Chapter 10 - Quiz - Part 1
Which of the following should not be relied upon as a source of assistance in understanding a provision or section of the North Carolina Offer to Purchase and Contract Form?
A certified paralegal working in a real estate office.
The OPC includes the seller's agreement and authorization to disclose certain information related to their owners' association, if applicable. Which of the following is not something that the buyer is entitled to receive and review?
A list of names and biographical details about neighbors.( includes:Bylaws. Restrictions and limitations on association members. The amount of regular assessments and dues.)
Addendums are often used with sales contracts. Which of the following is a true statement about addendums?
Addendums are attached to, and become part of, the sales contract. Certain addendums must be used when applicable, such as the lead-based paint or homeowners' association addendums. When they are used, they must be signed by all parties. Addendums attach to, and become part of, the legally-binding sales contract.
The Buyer Possession Before Closing Agreement identifies the Commencement Date, with the buyer taking occupancy at 8 AM on that date. When does the agreement terminate?
At closing.
How should the due diligence period be identified in the Back-Up Contract?
By using a number of days, with the time period starting on the day after the seller notifies the buyer that the primary contract was cancelled.
Which of these is not a common type of investigation that buyers typically complete during the due diligence period?
Criminal background investigation of the seller.
How are "days" calculated under the OPC?
Days means consecutive calendar days, including weekends and holidays. Section 23 of the OPC specifically defines the term "days" to state that the word "days" means consecutive calendar days, including weekends and holidays. The count begins on the day following the day on which an act or notice was required. References to time are to the time in the state of North Carolina.
The OPC form can be used for different types of real estate transactions, but what kind of sale was it specifically designed to document?
Existing single-family, residential properties in North Carolina.
North Carolina statutes and Real Estate Commission rules prohibit licensees from providing legal advice or services. Which of the following could a licensee do without breaking the rules?
Help a client select and complete pre-printed forms.
Some items are included in important contract addendums, if applicable, rather than appearing on the contract itself. Which one of the following is a separate contract addendum that's attached to the contract, if applicable?
Homeowners association information. If applicable, contract addendums are added for lead-based paint disclosures, homeowners' association disclosures, and property condition disclosures. These addendums are attached to and become part of the sales contract.
When might a buyer be exempt from some of the requirements under the Vacation Rental Act?
If the buyer hires the same rental broker who arranged for the existing rentals for the seller. Buyers are exempt from certain Vacation Rental Act requirements if the buyer hires the same rental broker who arranged for the existing rentals for the seller with respect to the agreements the buyer must honor, or the agreements the buyer has otherwise agreed to honor.
Which of these is NOT a true statement regarding the buyer's rights to cancel the Back-Up Contract?
If the buyer terminates the contract after it becomes the primary contract and after the expiration of the due diligence period, they are only entitled to receive a refund of one-half of their earnest money.
The Short Sale Addendum includes seven bulleted risks about short sales. Which of these is not one of the risks included on this form?
If the lienholders propose changes to the OPC, including changes to the Due Diligence period and the settlement date, the buyer and seller are obligated to accept those changes. Lienholders have the right to propose changes to the OPC, including changes to the Due Diligence period and the settlement date. However, the buyer and seller are under no obligation to accept the proposed changes.
How does foreclosure during the short sale process impact the parties?
If the property is foreclosed on before the end of the short sale process, the seller loses all rights, the contract becomes null and void, and the earnest money will be returned to the buyer.
In addition to the parties' names and the property description, which of the following must be included for a pre-printed Offer and Sales Contract to be valid, according to North Carolina Real Estate Commission Rules?
Itemized list of personal property included in the sale. North Carolina Real Estate Commission Rule A.0112 provides a list of 20 required components for valid pre-printed Offer and Sales Contract forms, including an itemized list of personal property to be included in the sale. There is no requirement to identify previous owners, disclose whether deaths occurred on-site, or document paint types on the sales contract.
Which of the following is an acceptable way to identify the sellers, John and Ann Smith?
John A. Smith and Ann C. Smith. When identifying the buyers or sellers on any real estate form, use their full names rather than abbreviations or initials.
Does the buyer under a Back-Up Contract have the right to examine the primary contract?
No, the buyer may not review or examine the primary contract unless the seller and primary buyer agree. Item 5 of the Back-up Contract Addendum states the parties' agreement and understanding that the buyer has no right to examine the primary contract unless the seller and primary buyer agree to such examination.
