Real Estate Prelicensing Exam 3

74 All of the following situations will terminate a listing EXCEPT: Review Later death of the individual listing licensee. breach by either party. mutual agreement of the parties. destruction of the listed property.

-breach by either party. Explanation Breach does not automatically terminate contracts. Contracts may be terminated by mutual agreement, operation of law (courts / bankruptcy), death of the principal or independent broker, or destruction of the property. NOTE: The listing agreement will not terminate when listing with a brokerage firm with more than one broker and one of the affiliated brokers die. The broker-in-charge will appoint another broker to perform. 75

27 Personal property includes all of the following EXCEPT Review Later emblements. trade fixtures. ceiling fans. chattels.

-ceiling fans. Explanation Ceiling fans that are attached are fixtures, not personal property. The remaining items are personal property, which leaves ceiling fans as the best option. Chattel is personal property that is moveable and may also be called personalty. Trade fixtures remain personal property when used in a trade or business. Emblements are annual crops (fructus industriales) which remain personal property that may be harvested after the sale.

53 The economic principle which states that the maximum value of an improved property is realized when other properties in the immediate area have compatible and harmonious style is: Review Later highest and best use. substitution. supply and demand. conformity.

-conformity. Explanation Conformity relates to being most similar to neighboring property. Highest and best is obtaining the best value for the property through its current or future use (which can change over time). Substitution states that the home with the lowest price will often sell the fastest and is the basis for the sales comparison approach. Supply and demand impact the amount a property can sell for - low supply with high demand, the property will sell for more / high supply with low demand, the property will sell for less..

62 Funds for originating both FHA and VA loans come primarily from: Review Later investors in government mortgage-backed securities. monies generated from FHA insurance premiums and VA funding fees. congressional appropriations. deposits in FHA- and VA-approved savings institutions.

-deposits in FHA- and VA-approved savings institutions. Explanation Banks are part of the primary mortgage market as they originate loans. Banks then package and sell the loans to Wall Street or a Government Sponsored Agency that will package and sell as mortgage-backed securities, which is considered the secondary mortgage market. FHA insurance premiums cover some of the loss a bank will realize when a property is foreclosed.

70 Asbestos that is in a deteriorated state and crumbling easily is: Review Later inert. corrosive. friable. oxidized.

-friable. Explanation Asbestos poses a risk when it becomes friable - where it is breaking down and becomes airborne. Exposure to asbestos can cause cancer and other lung issues. Asbestos may be encapsulated before it becomes friable or removed from the property (remediation).

47 A bilateral contract is one in which Review Later the promise of one party is given in exchange for the promise of the other party. some action is to be performed by one party only. only one of the parties is obligated to act. a restriction is placed in the contract by one party to limit the performance by the other.

-the promise of one party is given in exchange for the promise of the other party. Explanation A bilateral contract requires both parties to perform (a buyer promises to buy, and a seller promises to sell). A contract is unilateral when one party is obligated to perform only when the other party has performed (an option contract prior to the optionee exercising). When only one party is required to perform, while the other party can back out, the contract is voidable.

12 A provisional broker representing a seller: Review Later cannot act as a dual agent when the buyer is represented by a non-provisional broker. cannot act as a dual agent when the buyer is represented by the BIC. cannot act as a designated agent when the buyer is represented by a non-provisional broker. cannot act as a designated agent when the buyer is represented by the BIC.

cannot act as a designated agent when the buyer is represented by the BIC. Explanation A provisional broker and the supervising broker-in-charge cannot act as designated agents in a transaction as the BIC will become aware of information that could weaken the PB client's position. Remember: No BIC & PB and no P&C. Neither designated agent can be aware of personal/confidential information about the other client at the time the BIC appoints the designated agents.

20 The broker-in-charge allows licensees to negotiate listing compensation at five percent or higher. This policy: Review Later is a violation of Commission rules. is in compliance with laws and rules. is a violation of the Sherman Antitrust Act. is permitted when the Association of REALTORS approves.

-is in compliance with laws and rules. Explanation The Sherman Antitrust Act does not allow for price fixing, market allocation and boycotting. Price fixing occurs when more than one brokerage colluded to keep commision rates high. The Real Estate Commission and Association of REALTORS do not set minimum or maximum commission rates. NOTE: The Commission will not hear complaints about commission.

19 A broker places an advertisement in the daily newspaper which states one of the properties he has listed "has the most breathtaking view on the coast with lots of bedrooms." This action by the broker: Review Later constitutes a misrepresentation of a material fact. is known as "puffing" or sales talk and not a violation of license law. is a violation of fair housing familial status. is a violation of redlining laws.

-is known as "puffing" or sales talk and not a violation of license law. Explanation Puffing is stating a matter of opinion that does not constitute a misrepresentation of a material fact. The information identified is common sales talk and is not considered a material representation.

24 A property managers compensation: Review Later must be based on a percentage of rent collected. is paid from the brokerage trust account. is outlined in the property management agreement. is outlined in the standard lease agreement.

-is outlined in the property management agreement. Explanation The agency agreement outlines the amount of compensation and how compensation is calculated. A licensee cannot reference commission in an offer to purchase or lease contract, as they are not a party to the agreement. Compensation is negotiable, therefore a brokerage can set a policy for percentage of rent collected and/or a flat fee.

23 An agent's duties to the principal include all of the following EXCEPT: Review Later legal advice. obedience. accountability. loyalty.

-legal advice. Explanation A licensee is not an attorney and therefore cannot provide legal advice to a client or customer. The licensee should refer the client to an attorney. A licensee owes O.L.D. C.A.R. to a client - obedience, loyalty, disclosure of material facts and info about the other side, the confidentiality of information about the client that is not a material fact, accounting and reasonable skill, care and diligence.

13 The use of other people's money is a benefit to owning real estate. This is known as: Review Later cash flow. equity. leverage. liquidity.

-leverage. Explanation The use of other people's' money to acquire real estate is known as leverage. The borrower gets control of the asset without having to pay the full purchase price. Equity is the difference between the fair market value of the property and the amount owed. Cash flow refers to a report of money coming in versus money paid out. Liquidity refers to how quickly an asset can be sold for cash. Real estate is considered an illiquid investment.

37 Which of the following statements about the North Carolina Timeshare Act are FALSE?

A purchaser of a new timeshare ownership must be given a 10-day rescission period. Explanation The buyer of a timeshare has 5 days to terminate the transaction and be entitled to a refund. The minimum definition of a timeshare is 5 or more non-consecutive periods over at least 5 years, thus a timeshare for every other year must be for at least 10 years. An active real estate license is required to sell timeshares. NOTE: All funds must be held in the trust/escrow account for 10 days unless the buyer has elected to terminate.

Which of the following advertisements by a real estate agent would comply with appropriate rules and laws? Choose only ONE best answer. A 3 Bedroom, 3 Bath Townhouse, available for $135,000. Call John Zimmerman 919.555.1212 for information regarding low down payment financing. B 3 Bedroom, 2 Bath Downtown Condo for sale. Fantastic view of the city from this penthouse suite. Call Chris McKintock, ABC Realty, 919.555.1212 C 4 Bedroom property located near the town library and municipal park can be yours with as little as $4,000 down. Call Best Yet Realty at 919.555.1212 D 4 Bedroom, 2 Bath townhouse with $100/month HOA dues, located near the synagogue. The seller's loan is assumable. For more information visit our website at www.bestyetrealty.com

B 3 Bedroom, 2 Bath Downtown Condo for sale. Fantastic view of the city from this penthouse suite. Call Chris McKintock, ABC Realty, 919.555.1212 This answer is correct.An advertisement must contain the name of the brokerage or it is considered a blind ad. The prospective buyer needs to know that they are talking to a licensed agent and not the property owner. Listing a brokerage website does not meet the disclosure requirement. It is a violation of license law for a broker to violate Regulation Z and fair housing laws (state, federal, and Civil Rights Act of 1866). It is a violation of Regulation Z to use trigger terms (typically payment, down payment, and interest rate) without disclosing all required terms (all above plus APR, the amount borrowed, number of payments, finance charges, etc.). A broker should stick to facts about the property and not the people - such as stating religious preference or location of a church or synagogue nearby.

A broker is managing a 4-unit rental property on behalf of an owner that occupies one of the units. Which of the following statements is TRUE? Choose only ONE best answer. A When a tenant damages the property, a property manager can immediately use the security deposit to pay for the repair. B A landlord is not permitted to charge a pet deposit or pet rent for a service animal. C The property manager can refuse to rent a property to a protected class when ordered by his/her principal since the property is owner-occupied. D The broker is permitted to obtain a performance bond rather than hold the security deposit in a trust account.

B A landlord is not permitted to charge a pet deposit or pet rent for a service animal. This answer is incorrect. The correct answer is 'B' A property manager cannot charge pet rent or pet deposits for a service animal or companion animal, as they are not considered pets. A property manager cannot use the security deposit funds until the tenancy ends and then can charge for damage that is above normal wear and tear. An owner of a 1-4 unit property that has not hired a broker may have a limited ability to discriminate when they have not hired a licensed agent to represent them. A broker cannot discriminate, and the owner has agreed not to discriminate (note: all agency agreements must contain the prescribed anti-discrimination language). A property manager must have a trust account; bonding is not permitted.

39 A couple received $38,000 from the sale of their home which they used as a down payment toward the purchase of a new home costing $180,000. The lender charged a 1% origination fee and two (2) discount points to buy down the interest rate. How much was the lender paid in fees? Review Later $426 $2,840 $4,260 $5,400

$4,260 Explanation $4,260. 1% origination + 2% (2 discount points) = 3% $180,000 - $38,000 = Loan $142,000 $142,000 X .03 = $4,260

7 A borrower is obtaining a conventional loan. The buyer has a gross annual income of $144,000 and have recurring obligations other than housing expenses totaling $1,600 per month. In order to qualify for a conventional loan under both of the above standards, the buyer's monthly housing expenses must not exceed: (Round to the nearest dollar) Review Later $2,720 $3,360 $3,840 $4,320

-$2,720 Explanation This question is asking for the maximum PITI payment. Conventional loan ratios may not be given on the test so you need to memorize 28% housing and 36% total debt. The maximum PITI payment is the lower of the 2 amounts. $2,720 $144,000 / 12 = $12,000 per month Housing Max = $12,000 X .28 = $3,360 Max Debt = $12,000 X .36 = $4,320 Max Debt $4,320 - $1,600 Other Debt = $2,720 The maximum PITI is the lower of the 2, or $2,720. Having long term debts impacts the amount of money a buyer may be able to purchase.

12 Which of the following statements regarding property construction is INCORRECT? Review Later The ridge board is the highest wooden member in home construction. A footing is poured concrete that is installed below the freeze line. A ranch-style home is the typically the costliest type of construction. Sheathing is used to prevent water entry around chimneys, dormers, and roof joints.

-Sheathing is used to prevent water entry around chimneys, dormers, and roof joints. Explanation Sheathing is plywood or OSB board attached to the exterior or on the roof. Flashing prevents water entry around chimneys, dormers or roof joints (where two roof lines meet).

41 The legal remedy available to a purchaser of real property when the seller is in default on the sales contract and the purchaser still wants to acquire the property is called: Review Later Specific performance Suit for partition Subrogation Abrogation

-Specific performance Explanation Specific performance is forcing the seller to sell the property when the seller is refusing to sell. A suit for partition is property divorce - when two or more people own property, so long as the property is not owned as tenancy by the entirety. Subrogation is signing over the right to sue after an insurance company has paid a claim. Abrogation prevents a person from agreeing to a provision in a contract that is contrary to public law.

17 In which of the following situations is a buyer not entitled to a refund of the due diligence fee? Review Later The buyer discovers that the seller concealed a major defect that will cost over $10,000 to repair. The seller failed to deliver a copy of the Mineral, Oil and Gas Disclosure in the prescribed time and the buyer terminated the contract. The seller decides not to sell the property after the buyer requested repairs. The buyer discovers a hidden defect that will cost over $40,000 to repair. Comments

-The buyer discovers a hidden defect that will cost over $40,000 to repair. Explanation When is the due diligence fee NOT refundable? When the buyer completes due diligence and is not satisfied with the inspection results. The payment of due diligence allows the buyer to terminate the contract for any reason or no reason at all. The MOG disclosure is required in residential home sales (new and resale). The other exemptions to RPOADS apply: transfer among related parties, foreclosure, etc. NOTE: RPOADS and MOG are not required in vacant land sales. When a seller conceals a major defect to prevent detection it is considered fraud, therefore the buyer is entitled to terminate without penalty. When the seller breaches a valid purchase contract, the buyer is entitled to a refund of the due diligence fee, earnest money deposit and the costs that cannot be transferred (inspection, appraisal, survey...) or can sue for specific performance.

Under the Standard NCAR / NCBA Offer to Purchase and Contract, the buyer has how many days to delay settlement? Choose only ONE best answer. A 7 Calendar Days B 7 Business Days C 14 Calendar Days D 14 Business Days

C 14 Calendar Days This answer is correct.Under the standard NCAR / NCBA Offer to Purchase and Contract, the delaying party has 14 calendar days. Thus, the closing date in the OPC is not time is of the essence. Business days are Monday to Friday and used as a distractor on the exam. Banking days apply to deposit requirements for earnest money, security deposits, rent, and repair reserves.

All of the following activities require a license EXCEPT: Choose only ONE best answer. A the sale of a home that belongs to a family member for compensation. B managing an apartment building for a friend in return for free rent. C the purchase of a property for a buyer client where the buyer pays the commission. D the purchase of an investment property by a Limited Liability Company where the seller pays a commission to the LLC.

Dnew the purchase of an investment property by a Limited Liability Company where the seller pays a commission to the LLC.

8 Which of the following statements is TRUE regarding the requirements of the Residential Property Disclosure Act in connection with the sale of property subject to the Act? Review Later Sellers must fully disclose to buyers all adverse property conditions to the best of their knowledge. Failure to provide the buyer with the form allows the buyer to terminate under certain restrictions, without penalty. Listing and selling agents are released from the duty to disclose adverse property conditions when sellers comply with the Act. Listing agents are responsible for completing the disclosure form for sellers.

Failure to provide the buyer with the form allows the buyer to terminate under certain restrictions, without penalty. Explanation The buyer may terminate the contract the earlier of 3 days from the date of receipt, 3 days from the date of effective contract or prior to closing. The termination is without penalty and the seller would have to reimburse the earnest money and due diligence fee.

10 An agent is making an appointment to discuss listing a seller's property. Which of the following best describes the point in time when the agent is required to review and discuss the Real Estate Commission's "Working With Real Estate Agents" brochure with the seller? Review Later Prior to the agent receiving personal or confidential information from the seller. Over the phone when the agent makes the listing appointment. Immediately at the first face-to-face contact with the seller. Through email prior to the listing appointment and discussion about the property.

Prior to the agent receiving personal or confidential information from the seller. Explanation First substantial contact occurs when the conversation will shift from facts about the property to personal and confidential information. While first substantial contact can occur through email or on the phone, the facts in this problem do not detail that this occurred. If the seller does not give personal confidential information to the potential listing agent, then the agent must disclose prior to the listing presentation.

19 A house is listed with ABC Realty. When showing the house to a prospective buyer not represented by ABC Realty, an agent of ABC Realty advises the buyer to offer substantially less than the listing price because the seller must move soon and is very anxious to sell the property fast. Which of the following is TRUE? Review Later The agent has violated the Connor Act which is a violation of license law. The agent is acting as a designated agent for the buyer and can recommend an offer price. The agent is acting as an undisclosed dual agent in the transaction. The agent is acting in the best interest of the seller to help the seller meet his/her goals.

The agent is acting as an undisclosed dual agent in the transaction. Explanation ABC Realty exclusively represents the seller. The agent is acting on behalf of the unrepresented buyer which violates license law and the laws of agency. This is an example of undisclosed dual agency.

11 Which of the following would NOT be considered a stigmatized property in North Carolina? Review Later A tenant committed suicide in the basement. Local people consider the house to be haunted. The property was flooded during a hurricane The elderly owner died peacefully in her bedroom.

The property was flooded during a hurricane Explanation When a property is located in whole or in part in a flood hazard area, the broker must disclose this to potential buyers. Murder, death, suicide, haunting and sex offenders are not considered material facts.

36 When is the only time a licensee can draft a provision in an Offer to Purchase and Contract? Review Later When the Commission approves the language With the express permission of the broker-in-charge With the express permission of the principal When the licensee is party to the contract Comments

When the licensee is party to the contract

9 An agent reviews the brochure "Working with Real Estate Agents" with a prospective buyer. The buyer is reluctant to enter into a written buyer agency agreement with the agent's firm, so the agent and buyer agree that the agent's firm will represent the buyer under an oral buyer agency agreement. No mention is made of dual agency. The buyer soon expresses a particular interest in seeing a property listed with the agent's firm. The firm had previously executed a written listing agreement with the property's owner, but that agreement did not authorize the firm to act as a dual agent when selling the owner's property. At this point, can the agent lawfully proceed to show the buyer the listed property in question without a written dual agency agreement from the buyer and seller? Review Later Yes, but only if the agent first obtains oral permission of both the buyer and seller to represent them as a dual agent, and obtains a written dual agency agreement with both before any offer is presented. No, because a written dual agency agreement with both buyer and seller is required before any showing of a firm's listing to a buyer client of the firm. Yes, because a written dual agency agreement with the buyer and seller is never required until an offer is presented. No, because having not authorized dual agency in the written listing agreement, the seller may not now orally authorize dual agency. Comments

Yes, but only if the agent first obtains oral permission of both the buyer and seller to represent them as a dual agent, and obtains a written dual agency agreement with both before any offer is presented. Explanation A seller can subsequently agree to dual agency. The buyer's agency agreement will dictate if the agreement must be in writing or oral. When the buyer's agency agreement is oral, the seller can orally authorize dual agency. When the buyer's agency agreement is in writing, the seller must authorize dual agency in writing. It is important to note that since the buyer's agency agreement is oral both the buyer and seller can orally authorize dual agency.

21 A licensee sells a vacant lot to a buyer that wants to build a house. The buyer asks the licensee to recommend a builder. The licensee recommends a builder, without disclosing a 3% referral fee the licensee will receive. Has the licensee violated license law? Review Later Yes. The licensee must inform the buyer about the referral fee. No. The referral fee was earned when the lot sold. Yes. The Sherman Antitrust Act requires compensation disclosure. No. The licensee does not represent the buyer when the house is built.

Yes. The licensee must inform the buyer about the referral fee. Explanation A broker must disclose compensation that they expect to receive. Sherman Antitrust laws does not allow price fixing, market allocation or boycotting.

39 Whether subdivision streets are publicly or privately owned and maintained is: Review Later information that a broker must disclose only in new construction transactions. a required disclosure of the developer on any resale transactions. a material fact that must always be disclosed by a real estate broker. information that is not critical to a buying decision.

a material fact that must always be disclosed by a real estate broker. Explanation A broker is required to disclose if subdivision streets are public or private. Roads become public when they are built to DOT standards, dedicated to the DOT and the DOT accepts responsibility.

1 In North Carolina property management: Review Later a property manager must be designated as a broker-in-charge. a property manager cannot employ unlicensed persons to act as on-site leasing-agents. a person that is paid to manage property only for family members requires an active broker's license. a property manager cannot deposit tenant security deposits in the same trust account with earnest money deposits for sales transactions Comments

a person that is paid to manage property only for family members requires an active broker's license. Explanation The license triggering event is earning compensation on behalf of another. There are no exemptions for friends and family. A property manager can hire an unlicensed assistant to assist with property management duties, as long as the unlicensed assistant does not solicit business or negotiate lease terms. A property manager may be BIC or affiliated with a BIC since property management requires a trust account and marketing. A trust account can contain both security deposits and earnest money deposits.

15 In North Carolina property management: Review Later a property manager cannot employ unlicensed persons to act as on-site leasing-agents. a property manager cannot deposit tenant security deposits in the same trust account with earnest money deposits for sales transactions a property manager must be designated as a broker-in-charge. a person that is paid to manage property only for family members requires an active broker's license.

a person that is paid to manage property only for family members requires an active broker's license. Explanation The license triggering event is earning compensation on behalf of another. There are no exemptions for friends and family. A property manager can hire an unlicensed assistant to assist with property management duties, as long as the unlicensed assistant does not solicit business or negotiate lease terms. A property manager may be BIC or affiliated with a BIC since property management requires a trust account and marketing. A trust account can contain both security deposits and earnest money deposits.

27 The standard 2-T NCAR/NCBA Offer to Purchase and Contract: Review Later can be used for the purchase of residential property with 1-4 units. is contingent on the buyer obtaining finance approval to complete the purchase. requires the seller to pay for proposed special assessments. is the only form a REALTOR can use to assist a buyer with an offer.

can be used for the purchase of residential property with 1-4 units. Explanation The 2-T OPC can be used when a buyer is purchasing a condo, townhouse, or 1-4 family dwelling. The 2-T OPC is not contingent upon financing or appraisal. A licensee must use a standard for when writing up an offer on behalf of a client, which may be the NCAR/NCBA 2-T or a standard form prepared by an attorney. A client can prepare their own offer. In the standard 2-T OPC the seller is responsible for confirmed special assessments, while the buyer is responsible for proposed special assessments.

