Test Questions for Review

Question 1

Regarding BPO’s (Broker Price Opinions) all of the following statements are correct EXCEPT:

Answer 1

Correct Answer
A provisional broker may prepare a BPO for a lender, for a fee, so long as they are supervised by the broker-in-charge.

Explanation
A provisional broker cannot complete a BPO for a fee. A full broker can complete a BPO for a fee. The BPO must contain language indicating that the bank cannot use the BPO for the purpose of originating a debt. A BPO is typically performed for a lender, while a CMA is typically performed for a buyer or seller. Both calculate the probable sales price for a property and the price is often reported as a range.

Question 2

An agent is working under an oral buyer’s agency agreement. The agent knows the buyer is strongly interested in one of the homes seen by the buyer. The buyer is ready to write the offer but refuses to sign a buyer’s agency agreement. At this point the agent may:

Answer 2

Correct Answer
write the offer but advise the buyer that they are now a sub-agent of the seller and anything the buyer has revealed must be provided to the seller.

Explanation
When a buyer refuses to sign a written buyers agency agreement, the agent can no longer represent the buyer. The agent should warn the buyer that failure to sign the agreement will result in the agent becoming an agent for the seller. If this occurs, they will need to see if the seller will permit seller sub-agency. If so, the agent must disclose all personal / confidential information that they learned about the buyer to the seller. The oral agreement must be reduced to writing prior to the presentation of an offer - not prior to contract or closing.

Question 3

Henry, a buyer from Kentucky was hesitant to enter into a written buyer agency agreement at the inception of his relationship with his agent. All of the following are true, EXCEPT?

Answer 3

Correct Answer
An agent cannot insist that a buyer sign an Exclusive agency agreement before the agent will work for the buyer

Explanation

Agents and Firms, as a business practice, can choose to work only with buyers who enter into Exclusive agreements which would be required to be in writing from inception. A client can choose to be represented under an oral buyer agency agreement so long as the agreement is non-exclusive and open-ended. The agreement must be reduced to writing prior to presentation of an offer. Under an oral agreement, the buyer must agree to compensation, determine if dual/designated dual agency will be authorized, etc. The agent can SHOW property while under oral agency, but the agreement must be reduced to writing prior to the presentation of the offer.

Question 4

A broker has an exclusive buyer agency agreement that includes a 2.5 % commission and any bonuses offered. When must the buyer’s agent to disclose the bonus offered for which they are aware before showing?

Answer 4

Correct Answer
Prior to the preparation of the offer

Explanation

The bonus amount must be disclosed in time for the buyer to decide on making an offer. Oral disclosure is allowed when the buyer is considering an offer. Disclosure must be reduced to writing prior to preparation of an offer. So the very last minute would be before the agent prepares an offer for the buyer. It should be disclosed earlier rather than later. The best practice is before you show the property. NOTE: You must select the more correct answer.

Question 5

Which of the following entities would be EXEMPT from obtaining a separate firm license?

Answer 5

Correct Answer
Mary Jones, Broker

Explanation

The best answer is a sole proprietor, therefore the single broker named is correct. A sole proprietor is not required to obtain a separate firm license. All other entities - LLC’s, corporations and partnerships would required a firm license.

Question 6

All of following activities can be performed by an unlicensed employee, EXCEPT:

Answer 6

Correct Answer
create the marketing for a new listing based on information found in the public record.

Explanation

An unlicensed employee cannot create advertising without the direction of a licensed broker. The remaining activities can be performed by a W-2 employee that does not hold an active real estate license. To see the complete list, see page 3-4 of License Law and Commission Rule Comments.

Question 7

A licensee lists a property for sale and learns that the neighborhood has a registered sex offender. A family with young children ask to view the property and ask the licensee about criminal activity in the area. The broker responds that they cannot release those statistics and encourages the buyer to perform research if that is a concern. Did the licensee act appropriately?

Answer 7

Correct Answer
Yes. The broker has not violated license law by failing to disclose the sex offender.

Explanation

A broker has a duty to disclose material facts. It is not a material fact in North Carolina that a registered sex offender lives in the area. A broker cannot lie when asked specifically by the buyer about a registered sex offender, however can refuse to answer the question. A broker cannot disclose crime statistics to the buyer as this is a violation of the Federal Fair Housing Act.

Question 8

A broker manages several rental units for various owners and routinely employs Ajax Cleaning Service to clean the units after the tenant moves out. The broker pays Ajax a $50 per unit fee for its services out of rental proceeds received and deposited in his trust account. Ajax then refunds to the broker $10 for each $50 fee it receives. Which of the following is TRUE?

Answer 8

Correct Answer
A broker may receive compensation for procuring any services for properties managed by the broker with informed, written consent of the property owner

Explanation

A broker doing property management may receive fees for procuring services on behalf of the owner with the owner’s written consent.

