Sales Contracts & Procedures

Question 1

A woman made an offer on a home that was countered using the Offer to Purchase and Contract, Form 2-T. She verbally countered, and it was verbally accepted. She quickly applied for a loan three days later and when the woman asked her agent for a copy of the contract, she learned that the seller contracted with another buyer. What is the woman’s position?

A)
Both the woman and the second buyer have a claim against the seller.
B)
She has a contract and the second buyer does not.
C)
Her position is unclear.
D)
She has no contract.

Answer 1

D)
She has no contract.

Contracts must be in writing to be enforceable.

Question 2

You are a licensee in North Carolina and have a listing. Your seller has turned down all offers so far, even offers you thought were good. An offer comes in for 70% of the listing price. You know the seller will not consider it. You should

A)
toss it in the trash.
B)
deliver it immediately.
C)
explain to the selling agent why you will not present it.
D)
hold it for three days.

Answer 2

B)
deliver it immediately

As licensees, we are required to deliver every offer within a reasonable period.

Question 3

Which transaction requires a Mineral and Oil and Gas Rights Mandatory Disclosure Statement but not a Residential Property and Owners’ Association Disclosure Statement?

A)
All of these
B)
A 30-acre land tract
C)
A small commercial property
D)
New home bought from the builder

Answer 3

D)
New home bought from the builder

Land and commercial transactions are exempt from the oil, gas, and mineral rights disclosure. Any severance of a property right is a material fact, but the form is required only on certain transactions.

Question 4

The North Carolina statute that allows contracts to be formed via email or fax is called

A)
Real Estate Practices Act.
B)
Internet Neutrality Act.
C)
Uniform Electronic Transactions Act.
D)
Interstate Commerce Act.

Answer 4

C)
Uniform Electronic Transactions Act.

It has certain requirements for consumer transactions but allows contracts to be formed electronically.

Question 5

When must the parties to a contract receive copies of signed and accepted documents?

A)
Within three business days
B)
One calendar day
C)
One business day
D)
Within three calendar days of receipt by the broker

Answer 5

D)
Within three calendar days of receipt by the broker

Copies should be delivered immediately, but in no event later than three calendar days from receipt by the broker. All days are counted as calendar days unless otherwise specified.

Question 6

The due diligence period in the Offer to Purchase and Contract (NCAR/NCBA) allows for the buyer to do all of the following EXCEPT

A)
investigate the property condition and negotiate repairs with the seller.
B)
pursue loan approval.
C)
review the restrictive covenants.
D)
request the return of the due diligence fee if the seller will not address the items found in the home inspection report.

Answer 6

D)
request the return of the due diligence fee if the seller will not address the items found in the home inspection report.

The due diligence fee is only returned to the buyer if the seller breaches the contract or the property is materially damaged and the buyer opts out of the contract.

Question 7

The North Carolina Real Estate Commission typically takes action on which of the following issues?

A)
A broker modifies the standard Offer to Purchase Form 2T.
B)
A firm charges a much higher commission rate than the other firms in an area.
C)
A broker solicits the client of another firm.
D)
A broker refuses to pay another broker for procuring a buyer.

Answer 7

A)
A broker modifies the standard Offer to Purchase Form 2T.

The client may modify the contract or instruct the broker on what to change. The purpose of the North Carolina Real Estate Commission is to protect the public in dealings with brokers. By statute, the Commission is specifically prohibited from regulating commissions or arbitrating disputes between parties regarding matters of contract such as the rate and/or division of commissions, or similar matters.

Question 8

A woman made an offer on a home, which was accepted using the Offer to Purchase and Contract, Form 2-T. Her due diligence period ends in 40 days. On day 12, her lender turned her down, so she had to apply with another lender. She was approved right away. Two days before closing, her lender told her they would be unable to fund because they were being taken over. They suggested she reapply with the new bank. The seller has refused to grant the woman enough time to reapply, and the woman cannot close in accordance with the contract. What happens to the woman?

A)
She can walk away and get all of her money back.
B)
The seller must give the woman an additional 30 days, due to lender issues.
C)
The woman is in breach and will lose her due diligence fee and earnest money.
D)
If she walks away, she can be sued for specific performance by the seller.

