firm agree to terminate.

-the listing agent transfers to another brokerage company. The listing agreement is between the brokerage and the client. The agreement does not automatically terminate when the listing broker transfers to another brokerage. The brokerage can appoint another affiliated broker to fulfill the duties to the seller.

61 Suppose the first substantial contact with a prospective seller or buyer occurs by telephone or other electronic means that make it impractical to give the person the written brochure. In that case, the licensee is required to mail or otherwise transmit a copy of the agency brochure, "Working with Real Estate Agents," in no event later than: Review Later ten days. seven days. three days. five days.

-three days. When a broker is contacted by phone or by email which makes it impractical to deliver the WWREA, they are required to provide a copy within three days. The brochure is not required in all real estate transactions - it is optional in leasing transactions and is not required in auctions. The brochure is required for both residential and commercial purchase transactions.

Fiduciary duties are owed:

-to a principal. A licensee owes fiduciary duties to the principal/client. A principal/client is owed O.L.D. C.A.R. - obedience, loyalty, disclosure, confidentiality, accounting, and reasonable skill/care/diligence. A customer or 3rd party is owed H.F.D. - honesty, fairness, and disclosure of material facts.

41 Shared amenities and limited common elements are found in: Review Later commercial office buildings. single-family residential neighborhoods. all property types. townhouses and condos.

-townhouses and condos. Townhome and condo communities generally have shared elements - amenities (pool, gym, etc.) and may have limited elements. Limited features that are not available to all owners include garages, storage units, and parking spaces.

72 Scottie purchases a property with a deed restriction that requires it to be used for educational purposes resulting in a defeasible estate. Which of the following statements is TRUE? Review Later Scottie holds an estate that is pur autre vie and will terminate upon the death of the measuring life. The deed must contain an acceleration clause for the heirs to obtain the property following the deed restriction's breach. Scottie owns the property under fee simple conditional title if, after the breach of the restriction, an heir would need to sue or re-enter the premises to regain title to the property. The title must be obtained through a suit to partition following the breach of the deed restriction.

-Scottie owns the property under fee simple conditional title if, after the breach of the restriction, an heir would need to sue or re-enter the premises to regain title to the property. A fee simple conditional or subject to a condition subsequent requires the previous owner heirs to sue or reenter the property to regain title upon breach of the deed restriction. An estate pur autre vie is an inheritable life estate, where a party can use the property until the measuring life dies (for the life of another). An acceleration clause allows the bank to call the full balance due upon the buyer's default, where the buyer is behind on the mortgage payments. A suit for partition forces co-owners to sell the property (property divorce). A suit to quiet title settles which party has the highest claim to a property in a dispute.

Nate is purchasing a home located at 2100 New Hope Church Road and asks how property is taxed. Which of the following statements is CORRECT with regards to taxation? The Machinery Act details that taxes are charged based upon an ad valorem basis The Machinery Act establishes the tax rate for a property The assessed value of a property will adjust to the sales price of the home Property taxes are charged on a fiscal year basis

-The Machinery Act details that taxes are charged based upon an ad valorem basis The assessed value of the property changes on reassessment dates, not when the property sells. Property taxes are charged on a calendar year basis. Taxes attach January 1, are due September 1, and are late after January 5 of the following year.

Which of the following statements regarding compensation to agents is TRUE?

-The North Carolina Real Estate Commission will not hear disputes between brokers regarding the payment of compensation. The Real Estate Commission will not hear disputes regarding compensation between brokers. Brokers should file a grievance with the local Association of Realtors (assuming they are members). The commission is paid from the brokerage operating account. The trust account represents "other people's money." The brokerage can hold the earnest money until closing and then has three banking days to move the funds to the brokerage operating account. Clients must be notified about compensation paid by a 3rd party promptly - which may be verbal but must be reduced to writing before the presentation of an offer. An offer to purchase is between the buyer and seller. A broker should never reference commission or disclaim liability in the offer to purchase - it is outlined in the listing or buyer agency agreement.

23 Taylor purchased a home in North Carolina for $299,900 while obtaining a loan for $250,000. How much excise tax would be paid at closing and by which party? $500 paid by Buyer $500 paid by Seller $600 paid by Buyer $600 paid by Seller

-$500 paid by Seller Excise tax is paid by the seller and is based upon the sales price. It is calculated as follows - sales price ÷ 500, then round up. The tax is charged at $1 per $500 of the sales price. It is important to know that the sales price is rounded up to the nearest 500 or 1,000 as the tax is charged in whole dollars. $899,900 ÷ 500 = $1,799.80, round up $1,800

41 A property with a tax value of $144,700 has an annual tax bill of $2,025.80. What is the mills rate? Review Later 0.014 1.4 14 140

-14 When calculating taxes based on the national standards, take assessed value ÷ 1000 X Mills rate. To solve for the Mills rate, take taxes for the year and divide by the (assessed value ÷ 1000). Mills Rate: $2025.80 ÷ ($144,700 ÷ 1000) = 14.0 mills

12 A house with a market value of $100,000 is located in a city where the assessed value is 50% of market value. The city tax rate is $1.60 per hundred of valuation in the city and $1.40 per hundred in the county. Compute this year's property tax. Review Later 1400 1500 1600 3000 Comments

-1500 The formula to calculate annual property taxes is the Assessed Value / 100 X tax rate. When a property is located in the city, the owner will pay both city and county taxes.Assessed Value: $100,000 X 50% = $50,000Tax Rate: $1.60 + $1.40 = $3.00Annual Property Tax: $50,000 / 100 X $3.00 = $1,500

53 Compute the excise tax if the purchase price is $199,750 with a $150,000 loan assumption and $26,000 in seller financing if the rate is $1 per $500. Review Later 99.5 100 399.5 400

-400 Excise tax is calculated on the sales price, not the financed amount. Remember that the taxman is greedy, so round up excise tax the next whole dollar. Alternatively, you can round up the sales price to the nearest five-hundred or thousand, then divide by 500.Sales Price Rounded: $200,000 Excise Tax: $200,000 / 500 = $400. NOTE: Excise Tax may be referred to as Transfer Tax on the national exam.