Question 9

A broker recently listed a house acquired by a married couple in 2008 as tenants by the entirety. At the time of the listing presentation, the wife was overseas and not available to sign the listing agreement. Accordingly, does a valid listing agreement exist?

Answer 9

Correct Answer
No. The lack of the wife’s signature could prevent the husband from conveying title.

Explanation

Agreements to sell property owned as tenants by the entirety must be signed by both spouses to be valid. The property is said to be owned by the marital entity, i.e., the husband and wife do not have separate, distinctive shares - each owns 100%. A spouse may act as Attorney-in-Fact or under a Power-of-Attorney to sign on behalf of a spouse that is traveling. Oral consent does not constitute acceptance as the listing agreements must be in writing from inception and signed by all parties that have an interest in order to be legally binding. The word “never” should throw up a flag to be cautious about the answer as a person can be appointed as an attorney-in-fact or power-of-attorney.

Question 10

Can a brokerage legally retain the interest earned on client funds that are deposited into the brokerage trust account?

Answer 10

Correct Answer
Yes. When the client grants permission in the listing/buyer agency agreement.

Explanation

The client can give the brokerage the authority to retain the interest earned on the trust account to cover the expenses of maintaining the account. The trust account is “other peoples money” and only a limited amount of brokerage money can be deposited into the account (typically $100). The NCAR Exclusive Right to Sell Listing Agreement addresses the ability of the firm to retain the interest.

Question 11

A manufactured dwelling is built to which of the following standards?

Answer 11

Correct Answer
Federal

Explanation

Manufactured or mobile homes are built to federal (HUD) standards. Manufactured homes become real property when the wheels and hitch are removed, it is placed on a permanent foundation, and on land that is owned. The manufactured home must be removed from the DMV. Modular homes are built to state building codes. Site-built homes must meet local city/county building codes.

Question 12

Which of the following statement is TRUE about agency representation?

Answer 12

Correct Answer
A Provisional broker and his/her broker-in-charge may act as dual agents in a transaction.

Explanation

A provisional broker and his/her supervising broker-in-charge cannot act as designated agents, however they can act as dual agents. An easy way to remember this is “no BIC and PB and no P&C” - no broker-in-charge & provisional broker and no personal & confidential information about the other side. All other combinations may act as designated agents when the firm practices dual & designated agency, buyer and seller have consented and no BIC & PB and no P&C.

Question 13

Which of the following statements is most accurate regarding the Exclusive Right to Sell Listing Agreement?

Answer 13

Correct Answer
The seller has no legal right to terminate the listing agreement during the term of the agreement

Explanation

It is true that a seller has no legal right to terminate during the term of the listing agreement. The seller may fire the listing agent, but s/he would be in breach if the agent is performing in accordance with the terms of the contract. Listing agents may be paid in 2 circumstances beyond the end date of the listing agreement: under the provision of the “extender clause” and if the buyer was procured during the listing agreement but did not close until after the end date. Listing agreements, by rule, cannot automatically renew.

Question 14

A listing agent has a closing scheduled for July 2nd. The listing agent takes two CE electives for a total of 8 hours but fails to take the GENUP. The listing agent pays his renewal fee and attends the settlement meeting on July 2nd. Which of the following is TRUE?

Answer 14

Correct Answer
Neither the listing broker nor the firm may be paid because the listing broker engaged in real estate activities while on inactive status

Explanation

Attending a settlement meeting on behalf of a consumer is a brokerage activity and requires a license on active status. Neither the firm nor the listing may legally be compensated for this transaction because the listing broker was on inactive status. To accept the fee would be an illegal brokerage activity of both the listing broker and the firm.

Question 15

A broker is showing a property inside the city limits, and the buyer is interested in making an offer on a beautiful home with a large corner lot. The buyer told the broker they will be running a landscaping business from home and will need to park three dump trucks on site. Which of the following is TRUE?

Answer 15

Correct Answer
The broker must discover and disclose any restrictions, public or private, that may interfere with the buyer’s intended use.

Explanation

A broker must discover and disclose material facts. The need to park three dump trucks in the yard is a material fact for this buyer. Also, brokers are not allowed to draft (or craft) paragraphs in a sales contract for others. Remember, property in the city is regulated by the city, county, and private land use controls and the most restrictive rules.

Question 16

A broker is working for a buyer as a buyer’s agent. The buyer tells the broker to offer $210,000 for the property, but I will pay $220,000. The broker must:

Answer 16

Correct Answer
keep the buyer’s confidential information confidential.

Explanation
The broker is a buyers agent. The buyer is the principal, and the broker must keep confidential information confidential. The price the buyer is willing to pay is confidential information. Common courtesy does not apply, and this is why we have agency disclosure.