Answer 8

C)
The woman is in breach and will lose her due diligence fee and earnest money

If the woman cannot close per the contract including the grace time, she will be in breach. The seller is only obligated to give the woman the time allowed in the contract.

Question 9

A seller has an accepted offer on his listed home. The Offer to Purchase and Contract, Form 2-T, was used. The buyers have presented the seller with a list of repairs they want. The buyers have 20 more days until their due diligence period expires. Yesterday the seller got a better offer that he wants to accept. What is the seller’s BEST option?

A)
Invoke the kick-out clause and cancel the contract with the first buyer.
B)
Cancel the contract with the first buyers because they requested repairs.
C)
Accept the better offer.
D)
Accept the better offer as a backup offer.

Answer 9

D)
Accept the better offer as a backup offer.

The seller cannot accept two offers; there is no standard kick-out clause in Form 2-T, and the seller has no right to cancel the buyers’ contract.

Question 10

When using the Offer to Purchase and Contract (NCAR/NCBA), the MOST commonly accepted method(s) of communication between the negotiating parties is(are)

A)
text messages between the brokers.
B)
phone calls between the brokers.
C)
emails between the brokers.
D)
all of these methods are commonly used.

Answer 10

D)
all of these methods are commonly used.

“Any reasonable manner” is acceptable communication between the brokers.

Question 11

A married couple desire to buy real property in both their names for cash and one spouse is not available to sign the purchase contract, which of the following is TRUE?

A)
The unavailable spouse must sign before closing.
B)
The purchase contract is voidable if only one spouse signs.
C)
The contract is void unless both spouses the contract.
D)
It is only when they desire to sell the property that both signatures are required.

Answer 11

D)
It is only when they desire to sell the property that both signatures are required.

One buyer can sign the contract and request that title be conveyed to the signer and another. It is much more vital for all sellers to sign than it is for all buyers, although the best practice is to obtain the signatures of all parties. The broker should advise the seller as to why the spouse is not signing.

Question 12

A woman made an offer on a home that was countered using the Offer to Purchase and Contract, Form 2-T. She verbally countered, and it was verbally accepted. What does the woman need to do first?

A)
Apply for a loan
B)
Get the home inspected
C)
Get a copy of the contract in writing
D)
Pay her agent the commission

Answer 12

C)
Get a copy of the contract in writing

The contract must be in writing to be enforceable.

Question 13

A woman has her house on the market. She is looking for a larger home with her real estate agent. When the woman finds one she wishes to buy, can her real estate agent use the Offer to Purchase and Contract, Form 2-T, to make an offer?

A)
Yes, that is what it is for.
B)
Yes, but she also needs the Contingent Sale Addendum attached.
C)
Yes but only if the woman is prequalified.
D)
No, it is not the form to use.

Answer 13

B)
Yes, but she also needs the Contingent Sale Addendum attached

The addendum gives both the buyer and the seller protections in case the woman’s house does not go under contract or sell when expected.

Question 14

A woman has an accepted offer on her listed home. The Offer to Purchase and Contract, Form 2-T, was used. The buyer’s earnest money deposit check has been returned by the bank for insufficient funds. Yesterday the woman got a better offer, which she wants to accept. What is her BEST option?

A)
Accept the better offer.
B)
Cancel the contract with the first buyer because their check bounced.
C)
Accept the better offer as a backup offer.
D)
Invoke the kick-out clause and cancel the contract with the first buyer.

Answer 14

C)
Accept the better offer as a backup offer

The man cannot accept two offers; there is no standard kick-out clause in Form 2-T, and refusing the buyer the legal remedy of making the funds good within one banking day may put the woman in breach of contract.

Question 15

In North Carolina, when receiving multiple offers on a property, the listing agent must

A)
select the best offer(s) to present.
B)
present in-house offers first.
C)
present offers in the order received.
D)
present all offers immediately.

Answer 15

D)
present all offers immediately.

The answer is present all offers immediately. If the seller decides to respond to certain offers, that is the seller’s decision.