38 What is the square footage of a two-story house with exterior dimensions of 75X32 feet? Review Later 2400 3200 4800 7500

-4800 Square Footage First Floor: 75 X 32 = 2,400Square footage for 2-story house: 2,400 X 2 = 4,800

52 A property sold for $10,000,000. The listing agreement outlined compensation as follows: 6% on the first $5 million, 5% on the next $2 million, and 4% of the remainder. How much commission did the seller pay? Review Later 100000 120000 300000 520000 Comments

-520000 $5,000,000 X 6% = $300,000. $2,000,000 X 5% = $100.000; $3,000,000 X 4% = $120,000. Total Compensation: $300,000 + $100,000 + $120,000 = $520,000

22 A licensee has failed to renew his/her real estate license for 9 months. Which of the following is NOT correct? Review Later A builder may compensate the licensee representing his sister for selling a home in a new subdivision. The license has expired, and the licensee cannot perform brokerage activity. The licensee must submit a new application and background check and an increased fee to reinstate. The licensee is allowed to purchase property for their investment corporation and receive compensation from the seller.

-A builder may compensate the licensee representing his sister for selling a home in a new subdivision. An expired licensee cannot earn compensation on behalf of another, including compensation for a family member or friend. There are exemptions where an individual/entity can be compensated without having an active real estate license. For example: for sale by owner / for lease by owner (as an individual, entity, officer, or W-2 employee). Since the license has expired for more than 6 months but less than 2 years, the licensee must pay 2 X the renewal rate, submit a new application and background check. If the license expired for more than 2 years, the former licensee would be treated as if they had never obtained a license.

13 Which of the statements are TRUE regarding agency disclosure? Review Later The Working with Real Estate Agents Brochure must be signed by the buyer for a buyer's agent to show a property. A seller's agent must disclose to a potential buyer that the seller owes more money than the house is worth. An agent must have a meaningful conversation about agency and determine how they will work with a prospective buyer prior to showing the buyer property. A buyer's agent must disclose his/her status as an agent for the buyer to the seller or seller's agent at first substantial contact.

-An agent must have a meaningful conversation about agency and determine how they will work with a prospective buyer prior to showing the buyer property. A buyer can refuse to sign the WWREA brochure without impacting a potential agency relationship. The broker should write on the pamphlet that the potential buyer refused to sign. To act as a buyers agent, the client would need to at least orally agree to buyer's agency - as agency forms by agreement. Initial contact relates to a buyer's agent disclosing his/her status to the seller or seller's agent to ensure that the seller/seller's agent protects his/her confidential information. The WWREA brochure is a "Miranda Warning" that explains the different types of agency - where a broker must have a meaningful discussion, disclosing the different types of agency, and a decision is made about representation. A broker must disclose material facts to his/her client, customer, or interested party in the transaction (lender / attorney).

28 Which of the following people need a real estate license in North Carolina? Review Later A property manager's salaried employee who shows rentals A trustee in a bankruptcy proceeding or foreclosure sale An attorney who regularly lists and sells real estate for others for a fee An owner of real estate who is selling or leasing his/her own property

-An attorney who regularly lists and sells real estate for others for a fee The license triggering event is earning compensation on behalf of another. Salaried employees are exempt when they work for the benefit of an entity. For Sale/For Lease by owners are exempt as it is not for the benefit of another. Trustees and the mere crier of a sale at an auction are also exempt activities.

Which of the following best describes the ownership of the airspace of a particular unit and co-ownership of the common area, where the owner may be able to purchase or rent a garage or storage area?

-Condominium A condo blends ownership in severalty for the unit and in common for the shared common areas. A planned unit development will typically have clustered homes, large open spaces, and a mix of residential and commercial activities. When a buyer purchases a townhome, they own the unit and the land that it rests on, while BH away owns the common areas. When a buyer buys a co-op, they receive a share of stock and a proprietary lease.

50 Which of the following would NOT terminate a listing agreement? Review Later Sale of the property Death of the principal Listing a property for sale for a minor Death of an associated broker

-Death of an associated broker An associated broker/provisional broker/salesperson is affiliated with a brokerage. The agency agreement is between the principal/client and the brokerage/firm. The brokerage will appoint another associated broker to fulfil the firm's duties.

48 A high level of radon gas: Review Later is the result of leaking electrical equipment. may be mitigated with a remediation fan and vent system. will result in condemnation of the property. causes multiple organ failure from exposure.

-may be mitigated with a remediation fan and vent system. Radon gas is a material fact when levels reach 4.0 picocuries per liter of air or greater. The EPA recommends remediation when the level is 4.0 or higher, accomplished with vent pipes and fans. Radon increases the risk of lung cancer. PCBs cause cancer due to leaking electrical equipment.

3 The seller of a property with known lead contamination:

-must disclose the presence to potential buyers. The seller must provide the lead-based paint disclosure that requires the owner to answer yes or no for the following: Are you aware of lead-based paint? or Do you have reports about lead-based paint? NOTE: The seller does not have to pay for testing and is not required to remediate.

33 A property may have a leaking underground oil tank. The buyer's agent should: Review Later recommend that the buyer hire a qualified environmental engineer to perform testing. call the EPA to see if a leak has been reported. search public records for an underground tank permit. contact the attorney for more information.

-recommend that the buyer hire a qualified environmental engineer to perform testing. A broker should recommend that the buyer hire a professional to test to see if the tank is leaking. The attorney would not know this information unless it is noted on the deed. The EPA does not have a complete list of leaking tanks. Residential tanks did not require a permit

21 Which of the following is considered a material fact in North Carolina?7 Review Later The HOA is considering a special assessment to replace the roof The property has polybutylene pipes A registered sex offender lives nearby The owner is currently behind on mortgage payments

-The HOA is considering a special assessment to replace the roof The fact that the HOA is considering a special assessment would be material to a buyer. A licensee would need to disclose if they know or reasonably should have known about an issue with the property. Some items are always a material fact - leaking polybutylene pipes, meth house, or information that would impact a buyer's decision to buy or seller's decision to sell. Some items are not considered material - sex offender, murder, death, suicide, or HIV/AIDS.

Which of the following statements is FALSE regarding real estate licenses?

-A newly licensed broker desiring to remain on active status must complete continuing education by June 10th before their first license renewal. A newly licensed agent that wants to remain on active status must complete continuing education by June 10th prior to their second licensed renewal. All licenses (firm and individual) expire on June 30. To have a license on active status, the license must be renewed by June 30. Timeshare salespeople need to have an active real estate license; there are no separate timeshare licenses. The developer must register the project with the Commission, and a project broker supervises the licensed broker sales staff (whether provisional or non-provisional). An inactive licensee is not required to complete CE or Post classes.