Question 17

Once licensed, a provisional broker must:

Answer 17

Correct Answer
Complete three thirty-hour postlicense classes to remove provisional status

Explanation

A provisional broker needs to complete 90 hours of postlicense education to remove the provisional status. Failure to complete postlicense courses will cause a license to go inactive. A licensee can remain on inactive status as long as they pay the license renewal fee by June 30th each year. Continuing Ed is not due until the second renewal. A provisional broker license is always inactive absent a BIC.

Question 18

An agent is working under an oral buyer’s agency agreement. The agent knows the buyer is strongly interested in one of the homes seen by the buyer. The buyer is ready to write the offer but refuses to sign a buyer’s agency agreement. At this point the agent may:

Answer 18

Correct Answer
write the offer but advise the buyer that they are now a sub-agent of the seller and anything the buyer has revealed must be provided to the seller.

Explanation

When a buyer refuses to sign a written buyers agency agreement, the agent can no longer represent the buyer. The agent should warn the buyer that failure to sign the agreement will result in the agent becoming an agent for the seller. If this occurs, they will need to see if the seller will permit seller sub-agency. If so, the agent must disclose all personal / confidential information that they learned about the buyer to the seller. The oral agreement must be reduced to writing prior to the presentation of an offer - not prior to contract or closing.

Question 19

Which of the following would terminate an agency relationship?

Answer 19

Correct Answer
Death of the principal

Explanation

Agency agreements terminate by the death of the principal/client or the firm. Agency agreements terminate by the death of the principal/client or the firm. Listing agreements also terminate when a new deed records, as the agency relationship is fully performed (closed). Agency relationships are not terminated by the death of the listing agent, buyer agent, subagent, BIC, or selling agent unless the agency agreement is with an independent sole proprietor broker.

Question 20

A broker must enter into a written agency agreement with a buyer no later than:

Answer 20

Correct Answer
preparation of a written offer to purchase.

Explanation

A broker may work with a buyer client with an express oral agreement. Before the preparation of an offer, the buyer agency agreement must be in writing. The new Working With Real Estate Agents Disclosure states: “You may begin with an oral agreement, but your agent must enter into a written buyer agency agreement with you before preparing a written offer to purchase or communicating an oral offer for you.”

NOTE: The rule changed 7/1/2021 from presentation to preparation.

Question 21

A licensee is writing an offer using the Standard NCAR / NCBA 2-T for a home that she is purchasing. Which of the following statements is TRUE?

Answer 21

Correct Answer
The licensee is permitted to make the change to the Standard 2-T.

Explanation

This is tricky. A licensee is not permitted to draft terms in a contract where they are not a party to the agreement. Since the licensee is the buyer, they are a party to the contract and therefore may draft language. It is still recommended that the licensee seek the advice of an attorney. The Commission and REALTOR Association do not approve personal real estate transactions.

Question 22

A broker is holding an open house for a local builder. At what point must the broker provide the consumer with the Working With Real Estate Agents disclosure form?

Answer 22

Correct Answer
Before the consumer asks about the down payment needed to purchase the property

Explanation
Agency disclosure must occur before a consumer shares any confidential information with the broker. School district or septic system questions do not rise to the level of confidential information. Questions about financing terms and down payment requirements cross the first substantial contact line.

Question 23

A broker is involved in a sale transaction using the NCAR/NCBAR standard 2-T Offer to Purchase and Contract, where the buyer terminated by the due diligence date. Which of the following is TRUE?

Answer 23

Correct Answer
The buyer is entitled to a refund of the earnest money

Explanation

Standard form #2 says that if the buyer terminates the offer to purchase before the due diligence deadline (BY that date), the buyer is entitled to the return of the earnest money deposit. The due diligence fee pays for the time to decide, and the buyer forfeits the due diligence fee when the buyer terminates the agreement. When the buyer terminates after the due diligence period for any reason, the seller keeps both the due diligence fee and the earnest money.

Question 24

Oral buyer agency must:

Answer 24

Correct Answer
be express.

Explanation

Express agency is agreed to, and may be oral or written. Oral buyer agency is an example of an express agency. The implied agency is born out of actions and behaviors, rather than an express agreement. Implied agency is illegal in North Carolina. Â Apparent agency occurs when an agent, either acting beyond the scope of the agency agreement, or acting as an agent with an absence of any agency agreement. General agency grants authority to an agent to sign certain agreements on behalf of the client (property management/affiliation with a brokerage).

Question 25

A broker lists a new construction home for sale based on the builder's plan, stating the home will be 5,000 square feet. Before closing, an appraiser calculates that the house is 4,500 square feet. The buyer wants the seller to reduce the price. Which of the following is TRUE?