34 A licensee's pocket renewal card must be: Review Later swiped through electronic lockboxes to gain entry to listed properties. retained by the licensee at the licensee's residence. prominently displayed in the office of the employing broker. carried by the licensee when conducting real estate brokerage activities.

carried by the licensee when conducting real estate brokerage activities. Explanation A pocket card should be carried in the licensee's pocket to show that the person has a broker license. The license does not indicate active vs inactive status. The firm license must be displayed in a prominent location. NOTE: The BIC must ensure that all affiliated brokers have an active real estate license. The licensee is responsible to pay for renewal and to take the required education classes.

40 Charges levied on a property owner to pay for the installation of sewer and water lines are Review Later general property taxes. ad valorem taxes. special assessments. special excise taxes.

special assessments. Explanation Public special assessments are commonly charged for city water and sewer lines, paving, and street lights. Annual property taxes are charged on an ad valorem basis (assessed value). Excise taxes (nationally may be referred to as a transfer tax) are charged to the seller. In NC, excise tax is charged at $1 per $500 of the sales price.

1-st A brother and a sister can NOT concurrently own real estate in North Carolina as: Review Later remainder devisees. tenants by entireties. tenants in common. joint tenants.

tenants by entireties. Explanation Only a married couple can take title as tenants by the entirety. It is important that the couple is married at the time of purchase. NOTE: Tenancy by the entirety terminates upon divorce. Unless otherwise stated in the question, the divorced couple will own as tenants in common. ALSO NOTE: When a spouse dies, and the property is owned tenancy by the entirety, the surviving spouse will own in severalty.

22 The standard Exclusive Right to Sell Listing Agreement form approved by the North Carolina Association of REALTORS® contains provisions addressing all of the following matters EXCEPT: Review Later specific actions the listing firm may take to market the listed property. the automatic renewal of the listing agreement upon the expiration of its initial term. the authority of the listing firm to cooperate with and compensate other firms/agents. personal property items that are to be sold with the real property and are included in the listing price. Comments

the automatic renewal of the listing agreement upon the expiration of its initial term. Explanation A listing agreement must contain a definite end date. Only a property management agreement is allowed to contain an automatic renewal clause. A listing agreement must be in writing from inception, contain a definite end date, and disclose the broker's license number. No brokerage service can be performed prior to a written agreement when listing a property for sale or rent.

38 Two brokerages cooperate in the sale of a commercial property. The listing agent is holding $1,000 of repair funds in the trust account on behalf of the buyer until a vendor can complete the repair. The brokerage representing the buyer must retain records: Review Later for 3 years from the date of closing. for 3 years from the effective date of the contract. for 3 years from the date of the initial offer. for 3 years from the date the repair funds are released.

for 3 years from the date of closing. Explanation The brokerage that represents the buyer 3 year record retention clock starts from the date of closing. The listing brokerage's 3 year record retention clock does not start until the funds are released.

20 A broker lists a property for sale and agrees in the listing contract to place the listing in the local MLS, to advertise the property for sale, and to use his best efforts in good faith to find a buyer. The broker places a "For Sale" sign on the property, but fails to place the property in the MLS for more than 30 days. The broker: Review Later is trying to minimize inconvenience to the seller by limiting showings. is acting in the best interest of his/her client. has violated the Statute of Frauds. has failed to exercise proper skill, care and diligence on behalf of the seller

has failed to exercise proper skill, care and diligence on behalf of the seller. Explanation The listing broker agreed to market the property on the MLS and lied to the seller by not taking the action. The Statute of Frauds requires certain contracts to be in writing to be enforceable (real estate sales contracts, option agreements, installment land contracts, etc.).

17 A broker manages several rental units on behalf of a client. The broker pays a $100 cleaning fee to Super Clean, Co. and in return Super Clean, Co. "refunds" $10 to the broker. This fee: Review Later is acceptable standard practice in property management. is a violation of the National Association of REALTORS rules. is a violation of Commission rules when the owner is not aware. is a violation of the Real Estate Settlement Procedures Act.

is a violation of Commission rules when the owner is not aware. Explanation A licensee must disclose all compensation that they expect to receive and the client must agree to it. RESPA applies to real estate purchases (Real Estate SETTLEMENT Procedures Act).

28 A licensee's responsibility for the closing disclosure: Review Later is limited as the attorney and lender prepare the form. requires the licensee to verify all numbers entered. requires the licensee to complete the form. is limited to what the licensee knows or reasonably should have known.

is limited to what the licensee knows or reasonably should have known. Explanation A licensee is responsible for what they know or what they reasonably should have known. The licensee is not responsible for all of the entries on the closing disclosure. The licensee is not required to complete the form as the attorney and lender perform that task.

14 The property manager's chief concern should be that the property: Review Later exhibits the proper amount of the owner's pride. is managed to achieve the highest rate of return possible for the owner's investment. is seldom vacant because it is consistently rented at the lowest rents that produce a profit. manager's time is maximized in the management of the property.

is managed to achieve the highest rate of return possible for the owner's investment. Explanation The primary duty of a property manager is to achieve the highest rate of return for the owner while in compliance of all laws.

39 All of the following statements regarding a condominium are true EXCEPT: Review Later A condominium unit owner owns his/her unit outright and shares ownership with all other complex unit owners in buildings and land that make up the condominium complex. Each condominium unit owner must pay real property taxes based on the value of his/her unit and its associated undivided interest in the common areas. Condominium "common areas" include the physical structure of buildings containing the individual units, the land on which the buildings stand, parking areas, and all community facilities such as clubhouse, swimming pool, tennis court, greenway, etc. A condominium unit owner's interest is considered to be a nonfreehold estate.

A condominium unit owner's interest is considered to be a nonfreehold estate. Explanation A non-freehold estate is a leasehold estate which creates a leasehold estate for the tenant and leased fee estate for the owner. The ownership of a condo is a freehold estate that blends ownership in severalty and tenants in common as the owner owns his/her unit as well as co-ownership of the common area.The owner is required to pay taxes and association fees, or the unit may be foreclosed on, not the entire condo complex.

11 A buyer is purchasing a property for $300,000 by obtaining a conventional 30-year mortgage at 5% interest. The bank requires a 20% down payment. The amortization rate is 5.37. What is the mortgage balance after one payment, rounded to the nearest dollar? Review Later $238,711 $239,711 $298,389 $299,639

-$239,711 Explanation The monthly principal and interest payment is needed. To calculate, take the loan, divide by 1,000 and multiply by the amortization rate. Next, calculate the monthly interest. Subtract the monthly interest from the principal and interest payment to determine the amount applied to the principal. Subtract the principal payment from the loan amount to obtain the new balance. Loan: $300,000 X 80% = $240,000. P&I Payment: $240,000 / 1,000 X 5.37 = 1,288.80. Monthly Interest: $240,000 X 5% / 12 = $1,000. Principal Payment: $1,288.80 - $1,000 = $288.80. New Balance: $240,000 - $288.80 = $239,711.20

5 The principal balance on a homeowner's loan is $260,000 and the monthly PI payment is $1,560.00. The interest rate on the loan is 6%. How much money will the homeowner still owe on the principal balance after the next monthly payment has been made? Review Later $258,440 $258,700 $259,000 $259,740

-$259,740 $259,740 $260,000 X .06 = 15,600 / 12 = 1,300 Interest PI Payment $1,560 - Interest $1,300 = $260 $260,000 - $260 = $259,740

How would an owner financed second deed of trust be entered on a settlement statement or closing disclosure? Choose only ONE best answer. A Buyer debit, seller credit B Buyer credit, seller debit C Buyer credit, seller credit D Buyer debit, seller debit

-$4,260 Explanation $4,260. 1% origination + 2% (2 discount points) = 3% $180,000 - $38,000 = Loan $142,000 $142,000 X .03 = $4,2600

71 Lead-based paint disclosure is required to be made to prospective purchasers of properties built prior to: Review Later 1968 1978 1988 1992

-1978 Explanation Homes built prior to 1978 that are used for residential purposes are required to use the Lead Based Paint Addendum to disclose about knowledge or report relating to lead on the property. The requirement is outlined in the 1992 Lead Based Paint Hazard Reduction Act.

A buyer purchased a house several years ago for $110,000 making a 10% down payment. The value of the home has now increased by 20%, and the purchaser's mortgage loan amount has decreased by 15%. What is the percent of equity increase? Review Later 0.0335% 0.335% 3.35% 335% Comments

-335% 335%. $110,000 X .90 = $99,000 initial loan = $11,000 Down Payment $110,000 X 1.20 = $132,000 Current Market Value $99,000 X .85 = $84,150 Current Loan Balance $132,000 - 84,150 = $47,850 $47,850 - 11,000 = $36,850 / 11,000 = 3.35 = 335%

29 When purchasing a timeshare from a registered timeshare developer, how long after signing a contract does the purchaser have to cancel? Review Later 10 days 5 days 48 hours 3 days

-5 days Explanation It is important to remember 5/5/5/10 with regard to timeshares. 5 or more non-consecutive periods over at least 5 years, the buyer has 5 days to terminate the contract and the developer must hold ALL funds in an escrow account for 10 days.Other important terms with timeshares - a project broker acts as the broker-in-charge, the developer does not have to be licensed and there is no "timeshare" license.

64 When obtaining a conventional mortgage loan, a borrower is typically required to obtain private mortgage insurance when the loan-to-value ratio is more than: Review Later 90%. 80%. 75%. 95%.

-80%. Explanation To avoid private mortgage insurance, a bank will typically require a 20% down payment. Loan to value is calculated by taking the loan and dividing by the value. A loan that requires 20% down will have an 80% LTV. Conventional loans commonly have the lowest LTV, while VA loans have the highest LTV (no down payment / 100% LTV).

All the following statements are true regarding timeshares, EXCEPT: Choose only ONE best answer. A To list or sell timeshares, a licensee must obtain a timeshare license. B The initial deposit and fees must be held in a trust account for ten days from the effective date of the contract unless it is returned to the buyer before that date due to cancellation. C Timeshare projects must be registered with the North Carolina Real Estate Commission. D A project broker supervises licensed real estate agents to ensure compliance with Commission rules.

-A To list or sell timeshares, a licensee must obtain a timeshare license This answer is incorrect. The correct answer is 'A' There is not a separate license for timeshare sales, just as there is no separate license for Provisional Broker or Broker-in-Charge. To remember the requirements for a timeshare, remember 5/5/5/10 - the basic definition of a timeshare is five or more nonconsecutive periods over at least five years, five days for the buyer to terminate from the effective date of the contract, and ten days that ALL funds must remain in the trust/escrow account. The Commission can fine a timeshare developer $500 per violation of the timeshare act. A project broker supervises the licensed sales staff.

20 Which of the following is an example of dual agency? Review Later A firm that represents both buyers and sellers A provisional broker and a broker licensee from firms that are cooperating in a lease transaction A broker-in-charge assisting a buyer client in the purchase of a property that was listed by a provisional broker of the firm A broker finds a buyer for a property the broker personally has listed

-A broker-in-charge assisting a buyer client in the purchase of a property that was listed by a provisional broker of the firm Explanation Dual agency arises when the brokerage represents both the buyer and seller in the transaction. When two firms cooperate in the sale of the property, the buyer and seller have exclusive representation. A firm/brokerage can represent buyers and sellers without dual agency arising. Dual agency forms by agreement; both buyer and seller (or tenant and landlord) must consent to the dual agency relationship. A broker locating a buyer for a property does not create an agency relationship.

37 A buyer emails an offer to purchase to the seller. The seller signs the offer but deletes a provision requiring the seller to pay for an inspection of the electrical, plumbing, heating, and cooling systems, then communicates acceptance to the buyer by mail. Which of the following is TRUE? Review Later A legally binding contract formed when the seller communicated acceptance A legally binding contract did not form as the seller did not email the full contract A legally binding contract did not form as the seller made a counteroffer A legally binding contract formed when the seller signed the offer

-A legally binding contract did not form as the seller made a counteroffer Explanation When terms of an offer are changed, it constitutes both a rejection and counteroffer. A legally binding contract for the purchase of real estate must be in writing, signed by the parties, and communication of acceptance to the offeror has occurred. The offeree can use any reasonable means to communicate acceptance. They are not required to deliver the signed contract. In order to form a legally binding contract, with the seller's changes, the buyer or offeree would have to unconditionally accept the counteroffer and communicate the acceptance.

49 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 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 lien takes priority over property tax liens and all other liens. A special assessment on a residential lot may be made only by a properly established homeowners association.

-A lien for an unpaid special assessment is a lien against the property itself rather than against the property owner. Explanation A special assessment is a specific lien against the property. The current owner has ultimate liability - if the lien is not paid, the property can be sold to satisfy the debt. A special assessment can be public or private and therefore it does not have a higher claim than property tax liens. The seller may have agreed to be responsible for the special assessment under the terms of the contract or a signed deed and lien waiver, however the question does not provide sufficient information to make this selection.

35 Which of the following statements about license status is CORRECT? Review Later A provisional broker that desires to remain on active status must take at least one postlicensing course per year in the order prescribed by the Commission. A provision broker that desires to remain on active status must complete CE by June 10th prior to his/her second license renewal. A broker must pay the license renewal fee within the 60-day renewal period beginning on May 1st to remain on active status. A broker must have 2 years full-time experience gained after removing provisional status to be eligible to declare as broker in charge.

-A provision broker that desires to remain on active status must complete CE by June 10th prior to his/her second license renewal. Explanation A new licensee is not required to complete CE until June 10th prior to his/her second license renewal. A broker does need to complete at least one postlicense course per year prior to his/her anniversary date to remain on active status, however there is no prescribed order to the courses. A brokerage is not required to open a trust account unless they are engaged in activities that would require one, like property management or management of a homeowner association. A brokerage involved in sales may use elect to have a real estate attorney act as an escrow agent and retain the funds in the attorney trust account. The license renewal period is 45-days and begins May 15 through June 30th. All licenses expire on June 30th unless renewed by that date. In order to elect BIC status a broker must not be on provisional status and must have 2-years full-time experience or the equivalent over that past 5 years. The experience can be gained while on provisional status.

14 Julie, a broker with Taylor Realty, received an offer on a property listed with Williams Realty. With the buyers' consent, Julie was acting as a subagent of the seller in the transaction. The buyers made a low offer but told Julie they would be willing to go full price and terms if the sellers did not accept the offer. Julie presented the offer to Larry, the listing agent, and told Larry of the buyers' willingness to make a full-price offer if necessary. Larry presented the offer, making no mention that the buyers might be willing to pay more. Which agent has violated the Law of Agency? Review Later Neither Julie nor Larry Larry Julie Both Julie and Larry

-Larry Explanation A subagent works for the seller and therefore is required to disclose personal and confidential information learned about the buyer to the seller. The listing agent also works for the seller and therefore has to disclose personal and confidential information about the buyer to the seller.

1 Able opened an antique shop in a single-family residential zone in direct violation of the zoning ordinance. Seven years later Able sells the property to Baker who operates the antique shop for another fifteen years. Which of the following statements is CORRECT? Review Later Baker acquired the right to use the property as an antique shop by adverse possession. Able's use of the property was illegal and Baker's use of the property is illegal. Baker's use of the property is legal due to the Statute of Limitations. Able's use of the property became a legitimate conforming use after 5 years. Comments

-Able's use of the property was illegal and Baker's use of the property is illegal. Explanation An illegal use of the property is never grandfathered. There are no time limits where the use will become legal. The local government can sue for an injunction to stop the action. To qualify as a legal nonconforming the use must be legal when the owner starts the use, in this case as an antique shop, and then the zoning changes. The owner of a legal non-conforming use would be allowed to continue the use or sell it. Abandonment of the use would terminate this right and require the property to conform to current zonin

57 Which of the following is the clause in a mortgage or deed of trust that permits a lender to call the entire unpaid mortgage balance due upon a borrower's default due to non-payment? Review Later Alienation clause Escalator clause Forfeiture clause Acceleration clause

-Acceleration clause Explanation Acceleration occurs when the buyer defaults on a loan, and the lender can call the entire balance. Alienation occurs when a seller sells the property to another and requires payment of the full balance. A forfeiture clause in a contract relates to penalties when contract terms are not met. An escalation clause is included in an adjustable-rate mortgage to allow the interest rate to change based on changes in an index.

34 Which of the following is an example of advertising that probably violates the Federal Fair Housing Act as amended? Review Later Running a series of newspaper advertisements and television commercials for a large apartment complex that shows a variety of persons as tenants. Advertising that an apartment is located near a synagogue. Advertising a room for rent stating a preference for a male tenant in an owner-occupied unit. Advertising that the unit will be available in 3-weeks.

-Advertising that an apartment is located near a synagogue. Explanation Even when a property is near a church or synagogue, it should not be stated in the advertising as it appears to give preference to a protected class based upon religion. When renting a room in an apartment there is a limited exception to advertise the preference for the sex of the prospective tenant. NOTE: HUD announced they will not take action against a person renting out a room when they state a preference for a male or female tenant. In our opinion, advertising based on sex is a violation of the law, we are not sure how the exam will handle this topic. Advertising the synagogue is the "most" correct answer.

78 A phone call from a licensee to which of the following people registered on the Do-Not-Call Registry will probably be a violation of the Do-Not-Call laws? Review Later A for-sale-by-owner about your buyer's interest in their property A home inspector about a property inspection A seller-client that closed one year ago An expired MLS listing with another firm

-An expired MLS listing with another firm Explanation The exemptions from the DNC laws are past business relationship in the past 18-months, personal relationship, or invitation for 3-months. A FSBO can be called about a buyer's interest without trigger DNC. DNC prohibits solicitation.

15 Anita works for a firm that practices dual agency but not designated agency. Anita signs an Exclusive Buyer Agency Agreement to represent a buyer who subsequently becomes interested in one of the firm's listings that was listed by another agent. In this situation: Review Later Anita will represent only the buyer in this transaction, and the listing agent will represent only the seller. Anita must represent only the seller in this transaction because the property was listed with the firm before Anita signed the Buyer Agency Agreement. Anita may only show the firm's listed property to the buyer if the listing agent is also present. Anita's firm will be considered a dual agent and must obtain written consent from both buyer and seller to practice dual agency.

-Anita's firm will be considered a dual agent and must obtain written consent from both buyer and seller to practice dual agency. Explanation The firm can only act as a dual agent when both the buyer and seller consent. Since the buyer's agency agreement is exclusive, it must be in writing; thus the dual agency authorization must be in writing prior to showing any property listed with the firm. The brokers are not permitted to advocate for the buyer or seller as the firm does not practice designated agency.

69 Which of the following might an individual develop if he/she is exposed to excessive amounts of radon gas? Review Later Skin cancer Heart disease Liver cancer Lung cancer

-Lung cancer Explanation Radon is an odorless and colorless gas that increase the risk of lung cancer when the concentrations rise above 4.0 pico cures per liter of air. A broker must disclose when they know that the radon reading is 4.0 or higher. The only way to determine the level of radon in a home is to perform testing. Each property is unique and may be impacted by radon differently.

QUESTION 1 OF 40 Matt Hagan is a provisional broker with Red Carpet Realty. He just listed his first property located at 1802 New York Avenue. The seller is a licensed contractor that discloses at the listing appointment that the addition of his home was not permitted. The seller completes the North Carolina Residential Property and Owners' Association Disclosure Statement, selecting "No Representation" to all items. Matt is lucky and shows the property to multiple potential buyers but fails to disclose the unpermitted addition. Betty Biggs, one of the buyers Matt showed the property to, decides to make an offer. The home goes under contract and closes in 45 days with Matt never disclosing to the buyer the unpermitted square footage. Which of the following is TRUE? Choose only ONE best answer. A Matt could be liable for negligent misrepresentation for failing to disclose the unpermitted addition. B Matt could be liable for willful omission if he purposefully did not disclose the unpermitted square footage. C Matt would not be liable to Betty as the seller should have disclosed the unpermitted addition on the Property Disclosure Statement. D Matt would not be liable to Betty as North Carolina is a caveat emptor state, and the buyer is responsible for performing her due diligence.

-B Matt could be liable for willful omission if he purposefully did not disclose the unpermitted square footage This answer is correct.When a licensee purposefully fails to disclose a material fact, it is considered willful omission. Remember that willful vs. negligent comes down to intent, and misrepresentation vs. omission is determined if the agent said something or failed to say something (whether oral or written).

56 Which party to the contract selects the closing attorney or title company? Review Later Seller Licensee Lender Buyer

-Buyer Explanation Generally, the buyer selects settlement service providers. The licensee can make recommendations. Recall that the licensee generally acts as a special agent, with no decision making authority.

60 Which of the following types of real estate loans carry the highest risk for a lender? Review Later VA loans Second mortgage loans FHA loans Construction loans

-Construction loans Explanation Construction loans have the highest risk as the property is not complete, therefore the lender does not have adequate collateral. The lender does not release full funding at the time the loan closes. The funds are released in draws based on construction milestones, not based on money spent. Construction loans are typically interest-only (term loans) and temporary financing until construction is complete. A take out commitment is permanent financing used to pay off the construction loan. FHA loans insure the lender from some of the loss that the bank may incur. VA loans guarantee the lender from some of the losses according to a sliding scale. Secondary loans may increase lender risk as they typically subordinate to primary financing; however they are not considered the highest risk loan.