Barb Buyer wants her agent to write up a quick two-page agreement, because she doesn't want to make her offer too confusing for the seller. May the agent do as the client requested?
No. Licensees may not draft real estate contracts or forms for their clients.
Which of these is not one of the seller's obligations under the OPC?
Paying proposed special assessments. Item 8 of the OPC states the seller's obligations to provide documentation to the closing attorney, to give the buyer reasonable access to the property, and to remove personal property and garbage before closing. The buyer, not the seller, is responsible for paying any proposed special assessments.
When authorized or directed by a client to do so, which of the following may a real estate licensee draft for a client?
Pre-printed sale or lease contract forms.
Section 1(d) of the OPC lists the purchase price. Which of the following is not included in this section?
Proposed and confirmed assessments. Section 1(d) of the OPC includes the total purchase price, due diligence fee, initial earnest money, additional earnest money, loan assumption, seller financing, building deposit, and balance due from the buyer. Assessments are covered later in the form.
Why is it important for North Carolina real estate professionals to have a working knowledge of the standard sales contract form?
So they can help clients understand and fill in pre-printed forms.
What is the term used in the OPC to describe government charges against the property in addition to "regular" real estate taxes and fees or charges levied by a homeowners' association in addition to regular dues?
Special assessments.
Which of these is not something that's normally included in a standard North Carolina residential sales contract?
Specific repairs to be made as the result of the buyer's due diligence.
What is the main reason a licensee should think twice before drafting real estate contract provisions for a client?
State statutes and commission rules prohibit licensees from drafting contract language.
If the parties don't specify otherwise, what is the default settlement date for this Addendum?
The 30th day following the seller's notification to the buyer of the approval of the short sale. The settlement date is expressed as a specific number of days following notification of the approval of the sale. If this field is left blank, the settlement date will be on the 30th day following the seller's notification to the buyer of the approval of the short sale.
Which of the following is NOT true regarding the Additional Provisions Addendum?
The Addendum includes sections for Short Sales and Vacation Rental Property.
Which additional addendum is required for property built before 1978?
The Lead-Based Paint Disclosure Addendum.
Which of the following is not a typical source for licensees to find pre-printed real estate contracts and forms?
The North Carolina Real Estate Commission's website.
Who is responsible for paying any proposed and confirmed special assessments unless otherwise agreed to in writing?
The OPC documents that, unless the parties agree separately, the buyer bears responsibility for any proposed special assessments, and the seller is responsible for all confirmed special assessments.
Barb Buyer's agent chose the wrong pre-printed contract form. As a result, Barb suffered financial losses. Which of the following is a true statement as to who bears the financial responsibility for those losses?
The agent may be financially liable for Barb's losses incurred as a result of his choosing the wrong form for her to use. Licensees may be personally responsible for damages if a party incurs losses due to the licensee's use of an incorrect form. That's why it's critical for agents to use care when selecting pre-printed forms for their clients' transactions.
Why is the appraisal amount important for an FHA loan?
The appraisal figure represents the maximum mortgage amount that HUD will insure.
Under which of these circumstances would the buyer NOT be entitled to a return of their earnest money?
The buyer breaches the contract.
Using FHA financing, if the appraisal comes in lower than expected, what happens?
The buyer has the option of canceling the contract without penalty. If the appraisal comes in lower than expected the buyer can choose to cancel the OPC agreement without penalty. The buyer could instead choose to proceed with buying the property. HUD will only insure the mortgage up to the appraised value so the buyer would need to pay the difference in some other way or negotiate a lower price with the seller.
Which of these statements is true regarding the buyer's due diligence rights under this Vacation Rental Addendum?
The buyer has the right to review copies of existing rental agreements and to terminate the contract without penalty during the due diligence period.
Which of these is a true statement about the buyer's right to change, modify, or decorate the property?
The buyer may not change, modify, or damage the property in any way, and may not decorate without the seller's written consent during the term of the Agreement.
A buyer using VA financing learns that the appraised value was significantly less than expected. The buyer decides to proceed with the purchase, making up the difference in cash. Which of the following statements is true?
The buyer must disclose the source of the cash to the DVA. If the appraised value comes back lower than expected, a buyer who applied for a VA loan can cancel the contract and receive a return of their earnest money. The buyer can opt to proceed with the purchase, but they will need to pay cash for the excess. The buyer agrees that in that case, they will disclose the source of the cash to the DVA. The seller has the option of lowering the sales price but is not obligated to do so.