Answer 25

Correct Answer Both the listing broker and buyer broker are responsible for misrepresentation Explanation When a listing agent markets a property, they need to ensure that it is accurate. The listing broker can use the builder plan; however, he/she would need to verify the square footage once framing has occurred. The buyer's agent is also responsible as a 500 square foot difference on a 4,500 home is substantial. A reasonably prudent agent should have discovered the discrepancy.

Question 26

Which property ownership right sets a boundary at the mean high tide water mark?

Answer 26

Correct Answer Littoral Explanation Littoral water rights involve bodies of water with tides such as the ocean. Property boundaries are up to the high tide mean mark. The foreshore is the strip of land exposed during low tide and is public land. Riparian water rights refer to non-navigable bodies of water where adjacent owners own up the middle of the water source and all the land below. Lateral rights refer to the right that a neighbor's construction or excavation will continue to support the natural boundaries of the property.

Question 27

All of the following are true regarding broker trust accounts, EXCEPT:

Answer 27

Correct Answer Trust money must be held in a North Carolina bank or savings and loan institution. Explanation A recent law and rule change allows brokerages and property managers to keep trust money in accounts outside of the State as long as the bank is lawfully doing business in the State of NC and will allow audit privileges to the Commission. A BIC may delegate tasks associated with the maintenance of the trust account, however, is still responsible for any mistakes. A brokerage can retain the interest earned on balances in the trust account when it has been agreed to in the agency contract. A brokerage may place money in the trust account to cover account maintenance and returned check fees. While this question does not address commingling, conversion and embezzlement it is important to know these terms. Commingling is mixing client and brokerage money. Conversion is using money in the trust account to cover a client's expense in excess of the balance that the client has in the trust account. Embezzlement is fraud, where a broker steals the property of another.

Question 28

A broker at ABC Realty forms a team, Best Brokers Team Inc., and takes a listing. Which of the following is TRUE?

Answer 28

Correct Answer The listing agreement must include the name of ABC Realty and Best Brokers, Inc. The listing agent must include a license number. All marketing must include the name of both companies. Explanation When a team (firm) takes a listing on behalf of an overarching firm, BOTH firm names must appear on the agency agreements and all marketing.

Question 29

An attorney's title examination would, most likely, discover which of the following?

Answer 29

Correct Answer a 9-year old IRS lien against the property that has yet to be settled Explanation The title search would discover recorded liens against the property, such as an IRS lien. Unrecorded liens would not be on the public record. A survey would discover an encroachment. While the title exam would uncover mortgages, it would not be able to determine the current balance.

Question 30

An agent lists a parcel of undeveloped property which is currently zoned for single-family use. The agent knows the property is scheduled to be rezoned for multi-family use. The agent offers to buy the property from the seller and tells the seller that he wants to acquire the property as a long-term investment. Several months later and after the rezoning has taken effect, the agent sells the property for a substantial profit. In this case the agent:

Answer 30

Correct Answer acted improperly because this would be considered "self-dealing" and the agent has a duty to disclose the possible conflict of interest. Explanation Self-dealing is defined as taking secret profits by failing to disclose the appropriate value of a property to his/her client. A broker must disclose all material facts to all parties in the transaction. It is improper not to disclose the scheduled change in use and a potential substantial increase in value. There are no rules from the NC Real Estate Commission precluding an agent from purchasing the property. A brokerage may impose this rule through their company policies

Question 31

A broker in North Carolina has a limited listing agreement with the seller to put a for sale sign in the yard, install a lockbox, and enter the property into the MLS. Which of the following is TRUE?

Answer 31

Correct Answer A limited listing obligates the broker to provide full fiduciary duties to the seller Explanation A limited service listing limits services provided, but it does not limit the broker's fiduciary duties, the broker's obligation to discover and disclose material facts, or the broker's liability. Brokers that together decide not to show another firm's listings for any reason are participating in an illegal group boycott, which violates the Sherman antitrust laws.

Question 32

When a listing firm has multiple offices, and one broker from location A has a listing agreement, and a broker from location B has a buyer customer with no agency agreement. What type of agency are the firm and all brokers practicing?

Answer 32

Correct Answer Exclusive seller agency Explanation This is an example of exclusive seller agency since the buyer is not represented. The two agents will act on the seller's behalf. Transaction brokerage is not permitted in North Carolina.

Question 33

Which of the following activities would increase the equity in a property?