15 Which of the following statements is TRUE about the Due Diligence Period in the North Carolina standard offer to purchase and contract? Review Later The buyer must explain why she wishes to terminate the contract. During this period, the terms of the contract can be renegotiated. If the buyer exercises the option to terminate, the buyer will receive a refund of their earnest money deposit and due diligence fee. The seller must repair any material defects to the property that are discovered during this period.

-During this period, the terms of the contract can be renegotiated. Explanation The terms of a contract "can" be renegotiated before closing the transaction. The buyer and seller are not required to negotiate. A change to a contract is considered an amendment. The property is sold "as-is," therefore the seller is not required to make repairs. If the seller agrees to a repair request, the agreement must be in writing and signed by the parties. The buyer can terminate the contract for any reason or no reason at all during the due diligence period and is not required to tell the seller why. The buyer is entitled to a refund of the earnest money deposit when termination occurs BY the due diligence date.

73 An owner of a property wants to employ a listing broker but only be obligated to pay a brokerage commission if that broker procures a buyer on terms acceptable to the owner. The owner would need to use which of the following types of listing contracts? Review Later Exclusive listing contract Net listing contract Exclusive Right to Sell listing contract Open listing contract

-Exclusive listing contract Explanation An Exclusive Listing agreement is where the seller and broker compete. The seller would not be required to pay commission to another broker. Candidates often confuse the Exclusive Right to Sell, where the agent is compensated no matter how the buyer is introduced to the property with the Exclusive Agency Agreement where the broker competes against the seller. An open or non-exclusive listing allows the owner to hire multiple brokers that compete with the seller to find a buyer. A net listing allows the listing brokerage to retain the proceeds above an amount that the seller wants to net from the sale.

16 A broker working with a prospective buyer owes which of the following duties to the buyer under the common law? Review Later Advocacy Obedience Loyalty Fairness

-Fairness Explanation When a broker is working "with" a person they are a 3rd party customer. When a broker is working "for" a person they are a client. A customer is owed honesty, fairness and disclosure of material facts. A client is owned the same as well as obedience, loyalty, disclosure, confidentiality, accounting and reasonable still, care and diligence. The listing agent can advise the seller when they have questions about the form, however they cannot complete it. A broker would never use RPOADS to disclose material facts - as it is the SELLER's disclosure. The seller can select yes - there is a problem, no - there is not a problem to his/her knowledge, or no representation - I may or may not know and I am not going to tell. A listing agent must disclose material facts, even if the seller selects no representation on the disclosure form.

61 Which of the following is required to sign a deed of trust? Review Later Beneficiary Trustee Grantor Grantee

-Grantor Explanation The Grantor / Borrower signs the deed of trust. Deeds of trust are used in title theory states, where the borrower hold equitable title until final payment. The buyer is the grantee on the deed relating to the purchase of the property. The trustee hold legal title to the property until final payment is made. The lender is also known as the beneficiary.

18 Which of the following statements best describes a listing agent's duty to disclose material defects in a listed property to prospective purchasers? Review Later If the agent could discover a material defect by a reasonable inspection of the property, then he/she must disclose it to prospective purchasers. Unless the owner of the property gives him/her authorization, the agent has no right to disclose adverse matters to a prospective purchaser. The agent has an absolute duty to discover and disclose all material defects to prospective purchasers. Unless the agent has actual knowledge of a material defect, he/she has no duty to disclose it to a prospective purchaser.

-If the agent could discover a material defect by a reasonable inspection of the property, then he/she must disclose it to prospective purchasers. Explanation An agent has a duty to discover and disclose material facts by performing an investigation of the property. The agent does not perform an inspection to the level that a home inspector, however would be required to disclose what they know or reasonably should have known about the property. An agent would not be responsible for disclosing items that are concealed or not easily discovered, unless they have knowledge of the hidden defect. A broker is responsible for disclosing patent defects - those that are easily discovered. A broker is not responsible for latent defects - hidden defects, unless disclosed to the broker.

36 A buyer sent an offer to purchase to the owner's agent, who forwarded the offer to the owner by email. The owner signed the sales contract and emailed it to his agent. Before his agent read the email with signed acceptance another purchaser made an offer for the farm. The listing agent called the owner to tell him about the second offer. Before the owner could mention that he had accepted the first offer and emailed the signed contract to the agent, the agent told the owner about the second higher offer. The owner immediately demands his agent to disregard the email and the desire to accept the second offer. At this point which of the following statements is TRUE? Review Later The second offer is legally accepted, however the first offer can submit a new offer with a backup contract addendum. The seller and agent are liable to both buyers as two legally binding contracts have formed. The first offer has been legally accepted and therefore the seller cannot accept the second offer. Neither offer has become a legally binding contract and the seller may choose which offer to accept.

-Neither offer has become a legally binding contract and the seller may choose which offer to accept. Explanation An offer must be accepted and that acceptance communicated to the other side to form a legally binding contract. The communication of the first offer has remained on between the seller and the seller's agent, and therefore no legally binding contract has been formed. The seller is free to accept the second offer - which is required in writing and then for communication to the buyer or buyer's agent regarding the acceptance.

32 The owner of a 4 family, owner-occupied rental property hires a broker to lease the remaining available units. The owner informs the broker that they will not rent to a tenant that cooks ethnic cuisine such as Indian or Asian. The agent agrees and takes the listing. Is the agent acting appropriately? Review Later Yes, as the owner to the property can give instructions to the agent, and the agent must loyally obey. No, an owner is never permitted to discriminate against potential tenants. Yes, as an owner can limit the tenants that rent when it is fewer than 4 units, and one of the units is owner-occupied. No, the act of hiring an agent eliminates whatever exceptions to the fair housing law the owner may have.

-No, the act of hiring an agent eliminates whatever exceptions to the fair housing law the owner may have. Explanation Real estate agents are not permitted to discriminate. When the owner hires a real estate agent to manage the property, the owner agrees to adhere to Fair Housing laws. An owner of a 1-4 unit owner occupied property has a limited ability to discriminate against tenants so long as they do not market the exclusion and do not inform the prospective tenant that they will not rent to them.

50 Which of the following sold properties would an appraiser using the sales comparison approach to value be LEAST LIKELY to use as a comparable? Review Later One that is very similar but the owners were facing foreclosure. One that is very similar, in the same neighborhood that closed nine months ago. One that recently sold located in a similar neighborhood several miles from the subject house. One that is located on a substantially larger lot than the subject house.

-One that is very similar but the owners were facing foreclosure. Explanation A distressed sale is not a valid comparable unless the area has a substantial amount of distressed sales. It is likely on an exam that you will be asked to determine what is the best comp (fewest adjustments, most similar, recently sold, open market) vs the worst comp (distressed sale, FSBO, sold more than 12 months ago). The stem of the question details that all properties have been sold, so the absence of this statement in the answer choices does not mean that the comparable property has not sold.

34 Which of the following is NOT a material fact in North Carolina? Review Later A leak around the flashing of the chimney The imminent widening of the road in front of the property to four lanes A cracked heat exchange in the heating system Polybutylene pipes that have never leaked

-Polybutylene pipes that have never leaked Explanation Leaking polybutylene pipes are a material fact. If the pipes have never leaked it is not a material fact. Leaks, cracked heat exchange and widening of roads are considered material facts when the broker is aware or should have been aware of the issues. NOTE: A broker owes skill, care and diligence and therefore should be aware of pending zoning changes or major road projects.

29 Which of the following methods of acquiring title is NOT an example of the transfer of land by involuntary alienation? Review Later Lien foreclosure sale Adverse possession Quitclaim deed Eminent domain

-Quitclaim deed Explanation A quitclaim is a voluntary transfer of title to a property without assurances and is often used to remove the cloud on a title. Adverse possession is the hostile / intentional act of taking the property of another. A lien foreclosure is involuntary - the bank does not need to seek the borrower's permission. Eminent domain is the right of the government to take property for the public good, with the payment of fair market value to the owner. Eminent domain is the right and condemnation is the action.

58 The mortgagee foreclosed on property after the borrower defaulted on the loan payments. At the foreclosure sale the house sold for only $150,000. The unpaid balance of the loan at the time of foreclosure sale was $161,000. How will the lender most likely attempt to recover the $11,000 the borrower still owes? Review Later Sue for partition Sue for specific performance Sue to quiet title Seek a deficiency judgment

-Seek a deficiency judgment Explanation A lender can sue for deficiency judgment when the property does not sell for an amount that will cover the unpaid balance and fees. A suit for partition is "property divorce" where a co-owner wants to sell, and other owners are refusing. A suit for specific performance forces the sale when the seller has defaulted on a legally enforceable contract. A suit to quiet title asks the courts to decide which party has the highest claim when ownership is in dispute.

31 When calculating the gain or loss on the sale of residential property for federal taxation purposes, which of the following statements is FALSE? Review Later Closing costs at the time of purchase, excluding those related to obtaining a loan, are added to the basis when calculating adjusted basis. Basis is the purchase price of the property when acquired. Selling expenses such as commission, repairs and deed preparation are subtracted from the sales price to calculate the amount realized. Cost of capital expenditures are added to basis to calculated adjusted basis

-Selling expenses such as commission, repairs and deed preparation are subtracted from the sales price to calculate the amount realized. Explanation While no math calculations should appear on the exam, it is important to understand the calculation of adjusted basis as well as the calculation of the amount realized. Amount realized is the sales price less allowed closing costs such as commission and fees, but not repairs. The IRS does not allow a deduction for repairs. Adjusted basis is calculated by taking the purchase price and adding certain closing costs and capital improvements. Basis is another name for the purchase price or sales price at the time of purchase.

44 Which of the following would NOT make a contract void or voidable? Review Later A minor inherited a property and sold it to an adult The buyer has only 48 hours to locate and purchase a property and is feeling stressed The broker and seller failed to disclose a latent material defect of which they are aware The buyer has been adjudicated incompetent by a court of competent jurisdiction

-The buyer has only 48 hours to locate and purchase a property and is feeling stressed Explanation A buyer feeling stressed about a transaction does not impact contract formation. Duress occurs when someone is threatening violence (i.e., to hurt the individual or a family member). When a broker or seller has committed fraud, the buyer can rescind the contract. Contracts with minors are voidable on behalf of the minor. When someone is declared mentally incompetent, the contract is considered void. When someone is not aware that they were entering into a contract and that person is incapacitated, the resulting contract is voidable.

10 The assessed value of a parcel of land is $336,000, and the local ad valorem tax rate was $1.20 per $100. Which of the following is correct regarding the proration of the taxes per customary practice if the closing is April 15? Review Later The buyer is credited $1,176, and the seller is debited $1,176. The seller is credited $1,176, and the buyer is debited $1,176. The buyer is credited $2,856, and the seller is debited $2,856. The seller is credited $2,856, and the buyer is debited $2,856. Comments

-The buyer is credited $1,176, and the seller is debited $1,176. Explanation Debit seller, credit buyer - same dollar amount. $336,000 / 100 = 3,360 X 1.20 = 4,032 $4,032 / 360 = 11.20 JFM 90 + A 15 = 105 Days 11.20 X 105 = $1,176

3 A married couple purchased a lot from the Waterfront Development Corporation financed with an installment land contract. Which of the following is FALSE? Review Later -The buyer is the vendor and the seller is the vendee. -The seller retains legal title to the property until the final payment. -In the event of default, the buyer loses all money paid to the seller. -The buyer is given possession of the property at closing.

-The buyer is the vendor and the seller is the vendee. The seller is the vendor - think vending machines sell. The buyer is the vendee - that buys from the vending machine. An installment land contract may also be called a contract for deed. It is a form of seller financing that is heavily in favor of the seller. If the vendee/buyer defaults on the contract, the seller will regain the property and the buyer loses all payments made. The buyer has equitable title in the property until final payment.

8 A buyer wants to purchase a house for $225,000 and applies to a lender for a $210,000 conventional mortgage loan to finance the purchase. The buyer's gross annual income is $90,000. The lender determines that the buyer's housing expenses would be $2,160 per month and that his/her expenses for other recurring obligations are $450 per month. Which of the following is TRUE using conventional 28%/36% qualifying ratios? Review Later The buyer qualifies under the housing expense test. The buyer qualifies under the total debt expense test. The buyer qualifies for both housing and total debt expense tests. The buyer does not qualify for either housing nor total debt expense tests.

-The buyer qualifies under the total debt expense test. Explanation $90,000 / 12 = $7,500 Monthly Income $7,500 X .28 = $2,100 Max PITI $7,500 X .36 = $2,700 Max Total Debt Actual PITI $2,160 = NO Actual Total Debt = $2,160 + 450 = $2,610 = YES

59 Which of the following statements regarding Regulation Z is CORRECT? Review Later The law restricts terms that a broker can be use in an advertisement regarding consumer finance. The law applies to all financing types when a federally insured bank is making the loan. The disclosure requirements are triggered by specific terms like HOA dues or taxes. The disclosure requirements are not required when a broker markets the APR.

-The disclosure requirements are not required when a broker markets the APR. Explanation Regulation Z applies to consumer fiancé - including cars, home purchases and personal financing. APR or annual percentage rate discloses the cost of credit when factoring in lender charges. APR is not a trigger when used in an advertisement, but must be disclosed when Regulation Z is triggered. NOTE: The law does not limit or prevent a broker from using trigger terms, it requires full disclosure when a trigger term is used.

80 Which of the following is the BEST definition of actual eviction? Review Later The enforcement of a court order to remove a lessee The landlord's future interest in the rental premises The right of a landlord to use the rental premises The enforcement of a court order to remove a lessor

-The enforcement of a court order to remove a lessee Explanation Actual eviction occurs when summary ejectment is filed in small claims court to remove the lessee (tenant). The owner is the lessor. The owner gives exclusive possession to the tenant until the lease terminates and the tenant has vacated the premises.

30 Property is being transferred from the seller to the buyer in a title theory state. Which of the following statements regarding a deed is TRUE? Review Later The grantor under a general warranty deed promises that he/she will defend and protect the grantee's title only against claims resulting from the grantor's ownership. The grantor under a special warranty deed warrants that he/she will defend and protect the grantee's title against any claims whatsoever. The grantor under a special warranty deed makes no warranties to defend and protect the grantee's title against any claims whatsoever. The grantor under a general warranty deed promises he/she will defend the grantee's title against claims during his/her ownership and in the past.

-The grantor under a general warranty deed promises he/she will defend the grantee's title against claims during his/her ownership and in the past. Explanation A general warranty deed is the highest and best deed a grantee/buyer can receive. It provides the most warranties for past events that may impact clear title. It does not guarantee that the title is free from liens or encumbrances. A special warranty deed limits the grantor's warranties to issues arising during his/her period of ownership. A quitclaim deed makes no warranties and the grantor quits whatever claim they may have to the property.

9 The subject property has a fireplace. A comparable property does not. The broker estimates that a fireplace contributes $4,000. The broker would: Review Later decrease the subject sales price by $4,000. decrease the comparable sales price by $4,000. increase the subject sales price by $4,000. increase the comparable sales price by $4,000. Comments

-increase the comparable sales price by $4,000. Explanation Never adjust the subject property, only adjust the comparable. When the comp is superior, subtract. When the comp is inferior, increase. The broker should add $4,000 to the comparable sales price for the fireplace.

24 Which of the following statements regarding life estates is TRUE? Review Later The person named as remainderman has no legal interest in the property until the life tenant dies. The life estate must be for the life of the person granted the life estate. The life tenant may use the property in the same manner as any owner, but may not transfer his/her life estate. The life tenant typically pays ad valorem real property taxes during his/her ownership.

-The life tenant typically pays ad valorem real property taxes during his/her ownership. Explanation A life tenant is required to pay property taxes and cannot cause waste; the life tenant must maintain the property. The life tenant can remove timber for fuel or repairs (Estovers).A life estate can be conventional, marital or pur autre vie. A conventional life estate last for the life tenant's life. An estate pur autre vie lasts for the life of another, where the life tenant is not the measuring life. The life tenant can lease or sell his/her interest, however can only transfer the level of ownership that they possess. The remainderman holds an estate in real property that is possessory in the future.

72 Which of the following statements is TRUE about the commission paid to an active broker on provisional status? Review Later A seller can pay a bonus directly to a provisional broker so long as the commission earned is paid to the brokerage. The provisional broker does not need to disclose the commission split between the agent and the firm. In the event of a dispute regarding the payment of a commission, brokers should file a complaint with the Real Estate Commission. The amount of commission charged is limited by License Law and Commission rules.

-The provisional broker does not need to disclose the commission split between the agent and the firm. Explanation The full amount of compensation has been set and agreed to between the brokerage and the firm. A broker does not have to detail the commission split contained in his/her independent contractor agreement or that a referral fee is being paid. All compensation, including bonuses must flow through the brokerage. The broker's independent contractor agreement will detail how bonuses will be paid. NOTE: The Real Estate Commission will not hear complaints about commission. Those complaints are heard by the local REALTOR board.

28 Sam and Stella purchased a lake lot together on June 12. The deed lists both of them as grantees without specifying how title is taken. Sam and Stella are married on April 1st of the following year. Two weeks later, they purchase a house in Charlotte, NC. The deed to the house also listes both as grantees without specifying the form of ownership. Which of the following statements is CORRECT? Review Later They hold the Charlotte house as tenants by the entirety. They hold both the lake lot and the Charlotte house as tenants in common. At first, they held the lake lot as tenants in common, but upon their marriage, ownership of the lake lot converted to a tenancy by the entirety. They hold the lake lot as joint tenants and the Charlotte house as tenants in common.

-They hold the Charlotte house as tenants by the entirety. Explanation To own property Tenants by the Entirety, a couple must be married at the time of purchase. When no mention is made to the type of ownership when a married couple purchases a property, they will take property tenancy by the entirety. When an unmarried couple purchases a property, title will be taken as tenants in common, unless requested otherwise. The subsequent marrage has no impact on the ownership of the first property. It will remain as tenants in common.

67 Which of the following statements regarding a fully-amortized fixed-rate, level payment mortgage loan is TRUE? Review Later Most of the monthly payments during the early years of the loan term apply toward the principal. The longer the loan term, the higher the monthly principal and interest payments. When a borrower selects a lower loan term, it decreases the amount of interest paid to the lender. The monthly payment will decrease when a borrower makes additional payments towards principal over the loan term

-When a borrower selects a lower loan term, it decreases the amount of interest paid to the lender. Explanation A borrower will pay less interest when the loan term is shorter, however the monthly payment will be higher. The monthly payment will decrease with a longer loan term (repayment period). Additional payments towards principal will lower the principal balance owed and decrease the term of the loan. It does not impact the payment.

63 Which of the following statements regarding adjustable-rate mortgages is FALSE? Review Later The difference between the index and the interest rate charged to the borrower is called the margin. When the rate adjusts upwards, the payment charged to the borrower will increase as well as the mortgage balance. The clause that permits the interest rate to change at set intervals is known as the escalation clause. The initial interest rate is usually lower than the rate available for a fixed rate, level payment mortgage loan.

-When the rate adjusts upwards, the payment charged to the borrower will increase as well as the mortgage balance. Explanation With a variable rate or adjustable rate mortgage, the interest rate can change at set intervals. The rate change will impact the mortgage payment and total interest that will be paid, however should not impact the mortgage balance. A loan with a payment cap could result in the balance increasing (negative amortization); however the question does not provide information that would indicate this clause is in the mortgage. It is important to answer questions based on the information provided.

28 A buyer paid $5,000 due diligence. The entry on the closing disclosure is: Review Later a $5,000 credit to the buyer. a $5,000 debit to the seller. a $5,000 debit to the seller and credit to the buyer. not required as the seller retains the due diligence fee.

-a $5,000 debit to the seller and credit to the buyer. Explanation When a buyer purchases the property any earnest money or due diligence fee paid is credited to the buyer. Due diligence is a double entry, as the seller has already been paid the due diligence fee.

39 All of the following will terminate an offer EXCEPT: Review Later a counteroffer by the offeree. a better offer from a third party. death of the offeror before acceptance. acceptance of the offer and communication of acceptance.

-a better offer from a third party. Explanation A better offer from a third party does not terminate an offer from another party. The listing agent must present all offers and therefore must inform the seller that another offer has been received. A counteroffer terminates the original offer and creates a new offer. If a buyer or seller dies before the acceptance of an offer, the offer terminates. An offer also terminates once it becomes a contract.

30 The North Carolina Real Estate Commission believes that a broker's responsibility for settlement statements include all the following components EXCEPT: Review Later a broker is expected to confirm accuracy of all entries on the Closing Disclosure Core. a broker should review the entire Closing Disclosure Core for accuracy and completion. a broker should verify that calculations are correct a broker is expected to verify entries known from the sales contract.

-a broker is expected to confirm accuracy of all entries on the Closing Disclosure Core. Explanation With regard to the closing disclosure, a broker is responsible for what they know or what they reasonably should have known. The sales contract is the best resource to verify the accuracy. NOTE: A broker does not have absolute responsibility for the closing disclosure. A broker cannot calculate the aggregate accounting adjustment, which restricts the amount of escrow that a lender can charge.