70 What is the difference between a real estate broker and a REALTOR? Review Later A real estate broker can earn compensation for sales, but only REALTORS can earn referral fees. REALTORS may represent a broader type of real estate client. All REALTORS are real estate brokers, but not all brokers are REALTORS. REALTORS do not require postlicensing education when they take equivalent courses. Comments

-All REALTORS are real estate brokers, but not all brokers are REALTORS. A broker must join the National Association of REALTORS to be a REALTOR. It is a trade organization that supports brokers locally, statewide, and nationwide.

73 An agent that helps investors purchase rental property also manages the property for rent. He needs additional help to fulfill all of his duties. The agent hires an unlicensed assistant to help him. Which of the following activities would violate License Law and Commission Rules when performed by an unlicensed assistant? Review Later Entering properties for sale and for lease into the Multiple Listing Service Showing properties available for rent to prospective tenants Allowing a prospective buyer into a home that the broker has listed to view the property Filling out a pre-printed lease agreement based upon the owner's desired rent, security deposit, and lease term

-Allowing a prospective buyer into a home that the broker has listed to view the property An unlicensed assistant cannot perform all activities. There are separate limitations for unlicensed assistants in property management than all other types of real estate. They cannot show buyers property for sale; however, they can show property to prospective tenants for rent. The licensed broker is responsible for all actions taken by an unlicensed assistant.

72 Which of the following statements is TRUE regarding licensure for real estate agents in North Carolina? Review Later An agent licensed in another state seeking to represent a buyer or seller in a commercial transaction in North Carolina may obtain a Limited Non-Resident Commercial License if they meet certain requirements. For a provisional broker to hold a license on inactive status, they must be current, have met the license year's educational requirements, and affiliate under broker-in-charge supervision. To hold a license on active status, a broker must affiliate with a broker-in-charge. A provisional broker and a broker-in-charge hold a different real estate license.

-An agent licensed in another state seeking to represent a buyer or seller in a commercial transaction in North Carolina may obtain a Limited Non-Resident Commercial License if they meet certain requirements. Broker-in-charge and provisional broker is a status that a broker has on his her license. A broker, not on provisional status, is not required to declare themselves as a broker in charge or affiliate with a broker-in-charge to be on active status. There are significant limitations to what a broker can do when they are not broker-in-charge or affiliated with a broker in charge. The broker would not be permitted to advertise in any manner, hold trust money, or offer a property for sale. They can receive referral fees or represent buyers so long as they have not solicited the business. A broker licensed in another state in good standing can affiliate with a North Carolina BROKER, declare with the Commission can act as a limited non-resident commercial broker. Special Note: The rule for limited non-resident commercial brokers states explicitly that you can declare with a BROKER. Don't confuse this because the vast majority of firms need to have a BIC for advertising.

52 Which of the following is a violation of a listing salesperson's fiduciary duties to the seller? Review Later Informing the buyer that the seller is behind on mortgage payments and received a foreclosure notice. Informing the buyer the lowest price the seller will accept to induce an offer. Informing the buyer that a major highway will be built near the property. Informing a buyer that a recent fire in the kitchen prompted the house renovations. Comments

-Informing the buyer the lowest price the seller will accept to induce an offer. Major highways, foreclosure notice, and recent damage to the property are material facts that must be disclosed. Informing a buyer of the lowest amount that the seller will accept is a breach of fiduciary duties, specifically the confidentiality duty.

66 Which of the following statements is FALSE regarding property taxes? Review Later The mills rate is the amount of tax to be paid per thousand dollars of the assessed value. Property taxes attach to real estate when they are not paid by the due date on the tax bill. The Machinery Act does not set the rate of taxes to be paid on a property. In North Carolina taxes are charged based upon the assessed value which may change each year.

-Property taxes attach to real estate when they are not paid by the due date on the tax bill. Property taxes attach on January 1 - meaning that the lien attaches on January 1. The Machinery Act permits cities and counties to charge property taxes on an ad valorem basis or assessed value. The assessed value can change every year but must change every eight years (octennial reappraisal). The tax rate depends on the city/county budget, which is not set in the Machinery Act. To calculate annual property taxes in NC, take the assessed value, divide by 100, and then multiply by the tax rate. Property located in the county pay only county taxes. Property located in the city will pay both city and county taxes. National test questions may test the mills rate. The mills rate of taxes is per $1,000 of assessed value. To calculate annual taxes, take the assessed value, divide by 1,000 and multiply by the mills rate.

23 A salesperson represents a buyer under an exclusive buyer agency agreement. The buyer died in a car accident before locating a property for the buyer. Which of the following is TRUE? Review Later The buyer's agency agreement is not impacted if the buyer signed a power-of-attorney. The buyer agency agreement terminates immediately upon death. The buyer's estate will owe compensation to the salesperson's brokerage. The buyer agency agreement is binding upon the buyer's heirs. Comments

-The buyer agency agreement terminates immediately upon death. Agency agreements automatically terminate when the principal/client dies. The agency agreement is NOT binding upon the heirs. A power-of-attorney terminates upon the death of the principal.

63 All of the following statements regarding property taxes is TRUE? Review Later The city/county budget determines the tax rate The tax lien priority depends on the date the city or county filed Assessed value can only change every 8 years The tax rate can only change every 4 years

-The city/county budget determines the tax rate The machinery act allows cities and counties to charge property taxes. It does not set the rate. The rate is determined by the budget. Taxes are charged based upon the assessed value. The assessed value can change every year, but must change at least every 8 years (octennial reappraisal).

26 A deed contains restrictions that a buyer violates. The buyer never agreed to the restrictions, however accepted the deed at closing. What is the most severe penalty? Review Later The buyer can sue the seller for specific performance. The buyer is liable for liquidated damages. The original owner may regain the title. The buyer can sue the listing agent for material breach.

-The original owner may regain the title. A deed that contains deed restrictions is said to be defeasible, thus able to be defeated. The most severe action that could be taken by the courts is to return the title to the original owner. Fee simple determinable results in an automatic loss. Fee simple conditional requires court action. Specific performance is a remedy to enforce a legally binding contract. Liquidated damages are defined in a contract and result when a party to the contract breaches.

72 A new provisional broker with a license on active status is holding an open house for a property listed with his brokerage firm by a multi-million dollar top producing agent. Which of the following statements is CORRECT? Review Later The provisional broker must disclose the Working with Real Estate Agents Brochure to all visitors to the open house. The provisional broker can act as an exclusive buyer's agent in the event they meet a prospective buyer at the open house. The provisional broker can only work with a potential buyer as a third party customer if the seller does not authorize dual agency under any circumstances. The provisional broker can disclose that the Seller must sell the house as they are currently behind on the mortgage payments.