Answer 33

Correct Answer Appreciation to the property due to favorable market conditions in an area Explanation Equity is the difference between market value and the amount owed, so therefore an increase in value due to appreciation would increase equity. Other things that increase equity are paying down one's debt on a property and adding a needed capital improvement. Paying the interest only on the loan and maintaining a property hold value but do not increase the value. Depreciating a property is a tax concept and does not affect the actual value

Question 34

A buyer's agent advises a buyer to skip a termite inspection as it is not required by a lender. The buyer subsequently finds out that $40,000 in damage from an active termite infestation. The buyer's agent:

Answer 34

Correct Answer may be liable for the damage for breaching fiduciary responsibilities. Explanation A licensee should never discourage inspections. In North Carolina, termite infestation is prevalent. The only way to determine if an active or past infestation is to have a qualified inspector check the property. Advising a client/customer not to complete an inspection is a breach of agent duties.

Question 35

Betty, an independent broker, is working with a buyer customer. Betty failed to review the Working with Real Estate Agents disclosure form. She explains to the buyer that she is working for his best interest and "will help him get the best deal possible" should the buyer purchase one of her firm's listings. In this case:

Answer 35

Correct Answer Betty is acting as an undisclosed dual agent if she shows the buyer one of her firm's listings. Explanation Betty may represent both the buyer and seller with the express permission of the client. Consent to dual agency representation must be obtained prior to being allowed to act as a dual agent. A broker must disclose the Working with Real Estate Agents disclosure form at first substantial contact. A buyer may consent to oral buyer agency representation, which is non-exclusive and open-ended. The agent and buyer must discuss dual / designated agency authorization and how compensation will be paid. Since Betty is acting as an undisclosed dual agent she is not entitled to compensation.

Question 36

A licensee has listed a property for sale with the seller authorizing dual and designated agency. A prospective buyer expresses an interest in making an offer. The buyer has disclosed a proposed use that would violate restrictive covenants. Is the licensee required to disclose the issue to the buyer?

Answer 36

Correct Answer Yes. A licensee is required to disclose material facts to all parties to the transaction. Explanation A licensee is expected to recognize RED FLAG situations such as a violation of zoning or problems with restrictive covenants. Material facts must be disclosed to all parties to the transaction. When representing a 3rd party customer, a broker is not required to determine if this is the best property available for the buyer to purchase, however is required to disclose material facts - such as the restrictive covenants.

Question 37

Jane is a provisional broker affiliated with XYZ Realty. Tom, who is also affiliated with XYZ Realty, takes a listing. Jane holds an open house and locates a potential buyer that is considering an offer. In this instance:

Answer 37

Correct Answer Jane will act as a subagent of the seller unless dual agency is authorized. Explanation Jane is automatically a subagent to the seller, as she is affiliated with XYZ Realty. When Tom signs the listing agreement, binding the firm, all agents of the firm represent the seller. Jane cannot act as an exclusive agent for the buyer, as XYZ Realty already has the listing. XYZ Realty will have to work under dual or designated dual agency if they represent both the buyer and seller in the transaction. Transaction brokerage is not permitted in North Carolina; a broker must represent at least one party to the transaction. A BIC and PB cannot act as designated dual agents. The limitations for designated agent: No BIC & PB and No P&C. Designated agency is not allowed when one agent is the broker-in-charge, and one agent is on provisional status. Also, the agents cannot have personal & confidential information about the other party.

Question 38

The NCAR Property Management Agreement:

Answer 38

Correct Answer permits the property manager to prorate rent when a unit is not habitable. Explanation The property management agreement outlines the duties and responsibilities of the property manager and the property owner. The property manager may prorate rent when a unit is damaged and is not inhabitable. The owner agrees not to enter the property without contacting the property manager so that proper notice can be provided to the tenant. The owner may set the amount of rent, length of time to enter a lease, etc., however, the standard agreement does not restrict the amount of time. A property manager does not have the authority to make changes to the property without the owner's permission. The property manager has a duty to advise the seller about improvements, especially if the changes will lower the amount of rent that can be charged.

Question 39

A broker lists a property for sale and agrees in the listing contract to place the listing in the local MLS, to advertise the property for sale, and to use his best efforts in good faith to find a buyer. The broker places a “For Sale” sign on the property, but fails to place the property in the MLS for more than 30 days and fails to otherwise advertise the property during the listing period. Which of the following is TRUE?

Answer 39

Correct Answer The broker has failed to exercise reasonable skill, care, and diligence on behalf of his client as required by the listing contract and the Law of Agency. Explanation This broker has not exercised reasonable skill, care, and diligence, which violate the laws of agency. This does not violate Fair Housing laws, but it does likely violate most MLS rules. The broker did not willfully misrepresent as there is no statement about completing the task.