21 The relationship of a broker to a client is that of Review Later a fiduciary. an attorney-in-fact. a subagent. a trustee.

-a fiduciary. Explanation The relationship between a client and the firm (and affiliated agents) is a fiduciary relationship. The licensee is subagent to the brokerage. The fiduciary relationship requires the licensee and the firm to put the interest of the client above the brokerage. A trustee is appointed to handle the financial affairs of another (trust or court appointment). Power-of-attorney or attorney-in-fact occurs when a person is appointed to stand in and sign on behalf of another.

55 An appraiser will most likely utilize the sales comparison when estimating the value of : Review Later a church or synagogue. condo unit in a community with 200 units. an office townhouse. a vacant 20-acre lot.

-a vacant 20-acre lot. Explanation The sales comparison approach is used for sales of vacant lots and 1-4 unit residential properties. An office townhouse may use the sales comparison or income comparison approach. A church or synagogue property would be valued using the cost approach, as they are not sold often. NOTE: You must select the best answer choice on the exam. One answer may be right while another answer is "MORE" right.

45 The essential elements of any contract include all of the following EXCEPT Review Later competent parties. agency disclosure. legal consideration. legal objective.

-agency disclosure. Explanation The question does not specify a real estate contract or other contract required to be in writing under the Statute of Frauds. To form a legally binding contract 1) there must be offer and acceptance, 2) consideration - money or promises, 3) meeting of the minds - mutual intent, 4) lawful and 5) capacity of the parties. Agency disclosure is required when a licensee/affiliated broker is entering into a fiduciary relationship (note: there is not sufficient information in the question to conclude that the question is about agency).

25 A developer allowed Vision Cable Company to run its cable across the back of all 10 lots in The Meadows Subdivision. This is an example of: Review Later cross easements. a utility license. an easement in gross. an appurtenant easement.

-an easement in gross. Explanation This is an example of a commercial easement in gross - typically for utility lines, railroad tracks, etc. An appurtenant easement would be ownership of an adjoining lot - creating a dominant and servient estate. The dominant estate gets the benefit and the servient gets the burden.

52 In real estate appraising, the term "reconciliation" refers to: Review Later analyzing and comparing the results obtained by the various approaches to value to estimate the value of a property being appraised. the method used to determine a property's most appropriate capitalization rate. the process of making adjustments for differences in the characteristics of comparable properties. averaging the real estate values of properties similar to the one being appraised.

-analyzing and comparing the results obtained by the various approaches to value to estimate the value of a property being appraised. Explanation Reconciliation is the process of analyzing the value or probable sales price of a property using multiple approaches and determining which approach carries more weight. NOTE: The appraiser determines which approach to use (sales comparision, income or cost). The appraiser can determine that an approach would not apply to the current subject property.

22 A broker is permitted to represent both the seller and the buyer in the same transaction when Review Later both parties have been informed and agree to the dual representation. the broker decides principals will benefit from the dual representation. the broker is a subagent rather than the agent of the seller. commission is paid by the seller.

-both parties have been informed and agree to the dual representation. Explanation A licensee/broker cannot act as a dual agent unless all parties consent to dual agency representation. The broker acts under special agency, with no decision making authority. The payment of compensation does not create an agency agreement.

66 A first-time buyer has insufficient income to afford the mortgage payment on the new house she is interested in purchasing from a developer, but she has good income potential over the next few years. A lender offers to make the loan the buyer needs and to reduce the interest rate for the first three years if the developer pays a lump sum at closing to the lender to offset the lender's loss of interest income. This type of mortgage loan is known as a(n): Review Later adjustable-rate mortgage loan. buydown mortgage loan. graduated payment mortgage loan. term mortgage loan.

-buydown mortgage loan. Explanation A buydown mortgage temporarily reduces the interest rate through a lumps sum payment to the lender (discount points pay for a permanent reduction in the rate). A graduated payment loan provides for payment increases at set intervals. With a graduated payment loan the buyer anticipates higher income in the future. An adjustable-rate mortgage allows the interest rate to change at set intervals based on changes in an index rate. A term loan is interest-only, often for a time.

17 A selling agent is automatically considered to be an agent of the seller when the agent: Review Later is affiliated with the listing firm. finds the property by searching the multiple listing service. is to be compensated by the seller's agent. is affiliated with a firm that practices dual agency.

-is affiliated with the listing firm. Explanation In order for dual agency to occur both the buyer and seller are represented by the same firm. The fact that a firm practices dual or designated agency does not make an agent automatically a dual agent - in fact the agent will act as an exclusive agent up to the point where a buyer that is represented by the firm is interested in purchasing a home listed with the firm.

38 Property is listed with Agent Maria of ABC Realty. On Friday afternoon Agent Jeff of XYZ Realty, the buyer's agent, delivers an offer to purchase to Maria. A provision in the offer stated it would be void if not accepted within 72-hours. The sellers accept the offer when Maria presents it on Friday evening. Maria puts the accepted offer in her briefcase and goes to the mountains for the weekend without notifying Jeff or his buyers. Jeff's buyers decide to withdraw the offer on Saturday and they notify Maria's broker-in-charge. Jeff's buyers:

-can withdraw the offer because neither Jeff nor his buyers have been notified of the acceptance. Explanation A legally binding contract was not formed since the buyer or buyer's agent have not informed of the acceptance. In order to form a legally binding contract there must be unconditional acceptance and communication of acceptance to the offeror or agent.There is no requirement for the offer to remain open for the 72 hours, so the buyer can elect to terminate prior to receiving notice of acceptance. The 72-hour limitation is on the seller to respond to the offer.

33 A broker receives an earnest money deposit from a buyer. Under Commission Rules, the broker deposits the money into a trust account. Had the broker mistakenly deposited the money into the firm's general operating account, the broker could be charged with Review Later embezzlement. conversion. possessing lost or stolen funds. commingling.

-commingling. Explanation Commingling is mixing personal money with client money. Conversion occurs when a broker pays an expense from trust funds that are in excess of the balance for the individual. Embezzlement is stealing other people's money.

40 All of the following actions constitute legal communication by a seller of his/her acceptance of a written offer to purchase real estate EXCEPT: Review Later sending a fax to the buyer that is received by the buyer's agent through email. delivery of the signed offer to the listing agent. emailing the signed offer to the buyer's agent. delivery of the signed offer to the buyer's agent. Comments

-delivery of the signed offer to the listing agent. Explanation In order to form a legally binding contract communication of acceptance has to make it to the offeror. The seller sending acceptance to his/her agent does not form a legally binding contract. Communication must make it to the other side. (Offeree communicates acceptance to the Offeror) It is important to determine the type of agency (exclusive, dual, designated, unrepresented buyer), as this will impact contract formation.

54 The time over which improvements to a property will contribute to the property's value is known as the improvement's: Review Later amortized life. economic life. actual life. chronological life.

-economic life. Explanation The economic life of a building for example, is the period the improvement will be useful. The actual age of the building is a common distractor in a cost approach to value question.

26 A portion of a concrete driveway extends over the property line onto the neighboring property by three feet, to provide an adequate turnaround. This legally constitutes a(n): Review Later encroachment. misappropriation. appurtenance. expropriation.

-encroachment. Explanation An encroachment can occur when a neighbor mistakenly builds an improvement - shed, fence, etc. and some or all of it is on a neighboring property. A survey will discover encroachements, easements, and may disclose if the property is located in a flood zone. An appurtenance is an improvement to the property that attaches or appends to the property. Eminent domain is part of police power where the government can take property for public good through condemnation. Adverse possession is the hostile taking of property from another. The question does not give sufficient information to select this option as the answer. Sometimes you will need to pick the BEST answer out of the choices provided.

77 The listing agreement that provides for the payment of a commission to the broker even though the owner makes the sale without the aid of the broker is called an Review Later open listing. exclusive right to sell listing. non-exclusive listing. exclusive agency listing.

-exclusive right to sell listing. Explanation An Exclusive Right to Sell listing agreement requires the seller to pay the brokerage no matter who is the procuring cause of the sale. An Open or Non-Exclusive Listing allows the seller to list the property with multiple brokerages, while the seller competes to find the buyer. An Exclusive Agency listing occurs when the property is listed with one brokerage that competes with the seller to find the buyer.

75 A valid listing agreement terminates for any of the following reasons EXCEPT: Review Later sale of the property. destruction of the premises. agreement of the parties. expiration of the affiliated broker's license.

-expiration of the affiliated broker's license. Explanation A listing contract is between the client and the firm/brokerage. When an affiliated broker's license expires, the managing broker/broker-in-charge can appoint another affiliated broker to fulfil the firm's duties.

51 An appraiser performed an appraisal on a property. He gave one of his comparables a diminished value because it had a very outdated kitchen and old plumbing fixtures. This is an example of: Review Later functional obsolescence. breakdown obsolescence. economic obsolescence. physical deterioration.

-functional obsolescence. Explanation Functional obsolescence is a defect within the property which may or may not be curable. Economic obsolescence is a defect outside of the property. The breakdown method determines depreciation when using the cost approach to value

22 A broker lists a property for sale and agrees in the listing contract to place the listing in the local MLS, to advertise the property for sale, and to use his best efforts in good faith to find a buyer. The broker places a "For Sale" sign on the property, but fails to place the property in the MLS for more than 30 days. The broker: Review Later has violated the Statute of Frauds. has failed to exercise proper skill, care and diligence on behalf of the seller. is acting in the best interest of his/her client. is trying to minimize inconvenience to the seller by limiting showings. Comments

-has failed to exercise proper skill, care and diligence on behalf of the seller. Explanation The listing broker agreed to market the property on the MLS and lied to the seller by not taking the action. The Statute of Frauds requires certain contracts to be in writing to be enforceable (real estate sales contracts, option agreements, installment land contracts, etc.).

35 The provisions of the Federal Fair Housing Act apply: Review Later in all states. only in those states that do not have specific state fair housing laws. only in those states that have ratified the act. only in those states that do not have substantially equivalent laws.

-in all states. Explanation When there is a conflict between laws, the most restrictive applies. Federal fair housing laws apply in all states.

35 A real estate licensee with a newly issued provisional broker license: Review Later does not have to complete any continuing education hours in the years that post-licensing course work is completed. must be affiliated with a supervising broker-in-charge to activate the license. must complete postlicensing requirements or the license will be cancelled. must complete annual continuing education requirements prior to the first license renewal to keep the license active.

-must be affiliated with a supervising broker-in-charge to activate the license. Explanation A new licensee receives a provisional broker license on inactive status. In order to activate, the provisional broker must affiliate under the supervision of a broker-in-charge. An inactive broker is not required to complete postlicensing or continuing education. A new provisional broker on active status is not required to complete continuing education prior to the first license renewal. After the first renewal, to remain on active status, a licensee must complete the required 8-hours by the June 10th deadline.

32 A real estate agent is called to list a house. The seller shows the agent through the house and comments that the dishwasher is in "good working order". After listing the home the agent is asked by a buyer if the dishwasher is working. The agent responds that the dishwasher is in "good working order" without doing anything further to verify the condition of the dishwasher. The buyer closes on the property and discovers after closing that the dishwasher is inoperable. In this situation, the agent guilty of: Review Later willful omission. false promises. willful misrepresentation. negligent misrepresentation.

-negligent misrepresentation. Explanation The agent lied regarding the condition of the property so it is misrepresentation. The agent did not attempt to verify the information provided by the seller, however is not acting in malice or with careless disregard to the condition of the property, therefore is acting negligently. Willful misrepresentation occurs when a broker purposefully lies to a client or customer. Willful omission would occur if the broker knew of a problem and hid it from a client or customer. Negligent omission would occur if the broker should have known that something was wrong, however they failed to discover it and failed to disclose it to a client or customer. False promises would attempt to induce the sale of the property by offering to perform some act or acts after closing has occurred.

43 A void contract is one that is Review Later rescindable by agreement. voidable by only one of the parties. not legally enforceable. not in writing.

-not legally enforceable. Explanation A void contract is not legally enforceable. A voidable contract requires one party to perform, while the other party may choose to rescind. Voidable contracts occur when a contract is with a minor, either party is intoxicated (drugs/alcohol) or the property is damaged.

53 All of the following are characteristics of value EXCEPT: Review Later transferability. utility. obsolescence. scarcity.

-obsolescence. Explanation The characteristics of value can be recalled by memorizing D.U.S.T Demand, utility, scarcity, and transferability are all characteristics of value. Obsolescence is a loss in value from a property condition (functional) or outside of the property (economic).

65 All of the statements about VA loans are correct, EXCEPT: Review Later only a qualifying veteran can assume a VA mortgage. the VA loan cannot contain a prepayment penalty. the borrower must have a certificate of eligibility. the VA loan is limited to the certificate of reasonable value.

-only a qualifying veteran can assume a VA mortgage. Explanation A qualified borrower can assume a VA loan, whether they are a veteran or not. Only a qualifying veteran with a certificate of eligibility, or unremarried widow/widower can originate a VA loan. VA loans have the highest LTV (no down payment / 100% LTV).

76 The provision in a listing agreement that may obligate the seller to pay the listing firm a commission after the expiration date of the listing is the: Review Later compensation clause. override clause. marketing clause. open listing clause.

-override clause. Explanation An override clause/extender clause/protection period may require the seller to pay compensation after the listing has expired. The listing agent must disclose a list of potential buyers to the seller. The protection period terminates when the seller lists the property with another broker. An open listing occurs when the seller lists the property with multiple brokerages and still competes to find the buyer.

46 All of the following are essential to the formation of a contract EXCEPT Review Later consideration. offer. performance. acceptance. Comments

-performance. Explanation To FORM a legally binding contract there must be an offer, unconditional acceptance, consideration, lawful object and the parties must be competent. Upon full performance, a contract will terminate.

79 A tenant's apartment lease has expired. She and her landlord have agreed that she may remain on the premises until a sale of the building is finalized or until the tenant locates another suitable rental, whichever occurs first. The tenant will continue to pay her normal monthly rent. She and the landlord make a commitment to inform each other two weeks before terminating the agreement. The tenancy described is a(n) Review Later estate at will. tenancy at sufferance. estate sale. periodic tenancy.

-periodic tenancy. Explanation A periodic tenancy automatically renews until either the landlord or tenant provides proper notice of termination. An estate at will allows the landlord or tenant to terminate at any time without notice. A tenancy at sufferance occurs when a tenant will not leave after a lease ends, even after demands by the landlord.

38 When two real estate brokers involved in a commission dispute agree to submit their disagreement to the Real Estate Commission for arbitration, the Commission will: Review Later refuse to arbitrate the dispute. investigate the problem and render a decision only after a hearing. award the total commission to the broker who was the procuring cause of the sale. divide the commission between the brokers as warranted by the merits of the case.

-refuse to arbitrate the dispute. Explanation The Commission will not hear cases relating to commission disputes among brokers. The dispute may be reported to the Association of Realtors where a grievance can be filed.

48 The law requiring real estate contracts be in writing to be enforceable is the Review Later statute of limitations. parol evidence rule. writ of attachment. statute of frauds.

-statute of frauds. Explanation The Statute of Frauds requires certain contract to be in writing to be enforceable, which include purchase contracts, deeds, option contracts, installment land contracts/contracts for deed, etc. NOTE: In NC the Statute of Frauds requires lease agreements that exceed 3 years to be in writing and the Connor Act requires the lease to be recorded to be binding against third parties. A writ of attachment occurs when the court freezes assets and the writ of execution orders the sale. The statute of limitations limits the time that a lawsuit can be filed, which is generally 3 years.

33 A white married couple contacts a real estate agent to look at residential properties. The buyers ask the agent about several homes they have noticed, including one that the company has listed for sale in a predominantly African-American neighborhood. The agent states that he did not think the buyers would be interested in that particular neighborhood because it is a "mixed" neighborhood. The agent's actions constitute an example of illegal conduct commonly referred to as: Review Later blockbusting. panic peddling. steering. redlining.

-steering. Explanation Steering or channeling occurs when an agent refuses to show property is certain areas based on protected classes. Redlining is a lending term where a bank will not lend in certain areas, often based on racial makeup. Blockbusting or panic peddling is trying to induce the sale of a property by using fear of changing demographics in an area.

42 The transfer of the right to sue in lieu of the payment for a loss is known as: Review Later subrogation. abrogation. indemnification. subordination.

-subrogation. Explanation Subrogation is the transfer of the right to sue, often transferred to an insurance company for payment of a claim. Abrogation restricts a party from signing away rights that would be contrary to public law. Subordination is the changing of lien priority when a lien holder agrees to take a junior position to another lien. Indemnity relates to a release of liability in the event of damage or a lawsuit.

19 The lien on real estate for ad valorem property taxes comes into existence on: Review Later the first day of the tax listing period (January 1). 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. Comments

-the first day of the tax listing period (January 1). Explanation A tax lien attaches on January 1st, is due September 1st and is late after Jan 5th of the following year. Property taxes are permitted to be charged under the machinery act - based upon a property's assessed value. The assessed value and rate can change every year. The assessed value must change every 8 years. Property taxes represent a superior lien.

2 A developer has a cul-de-sac lot and he wants to build a house on the property, however the front setback requirement under the county zoning ordinance would force the planned house to encroach on a flood hazard area. To comply with the legal requirements for building the house on this lot, the developer must obtain a: Review Later special exception. special use permit. non-conforming use permit. variance.

-variance. A variance is a minor change to the current zoning rules that does not require a change in use. The property will still be a residential use, the builder is just asking if the setback requirement can be adjusted. No permit is needed to continue a non-conforming use, so this item does not exist. Many students do not understand that no addition permission is needed to continue a non-conforming use. As special use exception / special use permit is something already provided for in the current zoning rules, where a property can zoning can be changed if a project/development meets certain requirements - to build affordable housing, a museum, hospital, etc.

13 A broker acts as a subagent in a transaction: Review Later when the broker-in-charge represents the seller, and a provisional broker represents the buyer. when a broker is showing a buyer property listed with another firm, and the buyer refuses representation. when a full broker represents the buyer, and a provisional broker represents the seller. when the firm represents the buyer, and another firm represents the seller. Comments

-when a broker is showing a buyer property listed with another firm, and the buyer refuses representation. Explanation A broker in North Carolina has to represent either the buyer or seller in the transaction. When a buyer refuses to hire a broker/firm to represent, the broker/firm must represent the seller. This creates a seller subagency relationship between the buyer's firm and the seller's firm. When a firm represents both the buyer and seller in a transaction, dual agency arises.

The listing broker is holding an open house. Which of the following statements made by a prospective buyer would require the listing broker to disclose the Working with Real Estate Agent's brochure? Choose only ONE best answer. A "I am approved for a maximum purchase price of $250,000." B "The living room is large enough to hold my furniture." C "I am thinking about listing my home in the next 30 days." D "The city may widen the road in the next two years."

A "I am approved for a maximum purchase price of $250,000." This answer is incorrect. The correct answer is 'A' The requirement to disclose the Working with Real Estate Agent's brochure is at first substantial contact (FSC), the point that the conversation is shifting from facts about the property to personal/confidential information that could weaken a party's bargaining position. Disclosing the maximum price a buyer is willing to pay, the amount a lender has approved a buyer for, a buyer's special interest in this particular property, etc. is considered FSC. The statement that a room is large relates to the property itself. While a broker may be interested in offering services when a potential buyer or seller states they are considering listing a home for sale, that does not rise to the level FSC. A road-widening project is a material fact to disclose; however, it would not trigger FSC.

Which of the following would trigger first substantial contact, thus requiring disclosure of the Working with Real Estate Agents brochure? Choose only ONE best answer. A A prospective buyer mentions the need to purchase a property soon as they are relocating to the area. B A prospective buyer bids on a home being auctioned by a licensed broker and auctioneer. C A prospective tenant informs the landlord that she needs to move into the property within the next two weeks. D A prospective tenant of a commercial property is seeking a 10-year net lease.

A A prospective buyer mentions the need to purchase a property soon as they are relocating to the area. This answer is incorrect. The correct answer is 'A' The Working with Real Estate Agents brochure is required in ALL sales transactions - whether residential or commercial. It is NOT required in all real estate transactions as auctions and lease transactions are exempt. First substantial contact is triggered when information is provided that could weaken the party's bargaining position.

A commercial broker actively licensed in good standing in a state other than North Carolina is interested in representing buyers and sellers in the sale or lease of commercial property. Which of the following is NOT required for the agent to lawfully engage in this type of brokerage activity? Choose only ONE best answer. A Brokers must pass the State portion of the licensure exam. B Affiliate with a broker licensed in North Carolina. C Limit activity solely to commercial transactions, however, may earn referral fees for residential sales. D Apply for a limited license, including a background check.

A Brokers must pass the State portion of the licensure exam. This answer is incorrect. The correct answer is 'A' A broker seeking a Limited Non-Resident Commercial License does not need to pass the State portion of the licensing exam. They must meet the other requirements. Also, they are not permitted to hold trust funds and must deliver funds to the N.C. broker. A limited non-resident commercial broker must be licensed in good standing in another state, affiliate with a North Carolina broker, and declare affiliation with the Commission.