-The provisional broker can only work with a potential buyer as a third party customer if the seller does not authorize dual agency under any circumstances. When a seller refuses to authorize dual agency under any circumstances, the firm would not be permitted to represent a buyer for that property. Both the buyer and seller must agree to dual agency representation for a firm to be authorized to act as a dual agent.The provisional broker would not be able to offer exclusive agency as the brokerage firm already represents the seller. When a firm represents both the buyer and seller in a transaction, dual agency arises. WWREA must be disclosed at first substantial contact (FSC) - where the conversation shifts from facts about the property to personal/confidential information. At an open house, a broker is not required to disclose WWREA unless FSC has been reached. When a broker represents the seller in the transaction, they are required to conceal confidential information unless it rises to the level of material fact. It is not a material fact that the seller is behind on mortgage payments unless foreclosure notice has been received or the seller cannot pay liens in full.

46 When a seller sold his home, he removed his built-in hot tub prior to closing. Nothing was said about the hot tub in either the listing or the sales contract. Which is a TRUE statement assuming the seller used the standard NCAR/NCBA Offer to Purchase and Contract? Review Later The hot tub was a trade fixture and belongs to the seller The hot tub remained personal property after attachment to the home plumbing system The hot tub becomes real property on severance The sales contract should have specifically excepted the hot tub

-The sales contract should have specifically excepted the hot tub A built-in hot tub is considered a fixture. The seller's failure to except the hot tub in the offer to purchase will require him/her to leave the hot tub. Listing on the A built-in hot tub is considered a fixture. The seller's failure to exclude the hot tub in the offer to purchase will require him/her to leave the hot tub. Listing on the MLS that the seller will not transfer the hot tub is not sufficient - it must be excluded in the offer to purchase and contract.

44 A commercial tenant renting space under a 10-year lease installs a wall oven, and exhaust fans in the kitchen financed through a bank under a commercial line of credit. Which of the following is TRUE concerning termination of the lease? Review Later Since the equipment is financed, it is covered under the Uniform Commercial Code and therefore owned by the bank. The landlord has the rights to the property as it has been installed for more than 3 years. The equipment is considered real property owned by the tenant. The tenant can remove the equipment as it is a trade fixture before the lease ends. Comments

-The tenant can remove the equipment as it is a trade fixture before the lease ends. Items used in a trade or business remain personal property and can be removed by the tenant. If the tenant abandons them at the end of the lease, they become fixtures. A lender must file a UCC fixture filing (to secure the financing) to recover the property. A line of credit may be unsecured or could be secured by the business assets. The question does not provide enough detail to select that answer choice. It is crucial not to read into the questions - based on personal experience or what you think would typically happen. Stick to the facts presented in the question stem.

60 Virginia is renting a property located at 1010 Buck Horn Drive from Sarah. The lease agreement allows the lease to automatically renew for six months unless either party provides 45 days' notice of their intent to terminate. Which of the following statements is TRUE? Review Later Sarah has a leasehold interest in the property. Virginia has a leased fee interest in the property. This agreement is required to be in writing. This is an example of a periodic estate.

-This is an example of a periodic estate. A lease agreement for three years or less is not required to be in writing under North Carolina law (in some states, the requirement is one year). The tenant, Virginia, has a leasehold interest in the property as the tenant has a "hold" on the property. The landlord, Sarah, has a leased fee interest in the property as the owner gets the "fee." A leasehold estate from year to year allows for automatic renewal and less notice of termination has been provided by either party.

32 The type of listing agreement where a listing broker is least likely to know the amount of compensation is: Review Later an exclusive agency listing. a net listing. an open listing. an exclusive right to sell listing. Comments

-a net listing. The broker is least likely to know the amount of compensation under a net listing. The listing broker is entitled to the amount paid by the buyer in excess of the seller's desired net. With an open, exclusive, or exclusive right to sell listing, the amount of compensation earned is outlined in the agreement.

35 North Carolina Real Estate Commission Rules require the broker-in-charge to assume responsibility for assuring that: Review Later provisional brokers sign independent contractor agreements on time. all actively affiliated brokers complete real estate continuing education on time. license certificates of the affiliated brokers are prominently displayed in the public area of the real estate office. provisional brokers complete REALTOR® ethics training on time. Comments

-all actively affiliated brokers complete real estate continuing education on time. The BIC's responsibility for all brokers can be recalled by 3 A's and 2 T's. The BIC must ensure that all affiliated licensees have an Active license, must approve all Advertising and all Agency documents are complete. Also, the BIC is responsible for the Trust account and Transaction files. A broker/brokerage is not required to join the REALTOR organization, which is a trade association. The firm must prominently display the firm license, not all of the affiliated brokers. While it is common for a broker to sign an independent contractor agreement, it is not required. Some brokers may be employees of an organization.

34 An easement created when a seller conveys a landlocked lot without specifying access is: Review Later a personal easement. a commercial easement in gross. an easement by prescription. an easement by necessity.

-an easement by necessity. When a seller conveys a landlocked lot without specifying an easement, there is an implied easement, and the owner would be obligated to grant an easement to the buyer. An easement by prescription is adverse possession, where one party takes the property of another. It must be hostile, intentional, open, continuous, exclusive, adverse, and notorious. A personal easement is often for hunting, fishing, or crossing a property for the owner's lifetime. It cannot be willed or sold. A commercial easement in gross runs with the land and does not terminate upon the owner's death. It can be willed, sold, or transferred.

66 The appraised tax value of real estate in North Carolina can be changed upward or downward: Review Later annually. the 4th year after reappraisal. every 2 years. every 8 years. Comments

-annually. The assessed value MAY change every year but MUST change every 8-years (octennial reappraisal). The Machinery Act permits the charge of ad-valorem property taxes. It does not set the rate, as the city/county budget determines this. The tax rate may change every year.

10 A buyer calls to view a property listed with Barbara Green. Barbara should do all of the following before showing the property, EXCEPT: Review Later explain the Working with Real Estate Agents Brochure. enter into an exclusive oral buyer agency agreement. determine by an agreement if Barbara will represent the buyer. obtain permission to act as a dual agent if the buyer agrees to representation.