Question 16

The Offer to Purchase and Contract (NCAR/NCBA) provides for which of the following if the buyer’s loan is declined?

A)
The buyer is protected from loss of earnest money deposit and any due diligence funds.
B)
The buyer would get his due diligence funds back but would forfeit the earnest money deposit.
C)
If the loan is declined after the due diligence period, the earnest money deposit is forfeited to the seller.
D)
If the loan is declined during the due diligence period, the seller is given the earnest money deposit.

Answer 16

C)
If the loan is declined after the due diligence period, the earnest money deposit is forfeited to the seller

There is no loan contingency for the buyer in the Offer to Purchase and Contract (NCAR/NCBA). The buyer should pursue loan approval during the due diligence period.

Question 17

Buyers wish to make an offer on a home. The buyers ask their real estate agent to prepare an offer for them. What is the BEST way for the agent to proceed?

A)
Fill in the blanks of an attorney-approved contract form
B)
Any of these
C)
Draft a contract for the buyers
D)
Start with a verbal offer

Answer 17

A)
Fill in the blanks of an attorney-approved contract form

The agent may not draft (unless a licensed North Carolina attorney), and all offers should be in writing.

Question 18

Regarding possession of the property, the Offer to Purchase and Contract (NCAR/NCBA) states which of the following?

A)
The buyer obtains possession at closing.
B)
The buyer obtains possession after the settlement meeting.
C)
The buyer receives the keys when the earnest money deposit clears.
D)
The buyer receives the keys when buyer’s loan is funded.

Answer 18

A)
The buyer obtains possession at closing.

Per the Offer to Purchase and Contract (NCAR/NCBA), “unless provision is otherwise made in writing, possession shall be delivered to the buyer at closing.”

Question 19

Unless otherwise specified, how are days defined in the Offer to Purchase and Contract (NCAR/NCBA) calculated?

A)
Business days
B)
Calendar days
C)
Fiscal days
D)
Banking days

Answer 19

B)
Calendar days

Consecutive calendar days, including all holidays, count as days, beginning the day after an event. For example, 10 days from the effective date of a Monday would begin the 10 days on Tuesday.

Question 20

A selling agent is NOT aware of a latent defect in a property. Who is responsible for disclosing unknown latent defects to a purchaser?

A)
None of these
B)
The seller and the listing agent
C)
The listing agent and the selling agent
D)
The seller, the listing agent, and the selling agent

Answer 20

A)
None of these

A latent defect is hidden; unless the seller told the listing agent, there would be no way for the defect to be discovered.

Question 21

The usual offer to purchase provides for all of the following conditions EXCEPT

A)
a requirement of early occupancy.
B)
conditions by which the buyers will purchase the property.
C)
the closing date.
D)
seller to pay cost of deed preparation.

Answer 21

A)
a requirement of early occupancy.

The usual contract provides who will pay customary closing costs, and contains the essential conditions of

Question 22

Which of the following is NOT a seller obligation as stated in the Offer to Purchase and Contract (NCAR/NCBA)?

A)
To disclose all known defects in the house
B)
To keep the utilities operating for inspections
C)
To give copies of all title information available to the buyer as soon as possible after the effective date
D)
To disclose any known special assessments, pending or confirmed

Answer 22

A)
To disclose all known defects in the house

A seller must complete a property disclosure statement but is not required to disclose any defects. The seller may check “No Representation” on every question.

Question 23

A listing broker receives an offer that fully matches the listing terms. Before presenting the offer, the broker receives two more offers, one for less than the listing price but for cash and one for more than the listing price but for the seller to take back a mortgage. What is the BEST approach for the listing broker?

A)
Present the offers in the order received, one at a time.
B)
Present the offer for the highest price.
C)
Present all offers at the same time.
D)
Present the cash offer first.

Answer 23

C)
Present all offers at the same time

The broker must try to locate the seller immediately to present offers as they are received. Because this is not always possible, the broker should keep the seller apprised of all offers received (or even ones that may simply be rumored or in the works). It would be improper practice to urge a seller to decide whether to accept or reject an offer before presenting all other offers known to the broker.