What does this addendum say about the buyer's right to conduct due diligence on the property?
The buyer waives the right to conduct further due diligence after the Commencement Date and agrees to accept the property in its condition on that date. In paragraph 2 of this Addendum, the buyer waives the right to conduct further due diligence on the property after the Commencement Date and agrees to accept the property in its condition on that date. This provision is subject to the seller having completed any agreed-upon repairs or other contingencies in the OPC.
Which of the following is not a reason why a sales contract is important?
The contract must be recorded with the Register of Deeds. Real estate transactions are generally large-dollar transactions, so the sales contract is intended to protect both buyers' and sellers' rights by spelling out the important terms and conditions of the sale. If a deed is transferred, it should be recorded, but the sales contract itself is not recorded.
When signing this form, the seller agrees to provide the buyer with all of the following within ten days of closing, EXCEPT:
The credit scores of each tenant with existing vacation rental agreements.
What does the OPC state will happen if a dispute arises about the earnest money while it's in escrow?
The escrow agent may not release the funds until they receive a release signed by all the parties or until they receive a court order to disburse the funds.
Pre-printed real estate forms are available from a variety of sources, including online forms that are available from national providers. Which of the following is most important when a licensee is considering buying a form online?
The form may not comply with current North Carolina real estate laws and regulations.
Which of the following is not a true statement about the North Carolina Realtors' pre-printed forms library?
The library includes forms for standard sales contracts, but it doesn't include forms for additional contract-related matters.
How will legal expenses be handled if one party brings suit against the other for breach of this agreement?
The losing party will pay the costs and expenses associated with litigation, including the prevailing party's attorney fees.
When the Short Sale Addendum is used, how does the Due Diligence period work?
The period begins when the buyer receives notification that the short sale has been approved, and it continues for the number of days specified in the Addendum.
Which of the following statements regarding the Lead-Based Paint Addendum is false?
The presence of lead-based paint alone is not necessarily a risk. The purpose of the Lead-Based Paint Addendum, which attaches to and becomes part of the OPC, is to disclose that there is a potential for risk, not that there is necessarily a problem. If the buyer chooses to conduct inspections or assessments, the buyer is responsible for the costs of such investigations.
Which of the following is NOT a risk associated with using an incorrect real estate contract form?
The property description might be incorrect or inaccurate. There are various pre-printed forms available for real estate professionals' use. Using an incorrect form could mean the form includes information that's not applicable, excludes material information, and fails to include required disclosures. It's always important to verify that the property is accurately described on any real estate form, but this is not a risk that's specific to using an incorrect form.
If this contract is used for subdivided property, what must have already occurred before the contract is signed?
The property must be platted, approved, and recorded with the Register of Deeds.This contract should not be used for sales involving subdivided property unless that property has already been platted, approved, and recorded with the Register of Deeds. It is actually a misdemeanor in North Carolina to transfer land in a subdivision prior to subdivision approval.
Which is a true statement regarding a transaction involving rental property or property otherwise held for investment purposes?
The property will be conveyed subject to existing leases, preserving the rights of existing tenants. Item three documents the parties' understanding that the property will be conveyed subject to existing leases, preserving the rights of current tenants. There is a line in this item to fill in the date by which the seller agrees to provide the buyer with copies of all leases, rental agreements, tenant notices, deposits, claims, and any other relevant documentation.
Which of these is a true statement about the North Carolina sales contract?
The sales contract is the form the prospective buyer submits to the property owner with their bid to purchase real estate. The North Carolina sales contract is the form the prospective buyer submits to the property owner with their bid to purchase real estate. The agreement becomes binding on all the parties when everyone has signed it, but it's not recorded with the Register of Deeds.
Which of these is a true statement about the FHA/VA Financing Addendum?
The sections of the form to be completed depend on which financing option the buyer is pursuin
Which of these statements is NOT an element of a Short Sale, as defined in the Short Sale Addendum?
The seller has sufficient liquid assets to pay the remaining costs of the sale but doesn't want to expend those assets in the sale.
The seller may agree to make repairs or improvements prior to the settlement date, in Item 4 of the Additional Provisions Addendum. Which of the following is NOT a true statement:
The seller is responsible for making agreed-upon repairs, but the buyer and seller agree to be jointly responsible for paying the costs of such repairs.