-enter into an exclusive oral buyer agency agreement An oral buyer's agency agreement must be nonexclusive, open-ended, and reduced to writing before presenting an offer. If a broker seeks an exclusive contract, it must be in writing. Agency forms by agreement between the client and the firm, which may be oral or writing when representing a buyer. When a broker enters into an oral buyers agency agreement, there should be a discussion about dual/designated agency authorization, amount of compensation, and property types that will be viewed. The WWREA brochure must be reviewed at first substantial contact. The latest point for this to occur with a buyer is prior to the agent opening the door to show a property.

43 The right of the government to take personal property when the owner dies without an heir is known as: Review Later condemnation. escheats. eminent domain. prescriptive easement.

-escheats. The State takes ownership of property when the owner dies without a will and no heirs. Eminent domain is the government's right to take property for the public good, while condemnation is the action. A prescriptive easement may also be referred to as adverse possession. Adverse possession is hostile taking the property of another when certain conditions are met.

14 The protection clause: Review Later requires the principal to pay the commission when the agency agreement terminates early. extends the time that a seller agrees to pay commission. requires a buyer to pay compensation when a licensee finds a home that meets all of the buyer's criteria. extends the settlement date when a buyer or seller is making his/her best efforts.

-extends the time that a seller agrees to pay commission. A protection clause (protection period, extender clause) requires the principal to pay compensation beyond the expiration of the agency agreement for a specified number of days. NOTE: In NC, the standard 2-T NCAR/NCBA Offer to Purchase allows a 14-day delay in settlement when the delaying party is using his/her best efforts to close.

63 The unmarried owners of a property have taken the title as joint tenants. One of the main advantages of this form of ownership is: Review Later it cannot be terminated by partition suits. it is possible for the title to pass to surviving cotenants without going through probate. this form allows for unequal shares. that tenants will be allowed to will their shares to their devisees. Comments

-it is possible for the title to pass to surviving cotenants without going through probate. Joint tenancy has survivorship's rights, which allows the title to pass to the other co-owners upon death without going through probate. Joint Tenants require four unities: possession, interest, time, and title. The property must be purchased simultaneously, from the same source, with each owner having the same level of ownership. A suit for partition seeks a "property divorce," where the court is petitioned to force the sale. A will cannot defeat joint tenancy ownership. NOTE: You do not pass a joint to your kids.

50 Under riparian rights, an owner with a property located on a navigable river will: Review Later never be able to build a dock. own to the middle of the river. own to the banks as the state controls the waterway. own to the average high-water mark.

-own to the banks as the state controls the waterway. When someone owns property along a navigable river, they own to the riverbanks. The state controls the waterway, and the owner may or may not be granted permission to build a dock. Under littoral rights, a property owner owns to the mean or average high watermark, and the state owns the foreshore.

68 John James left his estate, including his real property, for the care of his son with disabilities. When his son dies, the estate, including the real property, will pass to his daughter. The daughter is known as a/an: Review Later tenant at will. sublessee. subordinate beneficiary. remainderman.

-remainderman. The party that has an interest in a property at the end of a life estate is known as the remainderman. A sublessee is a party that takes over the remaining lease term (with or without release of liability). A tenant at will holds a lease where either the party may terminate the lease without notice.

64 All of the following are examples of public or private assessments, EXCEPT: Review Later school construction. sidewalks. replacing a roof. city water lines.

-school construction. Sidewalks, paving, streetlights and city water, and sewer lines are examples of public assessments. School construction is provided for in the City / County budget. Private assessments are often for exterior maintenance, roof replacement, landscaping, and amenity costs.

43 The right of a buyer to force the sale of a property when a seller is refusing to sell under a legally binding contract is best defined as: Review Later the Statute of Limitations. specific performance. liquidated damages. the torren

-specific performance. Specific performance allows a buyer to enforce the terms of a legally binding contract if the seller defaults. The Statute of Limitations refers to when a party has to take legal action (typically three years). Liquidated damages are damages defined in the contract. An example of liquidated damages would be a builder agreeing to pay $5,000 if they do not meet a construction deadline. The Torrens system prevents adverse possession claims, requiring transfers to occur through a Torrens certificate.

71 All of the following statements regarding property taxes are true, EXCEPT: Review Later in North Carolina are charged as a dollar amount per $100 of assessed value. they attach on January 1st of the current year, thus charged on the calendar year basis. in states that charge a mills rate will be charged per $1,000 of assessed value. they are charged according to the rate established in the Machinery Act.

-they are charged according to the rate established in the Machinery Act. The machinery act allows cities and counties to charge property taxes. It does not set the rate. The budget determines the tax rate. Taxes are charged based upon the assessed value. The assessed value can change every year but must change at least every eight years (octennial reappraisal).

67 Anita Sell enters into an exclusive agency agreement with a broker to sell her home on June 14th for six months. There are multiple showings arranged through the broker's showing service, and while one offer was received, it was below asking, and the seller rejected. On November 10th, another buyer made an offer directly to the seller for less than the offer price that the broker received, which the seller accepted. Which of the following statements is TRUE? Review Later Anita is obligated to pay commission no matter the party that introduces the buyer to the property. Anita is not obligated to pay the commission as the agent was not the procuring cause in this transaction. Anita is not obligated to pay commission to her broker; however, must reimburse the marketing expenses incurred. Anita is obligated to pay a commission to her broker since she accepted an offer less than the broker's offer. Comments

-Anita is not obligated to pay the commission as the agent was not the procuring cause in this transaction. The seller, Anita, entered an exclusive agency agreement - which means the property is listed with one broker that is competing against the seller. If the broker finds the buyer for the property, then they receive compensation. If the seller finds the buyer for the property, then no compensation is owed. It is important to note that the seller would not owe compensation if another broker representing a buyer brought an offer on the home - as they do not have an agreement with the seller for compensation. NOTE: The seller would be required to pay commission no matter who brought the buyer if the seller and brokerage entered an Exclusive Right to Sell listing agreement.

54 Zack is a new agent with LQ Realty. He is determined and wants to list properties, so he decides to market to For Sale by Owners and Expired listings. Which of the following would NOT violate the National Do Not Call Registry? Review Later Calling an expired listing on the registry that was listed with the brokerage 2 years ago to see if they would be interested in listing the property again. Calling a FSBO on the registry to ask if the seller has a copy of the Residential Property and Owners Association Disclosure Statement and how he would be able to get the home sold quickly. Calling an expired listing on the registry, which was listed with another broker assuming the previous broker gave the agent permission to do so. Calling a FSBO on the registry to inquire about the price and whether the seller will compensate an agent representing a buyer.