Which of the following is/are CORRECT about designated agency? Choose only ONE best answer. A It is allowed when neither agent has personal or confidential information about the other party. B It is not allowed when one agent is a provisional broker, and the other agent is a broker. C It limits a broker's duty of loyalty, skill, care, and diligence. D It eliminates a broker's role as an advocate for either client.

A It is allowed when neither agent has personal or confidential information about the other party. This answer is correct.In order to practice designated agency the agent cannot have personal or confidential information about the other party. Designated agency cannot be used when one agent is provisional, and the other agent is the Broker-in-Charge (BIC). Remember that designated agency allows agents to move back to their traditional advocacy roles. The BIC must supervise the provisional broker and would learn personal and confidential information about the other party. The BIC would either harm their client by not disclosing information that was obtained or harm the other client by disclosing information that he/she became aware of. Dual agency, where the designated agency is not permitted, reduces the duties that a broker/brokerage can perform. The broker cannot advocate for one client over the other and must conceal personal/confidential information from the buyer and seller unless it rises to a material fact. Since the broker cannot advocate, it limits his/her duty of loyalty, skill, care, and diligence.

A provisional broker on active status assists a buyer with locating a property that meets all of their needs and promptly goes under contract on June 8th, 2020 with closing scheduled on July 1st, 2020. The provisional broker completes the general update, however fails to take an elective. The provisional broker completes his required continuing education to regain active status on July 3rd, 2019. His broker-in-charge refused to pay the commission since the provisional broker's license was inactive when the transaction closed. Is the broker-in-charge accurate? Choose only ONE best answer. A No. A broker is entitled to compensation so long as when they earned the compensation his/her license was on active status. B No. A broker-in-charge does not determine when a provisional broker is entitled to compensation, as this is the responsibility of the brokerage owner. C Yes. An active license is required to be paid compensation, both at the time of earning the compensation and when it is paid. D Yes. The broker-in-charge is accurate so long as the required wording has been included in the independent contractor agreement.

A No. A broker is entitled to compensation so long as when they earned the compensation his/her license was on active status. This answer is incorrect. The correct answer is 'A' A broker on provisional status or otherwise is entitled to compensation so long as his/her license was on active status at the time the compensation was earned and the broker did not perform any service while his/her license is on inactive status.

Charlotte Jones is managing a residential rental property located at 401 Shepherd Lane for Bob Johnson. All the followings statements are accurate regarding renting a property in North Carolina, EXCEPT: Choose only ONE best answer. A Should the tenant damage the property during the lease term, Charlotte can pay invoices from the tenant security deposit, and the tenant must replace the funds within 30 days. B The owner is not permitted to discriminate against protected classes, even if one unit of the triplex being rented is owner-occupied. C Charlotte must hold tenant security deposits in a trust or escrow account. D Should the tenant request repairs to ensure the unit is safe, fit and habitable, Charlotte and Bob cannot seek to evict the tenant without cause in retaliation.

A Should the tenant damage the property during the lease term, Charlotte can pay invoices from the tenant security deposit, and the tenant must replace the funds within 30 days. This answer is correct.A property manager/ owner cannot access the tenant security deposit until the end of the tenancy where the tenant has vacated. There are permitted uses and limits on the amount that can be charged according to the Tenant Security Deposit Act. When an owner hires a licensed broker, they lose the limited exemptions that they may have to discriminate. Security deposits must be held in a trust account when a licensee is involved (even personally owned by the broker), or if unlicensed - the landlord may be bonded. The property manager and owner are not permitted to retaliatory eviction when a tenant exerts his/her right to habitable premises. The owner/property manager would not be required to renew a lease upon the expiration of the initial lease term.

A married couple purchases a property on June 3rd for $475,000 in Asheville, North Carolina. No mention of how the couple will take title to the property is made in the Offer to Purchase and Contract. How will the couple take the title to the property? Choose only ONE best answer. A Tenancy by the Entirety B Joint Tenancy with the Right of Survivorship C Joint Tenancy without the Right of Survivorship D Tenants in Common

A Tenancy by the Entirety This answer is incorrect. The correct answer is 'A' When no mention is made regarding how a married couple will take ownership of a property, the title is taken as Tenants by the Entirety. This provides the married couple with the most protection. Each owns 100% of the property, and it will automatically pass to the surviving spouse without having to seek court approval. Joint tenancy is not favored in North Carolina and will be treated as tenants in common, without the rights of survivorship, unless very specific language is included in the deed. Tenants in common ownership typically occur when two or more owners hold title to a property, where the respective ownership interest is inheritable (passes to heirs rather than co-owners).

All of the following are deemed to be a material fact which require disclosure regardless of the buyer's status as a client or customer, EXCEPT: Choose only ONE best answer. A The previous owner was murdered in the home. B The owner has severed the mineral rights to the property. C The septic system is approved for three bedrooms; however, the home contains a 4th room with a closet. D The property was previously clad in synthetic stucco, which is an exterior insulation finishing system; however, the owner has had it fully remediated.

A The previous owner was murdered in the home This answer is correct.It is not a material fact that an owner died in the property, so a broker would not be liable for failing to disclose it. Murder, death, suicide, homicide, etc. are not a material fact. The remaining items are material facts and must be disclosed regardless of how the buyer is being represented (or not). It is a material fact that mineral rights have been severed, that the property's soil suitability /perc test is for a lower number of bedrooms than what the broker advertises, or that the property is currently or was previously clad in synthetic stucco.

Which of the following is FALSE regarding the disclosure of a bonus paid to the selling agent by someone other than his/her principal? Choose only ONE best answer. A When a new home builder offers a $5,000 bonus to a broker that sells three homes in a new subdivision, disclosure is required only when the bonus is earned. B An agent representing a buyer must disclose the existence of the bonus to the buyer no later than the time the buyer is considering an offer on the property. C The disclosure can initially be oral; however, it must be reduced to writing before the buyer makes an offer to purchase. D The bonus must be reported on the settlement statement.

A When a new home builder offers a $5,000 bonus to a broker that sells three homes in a new subdivision, disclosure is required only when the bonus is earned This answer is incorrect. The correct answer is 'A' The disclosure must be made to all parties if, for example, the agent is offered a trip for three closings in a neighborhood, then all buyers must be made aware. The correct time frame for the latest date to disclose a bonus is orally no later than consideration of an offer and reduced to writing before the presentation of an offer. Note that the bonus can be in cash or some other compensation equivalent - a trip, electronics, gift certificates, etc. The settlement statement, typically closing disclosure for financing that is federally related, must outline all money that has changed hands, including 3rd party compensation.

Seller's agent A lists a property for sale in a desirable location in Charlotte, NC. Buyer's agent B represents a buyer that becomes interested in the property. At which point must agent B disclose to agent A that they are acting as a buyer's agent in the transaction? Choose only ONE best answer. A When agent B telephones agent A to schedule a showing appointment B Before showing the home, notice must be provided either orally or in writing C Once first substantial contact is reached D Upon submission of an offer by agent B

A When agent B telephones agent A to schedule a showing appointment This answer is correct.The buyer's agent must disclose his / her status to the seller or seller's agent at initial contact. This can occur over the phone when scheduling an appointment and may occur up to the presentation of an offer. The first time the buyer's agent interacts with the seller or seller's agent, they must disclose that they represent the buyer. It allows each party to protect confidential information about his/her client.

A buyer's agent is working under an oral buyer agency agreement. When he prepares to show a property listed by his firm, which of the following statements would apply? Choose only ONE best answer. A With the buyer's knowledge and consent, they could enter an oral dual agency agreement before viewing the house. B The agent must act as a seller's subagent in this situation since dual agency is not reduced to writing, and the house is listed with his firm. C Oral dual agency is never legal in NC, and the buyer and agent would need to enter a written agreement before showing the property. D The agent should refer the buyer to an agent with another firm since all agents in his firm will have the same problem.

A With the buyer's knowledge and consent, they could enter an oral dual agency agreement before viewing the house. This answer is incorrect. The correct answer is 'A' A buyer can orally agree to buyer agency, including dual agency representation. An oral agreement must outline compensation and authorization to act as dual/designated agent or not. Oral dual agency may arise out of oral buyer agency as long as the buyer consents after being appropriately informed of dual agency - review of WWREA. The authorization for dual/designated agency under an oral agreement must be reduced to writing before the presentation of an offer.

QUESTION 39 OF 40 Both the buyer and seller have exclusive representation by provisional brokers under respective buyer agency and listing agreements. The listing firm has offered a 3.5% commission to the selling firm. Upon closing, the listing firm pays both the buyer and seller's agent his/her compensation directly. Does this violate license law? Choose only ONE best answer. A Yes, compensation cannot be paid directly to the buyer agent. B Yes, neither agent for buyer or seller can receive payment directly from the attorney. C No, it is common practice for the listing firm to pay agents compensation directly to the agent that earned the commission

A Yes, compensation cannot be paid directly to the buyer agent. This answer is incorrect. The correct answer is 'A' The buyer's agent does not work for the listing brokerage since both clients are represented under an exclusive agency agreement. The broker-in-charge must pay commission to a provisional broker, and compensation cannot be paid directly by any other party.

A licensed broker has decided to rent an apartment in a nearby city since a large majority of his residential brokerage sales have been in that area. The owner of the property manages the property "For Lease by Owner." The owner does not have a residential lease agreement and asks the broker to create a lease offer. Can the broker follow this request? Choose only ONE best answer. A Yes, the broker can use a preprinted form that has been prepared by an attorney. B Yes, so long as the broker has extensive knowledge concerning property management. C No, a broker is not permitted to write up a lease agreement for the owner to sign under any circumstances since he is a party to the transaction. D No, a broker can only write up a lease agreement when he/she is acting under a property management agreement.

A Yes, the broker can use a preprinted form that has been prepared by an attorney This answer is incorrect. The correct answer is 'A' If you restate the question to its base form, it would be "can a broker complete an offer to purchase/lease a property when it is for his/her own use?" When you get a real estate license, it does not mean that you can never represent yourself. A broker can make offers for sales or leases on preprinted forms or elect to write his/her offer on a bar napkin for that matter. While it is recommended to use preprinted forms written by an attorney for the protection of all parties, the broker can draft provisions or an entire form. The broker should understand lease agreements, however is not required to be knowledgeable in property management as he is a tenant.

A listing agreement that allows the owner to list the property for sale with multiple brokers is known as: Choose only ONE best answer. A an open listing. B a net listing. C an exclusive listing. D an exclusive right to sell listing.

A an open listing. This answer is correct.An open listing agreement allows the seller to list with multiple brokers. A net listing allows the seller to net a certain dollar amount from the sale of the property, and the broker will keep the remainder. An exclusive agency listing agreement permits the seller to compete against one broker - whoever finds the buyer wins. An exclusive right to sell is the most common listing agreement - no matter how the property is sold, optioned, exchanged, conveyed, or transferred, the broker is entitled to commission.

A brokerage would violate trust account rules: Choose only ONE best answer. A if they pay an affiliated broker's commission from the account. B if the bank is not physically located in North Carolina C when a brokerage holds earnest money deposits and security deposits in the same account. D when the broker delegates accounting to another, including preparation of the monthly reconciliation. This answer is incorrect. The correct answer is 'A' Commission or compensation is not paid from the brokerage trust account. This payment would be made through the brokerage operating account. A bank must only be approved to do business in North Carolina, virtual or otherwise, thus may be held in a bank that is outside of the State. A brokerage can hold earnest money deposits and security deposits in the same account without triggering the need for a separate account, unless one individual or entity has more than $250,000 in the trust account as this exceeds FDIC limits.

A if they pay an affiliated broker's commission from the account.

9 Which statement that is TRUE in reference to types of agency? Review Later A property manager usually acts as a special agent of the landlord. A buyer's agent usually acts as a universal agent for the buyer. A real estate licensee usually acts as a general agent of an affiliated firm. A listing agent usually acts as a general agent of the seller. Comments

A real estate licensee usually acts as a general agent of an affiliated firm. Explanation General agency arises when a broker affiliates with a firm or when an owner signs a property management agreement. Under general agency, there is a limited ability to bind the principal to certain defined tasks (licensee signs agency agreements on behalf of the firm or lease agreements on behalf of the owner. Special agency arises when a licensee/firm represents a buyer, seller or tenant, where there is no ability to bind the principal to an agreement. Universal agency allows someone to stand in and sign for the person that has granted power-of-attorney or attorney-in-fact to another, which is not commonly granted to real estate agents.

37 Licensee Lucia sells a house to Alan, the personnel manager of a local corporation. Alan suggests that since he is in touch with all his company's transferees he will refer them to Lucia if she pays him a referral fee. Lucia may lawfully pay Alan a referral fee under which of the following scenarios? Review Later Alan is entitled to the commission without obtaining a license since the business was not solicited. Alan must sign an independent contractor agreement with a brokerage. Alan has an active real estate broker license. Alan can be an assistant of the real estate brokerage.

Alan has an active real estate broker license. Explanation In order to earn compensation on behalf of another, a party must have an active broker's license. A broker that is not on provisional status does not have to affiliate with a brokerage or broker-in-charge so long as he does not solicit the business. In order to earn compensation on behalf of another, even for referral fees, a broker must be on active status.

Which of the following advertisements placed by licensed brokers would comply with License Law and Commission Rules? Choose only ONE best answer. A Large 3 bedroom 2 bath home in desirable neighborhood for only $215,000. Call Anita James at 919-555-1212. B Fulfill your dreams or someone else. Great opportunity to own investment property while your tenant pays the mortgage. Large duplex for only $280,000. One unit rents for $1,400. Call James Jones, Broker XYZ Realty at 919-555-1212. C Great rental opportunity. Own for as little as $5,000 down with seller financing available with excellent credit. For more information, visit www.abcrealty.com. D Great home for a first-time home buyer or retiree with no children. This home is located in a quiet neighborhood. Call Homes Realty at 336-222-2222.

B Fulfill your dreams or someone else. Great opportunity to own investment property while your tenant pays the mortgage. Large duplex for only $280,000. One unit rents for $1,400. Call James Jones, Broker XYZ Realty at 919-555-1212. This answer is incorrect. The correct answer is 'B' Listing how much a property rents for is a fact and does not trigger Regulation Z's disclosure requirements. The ad includes the name of the brokerage and therefore is not a "blind ad." An advertisement is a "blind ad" when it is not apparent that a potential buyer is calling a real estate license rather than the owner of the firm. A website is not sufficient; the advertisement must include the firm name. A broker should stick to facts about the property and not the people to avoid violating fair housing laws.

Gus is under contract using the standard NCAR/NCBA Offer to Purchase for 1412 Peppertree Lane with the payment of a $1,000 due diligence fee and $1,500 earnest money deposit. The due diligence period expires in 5 days. The buyer has paid for the loan application, appraisal, property inspection, survey, and pest inspection. Which of the following statements is FALSE? Choose only ONE best answer. A Gus may terminate the contract for any reason and be entitled to a refund of the earnest money deposit. B Gus will be entitled to a refund of the earnest money deposit and due diligence fee if a major foundation issue is discovered and termination occurs by the expiration of due diligence period. C The owner of the property is not required to negotiate for repairs in the event that a home inspection uncovers an issue that was not disclosed on the required property disclosure statement. D The owner of the property agrees to provide a fee simple marketable title transferred by a general warranty deed.

B Gus will be entitled to a refund of the earnest money deposit and due diligence fee if a major foundation issue is discovered and termination occurs by the expiration of due diligence period. This answer is incorrect. The correct answer is 'B' The due diligence fee is not refundable because the buyer is not satisfied with due diligence investigations. The due diligence fee is credited when the buyer purchases the property or is refunded if the seller breaches the contract. Due diligence is similar to an option- where the buyer can opt-out or terminate the contract for any reason or no reason vs. having the right to opt-in to purchase for an option. The seller is not required to negotiate repairs; however, if agreed, the repair agreement must be in writing and signed by the parties to the contract. The owner agrees to provide a general warranty deed and fee simple marketable title.

A licensed broker is renting her property to a prospective tenant. She drafts language in the lease agreement that is contrary to provisions contained in the standard NCAR lease. Has the broker violated license law? Choose only ONE best answer. A No. A broker is permitted to draft language in any lease or purchase contract when all parties consent. B No. Since the broker is a party to the lease, they are permitted to draft provisions to the contract. C Yes. A broker is not permitted to draft language in any lease or purchase contract. D Yes. Only a licensed attorney can draft language in any lease or purchase contract

B No. Since the broker is a party to the lease, they are permitted to draft provisions to the contract. The no drafting rule applies to contracts where the broker is not a party to the contract. When a broker is representing another, they must either refer the tenant/buyer to an attorney or allow the client to enter the language without providing direction. In a personal transaction, where the agent is the property owner that is selling or leasing or is buying/renting the property from an owner, they are permitted to draft. If a broker is an attorney, the drafting rule would not apply.

Annette is purchasing a large tract of land to build a home, farm organic vegetables, and raise chickens. The lot does not have access to public water, sewer, or cable television. Her agent has obtained a copy of the restrictive/protective covenants to review with her. Which of the following should the broker recommend to determine if the lot is suitable for a 4-bedroom house? Choose only ONE best answer. A Contact the EPA to obtain permission to install a septic system. B Obtain a perc (soil suitability) test, which may be performed by the county. C The buyer should review the restrictive covenants for the required bedrooms. D The buyer should obtain a survey defining septic size and location.

B Obtain a perc (soil suitability) test, which may be performed by the county. This answer is incorrect. The correct answer is 'B' A property that does not have access to a public sewer system will require a septic system. To determine the type of system or if the soil were not suitable - a buyer would obtain a perc test. This test can be performed by a private company (if allowed by local regulations) or the county. An environmental engineer is used to determine if the soil is contaminated. Covenants are essential for minimum construction standards, however not the best choice for determining soil suitability. A survey details locations of items on the property, however does not include soil testing.

CJ owns a property that she is selling For Sale By Owner. CJ is not a licensed real estate agent. All the following are permitted by an unlicensed owner, EXCEPT: Choose only ONE best answer. A Payment of 3% commission to the buyer of the house B Offering $2,000 to anyone that refers a buyer that ultimately purchases the home. C Payment to a licensed broker to enter the listing into the MLS only. D Offering a licensed provisional broker an iPad for referring a buyer that purchases the home.

B Offering $2,000 to anyone that refers a buyer that ultimately purchases the home. This answer is incorrect. The correct answer is 'B' The requirement for obtaining a real estate license is earning compensation on behalf of another. A buyer, who is a party to the transaction, may be paid compensation; however, it must be disclosed to the lender and included in the settlement statement. It is illegal, even for the owner of a property, to offer compensation to an unlicensed individual for referring a buyer - when the buyer is not a party to the purchase transaction. Compensation can be money, gift cards, travel, and non-cash items such as iPads.

A newly licensed broker holds an active license on provisional status. The provisional broker begins to send marketing materials to expired listings. Which of the following would NOT be permitted under federal law or Commission rules? Choose only ONE best answer. A Mailing postcards to all expired listings in the service area without first obtaining permission from the owner of the property. B Offering to perform a comparative market analysis at a discounted rate of $25 with the permission of his/her broker-in-charge. C Calling a seller directly whose home was listed by an agent of the firm one year after the listing expired when the seller is on the Do Not Call Registry. D Sending solicitation emails once a seller has requested additional information that includes a prominent opt-out.

B Offering to perform a comparative market analysis at a discounted rate of $25 with the permission of his/her broker-in-charge. his answer is incorrect. The correct answer is 'B' A provisional broker cannot be compensated for the preparation of a CMA / BPO. The provisional broker can still earn compensation on the sale of a property, but cannot charge a separate fee for the CMA/BPO. A broker, not on provisional status, would be able to be compensated for performing a CMA/BPO. There are very few regulations about sending regular mail - so no permission is required before sending out marketing material. The listing agreement is with the firm, so an agent of the firm may contact a past client up to 18 months after the agreement expired without violating the Do Not Call Registry. Can-SPAM requires a prominent opt-out from receiving future marketing emails.

QUESTION 28 OF 40 A provisional broker is holding an open house for a multi-million-dollar top producing agent affiliated with his firm. A potential buyer attends the open house and begins to express interest in the property. The provisional broker reviews the Working with Real Estate Agents publication, and the buyer decides against representation; however, still wants to purchase the house with the provisional broker writing the offer. Which of the following actions would violate the provisional broker's duties to his/her principal? Choose only ONE best answer. A Informing the potential buyer that the owner has received foreclosure notice against the property for sale. B Providing the potential buyer with a comparative market analysis outlining a probable sales price range. C Disclosing to the seller that the potential buyer would be willing to pay an amount greater than the current offer price. D Informing the potential buyer that a highway may be built close to the property line, per NCDOT's expansion plans.

B Providing the potential buyer with a comparative market analysis outlining a probable sales price range. This answer is incorrect. The correct answer is 'B' The provisional broker is currently acting as sub-agent of the seller since the buyer has opted to have no representation. Anything learned about the buyer, even if it weakens the buyer's bargaining position, must be disclosed to the seller. The provisional broker must conceal confidential information about the seller from the buyer. A broker, regardless of which party they represent - buyer or seller - must disclose material facts. These include highway expansion nearby, foreclosure notice, meth lab, leaking polybutylene pipes, etc.

