License Law and Commission (**State Focus**)

Question 1

On the seller’s default, what should happen to the earnest money?

A)
It should be placed in an escrow fund.
B)
It should be returned to the buyer.
C)
It belongs to the broker.
D)
It should be retained by the seller.

Answer 1

B)
It should be returned to the buyer

The earnest money is to protect the seller against the buyer’s default. If the seller defaults, the money must be returned to the buyer. However, the seller will still have to sign the release form to return the monies to the buyer. If the seller refuses, the firm must hold the monies until both the seller and the buyer have resolved their dispute or follow NCREC trust account guidelines regarding turning monies over to the clerk of court. If the buyer elects to sue the seller for specific performance, the money will most likely be held in escrow.

Question 2

Which of the following offenses is possible grounds for a disciplinary action on a real estate licensee?

A)
A broker uses outdated forms for a transaction.
B)
Any of these.
C)
A provisional broker accepts payment for staffing an open house from a broker at another firm.
D)
A listing agent fails to notify a buyer that the new highway will be in the backyard of the home.

Answer 2

A)
A broker uses outdated forms for a transaction.
B)
Any of these.
C)
A provisional broker accepts payment for staffing an open house from a broker at another firm.
D)
A listing agent fails to notify a buyer that the new highway will be in the backyard of the home.

Explanation

The answer is any of these. Using outdated forms is incompetence. A provisional broker is not allowed to accept payment of any kind from any broker except the broker-in-charge. Failing to notify a consumer of a new highway is omission of a material fact. All these situations might lead to revocation.

Question 3

How much personal money may a broker in North Carolina keep in his trust account?

A)
None of these
B)
Whatever is necessary to cover service charges on the account each month
C)
None
D)
$100

Answer 3

B)
Whatever is necessary to cover service charges on the account each month

Explanation
The answer is whatever is necessary to cover service charges on the account each month. The rules say “may deposit and maintain in his trust account a maximum of $100 . . . or such amount as may be required.”

Question 4

All of the following are true EXCEPT

A)
a Virginia broker in Norfolk calls a broker in Kitty Hawk, North Carolina. He says he and his clients have just returned from a weekend trip to Kitty Hawk, and during this trip, they looked at a property listed with the Kitty Hawk broker. The Virginia broker’s clients want to submit an offer. The Virginia broker emails an offer to the broker in Kitty Hawk and the sellers accept this offer. The Kitty Hawk broker can share her commissions with the Virginia broker.
B)
a South Carolina broker calls a broker in Charlotte, North Carolina, and tells her he has a friend who wants to buy a house in the Charlotte area. The South Carolina broker can receive a referral fee.
C)
a Tennessee broker in Knoxville calls a broker in Asheville, North Carolina. She says she has clients who have just returned from a weekend trip to Asheville. They told her they looked at a property listed with the Asheville broker and they want to submit an offer. The Tennessee broker emails an offer to the broker in Asheville and the sellers accept this offer. The Asheville broker can share her commissions with the Tennessee broker.
D)
a travel agent from Michigan calls a vacation rental manager in Wrightsville Beach, North Carolina, and indicates she has clients who are looking for a vacation rental. The travel agent can receive a referral fee.

Answer 4

A)
a Virginia broker in Norfolk calls a broker in Kitty Hawk, North Carolina. He says he and his clients have just returned from a weekend trip to Kitty Hawk, and during this trip, they looked at a property listed with the Kitty Hawk broker. The Virginia broker’s clients want to submit an offer. The Virginia broker emails an offer to the broker in Kitty Hawk and the sellers accept this offer. The Kitty Hawk broker can share her commissions with the Virginia broker.

Explanation
When an out-of-state broker sets foot into North Carolina, the individual needs a North Carolina license on active status. The Virginia broker should have stayed in Virginia.

Question 5

Which of the following statements about broker-in-charge education courses is TRUE?

A)
Brokers who are broker-in-charge eligible must take both the GENUP and BICUP mandatory update courses each year to keep their BIC-eligible status.
B)
If the broker-in-charge attends the GENUP in January, and he is designated as BIC in February, he will not be required to take the BICUP until after July 1.
C)
Brokers-in-charge must attend both the BICAR and BICUP courses each year.
D)
All brokers-in-charge must attend the 12-hour Broker-in-Charge course within 120 days of designation as a BIC, as well as take the Basic Trust Account Procedures course every four years.

