NC Sales Contracts and Related 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)
She has no contract.
D)
Her position is unclear.

Answer 1

C)
She has no contract.

Explanation
Contracts must be in writing to be enforceable.

Reference: Sales Contracts and Related Procedures

Question 2

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

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

Answer 2

A)
on the transfer of title.

Explanation
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.

Reference: Sales Contracts and Related Procedures

Question 3

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

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

Answer 3

B)
To disclose all known defects in the house

Explanation
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.

Reference: Sales Contracts and Related Procedures

Question 4

Which of the following is the MOST essential element for an enforceable real estate purchase contract?

A)
Witnessed
B)
Time of closing
C)
Date of contract
D)
To be in writing

Answer 4

D)
To be in writing

Explanation
The statute of frauds requires that real estate purchase contracts be in writing and signed by the party to be charged. Witnesses are not required in most states. While dates are helpful, they are not essential. Most courts will be able to imply a reasonable time to close based on custom and practice in the community. In exceptional cases, however, the contract may specify that it is important for tax purposes that the contract close on time. In such a case, a court could find that the omission of a closing date was fatal.

Reference: Sales Contracts and Related Procedures

Question 4

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)
No, it is not the form to use.
D)
Yes but only if the woman is prequalified.

Answer 4

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

Explanation
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.

Reference: Sales Contracts and Related Procedures

Question 4

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)
method of agent’s compensation.
D)
who pays closing expenses.

Answer 4

C)
method of agent’s compensation.

Explanation
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.

Reference: Sales Contracts and Related Procedures

Question 4

A man has an accepted offer on his listed home. The Offer to Purchase and Contract, Form 2-T, was used. Another offer comes in which the man likes better. What is the man’s BEST option?

A)
Refuse all legal requests made by the first buyer, hoping that party will cancel.
B)
Accept the better offer as a backup offer.
C)
Accept the better offer.
D)
Invoke the kick-out clause and cancel the contract with the first buyer.

Answer 4

B)
Accept the better offer as a backup offer.

Explanation
The man cannot accept two offers; there is no standard kick-out clause in Form 2-T and refusing legal requests may put the man in breach of contract.

Reference: Sales Contracts and Related Procedures

Question 5

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

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

Answer 5

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

Explanation
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.

Reference: Sales Contracts and Related Procedures

Question 6

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

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

Answer 6

B)
present all offers immediately.

Explanation
If the seller decides to respond to certain offers, that is the seller’s decision.

Reference: Sales Contracts and Related Procedures

Question 7

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

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

Answer 7

B)
a requirement of early occupancy.

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

Reference: Sales Contracts and Related Procedures

Question 8

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

Answer 8

D)
Present all offers at the same time.

Explanation
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.

Reference: Sales Contracts and Related Procedures

Question 9

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

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

Answer 9

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

Explanation
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.

Reference: Sales Contracts and Related Procedures

Question 10

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

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

Answer 10

A)
To sign a general warranty deed

Explanation
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.

Reference: Sales Contracts and Related Procedures

Question 11

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

Answer 11

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

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

Reference: Sales Contracts and Related Procedures

Question 12

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

Answer 12

D)
New home bought from the builder

Explanation
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.

Reference: Sales Contracts and Related Procedures

Question 13

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

Answer 13

A)
an option.

Explanation
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.

Reference: Sales Contracts and Related Procedures

Question 14

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 all parties agree to all terms and conditions
B)
When the earnest money deposit is deposited and has cleared the escrow agent’s bank
C)
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)
D)
When communication of acceptance of all terms and conditions has been relayed to the offeror

Answer 14

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

Explanation
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.

Reference: Sales Contracts and Related Procedures

Question 15

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)
hold it for three days.
D)
explain to the selling agent why you will not present it.

Answer 15

B)
deliver it immediately.

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

Reference: Sales Contracts and Related Procedures

Question 16

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

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

Answer 16

A)
Within three calendar days of receipt by the broker

Explanation
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.

Reference: Sales Contracts and Related Procedures

Question 17

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

Answer 17

A)
The buyer obtains possession at closing.

Explanation
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.”