The buyer and seller enter into a legally binding purchase contract, and the buyer agrees to pay $1,000 due diligence and $5,000 earnest money. The buyer's agent delivers the funds to the listing agent. The buyer changes his mind and demands the listing agent return both checks. Assuming that the listing firm has a trust account, which of the following actions must the listing broker take? Choose only ONE best answer. A Return both the due diligence and earnest money checks that are in the listing agent's possession. B Return the due diligence fee that is in the listing agent's possession. C Refuse to refund the earnest money and due diligence checks that are in the agent's possession. D Return the earnest money and due diligence checks that are in the agent's possession only if the buyer signs a termination agreement.

B Return the due diligence fee that is in the listing agent's possession. This answer is incorrect. The correct answer is 'B' The listing agent must follow the buyer's instructions when the funds have not reached the intended party. Since the listing agent did not deliver the due diligence fee to the seller, he/she is obligated to give the check to the buyer. The firm holds trust funds and would not be obligated to return the earnest money deposit as it reached the intended party.

The seller lacks funds to clear the current debt against the property in full. A prudent buyer's agent will include which addendum in the offer to purchase? Choose only ONE best answer. A Back-Up Contract B Short Sale C FHA/VA Financing D Contingent Sale

B Short Sale This answer is correct.A short sale may arise when the seller's property is "under water", where they owe more money than the house is worth, and the seller does not have sufficient assets to pay the difference. The bank needs to approve the short sale, where they agree to take less money and release the lien. A back-up addendum is used when the property is currently under contract. The FHA/VA addendum is used when the buyer obtains either FHA or V.A. financing. NCAR no longer provides a standard form for a contingent sale. The buyer negotiates the due diligence period to cover the contingency. Nationally, a contingent sale a

The treated wrap applied to the sheathing before the siding is known as: Choose only ONE best answer. A Ridge Board B Tar Paper C Flashing D Sill Plate

B Tar Paper This answer is correct.Tar paper or house wrap is applied to the sheathing prior to installing siding to protect against water entry. The ridge board is tested as the highest wooden point of construction and is a roofing component that is fastened to the ends of the rafters. Flashing is sheet metal that protects buildings from water damage and is commonly found around chimneys, skylights, dormers and roof joints. The Sill Plate is commonly tested as the lowest wooden member that rests upon the foundation and is the most commonly missed term on the licensing exam.

A broker fails to renew his license by June 30th, 2020. He wants to bring his license back to active status. Which of the following statements is FALSE? Choose only ONE best answer. A The broker must pay the increased fee and submit an activation form if they renew by December 31st, 2020. B The broker must pay the increased fee, take 8 hours of CE, and complete two postlicense classes if they submit a new application by July 5th, 2022. C The broker must pay the increased fee, submit a new application and background check, and complete one postlicense class if they seek to renew on March 1st, 2021. D The broker cannot earn compensation on behalf of another while his license is expired.

B The broker must pay the increased fee, take 8 hours of CE, and complete two postlicense classes if they submit a new application by July 5th, 2022.This answer is incorrect. The correct answer is 'B' When a license has expired for more than two years, the licensee must start over by completing a prelicense course, pass the license exam, and will be issued a license on provisional status. All licenses expire unless renewed by the June 30th deadline.

A broker is representing the buyer in the purchase of a property that is being sold For Sale by Owner. The broker has the seller sign a protection agreement outlining that the broker represents the buyer in the transaction, and the seller agrees to pay the broker 3% commission. Which of the following would violate license law? Choose only ONE best answer. A The broker has the seller sign the Working with Real Estate Agents brochure before the seller signs the protection agreement. B The broker provides the seller with a copy of the protection agreement within five calendar days of signing the document. C The broker provides the owner of the property with a sample copy of the NCAR Offer to Purchase and Contract to review. D The broker discloses that the buyer will make an offer contingent upon the sale of their current home.

B The broker provides the seller with a copy of the protection agreement within five calendar days of signing the document. This answer is incorrect. The correct answer is 'B' A broker must deliver instruments (offers, contracts, agency forms - anything that the client signs) immediately but no later than three calendar days from receipt. Before obtaining personal/confidential information about the seller, at first substantial contact, the broker must disclose WWREA, which would occur prior to the seller signing the protection agreement. The broker must deliver a sample copy of the NCAR/NCBA Offer to Purchase and Contract and must disclose a material fact to ALL parties.

Which of the following instances would require a brokerage to have multiple trust accounts? Choose only ONE best answer. A The brokerage holds security deposits, repair funds, and earnest money deposits on behalf of clients. B The brokerage provides property management services and holds trust funds for rental properties owned by clients and affiliated brokers. C The brokerage maintains a trust account balance of $10,000,000, with no client having more than $250,000 in the account. D The brokerage is engaged in both residential and commercial transactions that hold substantial earnest money deposits.

B The brokerage provides property management services and holds trust funds for rental properties owned by clients and affiliated brokers. This answer is incorrect. The correct answer is 'B' Trust account money, "other people's money," cannot commingle with money that is /or may belong to the firm. All of the funds belong to clients, not the firm. When a firm or its agents have an interest in the security deposits or repair funds of its tenants, it triggers the need for an additional trust account. The firm must keep other people's money separate from funds that the firm or its brokers have an interest.

A buyer has agreed to an oral buyer agency agreement with a provisional broker. Which of the following is FALSE? Choose only ONE best answer. A The agreement must be reduced to writing before the presentation of an offer. B The buyer must work exclusively with the buyer agent to locate the property. C The verbal agreement should include the rate of compensation expected. D The verbal agreement should address dual agency authorization.

B The buyer must work exclusively with the buyer agent to locate the property. This answer is correct.An oral agreement cannot be exclusive. When a broker wants an exclusive agreement, it must be in writing, with a definite end date, anti-discrimination language, and disclosure of the broker's license number.

Russell is preparing to list a single-family property in Chapel Hill, North Carolina. The local multiple listing service requires Russell to report the living area of the property. Which of the following statements is FALSE regarding Commission guidelines for square footage? Choose only ONE best answer. A Russell must be reasonably accurate when disclosing square footage. B The buyer's agent must verify the accuracy of Russell's calculation by measuring the home. C Russell should compare his calculation with tax records to identify potential issues. D The living area must be heated, finished, and directly accessible.

B The buyer's agent must verify the accuracy of Russell's calculation by measuring the home. This answer is correct.A buyer's agent can rely on the listing agent's square footage calculation unless it is apparent that it is wrong. The buyer's agent should compare the square footage reported to tax records to determine potential issues. The buyer's agent is responsible for failing to discover an error when a reasonably prudent agent would have discovered the issues. The Commission does not require the disclosure of square footage; however, when reported, it must be accurate. As a general rule, the agent has a 5% tolerance when an error is made calculating the square footage.

Per the standard NCAR/NCBA Offer to Purchase and Contract, which party is required to pay the excise tax, and how is it calculated? Choose only ONE best answer. A The buyer pays excise tax based upon the sales price of the home, divided by $500 and rounded up. B The seller pays excise tax based upon the sales price of the home, divided by $500 and rounded up. C The buyer pays excise tax based upon the loan amount of the home, divided by $500 and rounded up. D The seller pays excise tax based upon the loan amount of the home, divided by $500 and rounded up.

B The seller pays excise tax based upon the sales price of the home, divided by $500 and rounded up. This answer is incorrect. The correct answer is 'B' The seller pays excise tax based upon the sales price of the home. In class, we learn the sales price divided by 500 and then round up as the taxman is greedy. NOTE: For exam purposes, it may be stated differently. The sales price is rounded to the nearest $500 or $1,000, and the rate is charged at $1 per $500.

A makes an offer through her agent to buy B's house. A's agent delivers the offer to B's agent. B's agent presents the offer to B, who promptly signs the offer without changes. B's agent emails A's agent informing them of acceptance. Then B mails the offer to A's office, which is received two days later. When was a legally binding contract formed? Choose only ONE best answer. A When B signed the offer to purchase without change B When B's agent emails A's agent informing them of acceptance C When A is informed of acceptance by A's agent D When the legally binding contract is mailed to A's office

B When B's agent emails A's agent informing them of acceptance A legally binding contract forms upon an offer, unconditional acceptance, and communication back to the offering party. The offer must be in writing and signed by the parties (not the agents). Note that the delivery of the offer is not required. When a client hires a broker, "what one knows they all know," so A is deemed to know that B accepted the offer when B's agent sends the email to A's agent. NOTE: The mailbox rule applies to contract formation - when the document is mailed and deemed received unless the contract stated that notice must be received by a set date.

During a continuing education class, a student asks if a referral fee may be paid to a broker on active status that is not affiliated with a broker-in-charge. The instructor states that this is permitted and also highlights that compensation cannot be paid to a licensee that is on inactive status. Is the instructor's response CORRECT? Choose only ONE best answer. A Yes, as a licensee is always permitted to receive referral fees. B Yes, as a broker that has removed provisional status may be on active status even though they are not affiliated with a BIC or obtained BIC status. C No, for a broker to be on active status, they must be affiliated with a BIC or obtain BIC status. D No, as payment of referral fees are a violation of RESPA rules regarding compensation to third parties.

B Yes, as a broker that has removed provisional status may be on active status even though they are not affiliated with a BIC or obtained BIC status. This answer is correct.There is a limited area where a non-provisional broker can hold an active license and not be affiliated with BIC or acting as BIC. The limits are significant - as a broker must be BIC or affiliated with a BIC to solicit business, advertise, use yard signs, handle trust money, and limits on other brokers joining the firm. RESPA relates to payment by third parties such as lenders, inspectors, insurance agents, etc.

A broker is performing a walk through with the seller before listing a home and notices some staining on the ceiling. The seller states, "it has been that way for a while." The broker advises the seller to paint over it with specialty paint to block the stain without taking any further action. A buyer purchased the property without obtaining a home inspection. Is the listing broker liable? Choose only ONE best answer. A Yes. The listing broker is responsible for all defects deemed a material fact. B Yes. The listing broker is responsible as they advised the seller to conceal damage to the property. C No. The buyer's agent would be responsible for not encouraging the buyer to obtain a home inspection. D No. The buyer should have obtained a home inspection before purchasing the home.

B Yes. The listing broker is responsible as they advised the seller to conceal damage to the property. This answer is incorrect. The correct answer is 'B' A broker is responsible for what they know or what they reasonably should have known. In this instance, not only did the listing agent know of the problem, they encouraged the seller to conceal it. The broker should have advised further investigation by a roofing specialist to determine the cause of the leak. Failure to do so is a willful act of concealing a material fact.

A non-provisional broker lists a parcel of undeveloped land located in Orange County, NC, which is zoned for multi-family residential use. The non-provisional broker is aware that the property is about to be rezoned to commercial, which will significantly increase the value of the property. The non-provisional broker does not disclose this to the property owner and makes a full price offer. Ten months after closing, the rezoning occurs, and the non-provisional broker sells the property at a substantial profit. Has the non-provisional broker violated license law? Choose only ONE best answer. A Yes. It is a violation of license law for a broker to purchase the property from his/her client. B Yes. This is a violation of license law as the broker is supposed to act in his/her client's best interest. C No. There is no guarantee that the rezoning will take place and, therefore, no requirement to disclose. D No. So long as the broker pays the full listing price, there is no conflict of interest.

B Yes. This is a violation of license law as the broker is supposed to act in his/her client's best interest. This answer is incorrect. The correct answer is 'B' License law prohibits "self-dealing". The broker must put the client's interest above his/her interest. A broker cannot secretly profit from a property where he/she is supposed to be representing the client. A broker is permitted to purchase a property from his/her client if it does not violate the brokerage's rules, the client is allowed to terminate the listing or permit another broker of the firm to represent the seller in the transaction.

A seller has allowed the buyer to move in 2 months before closing. The listing broker should: Choose only ONE best answer. A write a provision into the purchase contract for the buyer to pay a $2,000 security deposit. B recommend that the seller contact his/her insurance agent to confirm proper coverage. C fill out a lease agreement and attach it as an addendum to the offer to purchase and contract. D insert a provision into the offer to purchase that holds the listing agent harmless from any damage or claim.

B recommend that the seller contact his/her insurance agent to confirm proper coverage. This answer is correct.When a buyer takes possession early, for an extended period it is prudent that the owner calls his/her insurance carrier to ensure proper insurance coverage in the event of a loss. A broker cannot draft a provision in a contract which they are not a party to (they are neither buyer or seller), which includes attaching a lease agreement as an addendum to the offer to purchase. A broker cannot disclaim liability in the offer to purchase and contract as they are not a party to the agreement.

A property located in the western part of North Carolina: Choose only ONE best answer. A are less likely to have tar paper installed. B will have a higher R-value. C are more likely to be built on a slab foundation. D are less expensive to build as construction is often one-story.

B will have a higher R-value. This answer is incorrect. The correct answer is 'B' A property located in a colder climate like mountainous areas in northwestern North Carolina have higher R-values for insulation. Tar paper or house wrap is installed before the siding is installed to prevent water entry. Slab construction is commonly built in warmer climates as the footing is poured below the freeze line. A one-story building is the most expensive form of construction as it takes up more land.

Broker A submits an offer to Broker B for a property located at 123 Main Street. Broker B reviews the offer with the client, who signs the offer with a few minor changes relating to the due diligence period. Broker B texts Broker A stating, "We have a deal. Everything is signed on our side. I will email you a scanned copy in the morning." Which of the following statements is CORRECT? Choose only ONE best answer. A A legally binding contract formed when Broker A receives the email from Broker B. B A legally binding contract formed when Broker B texted the seller's acceptance to Broker A. C A legally binding contract has not formed, and Broker B could be guilty of negligent misrepresentation. D A legally binding contract has not formed because Broker B has not yet emailed the scanned copy of the contract to the broker.

C A legally binding contract has not formed, and Broker B could be guilty of negligent misrepresentation. This answer is incorrect. The correct answer is 'C' If changes are made to an offer, then the original offer is terminated, and a counteroffer takes its place. To form a legally binding contract, you must have an offer, unconditional acceptance, and communication of acceptance to the other party. Receipt of the final documents is not required to form a legally binding contract, but a broker is required to deliver them within three calendar days. A legally binding contract formed when the agent witnesses the acceptance of an offer, then calls the agent for the other party and informs them of acceptance.

All of the following statements are included in the standard NCAR/ NCBA Offer to Purchase and Contract, EXCEPT: Choose only ONE best answer. A The contract is not assignable without the written permission of all the parties except in the instance of a tax-deferred exchange. B The seller is required to deliver a general warranty deed to the buyer. C A party that is acting in good faith and with reasonable diligence in preparing for settlement is entitled to delay settlement up to ten days. D The buyer may elect to deliver the earnest money deposit five days from the effective date of the contract.

C A party that is acting in good faith and with reasonable diligence in preparing for settlement is entitled to delay settlement up to ten days. This answer is incorrect. The correct answer is 'C' A party that is acting in good faith is entitled to a 14-day delay in closing under the standard NCAR/NCBA Offer to Purchase and Contract. The standard offer states that the seller will deliver a general warranty deed, and the contract is not assignable without the written permission of all the parties. The buyer may elect to deliver the earnest money deposit within five days of the effective date of the contract otherwise would be in breach.

Fred Taylor, with ABC Realty, recently met a prospective buyer. After informal conversations, the buyer states an interest in purchasing a property in the $250,000 price range and begins to disclose his financial information. Per NCREC rule, Fred stops the buyer, reviews the Working with Real Estate Agents (WWREA) brochure. Which of the following statements is TRUE? Choose only ONE best answer. A If the buyer refuses to sign the WWREA brochure, Fred cannot work as a buyer's agent on his behalf. B The buyer accepts oral buyer agency by completing the acknowledgment section of the WWREA brochure. C Buyer can agree to terms of buyer agency, including how he will be represented and the manner of compensation, even though Fred will have only an oral buyer agency agreement. D An agent should always act as a seller subagent until the buyer agency relationship is reduced to writing.

C Buyer can agree to terms of buyer agency, including how he will be represented and the manner of compensation, even though Fred will have only an oral buyer agency agreement. This answer is incorrect. The correct answer is 'C' While it is ideal for a prospective buyer to acknowledge the review of WWREA by signing, it is not required for a broker to represent a buyer. Signing the brochure does not create an agency relationship as the WWREA brochure is not a contract - it only explains the various types of agency representation available in a transaction. NOTE: WWREA does not explain the sales transaction.

A provisional broker is working for a buyer under an Exclusive Buyer's Agency Agreement that outlines 3% commission to be paid by the buyer when no compensation is offered from the seller. The provisional broker finds a property listed with a competing real estate firm that the buyer loves. The listing firm has provided for 2.5% compensation outlined in the Multiple Listing Service. Upon closing, no compensation is paid to the provisional broker. Which of the following is the best course of action for the provisional broker to take? Choose only ONE best answer. A File a complaint with the North Carolina Real Estate Commission B File a complaint with the Multiple Listing Service C File a complaint with the local Association of Realtors D File a lawsuit against the buyer for the commission

C File a complaint with the local Association of Realtors This answer is incorrect. The correct answer is 'C' The local Association of Realtors will hear complaints/grievances, including disputes regarding commission. The NC Real Estate Commission will not hear compensation/commission disputes between brokers regarding the amount or non-payment. The Multiple Listing service also will not hear complaints regarding compensation. While the broker may sue the buyer for the commission in certain circumstances, it is not the best course of action.

A broker is working with a buyer as a seller's subagent in the purchase of a resale property located outside city limits built in 1998. The roads in the subdivision are deteriorating, and the buyer asks if roads are publicly or privately maintained. The broker informs the buyer that all subdivisions built after October 1st, 1975 require the subdivision developer to establish a fund for road maintenance when roads are private. The agent is guilty of: Choose only ONE best answer. A Willful Omission B Negligent Omission C Negligent Misrepresentation D Willful Misrepresentation

C Negligent Misrepresentation This answer is correct.A broker must investigate to determine if roads are public or privately maintained as this is a material fact. When a property is initially sold by a developer, after October 1, 1975, the developer must disclose if roads are public or private by providing the Subdivision Street Disclosure Statement. The developer is not required to set up a fund for road maintenance. Willful versus negligent is determined by intent, and the facts of the question fail to show intent. Misrepresentation vs. Omission is determined by the agent stating something or remaining silent. In this case, the agent made a representation and was wrong.

An agent working with a buyer in the purchase of a property located in a subdivision learns the property has experienced well and septic issues. Recently the city has decided to extend services to the community, which will substantially increase the value of the home. The agent fails to disclose this fact to the seller but does disclose this to the buyer. Has the agent acted properly? Choose only ONE best answer. A Yes, as the agent's fiduciary duties, including loyalty to the buyer, and it would weaken the buyer's bargaining position. B Yes, as the seller has to protect his/her interest by remaining informed about changes that may impact the value of the property. C No, the agent must disclose material facts relating to the property to both parties regardless of the party represented. D No, the agent represents the seller and owes loyalty to the seller only.

C No, the agent must disclose material facts relating to the property to both parties regardless of the party represented. This answer is incorrect. The correct answer is 'C' A broker owes disclosure of material facts to all parties regardless of agency status (representing the buyer, seller, or both). In this transaction, the agent acts as a seller subagent as the question states the agent is working "with a buyer." While it does not impact the answer, it is essential to watch out for working "with" (customer) or working "for" (client).

A buyer is moving to North Carolina from a state that does not practice caveat emptor. The broker explains that a Seller is only required to disclose material facts that they know or reasonably should have known. Was the broker accurate? Choose only ONE best answer. A Yes, as the seller has the most knowledge about the property they must disclose. B Yes, as the buyer may elect to purchase the property "As-Is" without obtaining an inspection and would not be able to discover material facts. C No, the seller is not required to disclose all material facts, only items required by North Carolina law. D No, the broker should have told the buyer that the seller has no duty to disclose material facts, and the buyer must discover and disclose.

C No, the seller is not required to disclose all material facts, only items required by North Carolina law. This answer is incorrect. The correct answer is 'C' In North Carolina, the seller has limited items where they are mandated to disclose information regarding the house. Some items are deemed material facts by the Real Estate Commission, so the seller must disclose synthetic stucco (EIFS - Exterior Insulating Finishing System) when the home is clad or has been previously clad and replaced, leaking polybutylene pipes and if the property has ever been the site of a methamphetamine lab. Also, a seller must disclose if they severed or plan to sever oil, mineral, or gas rights. The seller can select NO REPRESENTATION on the Residential Property Owner Association Disclosure Statement. The buyer must perform inspections on the property and the agents to disclose material facts known or those they reasonably should have known. Selling a property "As-Is" does not relieve the brokers from disclosing material facts.

The broker-in-charge supervising a provisional broker states that a licensee is responsible for the full accuracy of the settlement statement. Is the broker-in-charge accurate? Choose only ONE best answer. A Yes. A broker is responsible for the full accuracy of the settlement statement. B Yes. A provisional broker is responsible for the full accuracy of the settlement statement if the broker-in-charge enacts a policy stating this. C No. A broker is responsible for items that they know or reasonably should have known. D No. The lender and attorney prepare the settlement statement and therefore are fully responsible for the accuracy.