What happens if a buyer is in breach of their responsibilities under a sales contract using the Buyer Possession Before Closing Addendum?
The seller may evict the buyer using the North Carolina Summary Ejectment Proceeding. Paragraph 14 of the Addendum contemplates a scenario where the buyer is in breach of their responsibilities under this agreement. In that case, the buyer may be evicted through a North Carolina Summary Ejectment Proceeding.
If the agreement is terminated after the Commencement Date, all of the following are true EXCEPT:
The seller must pay one-half of the buyer's relocation expenses.
If the seller tells the buyer under the Back-Up Contract that the primary contract was cancelled when it actually wasn't, and the buyer incurs expenses as a result, who is liable?
The seller.
Which of the following is not a true statement about the "Settlement" date in the OPC?
The settlement date and closing date are always the same date. Item 1(k) on the OPC states the settlement date, which may or may not be the same as the closing date. "Settlement" refers to the date that the closing attorney receives all deeds, settlement statements, financing documents, and funds to complete the transaction.
Which of the following statements regarding the North Carolina Back-Up Contract Addendum is false?
This form is used for the primary contract (first accepted offer), when the seller wants to consider a secondary offer in case the primary offer falls through.
For which of these properties would you use the "Offer to Purchase and Contract - Vacant Lot/Land" form?
Unimproved real property that the buyer is purchasing for personal use with no immediate plans to subdivide it.
How are costs like real estate taxes, personal property taxes, rents, and owners' association dues handled in the OPC?
Unless agreed upon is some other manner by the parties, these expenses are prorated, and the seller is responsible for paying them until closing.
If the property includes one or more manufactured homes, the home(s) should be identified in Item 5 of the Additional Provisions Addendum. Which of the following are acceptable ways to identify each mobile home?
VIN number or, if unknown, a description including the year and model.
Barbara bought a beach house from Sam and closing occurred May 1. Victoria had a rental agreement with Sam scheduled to begin December 15. Which of the following is NOT a true statement about Victoria's and Barbara's rights?
Victoria can compel Barbara to honor the existing rental, since it was made before closing. In this case, because the existing rental is scheduled for more than 180 days after closing, it is the buyer's decision (Barbara) as to whether or not she wants to honor the agreement. If she decides not to honor it, she must refund any money Victoria already paid.
When are due diligence fees payable under the Back-Up Contract Addendum?
Within 5 days of the seller notifying the buyer that the Primary Contract was cancelled.
Does the 2A9-T form allow for the buyer to inspect the property to assess lead poisoning risks?
Yes, and the buyer is strongly encouraged to do so.
Can the standard sales contract be used for properties constructed before 1978?
Yes. In addition to the standard sales contract, the parties will also include and sign the Lead-Based Paint Addendum. For properties that may include lead-based paint risks, the Lead-Based Paint Addendum is used in addition to the standard North Carolina sales contract
A seller decides to sell their house which was constructed in 1970. The seller does not want to include the Lead-Based Paint Addendum, reasoning that the house is more likely to sell without it. Are there any problems with this approach?
Yes. The form is legally required when the transaction involves a structure built prior to 1978
The section addressing FHA loans is identified as what type of clause in this addendum?
an amendatory clause
Which of the following expenses is not something the seller is responsible for paying during the term of the agreement?
insurance to cover property damage
Who is legally and financially responsible for liability claims, lawsuits, costs and expenses related to property damage, personal injury or death that may occur as the result of the seller's occupancy after the closing date?
the buyer, although the seller agrees to indemnify and hold the buyer harmless. Paragraph 9 of the addendum addresses the seller's obligation and agreement to indemnify and hold the buyer harmless against liability claims, lawsuits, costs and expenses related to property damage, personal injury or death that may occur as the result of the seller's occupancy after the closing date. This is important because without this provision the buyer would be legally and financially responsible for such loss occurring after the closing date.
Who is legally and financially responsible for liability claims, lawsuits, costs and expenses related to property damage, personal injury or death that may occur as the result of the seller's occupancy after the closing date?
the seller, although the buyer agrees to indemnify and hold the seller harmless. Paragraph 9 of the addendum addresses the seller's obligation and agreement to indemnify and hold the buyer harmless against liability claims, lawsuits, costs and expenses related to property damage, personal injury or death that may occur as the result of the seller's occupancy after the closing date. This is important because without this provision the buyer would be legally and financially responsible for such loss occurring after the closing date.