Reference: Sales Contracts and Related Procedures

Question 18

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

A)
After discussing the offer and obtaining verbal assent from the offeree
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)
Any of these answers are correct

Answer 18

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

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

Reference: Sales Contracts and Related Procedures

Question 19

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

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

Answer 19

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

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

Reference: Sales Contracts and Related Procedures

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 seller, the listing agent, and the selling agent
D)
The listing agent and the selling agent

Answer 20

A)
None of these

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

Reference: Sales Contracts and Related Procedures

Question 21

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

Answer 21

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

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

Reference: Sales Contracts and Related Procedures

Question 22

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) Pay her agent the commission D) Get a copy of the contract in writing

Answer 22

D) Get a copy of the contract in writing Explanation The contract must be in writing to be enforceable. Reference: Sales Contracts and Related Procedures

Question 23

The North Carolina Real Estate Commission typically takes action on which of the following issues? A) A firm charges a much higher commission rate than the other firms in an area. B) A broker refuses to pay another broker for procuring a buyer. C) A broker solicits the client of another firm. D) A broker modifies the standard Offer to Purchase Form 2T.

Answer 23

D) A broker modifies the standard Offer to Purchase Form 2T. Explanation 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. Reference: Sales Contracts and Related Procedures

Question 24

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

Answer 24

A) It is only when they desire to sell the property that both signatures are required. Explanation 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. Reference: Sales Contracts and Related Procedures

Question 25

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

Answer 25

D) Explain the situation, ask the seller for more time. Explanation 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. Reference: Sales Contracts and Related Procedures

Question 26

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

Answer 26

D) Accept the better offer as a backup offer. Explanation 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. Reference: Sales Contracts and Related Procedures

Question 27

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

Answer 27

C) request the return of the due diligence fee if the seller will not address the items found in the home inspection report. Explanation 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. Reference: Sales Contracts and Related Procedures

Question 28

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 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. B) The listing agent did not need to present the first offer because he got a higher offer from his buyer. C) 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. D) 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.

Answer 28

A) 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. Explanation All offers should be shown immediately, but in no event later than three days. Reference: Sales Contracts and Related Procedures

Question 29

The North Carolina statute that allows contracts to be formed via email or fax is called A) Real Estate Practices Act. B) Interstate Commerce Act. C) Uniform Electronic Transactions Act. D) Internet Neutrality Act.

Answer 29

C) Uniform Electronic Transactions Act. Explanation It has certain requirements for consumer transactions but allows contracts to be formed electronically. Reference: Sales Contracts and Related Procedures

Question 30

A listing agent receives an offer on a property that is already verbally under contract. Which of the following is NOT acceptable? A) With the seller's permission, suggesting that both buyers submit their ''highest and best'' offer B) Using the North Carolina Association of REALTORS® Response to Buyer's Offer form C) Telling the second offeror that she may submit a backup offer for the seller's consideration D) Presenting the second offer to the seller as soon as reasonably possible

Answer 30

C) Telling the second offeror that she may submit a backup offer for the seller's consideration Explanation 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. Reference: Sales Contracts and Related Procedures

Question 31

Unless otherwise specified, how are days defined in the Offer to Purchase and Contract (NCAR/NCBA) calculated? A) Calendar days B) Banking days C) Business days D) Fiscal days

Answer 31

A) Calendar days Explanation 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. Reference: Sales Contracts and Related Procedures

Question 32

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

Answer 32

A) all of these methods are commonly used. Explanation "Any reasonable manner" is acceptable communication between the brokers. Reference: Sales Contracts and Related Procedures

Question 33

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) If she walks away, she can be sued for specific performance by the seller. D) The woman is in breach and will lose her due diligence fee and earnest money.

Answer 33

D) The woman is in breach and will lose her due diligence fee and earnest money. Explanation 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. Reference: Sales Contracts and Related Procedures

Question 34

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 as a backup offer. D) Accept the better offer.

Answer 34

C) Accept the better offer as a backup offer. Explanation 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. Reference: Sales Contracts and Related Procedures

Question 35

Which of the following are NOT included as fixtures in the Offer to Purchase and Contract (NCAR/NCBA)? A) Refrigerators B) Fuel tanks, including the contents C) Gas logs D) Stoves

Answer 35

A) Refrigerators Explanation A refrigerator, unless attached or built in, is considered personal property, which belongs to and may be taken by the seller. Reference: Sales Contracts and Related Procedures