-Calling a FSBO on the registry to inquire about the price and whether the seller will compensate an agent representing a buyer. A broker can contact the seller to ask for additional information about the property, including the listing price and whether the seller is offering compensation to a buyer's agent. They cannot solicit the listing as this would violate the Do Not Call Registry. The Do Not Call Registry allows certain exemptions - prior business relationship in the past 18 months, an invitation to contact, or a personal relationship.

25 The form of ownership where you receive a share of stock would be best described as which of the following? Review Later Condominium Cooperative Townhouse Timeshare

-Cooperative The broker has stated something that is not true, so this is a misrepresentation. Omission occurs when the broker says nothing at all. The intent of the agent determines willful versus negligent. In this scenario, the broker did not intentionally lie however, they are relying on the seller's representation without verifying. Willful misrepresentation is purposefully lying. Willful omission is purposefully not disclosing a fact. It is important to review License Law and Commission Rule Comments for scenarios.

58 Which of the following methods of acquiring title occurs when a property is taken for the public good? Review Later Quitclaim deed Adverse possession Lien foreclosure sale Eminent domain

-Eminent domain Eminent domain occurs when the government takes the property for the public good. The owner is compensated fair market value for the property plus moving expenses. Adverse possession is the hostile taking the property of another. To have a valid claim against the property, it must be open, continuous, exclusive, adverse, and notorious. The time limit without the color of title is 20-years or 7-years with the color of title. Color of title is the mistaken belief that you own the property, rather than purposefully taking the property. NOTE: There is no protection for owner's with disabilities (blind, hermit, etc.) to prevent adverse possession. A quitclaim deed is a deed of release, with no covenants made by the grantor. A lien foreclosure is an involuntary transfer when a borrower has failed to make the required payments.

11 A couple purchases a property that is subject to restrictive covenants. They ignore the covenants and paint the house in a color not approved by the association. Which of the following would be the best course of action for another homeowner in the neighborhood to take? Review Later File a complaint with the county housing authority File a complaint with the city planning and zoning department File a complaint with the homeowner association File a complaint in court and seek an injunction

-File a complaint with the homeowner association The best course of action a homeowner can take against another homeowner who has violated restrictive covenants is filing complaints with the homeowners association. They do have the right to sue in court, and there is no obligation to prove direct harm - it is just not the best course of action. An injunction is used just to stop a party from doing something that is violating a previous agreement. City planning and zoning, the County Housing Authority, nor the police department or sheriff's department will take action when a party violates restrictive covenants. These are private use restrictions.

26 April accepts an offer from Barry on her vintage Victorian home, built in 1892. Based on these facts, which of the following statements is TRUE? Review Later April may be fined if she fails to attach a lead-based paint disclosure statement to the sales contract. If April is aware of any lead-based paint on the premises, she must disclose that fact to Barry. If Barry requests a lead-based paint inspection, April has ten days to obtain one at her own expense. April must remediate all lead from the premises when Barry requests it.

-If April is aware of any lead-based paint on the premises, she must disclose that fact to Barry. April is the seller, and Barry is the buyer. The buyer is responsible for paying for a lead inspection. Under the 1992 Lead-Based Paint Hazard Reduction Act, the buyer is permitted ten days to obtain a test, at the buyer's expense, to determine if lead is present in the home. The seller is not obligated to remediate the lead or certify that the home is lead-free. The buyer's agent should ensure that the buyer receives a copy of the pamphlet Protecting Your Family From Lead in the Home. The seller of a property built prior to 1978 must represent if they know that lead is present or have reports about lead.

31 Which of the following statements regarding an offer to purchase real property is TRUE when a buyer is seeking to make an offer with a licensed broker's assistance? Review Later A broker can draft language in the offer to purchase so long as the buyer is directing them. The buyer is required to use one of the standard forms approved by the Real Estate Commission. If the broker is acting as an exclusive agent, he/she can advise the buyer about making the best possible offer. The buyer can digitally sign an offer, however, it is not legally binding until the 48 hour withdrawal period has expired under the Uniform Electronic Transactions Act.

-If the broker is acting as an exclusive agent, he/she can advise the buyer about making the best possible offer. A broker must use a standard offer to purchase prepared by an attorney when they write up the offer (filling in the blanks). The buyer is not required to use these forms and can choose to hire an attorney. The Commission does not approve standard contract forms. The Commission establishes the rules for required provisions to include in a standard contract. The most often used form is the standard NCAR/NCBA Offer to Purchase and Contact. Under the Uniform Electronic Transaction Act, a digital signature is as legally binding as a wet pen signature. The digital signature is binding from the moment signed. There is no seasoning period or time where the party can withdraw. A broker cannot draft language in a contract unless they are party to the contract (they are buyer or seller in a purchase transaction). When representing a buyer or seller exclusively, the agent acts as more of a coach, disclosing all information they are aware of and making recommendations about what to offer or how to improve an offer.

10 A buyer signs an offer for $250,000 to purchase a condo with the payment of a $2,500 earnest money deposit and a $500 due diligence fee. The buyer's agent promptly delivers the offer to the listing agent with both checks. The listing agent presents the offer electronically to the seller, which is promptly signed. The listing agent calls the buyer's agent and leaves a message about acceptance, then delivers the earnest money check to his broker in charge. The listing agent is about to leave the office to deliver the due diligence fee to the seller when the buyer calls and demands the return of the earnest money and due diligence fee. What action should the listing agent take? Review Later Refuse to release the funds without first gaining the seller's approval Deliver the earnest money and due diligence fee to the buyer or buyer's agent Deliver the due diligence fee to the seller as the contract is legally binding Inform the buyer that this will result in breach but follow the buyer's instructions regarding the due diligence fee

-Inform the buyer that this will result in breach but follow the buyer's instructions regarding the due diligence fee A broker should promptly deliver the earnest money to his/her BIC as soon as possible for the BIC to meet the three banking day deposit requirement for earnest money (the later of 3 banking days from receipt or the effective date of the contract. The due diligence fee should be delivered to the seller immediately, but no later than three calendar days once an effective contract has been formed. A broker, whether buyer's agent or listing agent, must follow the buyer's instructions when a check has not been delivered to the intended party. The earnest money check is paid to the listing firm, so the listing brokerage may retain the check. Since the listing broker did not deliver the due diligence fee to the seller, the listing broker must follow the buyer's instructions. However, the seller can sue for breach of contract but would not be successful in suing for specific performance - forcing the sale.