Answer 5

B)
If the broker-in-charge attends the GENUP in January, and he is designated as BIC in February, he will not be required to take the BICUP until after July 1.

Brokers-in-charge must attend the BICUP and a four-hour elective course each year. Brokers who have declared themselves as a BIC must attend the 12-hour BIC course within 120 days of designation as a BIC. There is no requirement for a BIC to attend the Basic Trust Account Procedures course.

Question 6

Which is TRUE concerning an earnest money deposit?

A)
It is essential to the contract for the sale of real property.
B)
It must equal 10% of the purchase price.
C)
It serves as a source of payment of damages to the seller in case of a buyer’s breach.

Answer 6

C)
It serves as a source of payment of damages to the seller in case of a buyer’s breach.

Explanation
The answer is it serves as a source of payment of damages to the seller in case of a buyer’s breach. It is also considered liquidated damages in North Carolina’s standard sales contract for residential property. Use of earnest money is both customary and prudent. It is not essential because the buyer’s promise to perform is sufficient consideration to support the seller’s promise to sell.

Question 7

What is the requirement for retaining copies of all contracts and documentation related to the sale of a time-share?

A)
The five-year retention period begins at the date of the last activity in the transaction, whether closed or not.
B)
The three-year retention period begins at the date of the last activity in the transaction.
C)
The five-year retention period begins at contract formation.
D)
The three-year retention period begins at closing.

Answer 7

B)
The three-year retention period begins at the date of the last activity in the transaction.

Explanation
The answer is the three-year retention period begins at the date of the last activity in the transaction. The statute for record retention for time-shares is three years from the date of the last activity in the transaction.

Question 8

A limited nonresident commercial license in North Carolina would be beneficial to which of the following?

A)
A licensee from another state wishing to assist a commercial client with North Carolina purchases
B)
A North Carolina licensee wishing to do commercial real estate in other states
C)
A resident of another state wishing to do commercial real estate in North Carolina
D)
A licensee from another state wishing to assist residential buyers in North Carolina

Answer 8

A)
A licensee from another state wishing to assist a commercial client with North Carolina purchases

Explanation
The answer is a licensee from another state wishing to assist a commercial client with North Carolina purchases. The limited nonresident commercial license is available to an active licensee from any other state or U.S. territory as long as it is obtained before coming to North Carolina.

Question 9

An Arizona broker, Jill, wants to help her client purchase commercial real estate in North Carolina. She is with a national firm that has an office in Charlotte. How can she legally practice real estate in North Carolina?

A)
All of these.
B)
She can acquire a Limited Nonresident Commercial Broker License.
C)
She can take the state portion of the exam and apply for a North Carolina license.
D)
She can stay in Arizona and refer her client to a North Carolina licensed broker.

Answer 9

A)
All of these.

If Jill steps into North Carolina to practice real estate, she must have a North Carolina real estate license. There are two ways for her to acquire a license. Another option is for her to refer her client and receive commission or a referral fee.

Question 10

A North Carolina licensee was taken to court by an unhappy seller. The court found in favor of the seller. All of the following could occur EXCEPT

A)
the court may revoke the licensee’s license.
B)
the court could ask the chairman of the North Carolina Real Estate Commission to consider disciplinary action against the licensee.
C)
the licensee could be fined.
D)
the seller could also file a complaint to the North Carolina Real Estate Commission.

Answer 10

A)
the court may revoke the licensee’s license.

The courts cannot revoke a license but can recommend such action to the chairman of the North Carolina Real Estate Commission.

Question 11

The NCREC requires a broker-in-charge

A)
at each branch office only.
B)
at the firm’s principal office and each branch office.
C)
on each team within the firm and at the firm’s principal office.
D)
at the firm’s principal office only.

Answer 11

B)
at the firm’s principal office and each branch office

The firm’s principal office must have a BIC. Each branch office must also have a BIC. Teams within a firm will work under the BIC at the principal office or the BIC at a branch office. Some teams may also have a BIC

Question 12

When is the last day a North Carolina licensee can take continuing education in a license year?

A)
December 31
B)
June 30
C)
June 10
D)
It depends when the license was issued

Answer 12

C)
June 10

Explanation
The answer is June 10. No continuing education can be offered between June10 and June 30.

Question 13

A provisional broker who wants to have the provisional status removed from her license will be required to have which of the following?