C No. A broker is responsible for items that they know or reasonably should have known. A broker is responsible for verifying the accuracy for items that they know or reasonably should have known and is not responsible for all items listed on the settlement statement. The contract is the best source for verifying accuracy. In addition, some lenders are refusing to allow the listing agent to see the complete settlement statement (with the buyer's side of the transaction). A broker will not be responsible for errors on a settlement statement when the statement has not been provided to him/her.

The buyer's agent forgets to include the refrigerator offered on the MLS in the purchase contract. As a result, is the seller required to leave the refrigerator? Choose only ONE best answer. A Yes. Since it was offered in the MLS, the seller is required to leave the refrigerator. B Yes. A refrigerator is real property and must be left for the buyer. C No. Since it was not included in the offer, the seller can keep the refrigerator. D No. A lender will not permit the buyer to receive a kickback like appliances.

C No. Since it was not included in the offer, the seller can keep the refrigerator. This answer is correct.Personal property belongs to the seller unless otherwise agreed to in the contract. An offer was made to leave the refrigerator; however, the buyer's agent did not accept that offer by requesting it in the contract. The written offer to purchase and contract is the final expression between the buyer and seller (parol evidence rule).

QUESTION 15 OF 40 A broker representing a buyer under an Exclusive Right to Represent prepared an offer to purchase using the standard NCAR/NCBA form. The seller agreed, and the property went under contract. Ten days before closing, the city confirmed a $5,000 special assessment for installing city water lines. The listing agent stated that the buyer is responsible for paying the assessment. Is this accurate? Choose only ONE best answer. A Yes. The assessment is the buyer's responsibility as he/she will benefit most from city water. B Yes. The buyer takes the title subject to pending and confirmed assessments per the contract. C No. The seller is obligated to pay confirmed assessments before settlement. D No. The seller is obligated to pay pending and confirmed assessments before settlement.

C No. The seller is obligated to pay confirmed assessments before settlement. This answer is incorrect. The correct answer is 'C' Per the Standard NCAR/NCBA Offer to Purchase, the seller is obligated to pay confirmed assessments where the fees are known through closing. The buyer takes title subject to proposed special assessments - which are under consideration, although no action has been taken.

A provisional broker who desires to remain on active status must do which of the following? Choose only ONE best answer. A Complete one of the Postlicense class before his/her anniversary date B Complete continuing education before the June 30th deadline C Pay the renewal fee within the 45-day renewal period D Affiliate under the supervision of a North Carolina broker

C Pay the renewal fee within the 45-day renewal period This answer is incorrect. The correct answer is 'C' To keep a license on active status a licensee must renew their license. Failure to do so will result in the license expiring. There are no postlicense or continuing education requirements for a licensee to remain on inactive status. The 45-day license renewal period begins on May 15th and ends June 30th. A new licensee does not need to complete CE before his/her first license renewal. Each year after the first renewal, before the June 10th deadline, the licensee must complete 8-hours of CE. Beginning July 1st, 2020 a provisional broker desiring active status must complete Postlicense courses within 18-months of licensure.

QUESTION 6 OF 40 A seller lists his property for sale with Zippy Realty under an Exclusive Right to Sell listing agreement. The seller is concerned about conflicts of interest and does not initially agree to dual agency representation. Two weeks have passed since listing the home, and while there have been multiple showings, no offers are received. A buyer that is represented by a provisional broker with Zippy Realty is interested in viewing the home. The listing broker asks the seller to consent to dual and designated agency representation. Which of the following is FALSE? Choose only ONE best answer. A The seller is not obligated to consent to dual/designated agency; however, the buyer's agent cannot show the listing as a buyer's agent. B The seller may orally agree to dual and designated agency, after listing the property, and it may be oral if the buyer agency agreement is oral. C Should the buyer desire to view the home with representation, the buyer agency agreement must terminate, and the buyer referred to another brokerage company. D Should the seller consent to dual and designated agency, the buyer and seller agents may act as dual agents if the listing agent is not the supervising broker-in-charge.

C Should the buyer desire to view the home with representation, the buyer agency agreement must terminate, and the buyer referred to another brokerage company. This answer is incorrect. The correct answer is 'C' The listing agent may ask the seller to amend the listing contract to authorize dual and/or designated dual agency. The determination about whether it must be in writing or is permitted to be oral is the status of the buyer agency agreement. When the buyer agency agreement is in writing, the change by the seller must be in writing. When the buyer agency agreement is oral, the change by the seller may be oral up until the buyer decides to make an offer to purchase. NOTE: The buyer agency agreement controls subsequent authorization by the buyer or seller for dual / designated dual agency.

QUESTION 27 OF 40 A provisional broker licensee is hired to represent a buyer in the purchase of a property listed with another agent within the licensee's office that is not the broker-in-charge. The buyer and seller have authorized both dual and designated agency, and both agents are acting as designated agents. Under this scenario, which of the following would violate license law or Commission rules? Choose only ONE best answer. A The agent designated for the buyer discloses to the buyer that the seller would entertain an offer below the listing price. B The agent designated for the seller discloses to the seller that the buyer is pre-approved for an amount greater than the list price of the home. C The agent designated for the seller discloses that the seller is currently behind on the mortgage payments and that the foreclosure notice should be coming any time now. D The agent designated for the buyer discloses to the agent designated for the seller that the buyer must sell another home to purchase the seller's prop

C The agent designated for the seller discloses that the seller is currently behind on the mortgage payments and that the foreclosure notice should be coming any time now. This answer is incorrect. The correct answer is 'C' An agent must disclose personal and confidential information about the other party to their client/principal unless they are acting as a dual agent. The fact that a seller is currently behind on the mortgage is not material and therefore does not have to be disclosed - it becomes a material fact when the foreclosure notice is received, not when the agent expects it soon. An agent is required to disclose material facts to all parties, and this would include the possibility that the buyer may be unable to complete the transaction..

A broker is contacted by a potential buyer to see her listing located at 12 Elm Street. The broker explains the Working with Real Estate Agents brochure, and the buyer agrees to buyer agency, authorizing both dual and designated agency. When must the agreement be in writing? Choose only ONE best answer. A The buyer must enter a written agreement within three days from the date oral buyer agency, or the agreement will become void, and all personal information disclosed to the seller. B The buyer agency agreement must be in writing from inception under per License Law regarding agency agreements and disclosure. C The buyer must enter a written agency agreement no later than the time that the buyer seeks to make an offer on the property. D The buyer is not required to enter a written agreement unless the seller is not offering compensation, and the broker requires the buyer to pay.

C The buyer must enter a written agency agreement no later than the time that the buyer seeks to make an offer on the property. This answer is incorrect. The correct answer is 'C' All agreements eventually need to be in writing; however, in certain circumstances, a client may orally agree to representation. As a rule, agreements to list a property for sale or lease must be in writing from inception. Agreements with buyers or tenants are permitted to be oral when they are not exclusive and provide for no end date. Oral agreements must be reduced to writing before a party makes an offer to sell or lease the property.

A broker lists a duplex property for sale that is subject to lease agreements. A buyer is interested in purchasing the property to live in one side and have a family member live in the other. Both units are currently rented, one that is month-to-month, and the other has five months remaining. Under the current situation, the listing broker should advise the potential buyer: Choose only ONE best answer. A All lease agreements terminate upon sale unless an agreement is made otherwise between the owner and tenant. B The owner must honor the lease with five months remaining; however, it can automatically terminate the month-to-month tenancy. C The new owner may give termination notice to the tenant renting month-to-month; however, they must honor the lease with five months remaining. D The lease agreements will only bind the new owner if the seller assigns the agreements at closing.. D No, the Real Estate Commission does not set rules regarding payment of compensation to provisional brokers.

C The new owner may give termination notice to the tenant renting month-to-month; however, they must honor the lease with five months remaining. This answer is incorrect. The correct answer is 'C' Lease agreements do not terminate upon sale of the property and must be honored by the new owner. Assignment should take place at closing, although failure to do so will not invalidate the existing lease agreements. NOTE: Do not confuse a private party sale with a foreclosure sale. In a foreclosure, the lease must be honored if rent is at or near market rate, the unit is not rented by a family member of the foreclosed owner, and the new buyer is an investor that will not owner-occupy. When the new buyer will occupy, they are permitted to give the tenant 90-days' notice to vacate.

A provisional broker enters into an Exclusive Buyer Agency Agreement to help a buyer locate a property in Mebane, NC. The buyer finds a property and wants to write an offer. The provisional broker is acting as a designated dual agent in the purchase of the property. Which of the following is FALSE? Choose only ONE best answer. A The provisional broker is permitted to prepare a market analysis for the buyer to assist with determining an appropriate offer price. B The provisional broker is appointed by the broker-in-charge to act as a designated agent in the transaction. C The provisional broker cannot disclose personal or confidential information that they learn about the seller unless it rises to the level of material fact. D The provisional broker must disclose to the buyer any adverse information that they learn about the property.

C The provisional broker cannot disclose personal or confidential information that they learn about the seller unless it rises to the level of material fact. This answer is incorrect. The correct answer is 'C' When a broker is acting as a designated agent, they are permitted to advocate for their client. In this situation, the broker subsequently learns information about the seller and must disclose it to the buyer, even though the same firm represents both. Do not confuse dual agency (cannot advocate for one over the other - cannot disclose information known from buyer to seller or seller to buyer), with designated agency (where the agent advocates for his/her client - similar to exclusive representation).

Bruce represents a buyer that is under contract to purchase a property listed with Suzette, another broker of his firm. A local closing attorney is handling the settlement and closing of the property. Which of the following statements is TRUE regarding settlement and closing? Choose only ONE best answer. A Bruce and Suzette are not permitted to represent both parties at closing and must refer each to an attorney. B The seller must pay the commission after all parties have signed the required documents. C The settlement agent cannot release funds until all funds are received from the buyer, lender, or others, and the deed and deed of trust are recorded. D Bruce and Suzette are responsible for the accuracy of the entire closing statement and are liable if a mistake is not discovered.

C The settlement agent cannot release funds until all funds are received from the buyer, lender, or others, and the deed and deed of trust are recorded. This answer is incorrect. The correct answer is 'C' Under the Goods Funds Settlement Act, the settlement agent must ensure that all funds have been received from the buyer, lender, and others (seller, etc.). The deed and deed(s) of trust must be recorded before closing completes, and funds are released. A broker will not receive commission, seller proceeds will not be paid, and keys will not change hands until the closing has occurred as defined above. Brokers are not responsible for the complete accuracy of the settlement statement (also called closing disclosure when lender financing is involved). They are responsible for what they know or reasonably should have known. A broker is not required to recalculate the mortgage payoff or aggregate accounting adjustment. The contract is the best resource for determining the accuracy of the settlement statement.

A tenant files a written complaint regarding a non-functioning heating system during an extraordinarily cold period in February to the property's management company. The property management company is busy with negotiations regarding a new management contract and is running weeks behind on repairs. Which of the following would be a fair outcome, given the circumstances? Choose only ONE best answer. A The management company could require that the tenant make the necessary repair. B The tenant may withhold rent until the heating system is repaired in a good and workmanlike manner. C The tenant may be able to move out and receive his security deposit back as well as the difference between his actual rent and fair market rent. D The tenant should have the repair work done, pay for it, and then deduct the expense from his rent.

C The tenant may be able to move out and receive his security deposit back as well as the difference between his actual rent and fair market rent. This answer is correct.Constructive eviction is the failure of the landlord to provide safe, fit, and habitable premises. The renter may move out and sue for damages. The renter does not have the right to unilaterally withhold the rent or to make the repairs and seek reimbursement. NOTE: Termination of a lease through constructive eviction does not terminate the property management agreement. Constructive eviction is a remedy for the tenant when the owner or property manager fails to make repairs in a reasonable amount of time.

A licensee is calculating the living area of a two-story home that includes a bonus room with a sloped ceiling. Which of the following statements is CORRECT regarding the North Carolina Square Footage Guidelines? Choose only ONE best answer. A An adjustment is always necessary to account for the stairs in a 2 story home. B A licensee can never include square footage where the ceiling height is less than 7 feet. C To be considered living area the space is not required to be cooled. D A bonus room that is accessed through the garage will be included in the living area.

C To be considered living area the space is not required to be cooled. This answer is incorrect. The correct answer is 'C' Happy Feet Dance Always - The requirements for including square footage in the living area state that the area must be Heated, Finished and Directly Accessible - as well as 7 feet or more (6' 4" under ducts and beams; unless there is a sloped ceiling where 50% or more must be 7 feet and then you can include where the wall is 5 feet tall). There is no requirement for the area to be cooled, no adjustment for stairs unless the opening for the stairs is larger than the stairs themselves (so you would deduct the open space on the second floor), and square footage that is not directly accessible would be included in other area.

The fee paid by the seller to the State when an interest in real property is conveyed to another is known as a (an) Choose only ONE best answer. A transfer tax. B machinery tax. C excise tax. D progressive tax.

C excise tax. This answer is incorrect. The correct answer is 'C' Excise tax, formerly known as revenue stamps, is a state tax charged at a rate of $1 per $500 of sales price, or any fraction thereof (sales price / $500, round up). The county collects the taxes and remits them to the State. Transfer taxes are typically charged by local municipalities when property transfers. The Machinery Act permits cities and counties to charge property taxes on an ad valorem basis.

Which of the following statements about compensation is TRUE? Choose only ONE best answer. A An active, licensed broker in North Carolina may be paid a fee from the lender for referring a buyer client when it is disclosed on the closing disclosure. B Gift cards, hotel stays of no more than three days, and travel vouchers are considered nominal and do not trigger the need for an active real estate license. C An inactive agent can receive referral fees so long as they did not solicit the business or advertise in any manner. D An active, licensed broker in another state may receive a referral fee when the sale of the property is in North Carolina.

D An active, licensed broker in another state may receive a referral fee when the sale of the property is in North Carolina. This answer is incorrect. The correct answer is 'D' A broker with an active license in another state may earn a referral fee for transactions in North Carolina so long as they do not come to N.C. with the referral client to see the property. RESPA does not permit kickbacks from settlement service providers. Gift cards, hotel stays, travel vouchers, iPads are all considered compensation that triggers an active license when earned on behalf of another. An active real estate license is required to earn compensation on behalf of another - even for referral fees.

Broker A is representing a buyer under an Exclusive Buyers Agency Agreement. During team meeting, Broker B announces a new listing and that the seller is under pressure with a need to sell quickly. The property meets many of the buyer client's needs. The buyer and seller have both agreed to dual and designated agency. Broker A shows the property and writes up an offer, without disclosing the desperation of the seller. Has Broker A violated license law? Choose only ONE best answer. A Yes, Broker A is acting as an exclusive buyer's agent and must disclose. B Yes, Broker A is acting as a designated agent and must disclose. C No, Broker A, acting as a designated dual agent, can refuse to relay this information deemed confidential, which could weaken the seller's position. D No, Broker A and Broker B must act as dual agents since Broker A is aware of personal information that could weaken the seller's bargaining position.

D No, Broker A and Broker B must act as dual agents since Broker A is aware of personal information that could weaken the seller's bargaining position. This answer is incorrect. The correct answer is 'D' When a firm represents both the buyer and seller in a transaction, dual agency arises. Next it must be determined if the buyer or seller's agent can act as designated agents. The firm must practice designated agency and both the buyer and sell must agree. Designated agency cannot be practiced if one broker is a PB and the other broker is the BIC or if either agent has personal / confidential information about the other party. In this instance, the agent that represents the buyer learned confidential information in the team meeting. Neither agent will be permitted to designate, and therefore the broker did not violate license law by not disclosing personal / confidential information about the seller.

A new provisional broker with ABC Realty is holding an open house with the permission of a top producing listing agent in his office. A potential buyer begins to ask questions beyond facts that relate to the property. The provisional broker stops the conversation and explains the Working With Real Estate Agents Brochure. The provisional broker informs the potential buyer that he can act as an exclusive buyer's agent should the buyer be interested in purchasing the property. Is this a CORRECT statement? Choose only ONE best answer. A Yes, as the seller's agent will exclusively represent the seller's interest, and the provisional broker will exclusively represent the buyer's interest. B Yes, so long as the seller's agent is not also the broker-in-charge that is supervising the provisional broker. C No, as the provisional broker may only act as a seller sub-agent in the transaction since he has held the house open. D No, the provisional broker may not act as an exclusive agent since the firm already represents the seller.

D No, the provisional broker may not act as an exclusive agent since the firm already represents the seller. This answer is incorrect. The correct answer is 'D' Should the potential buyer elect to purchase the property and hire the provisional broker to represent them, dual agency would arise (both buyer and seller represented by the same firm). The provisional broker can represent the buyer under dual or designated dual agency (so long as he/she does not have personal and confidential information about the seller, and is not designated against the BIC). The potential buyer could also elect to be unrepresented.

A broker, not on provisional status, forgets to renew his license, discovering the error eight months after the renewal deadline. His broker-in-charge informs him that he will need to pay an increased fee of $90, with no additional requirements. Is the broker-in-charge CORRECT? Choose only ONE best answer. A Yes, the only instance the Commission would require the non-provisional broker to meet additional conditions would be an expired license greater than three years. B Yes, the only instance the Commission would require the non-provisional broker to meet additional conditions would be an expired license greater than five years. C No, when a license expires beyond six months but less than two years, the non-provisional broker will be treated as if they never obtained a license and must meet the new licensure requirements. D No, when a license expires beyond six months but less than two years, the non-provisional broker will be required to apply with the current background check and will need to meet additional conditions set by the Commission.

D No, when a license expires beyond six months but less than two years, the non-provisional broker will be required to apply with the current background check and will need to meet additional conditions set by the Commission. This answer is incorrect. The correct answer is 'D' When a license has expired for more than six months up to 2 years, the Commission will require payment of the increased fee ($90), application, and updated background check. The Commission will require brokers that were not provisional to take postlicense class(es) or sit for the licensure exam as a penalty. An individual whose license expires for more than two years is treated as if they never obtained a license. Licensees need to complete all postlicense courses within 18-months of his/her anniversary date to remain on active status.

A non-provisional broker failed to complete his continuing education by the June 10th deadline. Which of the following statements is CORRECT concerning bringing his license to active status? Choose only ONE best answer. A The broker must complete all 3 Postlicensing courses before requesting the Commission activate the license. B The broker must complete 8 hours of continuing education to request that the Commission activate the license. C The broker must cease all brokerage activity on June 11th until they take the general update and three elective courses before requesting that the license be activated. D The broker must complete the general update and three elective courses before they can request for the license to be activated by the Commission.

D The broker must complete the general update and three elective courses before they can request for the license to be activated by the Commission. This answer is incorrect. The correct answer is 'D' A licensee that desires to keep his/her license on active status must complete 8 hours of continuing education (unless it is the first renewal) consisting of the general update and an elective unless the licensee is a broker-in-charge or BIC eligible (then they are required to take the Broker-in-Charge Update and elective). When a licensee neglects to take the prior year's continuing education, they must complete the current year (8 hours) and make up the deficiency (8 hours) for a total of 16 hours, which will include the general update and three elective courses.

A buyer is considering the purchase of a property that was used as a gas station 20 years ago. They intend to rehab the building to operate a restaurant. What should the agent recommend to the buyer? Choose only ONE best answer. A The buyer should contact the Environmental Protection Agency (EPA) to discover potential contamination. B The broker should review public records to determine if a past leak was reported on the property. C The buyer should instruct the closing attorney to review past legal action taken against the property for potential contamination. D The buyer should hire an environmental engineer to perform testing.

D The buyer should hire an environmental engineer to perform testing. This answer is incorrect. The correct answer is 'D' When a buyer is purchasing a property that may have been environmentally contaminated, a broker should recommend the use of an Environmental Engineer (to assess potential risk/contamination). The EPA can provide information and will investigate reports of active contamination; it is not the best recommendation. The attorney is not responsible for assisting the buyer in determining contamination. The public record may not contain information regarding contamination, as it has not been discovered.

Which of the following statements regarding the Standard NCAR / NCBA Offer to Purchase form 2-T is FALSE? Choose only ONE best answer. A The seller is not obligated to transfer title free from all liens and encumbrances B The seller is to transfer the title under a general warranty deed C The buyer is permitted a 14-day delay in settlement D The standard contract is created by the NC Real Estate Commission

D The standard contract is created by the NC Real Estate Commission This answer is incorrect. The correct answer is 'D' The Commission does not create contract forms, the NCAR does. The Commission sets the rules for standard forms, and the brokerage will determine if association forms will be used or hire an attorney to create standard forms for the office. It is important to know the definition of an encumbrance. It is a common mistake to think only of financial liens as encumbrances - however, encroachments, easements, deed restrictions, and restrictive/protective covenants are also encumbrances. Most of these items, excluding encroachments that may be cured, run with the land, and the seller would not, on his/her own, terminate them. The buyer or seller is entitled to a 14-day delay in the settlement so long as the delaying party is using best efforts.

Which of the following statements about property taxation in North Carolina is FALSE? Choose only ONE best answer. A An addition completed on June 30th will not increase the assessed value in the current year. B The seller is typically responsible for property taxes through the day of closing. C The tax lien attaches to the property on January 1st of the current year. D The tax value increases to the sales price when a property sells for more than the current assessed value.