Question 40

Provisional broker Q assists buyer L in the writing of an offer to purchase, where buyer L desires possession of the home prior to closing. Provisional broker Q is asked to place language in the offer to purchase that would make the offer to purchase contingent upon acceptance of a lease agreement and write up a lease that is contingent upon the acceptance of the offer to purchase. In this situation provisional broker Q should:

Answer 40

Correct Answer Advise buyer L that an attorney may be consulted to prepare the requested change. Explanation A broker should always recommend that a client seek legal advice before a client makes changes to an offer to purchase. The changes could have serious unintended consequences. A broker is not permitted to draft terms in a contract, only fill in the blanks in the preprinted form. A broker cannot DRAFT provisions in an Offer to Purchase when they are not a party to the agreement. The client can make changes to the offer in his/her own handwriting. The broker needs to make it clear that the client and not the broker added the additional language. The broker should strongly recommend the consultation with an attorney. Technically a broker is permitted to DRAFT provisions in the Buyer Agency, Listing Agreement and Property Management Agreement. It is not advisable, however since they are a party to the agreement, it is permitted. A prudent brokerage will have policies against this practice - however best practice for a brokerage is not something typically covered on the exam.

Question 41

Property tax liens:

Answer 41

Correct Answer are paid before all other liens against the property. Explanation Real property taxes and special public assessments receive special treatment and are paid before all other liens. The remaining liens are paid in order of recordation, except for mechanics liens, which may jump in priority. Mechanics liens cannot jump in front of real property taxes and public assessments. The mechanic's lien must be filed within 120 days from the last date labor or materials are provided, and the contractor must sue to enforce the lien within 180 days from the last date labor or materials were provided. An adequately filed mechanics lien will jump back to the first date labor or materials were provided. Federal tax liens do not receive special treatment and will be paid based on lien priority. Federal tax liens are considered a general lien against all property that the owner has.

Question 42

A seller signs the Wire Fraud Addendum to the listing contract. The broker:

Answer 42

Correct Answer must deliver a copy to the BIC within 3 calendar days of the document being signed to the customer or client and BIC Explanation A broker must deliver a copy of transaction documents within 3 calendar days of the document being signed to the customer or client and BIC. The broker has 3 days from receipt to deliver a copy of written agency agreements, offers, contracts, leases, property management agreements, lease agreements, etc.thin 3 calendar days of the seller signing the form.

Question 43

A broker takes a listing, and then the seller sells the property directly to a buyer to avoid paying a commission. The type listing agreement used is:

Answer 43

Correct Answer an exclusive agency listing agreement. Explanation With an exclusive right to sell listing agreement, the seller pays a commission no matter who sells the property. An exclusive agency listing agreement gives the seller the right to sell it directly to a buyer and avoid paying a commission. The Multiple listing service is a mechanism brokers use to co-broker sales. The MLS is NOT a type of listing agreement. An open-ended listing agreement is illegal.

Question 44

A licensee in North Carolina has an affirmative obligation to:

Answer 44

Correct Answer disclose material facts that may put their client at a disadvantage when negotiating a sale with a customer. Explanation A broker in NC has an affirmative obligation to discover and disclose material facts to all parties to the transaction, both customers and clients, no matter who the broker represents, and no matter where the information comes from. If a deal falls apart because of information on the home inspection report, the report may or may not be shared determined by the owner of the report. However, IF the seller refuses to repair the problem, the issue is now a known material fact that must be disclosed to all buyers!

Question 45

A licensee is representing a seller through an Exclusive Right to Sell listing agreement. At the settlement meeting the seller refuses to pay commission to the listing firm. The licensee:

Answer 45

Correct Answer must advise the seller that this is a breach of the listing contract. Explanation The principal / client has a duty to act in good faith and to compensate the listing firm according to the listing contract. A licensee should never advise a buyer to cancel a contract or refuse to close when a seller is withholding compensation. Compensation to a broker/brokerage is NEVER referenced in the purchase contract.

Question 46

A seller has received three very good offers on her listing. Unable to decide between the offers, the seller instructs her agent to disclose to each of the buyers the highest offer received. The listing agent should do which of the following?

Answer 46

Correct Answer Explain to the seller that this request violates Commission rule Explanation A licensee cannot disclose the price or other material terms contained in a buyer’s offer without the express written permission of the party that made the offer. The licensee cannot ignore his/her client, however can only follow the client’s lawful instructions. The seller may elect to request that buyers bring their highest and best offer. A broker should never advise countering to multiple offers as this could result in the property being under contract with multiple buyers. One way to avoid this is to send a Response to Buyer’s Offer or Memo to Buyer that lists terms that the seller would favorably consider.

Question 47

When a tenant vacates a long-term residential rental, how long does the property manager or property owner have to account for the security deposit?

Answer 47

Correct Answer 30 days, or with written notification during the 30 days, a maximum of 60 days Explanation 30 days is a good answer unless the landlord notifies the tenant in writing during the 30-day window that he needs more time. The maximum with written notice given is 60 days. NOTE: You must select the most right answer.