16 For a space to meet the definition of living area, it must meet which following criteria? Review Later It must be finished and directly accessible It must be finished and directly accessible above-grade space It can include the area of a two-story great room with cathedral ceilings It must be heated and cooled by a conventional HVAC system

-It must be finished and directly accessible Living area must be heated, finished, and directly. There is no requirement that it be cooled. Living area may include above and below grade square footage. When the living area of a home is fully or partially underground, the square footage is considered below grade.

76 J is the listing agent for a property located in Durham County, North Carolina. The seller informs J that the property line "extends 10 feet beyond the back fence". J relays this to all potential buyers and includes this in the comment section on the multiple listing service. K, an agent with another firm representing a buyer, informs the buyer of the 10 feet. The buyer makes an offer that is accepted and promptly closes. The new owner extends the fence along the rear boundary and builds a new storage building. Upon discovering the new building and fence, the neighbor provides a survey showing both are on her property. Which of the following statements is CORRECT? Review Later Only J is guilty of negligent misrepresentation of a material fact. Neither K nor J is responsible as the buyer should have obtained a survey when they purchased the property. K and J are guilty of willful misrepresentation of a material fact. K and J are guilty of negligent misrepresentation of a material fact. Comments

-K and J are guilty of negligent misrepresentation of a material fact. When a broker represents something that turns out to be wrong, it is a misrepresentation or lie. To determine if the lie is willful or negligent, you must determine intent. A willful misrepresentation occurs when the broker intentionally lies. In this instance, the listing broker relied on the seller's information without verification. The selling broker relied on the listing agent's representation without verification. This is a mistake, thus an example of negligent misrepresentation. Note that both agents are guilty of negligent misrepresentation.

24 A seller tells the listing agent that the property line extends 20 feet beyond the rear fence. The agent has not reviewed a survey. The listing agent includes this information when advertising the property on the Multiple Listing Service. What if anything is the agent guilty of? Review Later Negligent Misrepresentation Willful Omission Negligent Omission Willful Misrepresentation

-Negligent Misrepresentation The broker has stated something that is not true, so this is a misrepresentation. Omission occurs when the broker says nothing at all. The intent of the agent determines willful versus negligent. In this scenario, the broker did not intentionally lie however, they are relying on the seller's representation without verifying. Willful misrepresentation is purposefully lying. Willful omission is purposefully not disclosing a fact. It is important to review License Law and Commission Rule Comments for scenarios.

26 A buyer hires an agent under an exclusive buyer agency agreement. Which of the following statements is TRUE? Review Later The buyer's agent cannot disclose personal and confidential information regarding a seller assuming dual agency has not arisen. The agent will not be able to show other buyers the same property that his/her client is interested in. The agent will not be able to show any listings with his/her brokerage unless both the buyer and seller agree to dual agency representation. The agent must disclose his/her status as a buyer's agent to the seller or seller's agent at first substantial contact.

-The agent will not be able to show any listings with his/her brokerage unless both the buyer and seller agree to dual agency representation. A broker and/or brokerage can show the same property to the same buyers per the buyer's agency agreement. A buyer client understands that a brokerage could work with multiple buyers looking for similar property and agree that this is not a conflict of interest. When a brokerage represents both the buyer and seller in a transaction, dual agency arises. A dual agency must be agreed to by both buyer and seller. A firm may practice designated agency, so long as both the buyer and seller consent, and the designated agents are not BIC and PB, and no personal/confidential information is known at the time of designation. First Substantial Contact relates to WWREA disclosure before the agent obtains personal/confidential information about a prospective client/customer. Initial contract relates to a buyer's agent disclosing his/her status as a buyer's agent to the seller or seller's agent. The latest point for this to occur is the presentation of an offer.

A broker associate located in Texas wants to sell commercial property in NC. Which of the following is TRUE?

-The broker associate must affiliate with a North Carolina Broker. From License Law and Commission Rule Comments: Limited Nonresident Commercial Broker - A broker or salesperson residing in a state other than North Carolina who holds an active broker or salesperson license in the state where his or her primary place of real estate business is located may apply for and obtain a North Carolina "limited nonresident commercial broker license" that entitles such licensee to engage in transactions for compensation involving "commercial real estate" in North Carolina. While the non-resident limited broker will remain affiliated with his/her out of state real estate company and will not have a North Carolina broker-in-charge, the non-resident licensee must enter into a "notification of broker affiliation" and a "brokerage cooperation agreement" with a resident North Carolina broker not on provisional status and the licensee must be supervised by the North Carolina broker while performing commercial real estate brokerage in North Carolina. A limited nonresident commercial broker license is a separate license.

15 A buyer enters into a contract to purchase a condominium unit on October 16th from the developer. On October 22nd, the buyer sends a letter to the seller rescinding the contract. Which of the following is TRUE? Review Later The buyer can rescind the contract because the buyer has a 5 day right of rescission. The buyer cannot rescind the contract because the 5 day right of rescission has passed relating to the developer's declaration of condominium. The buyer can rescind the agreement because the buyer has a 7 day right of rescission. The buyer cannot rescind the contract because the buyer is beyond the 3 day right of rescission.

-The buyer can rescind the agreement because the buyer has a 7 day right of rescission. When a buyer enters into a contract to purchase a new condominium, there is a seven day right of rescission. There is no right of rescission when the unit is resold.

6 Suppose the North Carolina Residential Property Disclosure Statement is not delivered to the purchaser prior to or at the same time the purchaser makes an offer. In that case, the purchaser has a right to cancel the contract. Which of the following statements is TRUE?

-The buyer is entitled to a refund of the due diligence fee and the earnest money deposit when cancelation occurs in the prescribed time. The RPOADS (residential property owners association disclosure statement) is required in MOST residential sales. There are exceptions for new construction, foreclosure, transfer between related parties, etc. It is in the best interest of the owner to complete the statement and ensure that the buyer receives a copy. If not, the buyer can terminate the contract and is entitled to the return of the earnest money deposit and the due diligence fee if the termination is within the EARLIER of 3 calendar days from receipt, three calendar days from the effective date of the contract, or before closing.

-59 A newly licensed agent is granted a license on August 25 of the current year, which they desire to remain on active status. Which of the following statements is TRUE? Review Later The licensee must complete continuing education by June 10th following their first license renewal. The licensee must complete 4 hours of continuing education prior to June 30th to remain on active status. The licensee must complete 8 hours of continuing education prior to their anniversary date. The licensee must renew their license by June 10th of the following year, or their license will expire.