Question 24

A woman made an offer on a home, which was accepted using the Offer to Purchase and Contract, Form 2-T. Her due diligence period ends in 40 days. On day 12, her lender turned her down, so she had to apply with another lender. She was approved right away. Two days after her due diligence period expired, her lender told her they would be unable to fund because they were being taken over. The broker suggested she reapply with the new bank. What is the woman’s BEST option?

A)
Walk away and get all of her money back.
B)
Walk away and be sued for specific performance by the seller.
C)
Explain the situation, ask the seller for more time.
D)
Say nothing and hope for the best.

Answer 24

C)
Explain the situation, ask the seller for more time

If the woman cannot close per the contract including the grace time, she will be in breach. Her best avenue is to ask the seller for more time.

Question 25

A broker has a listing on a house. The list price is $365,000. The listing agent is also working with a buyer client who has made an appointment to look at this house at 10:00 am on Tuesday. At 3:30 pm on Monday, the listing agent receives an offer for $357, 500 from a broker from a different firm who is representing a buyer. The listing agent shows his buyer client the property the next morning and tells him there is already an offer on the table “for close to the asking price” and he needs to make a full-price offer if he wants the house. The listing agent’s buyer client asks him to write up a full-price offer. The listing agent presents this offer to the seller and the seller accepts the offer from the listing agent’s buyer client. Which of the following is TRUE?

A)
The listing agent did not need to present the first offer because he got a higher offer from his buyer.
B)
The listing agent should have presented the first offer when it was received and waited to see what the seller decided before he showed the property to his buyer client.
C)
The listing agent did a good job because he helped the buyer find the house he wanted and he got the full asking price for the seller.
D)
The listing agent should have presented the first offer when it was received and told the seller he had a buyer client scheduled to look at the house the next morning

Answer 25

D)
The listing agent should have presented the first offer when it was received and told the seller he had a buyer client scheduled to look at the house the next morning

All offers should be shown immediately, but in no event later than three days.

Question 26

Which of the following is NOT a buyer obligation as listed in the Offer to Purchase and Contract (NCAR/NCBA)?

A)
To pay proposed special assessments
B)
To pay homeowners association fees to transfer ownership
C)
To pay closing costs
D)
To sign a general warranty deed

Answer 26

D)
To sign a general warranty deed

The seller, not the buyer, signs the general warranty deed. Buyers are obligated to pay their own closing costs, homeowners association transfer fees, and proposed special assessments per the Offer to Purchase and Contract, unless otherwise negotiated.

Question 27

If no date of possession is mentioned in the sales contract, the buyer should receive possession

A)
on signing the deed.
B)
on the signing of the contract.
C)
when the seller vacates the property.
D)
on the transfer of title.

Answer 27

D)
on the transfer of title

Possession usually takes place on delivery of the deed, which often is several days after signatures are obtained on the deed and a month or so after the sales contract is signed.

Question 28

A listing agent receives an offer on a property that is already verbally under contract. Which of the following is NOT acceptable?

A)
Telling the second offeror that she may submit a backup offer for the seller’s consideration
B)
Presenting the second offer to the seller as soon as reasonably possible
C)
Using the North Carolina Association of REALTORS® Response to Buyer’s Offer form
D)
With the seller’s permission, suggesting that both buyers submit their ‘‘highest and best’’ offer

Answer 28

A)
Telling the second offeror that she may submit a backup offer for the seller’s consideration

All offers must be presented immediately, and there is no existing contract to “backup” All offers must be in writing, so a verbal offer is just like having no offer.

Question 29

As a licensee in North Carolina, when using an attorney-approved preprinted offer, sales contract, or both for a customer or client, all of the following must be included in the preprinted agreement EXCEPT

A)
agency disclosure to the other side of the transaction.
B)
buyer’s intended use of the property.
C)
who pays closing expenses.
D)
method of agent’s compensation.

Answer 29

D)
method of agent’s compensation.

There are 19 required items a licensee must have in any contract offered to a customer/client. Two things not allowed to be part of the preprinted form are the agents’ compensation (which belongs in the agency agreement) and any attempt made by the agent to disclaim liability.

Question 30

When should a broker communicate acceptance to an offeror or the offeror’s broker?