Question 48

With regard to tenant security deposits, all of the following statements are correct, EXCEPT:

Answer 48

Correct Answer a property management company is required to have all security deposit funds deposited in a trust or escrow account or be bonded. Explanation A licensed property management company is not allowed to be bonded and therefore would be required to have a trust or escrow account. The trust / escrow account must be in an insured bank that is approved to do business in North Carolina and agrees to make records available to the NC Real Estate Commission upon request. Note that the account can be with a virtual bank so long as it has been approved to do business in North Carolina.

Question 49

Grace decides to sell her property “For Sale by Owner”. She asks a friend, Kennedy to show the home to prospective buyers. In return, Grace will allow Kennedy to stay for 2-weeks at her beach house, only charging her a cleaning fee. Does Kennedy require an active real estate license?

Answer 49

Correct Answer Yes. A license is required when a party earns compensation in a transaction when acting on behalf of another. Explanation The license triggering event is earning compensation on behalf of another. Note that there is no exception for representing family or friends when compensation has been paid. A party can offer to do the work for free and not trigger the requirement to have a license. The NC Real Estate Commission could seek an injunction against Kennedy for practicing real estate without a license. Compensation can come in many forms including cash, gift cards, travel, vehicles, iPads, etc.

Question 50

A broker that specializes in residential sales for ABC Realty, and agrees to help a seller in distress procure a tenant for a property that has been on the market for an extended period . The broker has the tenant make the rent check payable to the landlord, and the broker gives the tenant keys to the property and delivers the rent check directly to the owner. Which of the following is TRUE?

Answer 50

Correct Answer The broker is in violation of commission trust account rules Explanation A broker must deposit all funds collected on behalf of others for properties for sale or lease into a trust account. The only exceptions are the due diligence fee paid by means other than cash made payable to the seller and earnest money paid by means other than cash payable to the closing attorney. The broker in charge is strictly responsible for the trust funds.

Question 51

Carlos recently gave a listing presentation to a potential seller. The seller agreed to list the house. At the time of the signing, Carlos and the seller could not come to an agreement on price and rate of commission. The seller signed the agreement with the two items left blank, with the understanding that the agent and seller would agree to the terms later. Carlos congratulated the seller and replied that he was now acting as the seller’s agent. Given this scenario, which of the following is TRUE?

Answer 51

Correct Answer The listing agreement is not valid as it lacks essential terms Explanation Contracts are based on the concept of well-defined terms and the two most essential terms were not agreed upon; the listing price and the commission rate. The agent misrepresented that he was acting as a seller’s agent based on the facts identified at that point. The agency agreement is not binding, therefore, the seller is still able to work with another agent. A listing agreement must be in writing, provide a definite end date, contain the prescribed anti-discrimination language and disclose the agent’s license number. It also must be signed by all owners that have an interest in the property to be legally enforceable.

Question 52

Which of the following is an unlawful activity of an unlicensed assistant that assists a licensed broker?

Answer 52

Correct Answer Negotiating lease terms Explanation An unlicensed assistant is very limited and strictly prohibited from negotiating lease price and terms. They may show a property for lease, but not for sale. The broker is responsible for the trust funds but may delegate the duty to an unlicensed assistant. A broker must prepare the offer, while an unlicensed assistant may type it up from a draft. Unlicensed assistants may only communicate basic factual information and should NOT be allowed to discuss market trends or market value information.

Question 53

A provisional broker has received multiple offers on a property listed recently. The provisional broker must:

Answer 53

Correct Answer present all offers immediately, but in no event later than 3 days. Explanation All offers must be presented immediately, but in no event later than 3 days to the seller. The seller may evaluate all offers simultaneously with no respect to which offer came in first. There is no rule requiring the provisional broker to notify the BIC, so while answer 2 is not a bad idea, the question says must, and notifying the BIC is not mandatory.

Question 54

A broker is showing a property outside the city limits, and the buyer is interested in making an offer on a beautiful home with a beautiful view of the park. The buyer will be running a landscaping business from home and will need to park three dump trucks on site. Which of the following is TRUE?

Answer 54

Correct Answer The broker must disclose any know restrictions and assist the buyer in discovering any restrictions, public or private, that may interfere with the buyer's intended use. Explanation A broker must discover and disclose material facts. The need to park three dump trucks in the yard is a material fact for this buyer. Also, brokers are not allowed to draft (or craft) paragraphs in a sales contract for others. Remember, property in the city is regulated by the city, county, and private land use controls and the most restrictive rules. The extraterritorial jurisdiction gives the municipality the ability to regulate property outside the city limits up to three miles.