A)
Three years of experience
B)
90 hours of post-licensing classes
C)
Two years of full-time experience
D)
Three years of post-licensing classes

Answer 13

B)
90 hours of post-licensing classes

Explanation
The answer is 90 hours of post-licensing classes. The required 90 hours of post-licensing education may be completed immediately upon receiving a real estate license; however, it must be successfully completed before the broker’s 18-month anniversary of licensure, effective July 1, 2020.

Question 14

Which of the following would be legally allowed by a North Carolina real estate broker?

A)
Offer a $100 dinner gift certificate to any of her friends who send business her way
B)
Accept payment from her lender for her annual errors and omissions insurance
C)
Offer a $100 dinner gift certificate to any of her past clients who send business her way
D)
Pay the closing costs for the buyer of one of her listings, with lender approval

Answer 14

D)
Pay the closing costs for the buyer of one of her listings, with lender approval

Explanation
The answer is pay the closing costs for the buyer of one of her listings, with lender approval. GS 93A and Commission rules allow payment to a broker with an active license or a principal in any transaction in which the broker is a part as long as the lender approves it. North Carolina license law prohibits a broker from paying a referral fee to an unlicensed individual other than a principal in the transaction. The Real Estate Settlement Procedures Act prohibits brokers from receiving kickbacks for referrals to service providers.

Question 15

Examples of trust money include

A)
homeowner association dues and assessments, earnest money deposits, and interest earned on the trust account.
B)
parking fees in apartment complexes, rents, and tenant security deposits.
C)
earnest money deposits, parking fees in apartment complexes, and interest earned on the trust account.
D)
tenant security deposits, rents, and homeowner association dues and assessments.

Answer 15

D)
tenant security deposits, rents, and homeowner association dues and assessments.

The answer is tenant security deposits, rents, and homeowner association dues and assessments. Interest earned on the trust account and parking fees in apartment complexes go into the firm’s operating account. The trust account is to be reconciled at least every 30 days and any interest earned must be moved to the operating account.

Question 16

The North Carolina Real Estate Commission has the power to do all of the following EXCEPT

A)
suspend a broker’s license for two years.
B)
order a broker to pay for needed repairs that were not disclosed by the broker.
C)
fine a time-share developer for using unlicensed sales agents.
D)
reprimand a broker.

Answer 16

B)
order a broker to pay for needed repairs that were not disclosed by the broker

The NCREC may not order a broker to pay an injured member of the public, nor can the NCREC fine a broker.

Question 17

In order to have the provisional status removed from their license, brokers must do which of the following?

A)
Take all three post-licensing courses plus eight hours of CE each year
B)
Take all three post-licensing courses by the 18-month anniversary of licensure
C)
Take one post-licensing class each year for the first three years after licensure
D)
Have at least two years of full-time experience in the previous five years

Answer 17

B)
Take all three post-licensing courses by the 18-month anniversary of licensure

To remove provisional status, you must take all three post-licensing courses, in any order and at any time within 18 months of original licensure, effective July 1, 2020. The only requirement to remove provisional status is 90 hours of post-licensing.

Question 18

Which of the following is NOT allowed as a disciplinary action by the North Carolina Real Estate Commission?

A)
Suspension
B)
Reprimand
C)
A fine equal to three times the plaintiff’s loss
D)
Revocation

Answer 18

C)
A fine equal to three times the plaintiff’s loss

Explanation
The answer is a fine equal to three times the plaintiff’s loss. The Commission is not allowed to fine licensees; the court system usually allows treble damages for the plaintiff.

Question 19

Every purchaser of a time-share in North Carolina must be given

A)
a guarantee that weeks can be traded at any time.
B)
none of these.
C)
a three-day right of rescission.
D)
a free weekend to “try before you buy.”

Answer 19

B)
none of these.

Explanation
The answer is none of these. The purchaser must be given a five-day right of rescission, a public offering statement, and accurate information on any exchange program.

Question 20

A listing broker knows that the previous owner of the listed home died from a heart attack. In North Carolina, the broker must

A)
disclose the death to all buyers and agents.
B)
disclose honestly if asked.
C)
say that he does not know the status of the owner.
D)
keep the death confidential even if asked.

Answer 20

B)
disclose honestly if asked

Explanation
The answer is disclose honestly if asked. It is not required to disclose, but the broker must answer honestly if asked.

Question 21

Which of the following does NOT meet the North Carolina statutory description of a time-share?