-The licensee must complete continuing education by June 10th following their first license renewal. A newly licensed broker is not required to complete continuing education prior to his or her first license renewal. To remain on active status, the broker must complete continuing education prior to the June 10 deadline before his or her second renewal. All licenses expire on June 30, therefore must be renewed by that date, during the 45-day license renewal period. Post-licensing courses must be completed by the anniversary date, at least one per year to remain on active status.

45 Which of the following statements is TRUE about property disclosures in North Carolina? Review Later The listing licensee is required to disclose material facts on the property disclosure when the seller selects "no representation." The Mineral, Oil, and Gas Disclosure is required in all residential sales transactions. The Mineral, Oil, and Gas Disclosure is required in vacant land sales. The listing licensee must inform the seller about a known error on the disclosure form. Comments

-The listing licensee must inform the seller about a known error on the disclosure form. The listing agent must ask the seller to correct known errors on the property disclosure as the seller may be liable for lying to prospective buyers. The seller can select "no representation," although this does not relieve the broker's duty to disclose material facts. The listing agent does not complete the form, nor does the listing agent make any disclosures on the disclosure form. The Mineral, Oil, and Gas Disclosure is not required in foreclosures or transfers among related parties. It is required in new construction sales.

28 An agent listed property on April 10th for three months, with the seller authorizing both dual and designated agency. The broker receives three offers on the property within days of listing it on the Multiple Listing Service. Which of the following would NOT be permissible? Review Later The listing agent presents all offers simultaneously, and the seller elects to counter one of the offers. The listing agent presents all offers, and the seller requests all buyers to bring their highest and best offer. Upon presenting all offers, the listing agent is instructed by the seller to sign the highest and best offer. The listing agent presents all offers and advises the seller that the highest offer contains a contingency and might not be the best offer.

-Upon presenting all offers, the listing agent is instructed by the seller to sign the highest and best offer. A broker is not permitted to sign on the seller's behalf, even with permission, unless the broker is granted power of attorney. This does not typically occur in a real estate contract with regard to contract formation. A listing agent may act under a limited power of attorney to sign the closing disclosure at the settlement meeting if the seller is not attending. It is a violation of license law and commission rules for a broker to disclose the price or other material terms in a party's offer without their express permission. A broker, upon receiving direction from the seller, can seek the highest and best offer. It is important to note that a broker cannot take action on his/her own, such as asking for the highest and best without the seller's authority. A broker acting for a seller, buyer, or tenant typically acts as a special agent - where information can be gathered and presented to the client. Still, the agent lacks any decision making authority.

63 What is leverage? Review Later Use of financing to purchase a property A determination of the highest and best use The difference between the fair market value and the amount owed The loss of the right to enforce restrictive covenants Comments

-Use of financing to purchase a property Leverage is the use of financing (other people's money) to purchase an asset. The borrower has control over the asset purchased without having to pay the full purchase price upfront. The use that provides the greatest return to the owner is known as the highest and best use. Equity is the difference between the fair market value of the property and the amount owed. Latches occur when the HOA fails to enforce covenants for three years, and the HOA loses the right to enforce them.

11 Which of the following statements is FALSE regarding deed restrictions and restrictive/protective covenants? Review Later The owner of a property may be able to obtain a permit to build a structure that violates restrictions that have been placed on the deed. Restrictive and protective covenants are often more restrictive than zoning regulations. Fee Simple Defeasible estates are examples of a property with deed restrictions. Violations of deed restrictions are resolved by a suit to partition. Comments

-Violations of deed restrictions are resolved by a suit to partition. When an owner violates a deed restriction, it will depend if the estate is fee simple determinable or conditional. A suit to quiet title would be filed to determine who has the highest claim on the property. A suit for partition is property divorce - where one co-owner is suing the other owner(s) to force the sale. The city/county has no obligations to check private use restrictions before issuing a permit. Restrictive covenants are typically more restrictive than zoning. Whichever rules is more strict will apply.

75 A licensee is preparing to measure a home and is using the North Carolina Real Estate Commission Guidelines to calculate the living area. Which of the following statements is NOT correct? Review Later When measuring a room with a sloped ceiling, the entire room can be included as living area when 50% or more has a ceiling height of at least 7 feet. A bay window may be included in the living area calculation so long as it is a least 7 feet tall. The stairs' square footage is included in both the first and second floor of a two-story home unless the opening for the stairs is wider than the staircase. The living area must be finished, directly accessible, and heated. Comments

-When measuring a room with a sloped ceiling, the entire room can be included as living area when 50% or more has a ceiling height of at least 7 feet. A licensee may only include a ceiling height of 5 feet or greater so long as at least 50% or more of the ceiling height is at least 7 feet tall. To be considered living area, the space must be heated, finished, and directly accessible - at least 7' tall, 6'4" under a duct or beam. A licensee should use outside measurements whenever possible. A licensee should add 6" to any exterior wall when taking inside measurements.

29 Which of the following is FALSE regarding environmental matters when a property is sold? Review Later A radon test must be performed to determine the level present in a home. The buyer must be permitted at least ten days to inspect for lead-based paint in a home built before 1978. When selling commercial property, a broker should check with the EPA to determine if a property is contaminated. Lead-based paint and asbestos may be encapsulated to reduce health risks. Comments

-When selling commercial property, a broker should check with the EPA to determine if a property is contaminated. A broker should recommend that a qualified environmental engineer test a property. The EPA may be aware of a contaminated site, is not aware of all contaminated sites. A broker is required to disclose what they know or reasonably should know. The broker must disclose so that a buyer can determine if they want to order an inspection. Radon is odorless and colorless naturally occurring gas that is the second leading cause of lung cancer and must be disclosed by a broker when testing shows a level of 4.0 picocuries or higher. Under the 1992 Lead-Based Paint Hazard Reduction Act, the buyer must be provided at least ten days to perform a lead inspection. The seller is not obligated to pay for the inspection or to remediate it if they find lead. Lead and radon may be encapsulated to reduce the health risks as they are a danger when disturbed (construction / remodel).

56 When is compensation earned by a buyer's agent in a real estate transaction? Review Later When the buyer enters into a legally binding contract When the buyer terminates the contract during the due diligence period When the buyer's agent locates a property that meets all of the buyer needs When the buyer closes on a property

-When the buyer enters into a legally binding contract A buyer's agent earns compensation when a legally binding contract forms. It is generally paid at closing. The buyer's agent may also be entitled to compensation when the buyer breaches the contract under certain circumstances. No compensation is due to the listing or buyer's agent when a buyer terminates the contract during the due diligence period.