D The tax value increases to the sales price when a property sells for more than the current assessed value. This answer is incorrect. The correct answer is 'D' Per the Machinery Act, property taxes are charged on an ad valorem basis (assessed value). The value only changes in revaluation years or when an addition is completed. Since the lien attaches on January 1st, an addition completed after that date would not be taxed until the following year. The seller typically pays taxes through the day of closing.

Which of the following is TRUE regarding agency contracts? Choose only ONE best answer. A All agency contracts must be in writing from the inception of the agreement. B An agent can disclaim measurements reported in the Multiple Listing Service when added under the additional provisions section of the listing agreement. C All agency agreements can contain an automatic renewal when agreed to by both the firm and client. D Ultimately all agency agreements that result in a successful transaction will need to be in writing.

D Ultimately all agency agreements that result in a successful transaction will need to be in writing. This answer is incorrect. The correct answer is 'D' Not all agency agreements must be in writing from their inception. The buyer or tenant's agency agreement may be oral so long as it is non-exclusive and open-ended (no end date) up until the point that a buyer/tenant wants to make an offer to buy or lease. Licensees cannot disclaim liability - if they report something as true, then it must be true, or they will be held accountable. Only a property management agreement may contain a clause for automatic renewal so long as either party can terminate with an agreed-upon termination period.

All of the following activities require a license EXCEPT: Choose only ONE best answer. A the sale of a home that belongs to a family member for compensation. B managing an apartment building for a friend in return for free rent. C the purchase of a property for a buyer client where the buyer pays the commission. D the purchase of an investment property by a Limited Liability Company where the seller pays a commission to the LLC.

D the purchase of an investment property by a Limited Liability Company where the seller pays a commission to the LLC. This answer is correct.A license is required when compensation is earned on behalf of another (even when compensation is paid by gift card, free rent, meals, etc. or paid by a friend or family member. Exempt activities include those acting as Power of Attorney (or Attorney in Fact) as they are standing in for a party and for legal purposes are that person, representing yourself in the transaction (FSBO / FLBO), or an officer of a corporation or W-2 employee acting on behalf of the entity. Remember the license triggering event is earning compensation on behalf of another. The law applies even when a friend or family member pays compensation.

Which of the following is CORRECT with regards to handling funds in a real estate transaction? Choose only ONE best answer. A An agent must deliver the earnest money and due diligence payment to his/her broker-in-charge so that it can be deposited in the trust account according to the Real Estate Commission's guidelines. B The brokerage is only required to retain the deposit for a timeshare in a trust account for five days from the effective date of the contract. C A brokerage must deposit earnest money received with an offer within three banking days of receipt. D When an agent receives an earnest money deposit in cash it should be deposited into the trust account immediately but no later than three banking days from receipt.

D When an agent receives an earnest money deposit in cash it should be deposited into the trust account immediately but no later than three banking days from receipt. This answer is incorrect. The correct answer is 'D' When a broker accepts cash for an earnest money deposit, it must be deposited into the trust account within three banking days, even if a legally binding contract has not been formed. The due diligence fee is made payable to the seller, and so it does not go into the trust account and should be delivered to the seller within 3 calendar days of the effective date of contract. A deposit that is for a timeshare must be retained in the trust account for ten days from contract acceptance (note: ALL funds remain in the trust/escrow). Earnest money must be deposited the later of 3 banking days from the effective date of the contract or three banking days from receipt. The statement says, "earnest money received with an OFFER," not earnest money received with a contract.

A licensed broker is purchasing a property from a For Sale by Owner. The seller has signed a protection agreement that provides a 3% commission to the broker. The broker writes up an offer adding a condition that rezoning must be approved for him to be required to purchase. Are the broker's actions permitted? Choose only ONE best answer. A No. The broker is not permitted to draft provisions in an offer to purchase. B No. The broker is not eligible for compensation on personal transactions. C Yes. The broker can always draft provisions in an offer to purchase with client direction. D Yes. The broker is a party to the contract; therefore is eligible for compensation and can draft provisions.

D Yes. The broker is a party to the contract; therefore is eligible for compensation and can draft provisions. This answer is incorrect. The correct answer is 'D' A broker cannot draft offers when they are not a party to the contract. In this instance, the broker is the buyer; therefore, can add provisions to the sale or lease contract. A broker is entitled to earn compensation on personal transactions in accordance with his/her independent contractor agreement.

A agrees to sell her house to B for $250,000, each with exclusive representation by brokers affiliated with different firms, using the Standard NCAR/NCBA Offer to Purchase and Contract. The appraisal is performed and is $10,000 less than the agreed purchase price. The buyer and seller agree to reduce the purchase price, which is known as: Choose only ONE best answer. A an assignment. B a substitution. C an addendum. D an amendment.

D an amendment. This answer is correct.The agreement to change a provision of a valid contract is known as an amendment. Assignment of contract occurs when either the buyer or seller transfers the contract to another party, which is prohibited without permission, except in the case of a 1031 Like-Kind Exchange. Substitution is a term associated with valuations - which is the basis of the sales comparison approach, which states that the property with the lowest price will sell faster than a comparable property at a higher price. An addendum is added to an offer before the offer becoming a binding contract.

Aiden is representing a seller through an Exclusive Agency Listing Agreement on October 10th. He performed a visual inspection of the property and viewed the crawl space from the opening, noting no material facts for disclosure. Had he thoroughly inspected the crawl space, he would have seen water stains on the inside foundation block from standing water that occurs during springtime. The seller made no mention of standing water to Aiden, and Aiden did not disclose the standing water to the buyer or buyer's agent. Aiden guilty of: Choose only ONE best answer. A negligent omission as standing water is a material fact that should have been discovered. B negligent misrepresentation for failure to disclose the material fact. C willful omission as Aiden failed to investigate the property as required by the Commission. D no violation as this is a latent defect.

D no violation as this is a latent defect. This answer is incorrect. The correct answer is 'D' An agent is responsible for disclosing facts that they know or reasonably should have known. Since Aiden performed a visual inspection of the property with no noted defects, he would not be liable. The defect is latent - meaning hidden. Brokers are not required to inspect the entire crawl space visually or to discover concealed problems. Had the seller disclosed the issue, then Aiden would be required to disclose as a material fact, even if standing water is not present at the current time. Willful vs. Negligent comes down to intent or a broker's failure to take additional action when informed about a material fact. Omission vs. Misrepresentation comes down to the broker, not saying something or saying something untrue.

Property listed with a brokerage using the standard NCAR Exclusive Right to Sell Listing Agreement authorizes the listing agent to act as: Choose only ONE best answer. A a transaction broker. B general agent to the seller. C universal agent to the seller. D sub-agent of the seller.

D sub-agent of the seller. This answer is incorrect. The correct answer is 'D' The listing agent is subagent to the seller since the property is listed with the firm. North Carolina does not permit transaction brokerage, where the agent would represent the transaction rather than the buyer or seller. General agency occurs between a broker, and the firm is an independent contractor agreement or between the owner and a firm for a property management agreement. Universal agency occurs when a party is appointed power-of-attorney or attorney-in-fact.

Which of the following would NOT be the responsibility of a provisional broker handling the sale of a property in a new unapproved subdivision as the listing agent, when the buyer has elected not to have representation? Choose only ONE best answer. A Providing the buyers with a copy of the signed Mineral and Oil and Gas disclosure in a timely manner B Providing the buyers a copy Subdivision Street disclosure in a timely manner as the streets will be private C Disclosing to the buyers that closing cannot occur until final approval of the subdivision D Advising the buyers about the benefits of taking title to the property as tenancy by the entirety

D)Advising the buyers about the benefits of taking title to the property as tenancy by the entirety This answer is incorrect. The correct answer is 'D' A broker cannot advise a client or customer how to take title to a property as that would be an unauthorized practice of law. A broker working with an unrepresented buyer must disclose all material facts.

QUESTION 2 OF 40 According to the NCAR/NCBA Standard Offer to Purchase and Contract, which of the following statements is TRUE once the contract forms? Choose only ONE best answer. A The due diligence fee is nonrefundable. B The due diligence fee is only refundable if the seller failed to disclose a significant repair item in the NC Property Disclosure Statement. C The buyer will receive the earnest money refund only if he terminates the contract by the end of the due diligence period. D The due diligence fee becomes the property of the seller at the time the contract becomes effective.

D)The due diligence fee becomes the property of the seller at the time the contract becomes effective. his answer is incorrect. The correct answer is 'D' The due diligence fee is credited to the buyer at closing. It belongs to the seller unless the seller breaches the contract, in which case it should be refunded to the buyer along with the earnest money deposit and any compensatory costs. The seller is not obligated to disclose that a property has a major defect as NC is a caveat emptor state; the owner cannot conceal the major defect. The licensee would be required to disclose the item if they know or reasonably should have known about the defect. Be careful when a question or answer choice states always, must, never or only - there are very few items that are definitive in real

All the following are responsibilities of the broker-in-charge, EXCEPT: Choose only ONE best answer. A making sure the firm has a copy of a broker's current pocket card. B ensuring that all licensees of the firm have completed continuing education. C ensuring that all licensees of the firm have complied with the Commission's agency disclosure rules. D direct supervision of all licensees that are affiliated with the firm.

D)direct supervision of all licensees that are affiliated with the firm. This answer is incorrect. The correct answer is 'D' A broker-in-charge must directly supervise all provisional brokers. The BIC is responsible for ensuring all agents comply with advertising and disclosure of agency and ensuring transaction files are complete. An easy way to remember the BIC's duties to all brokers is "3 A's and 2 T's". The BIC is responsible for advertising, agency disclosure/documents, active status of affiliated brokers, trust accounts, and transaction files.

6 Sally, a provisional broker is holding an open house. Betty, a potential buyer enters and tours the house, observing all the features it has to offer. She thanks Sally for allowing her to see the listing and starts to leave. Which of the following statements is CORRECT regarding this situation? Review Later Betty must enter into a dual agency agreement before Sally can allow her to tour the house. Sally must enter into a written buyer agency agreement with Betty before allowing her to tour the house so has violated license law. First substantial contact has not occurred and agency disclosure is not required. Betty must enter into an oral buyer agency agreement before Sally can allow her to tour the house.

First substantial contact has not occurred and agency disclosure is not required. Explanation Disclosure of the Working with Real Estate Agents brochure is not required until first substantial contact has occurred. At an open house, the conversation would need to shift from facts about the property to personal / confidential information, in order for the listing agent to be required to disclose WWREA.A listing agent would be required to go over WWREA when opening the door for a potential buyer to show the home so that the buyer can agree how they will be represented (or not represented).

4 A licensee promises to rebate half of his commission if the buyer uses him as a buyers agent. After closing, the licensee refuses to pay the rebate since the buyer is not licensed. Is the licensee correct? Review Later Yes. The licensee can decide how and when to pay compensation. No. The licensee is guilty of making false promises and may be found liable. Yes. Compensation cannot be shared with someone that is not licensed. No. The licensee may be forced by the Commission to pay the rebate to the buyer.

No. The licensee is guilty of making false promises and may be found liable. Explanation False promises are used to induce a buyer or seller into a transaction, where the licensee promises to take some action after closing and the licensee fails to perform. The license triggering event is earning compensation on behalf of another, therefore a party to a transaction does not require a license when they act as either buyer or seller / tenant or landlord. The Commission cannot order a licensee to reimburse a client; the courts take that action. The Commission grants the license and they are the only entity that can take it away.

6 Which of the following is NOT one of the criteria for "living area" according to the North Carolina Real Estate Commission's Residential Square Footage Guidelines? Review Later The area must be heated by a conventional permanently-installed heating system. The area must be air-conditioned, have permanently-installed fans or functioning windows. The walls, floors and ceilings must be "finished." The area must be directly accessible from other living areas.

The area must be air-conditioned, have permanently-installed fans or functioning windows. Explanation HFDA - Living area must be heated, finished and directly accessible. There is no requirement for air conditioning or fans. To meet the heating requirement, it must be heated by a conventional system, not space heaters.

24 A builder-seller is supposed to close on the sale of a new house the 30th of this month. Due to labor problems, construction is behind schedule by at least 30 days. Under the NCAR/NCBA Offer to Purchase and Contract, which of the following statements is TRUE? Review Later The buyers can break the contract if the builder cannot close by the noted closing date but will forfeit their earnest money. The contract is voidable at the option of the buyers if closing does not occur by the closing date in the contract. The settlement date may be extended without penalty since it is just a target date. The buyers must allow the builder-seller 14 days to remedy the breach of contract, then the contract is voidable.

The buyers must allow the builder-seller 14 days to remedy the breach of contract, then the contract is voidable. Explanation The standard NCAR/NCBA Offer to Purchase is not time is of the essence with regard to the closing date. A party that is making best efforts to close is allowed a 14-day delay before the contract becomes voidable on behalf of the non-delaying party. The settlement date has been negotiated in the contract. The builder may seek to amend the contract with the buyer's approval, however the buyer is not obligated to grant the extension. If the buyer breaches the terms of the contract, they will lose the due diligence fee and earnest money as the seller's sole and exclusive remedy for breach.

23 A lease agreement that exceeds 3 years: Review Later violates state law unless the lease is for commercial property. must be in writing under the Statute of Frauds to be enforceable. may be oral and binding on third parties when a buyer is aware of the lease. must be recorded under the Statute of Frauds to be enforceable.

must be in writing under the Statute of Frauds to be enforceable. Explanation The statute of Frauds requires certain contracts to be in writing to be enforceable, which include purchase contracts, deeds, option contracts, installment land contracts/contracts for deed, etc. NOTE: In NC the Statute of Frauds requires lease agreements that exceed 3 years to be in writing, and the Connor Act requires the lease to be recorded to be binding against third parties.

5 The Working with Real Estate Agents Brochure: Review Later must be in writing no later than closing. must be review no later than the effective date of the contract. must be reviewed no later than the start of the listing appointment with a seller. must be in writing no later than the presentation of the first offer.

must be reviewed no later than the start of the listing appointment with a seller. Explanation The trigger for review of the Working with Real Estate Agent's brochure is at first substantial contact. This occurs when the conversation shifts, or is about to shift, to personal and confidential information. NOTE: The latest point for this to occur with a buyer is prior to opening the door to show a property to a prospective buyer. The latest point for this to occur with a seller is prior to the start of the listing presentation. It is BY FAR too late to review the disclosure when a buyer is making an offer, the offer is accepted or the transaction closes.

26 The buyer has contracted to purchase the seller's home by utilizing the NCAR Standard offer to purchase form 2-T. One day after the due diligence date the buyer informs the seller that the buyers loan has been denied and is unable to purchase the home. The buyer is entitled to: Review Later due diligence fee only. neither the earnest money nor the due diligence fee. both earnest money and due diligence fee. earnest money deposit only.

neither the earnest money nor the due diligence fee. Explanation A buyer loses both due diligence and earnest money when the offer is terminated after the expiration of the due diligence period. The standard 2-T Offer to Purchase and Contract is not contingent upon financing or appraisal. NOTE: When a buyer terminates the contract BY the due diligence date, the buyer is entitled to a refund of the earnest money deposit. The due diligence fee is retained by the seller since the buyer has the right to terminate for any reason or no reason at all.

13 The Residential Property Disclosure Statement must be given to the prospective buyer of residential property: Review Later upon first substantial contact. at initial contact with the seller's agent. no later than the time the property is shown. no later than the time the buyer makes an offer on the property.

no later than the time the buyer makes an offer on the property. Explanation The best answer out of the choices provided is prior to the buyer making an offer. In order to avoid a buyer being entitled to terminate the contract without penalty, including the return of the due diligence and earnest money, the disclosure should be provided prior to the buyer making an offer.In the event that the buyer does not receive the disclosure prior to making the offer, the buyer has the right to terminate, without penalty - return of earnest money deposit and due diligence fee, the EARLIER of: 3 calendar days following receipt, 3 calendar days following the effective date of contract or prior to closing.

68 The Real Estate Settlement Procedures Act (RESPA) does all of the following EXCEPT: Review Later require lenders to provide mortgage loan borrowers with a loan estimate of closing costs. prohibit the payment and receipt of kickbacks between real estate settlement service providers. require that a real estate attorney conduct real estate closings. require lenders to provide mortgage loan applicants with an information booklet on settlement costs.

require that a real estate attorney conduct real estate closings. Explanation The Real Estate Settlement Procedures Act (RESPA) relates to providing information with regard to the finance of real estate purchases. It requires lenders to provide a booklet, limit escrow amounts, provide a loan estimate, prohibits kickbacks among settlement service providers and a uniform settlement statement - Closing Disclosure. Closings are not required to be conducted by an attorney - as we have escrow closings in some states.

2 The basic components of a foundation include all of the following EXCEPT: Review Later concrete slabs. piers. footings. ridge boards.

ridge boards. Explanation The ridge board is the highest wooden member in house construction is a roof component. Many new homes or homes with a new roof have a "ridge vent." Piers, footings, foundation walls, and concrete slabs are foundation components.

18 A licensee lists a property for sale. The owner is allowed to market the property for rent. The owner asks the licensee to advertise the rental on the MLS. The licensee: Review Later should comply with the seller's request or risk violating the laws of agency. should refuse to advertise the property unless the owner signs a property management agreement. should obediently comply with the seller's request. should refuse to advertise the property for rent without BIC permission.

should refuse to advertise the property unless the owner signs a property management agreement. Explanation In order to advertise a property for rent, a licensee requires a written property management agreement. The services can be limited to listing the property in the MLS only. A licensee can only follow the principal/client's lawful instructions.

3 The North Carolina Working with Real Estate Agents brochure must be given Review Later to all consumers in a sales transaction no later than first substantial contact. to property owners upon initial contact. to all consumers prior to first substantial contact. only to buyers in a real estate transaction.

to all consumers in a sales transaction no later than first substantial contact. Explanation The trigger for disclosing the Working with Real Estate Agents Brochure is first substantial contact. First substantial contact occurs when the conversation shifts from facts about the property to personal/confidential information. NOTE: The latest point to disclose the brochure to a buyer is prior to opening the door to show the first property. The latest point to disclose the brochure to a seller is prior to beginning the listing appointment. NOTE: An oral buyer's agency agreement must be reduced to writing prior to presentation of an offer. WWREA must be disclosed well before writing an offer or closing on the sale.

7 The Mineral, Oil and Gas disclosure is not required in: Review Later vacant land sales. the resale of a residential townhouse. residential new construction sales. residential resale transactions.

vacant land sales. Explanation The MOG disclosure is required when residential property is sold (1-4 units) regardless of whether it is new or resale and regardless of whether a licensed agent is involved in the transaction. Exemptions can be found in G.S. 47E-2 at https://www.ncleg.gov/EnactedLegislation/Statutes/HTML/ByChapter/Chapter_47E.html).

2 A residential tenant is unhappy with the habitability of an apartment because the toilet will not flush. Under the North Carolina Residential Rental Agreements Act, the tenant may Review Later wait for the landlord to make the repair. hire a plumber and charge it to the landlord. pay a plumber and deduct it from his next month's rent. withhold rent until the problem is fixed by the landlord. Comments

wait for the landlord to make the repair. Explanation The tenant can request the repair, however cannot unilaterally withhold rent without a court order, make the repair and deduct it from rent or charge the landlord. The tenant, after a reasonable period, may claim constructive eviction which terminates the lease agreement and entitles the tenant to sue the landlord for damages. NOTE: Constructive or actual eviction terminates the lease agreement NOT the property management agreement.

16 An agent working for a prospective buyer must have the buyer sign a written buyer agency agreement in all the following scenarios EXCEPT: Review Later if the buyer is ready to present an offer on a property that is listed with another firm. when the agent wants to be the buyer's exclusive agent. when the agent and buyer have an oral non-exclusive buyer agency agreement and the buyer wants to view a home listed with the firm. if the buyer wants to hire an exclusive agent for a fixed period for property in a set geographic location. Comments

when the agent and buyer have an oral non-exclusive buyer agency agreement and the buyer wants to view a home listed with the firm. Explanation A buyer can orally agree to non-exclusive representation and authorize dual agency without triggering the requirement to be in writing. An oral agreement must be non-exclusive and open-ended. Oral agency must be reduced to writing prior to presentation of an offer.

25 During the Due Diligence Period in the North Carolina standard offer to purchase and contract, the buyer did not receive final loan approval but chose not to terminate the contract based on favorable communications from the lender. A week before closing, the buyer's loan application is denied. If the buyer terminates the contract at this point, the buyer:

will forfeit the earnest money deposit, because it would be a buyer breach. Explanation The standard NCAR/NCBA Offer to Purchase is not contingent upon financing or appraisal. The buyer is in breach of contract if they cannot close after the due diligence period has expired. The seller is entitled to the earnest money deposit as well as retention of the due diligence fee, which is the sole and exclusive remedy for the seller (liquidated damages).

31 In the course of selling a home to buyer, a broker told the buyer that the home's foundation was "solid as a rock," when he knew for a fact that it was slowly sinking into the landfill on which it was built. In this situation the brokers conduct would be best defined as: Review Later willful misrepresentation. willful omission. negligent omission. negligent misrepresentation.

willful misrepresentation. Explanation When a broker is aware of an issue and lies to a potential buyer, it is an example of willful misrepresentation. Misrepresentation occurs when a broker lies. Omission occurs when information is not disclosed. Willful vs. negligent comes down to intent.