A)
A vacation bond to occupy a property three times in the next three years
B)
A non-freehold estate for five weeks during the next six years
C)
A freehold estate for 10 weeks during the next 10 years
D)
The right to occupy a beach condo one week a year for the next 15 years

Answer 21

A)
A vacation bond to occupy a property three times in the next three years

Explanation
The answer is a vacation bond to occupy a property three times in the next three years. The definition of a time-share is the right to occupy a property a minimum of five separated intervals over a minimum of five years.

Question 22

Which of the following does NOT meet the North Carolina statutory description of a time-share?

A)
A vacation bond to occupy a property three times in the next three years
B)
A non-freehold estate for five weeks during the next six years
C)
A freehold estate for 10 weeks during the next 10 years
D)
The right to occupy a beach condo one week a year for the next 15 years

Answer 22

A)
A vacation bond to occupy a property three times in the next three years

Explanation
The answer is a vacation bond to occupy a property three times in the next three years. The definition of a time-share is the right to occupy a property a minimum of five separated intervals over a minimum of five years.

Question 23

Provisional broker post-licensing coursework is

A)
optional for inactive licensees, unless they wish to become active.
B)
mandatory for all licensees, whether active or inactive.
C)
a mandatory 30 hours of courses that must be completed by June 30 of each year.
D)
mandatory for all provisional brokers, whether active or inactive, before they may actively sell real estate.

Answer 23

A)
optional for inactive licensees, unless they wish to become active.

Explanation
The answer is optional for inactive licensees, unless they wish to become active. The penalty for not completing post-licensing courses by the required deadline is for the provisional broker’s license to be placed on inactive status by the North Carolina Real Estate Commission.

Question 24

A broker is holding an earnest money deposit equal to the amount of the commission. The seller, at the closing, not only refuses to pay the broker a commission, but also demands that the broker pay him the entire deposit. The broker should

A)
retain the earnest money as commission.
B)
refuse to permit the closing of the deal.
C)
file a complaint with the real estate licensing agency.
D)
pay the earnest money to the seller and then sue for the commission.

Answer 24

D)
pay the earnest money to the seller and then sue for the commission.

Explanation
The answer is pay the earnest money to the seller and then sue for the commission. The broker has a fiduciary duty of obedience and a duty to account for all the client’s money. The broker cannot use client monies to set off or satisfy personal claims. A lawsuit may be the only answer.

Question 25

A criminal conviction must be reported to the North Carolina Real Estate Commission within

A)
30 days.
B)
10 days.
C)
60 days.
D)
180 days.

Answer 25

C)
60 days

The answer is 60 days. The North Carolina Real Estate Commission rules do not require reporting of criminal charges, only convictions within 60 days.

Question 26

A listing broker receives on offer from a buyer’s agent on Thursday. The offer includes earnest money in the amount of $1,000 and a check for this earnest money is delivered with the offer. The contract states that the earnest money will be held by the listing broker. The seller signs the offer on Thursday evening, and the listing agent communicates acceptance to the buyer’s agent Friday morning. Which of the following is TRUE ?

A)
The earnest money check must be deposited into the listing broker’s trust account no later than Tuesday.
B)
The earnest money check must be deposited into the listing broker’s trust account no later than Wednesday, if the bank is not open on Saturday.
C)
The earnest money check must be deposited into the listing broker’s trust account on Friday.
D)
The earnest money check must be deposited into the listing broker’s trust account no later than Monday.

Answer 26

B)
The earnest money check must be deposited into the listing broker’s trust account no later than Wednesday, if the bank is not open on Saturday.

Explanation
The answer is the earnest money check must be deposited into the listing broker’s trust account no later than Wednesday, if the bank is not open on Saturday. This is three banking days from acceptance. The day of acceptance is not counted.

Question 27

A licensee must carry her pocket card for all of the following EXCEPT

A)
for entrance into post-licensing classes.
B)
to prove to anyone who asks that her license is active.
C)
to produce it whenever requested by a consumer or a broker-in-charge.
D)
for entrance into CE classes.
Explanation
The answer is to prove to anyone who asks that her license is active. A pocket card is issued to all current licensees, regardless of whether they are on active status.

Answer 27

B)
to prove to anyone who asks that her license is active.

Explanation
The answer is to prove to anyone who asks that her license is active. A pocket card is issued to all current licensees, regardless of whether they are on active status.