A)
Any of these answers are correct
B)
After presenting the offer to the offeree and obtaining the signatures and initials required from the offeree
C)
After writing the offer for the offeror’s signatures
D)
After discussing the offer and obtaining verbal assent from the offeree

Answer 30

B)
After presenting the offer to the offeree and obtaining the signatures and initials required from the offeree

Contracts to convey real estate must be in writing. It would be inappropriate to communicate acceptance until all signatures have been obtained.

Question 31

A buyer who merely wants the right to buy a property under specific terms during a specific period of time, has to move forward proactively before the end of the period if intending to buy, and likely pays a nonrefundable fee to the seller for this right will likely use

A)
a due diligence contract.
B)
an option.
C)
a right of first refusal.
D)
a conditional sales contract.

Answer 31

B)
an option.

While North Carolina’s standard residential contract, Offer to Purchase and Contract, Form 2-T, allows a buyer to cancel for any reason or no reason, not everyone uses that contract. Also that form states that if the buyer does not cancel by the end of the due diligence period, then the contract proceeds. With an option agreement, the buyer’s rights terminate at the end of the option period if the buyer does not exercise the option.

Question 32

Regarding the standard Offer to Purchase and Contract, Form 2-T, which of the following is TRUE?

A)
It cannot be used by the buyer or the seller, unless they have a broker.
B)
It can be used for small commercial real estate transactions.
C)
It can only be completed by an attorney.
D)
It can be completed by a broker, following the buyer’s instructions.

Answer 32

D)
It can be completed by a broker, following the buyer’s instructions

The form is meant to be used by North Carolina licensees and can also be used by buyers and sellers. Brokers must be careful to refrain from drafting, and stick to filling in the blanks.

Question 33

A buyer wishes to add a financing contingency to an offer. How may this be accomplished?

A)
The buyer or the agent may ask an attorney to write an addendum for this transaction.
B)
The agent can email the listing agent to make all parties aware that the offer is contingent.
C)
The buyer may direct the agent to insert the verbiage into the offer.
D)
The agent may use an addendum that had been previously written for this buyer.

Answer 33

A)
The buyer or the agent may ask an attorney to write an addendum for this transaction.

Agents are prohibited from drafting conditions to a contract. An attorney should be consulted to add additional contingencies.

Question 34

At what point is it appropriate to refer to the Offer to Purchase and Contract (NCAR/NCBA) as a contract and NOT an offer?

A)
When the earnest money deposit is deposited and has cleared the escrow agent’s bank
B)
When all parties agree to all terms and conditions
C)
When communication of acceptance of all terms and conditions has been relayed to the offeror
D)
When all parties have indicated their agreement on all terms and conditions by signing every page of the Offer to Purchase and Contract (NCAR/NCBA)

Answer 34

C)
When communication of acceptance of all terms and conditions has been relayed to the offeror

Until the last party has initialed and signed and communication of such signing has been relayed, the Offer to Purchase and Contract (NCAR/NCBA) is still an offer.

Question 35

The North Carolina listing agent on a property received an offer from an interested buyer. The seller wants the listing agent to show the offer to the next door neighbor who expressed some interest in the property at a local neighborhood party last week. Can the listing agent do this?

A)
Yes, but only if the neighbor requests the information
B)
Yes, if the interested buyer has given permission for the offer to be shown to others
C)
Yes, if the seller tells the listing agent to do so
D)
No, it is illegal

Answer 35

B)
Yes, if the interested buyer has given permission for the offer to be shown to others

Question 36

The North Carolina listing agent on a property received an offer from an interested buyer. The seller wants the listing agent to show the offer to the next door neighbor who expressed some interest in the property at a local neighborhood party last week. Can the listing agent do this?

A)
Yes, but only if the neighbor requests the information
B)
Yes, if the interested buyer has given permission for the offer to be shown to others
C)
Yes, if the seller tells the listing agent to do so
D)
No, it is illegal

Answer 36

B)
Yes, if the interested buyer has given permission for the offer to be shown to others

The listing agent must have the interested buyer’s express permission to reveal material terms of the offer to other interested buyers.