Question 55

A buyer makes an oral offer, and the seller unconditionally accepts. The resulting contract is:

Answer 55

Correct Answer Unenforceable Explanation A valid offer must be in writing. The Statute of Frauds states oral agreements that transfer an interest in real property are unenforceable. While this agreement is technically voidable by both parties, unenforceable is the best answer. Unenforceable

Question 56

The standard 2-T Offer to Purchase and Contract:

Answer 56

Correct Answer allows for a 7-day delay in settlement before the contract can be terminated. Explanation Settlement is NOT time is of the essence as the delaying party has 7-days to correct the issue. A brokerage can, when members of NCAR, use the form or hire an attorney to prepare an offer that meets Commission rules. NCAR / NCBA created the Standard 2-T Offer to Purchase, not the Commission. The Commission sets the rules for what needs to be included in a standard form. When a buyer desires to purchase land they would use the Vacant Lot and Land offer.

Question 57

A non-provisional broker affiliates with two firms. Which of the following is TRUE?

Answer 57

Correct Answer A broker must have the consent of the brokers in charge of both firms Explanation A non-provisional broker may affiliate with multiple firms. The only requirement is that the brokers in charge give permission. The permission may be oral, but it is always best practice to get permission in writing.

Question 58

An agent knows that the approximate probable sales price of a house is $223,000, but tells the property owner that the home is worth $250,000 in order to obtain a listing. In this case the agent:

Answer 58

Correct Answer has committed willful misrepresentation. Explanation This is an example of willful misrepresentation – purposefully lying to a client. Willful vs negligent actions depend upon the agent's intent; did he/she intentionally withhold information or lie. Misrepresentation vs Omission depends upon the agent making a representation or not saying anything at all (orally or in print). Make sure to review examples provided in NC License Law and Commission Rule Comments.

Question 59

Which of the following businesses are NOT required to obtain a firm license?

Answer 59

Correct Answer A sole proprietorship with 10 affiliated provisional brokers. Explanation The question is asking which entity requires a license, not which activity would require a broker in charge. All businesses other than sole proprietorships are required to have a separate firm license. LLC's, partnerships and corporations must have a firm license when engaged in real estate activity where they will earn compensation on behalf of another. A BIC is required when money will be held in a trust account, more than one broker is affiliated with the firm (regardless of provisional or non-provisional status), or advertising (signs, business cards, social media posts, orally offering services)

Question 60

A broker is in a multiple offer situation and has reason to believe the buyers will make higher offers if they knew that multiple offers are coming in. Which of the following is TRUE?

Answer 60

Correct Answer The broker must have the seller's permission to disclose a multiple offer situation. Explanation In a multiple offer situation, a broker must have the sellers permission to disclose multiple offers. The broker must have the BUYER's permission to disclose the terms of the buyer's offer to another buyer.

Question 61

A broker is representing a client at the settlement meeting under the standard NCAR Exclusive Buyer Agency Agreement. Which of the following would the broker be responsible for at the settlement meeting?

Answer 61

Correct Answer Verifying the accuracy of the contract terms on the closing disclosure Explanation Brokers are responsible for the accuracy of the Closing disclosures to the extent that they can verify. This would include any items that are memorialized in the contract, which is the best resource to use to determine accuracy. Brokers do not sign closing documents (which could include loan documents) without a Power of Attorney. The buyer would not receive the keys at settlement as this is just the signing of documents, the transfer would occur after closing (recording where cash and keys change hands). The attorney is responsible for notifying the IRS about the property transfer.

Question 62

A buyers agent is showing a limited services listing in a co-broker sale, and the seller has many questions about the process, the value and is unable to attend inspections without assistance. Which of the following is TRUE?

Answer 62

Correct Answer A buyer's agent may provide customer level service to a seller the buyer's agent does not represent. The buyer's agent may not give advice or insights on value. The agent should remind the seller not to share confidential information. Explanation In a limited services listing situation the listing agent is likely limiting their services to providing a sign, lock box and access to MLS. The MLS info directs cooperating brokers to call the seller directly. A buyer agent may provide customer level service to the seller and assist their buyer client in the purchase of the property.

Question 63

A municipality is extending city water and sewer services to a neighborhood previously serviced by well and septic. The municipality would most likely:

Answer 63

Correct Answer charge the current owner a special assessment. Explanation A city would most likely charge each owner a special assessment to cover the cost of installation. Bonds are commonly issued for school construction and may be used to expand services, however, it is more common to charge the party that will directly receiving the benefit.

Question 64

A buyer makes an offer using a buyer's agent. The buyer's agent delivers the offer to the listing agent of the same firm. The listing agent and the seller meet to discuss the offer, and the seller accepts the offer as written. Before communication of acceptance to the buyer, the buyer calls to withdraw the offer. Which of the following is TRUE?

Answer 64

Correct Answer The buyer may not withdraw the offer Explanation When the seller unconditionally accepts the offer and communicates with a dual agent, the agreement is a binding contract. When you communicate with a dual agent, you are communicating with the buyer and the seller. Notification of acceptance to the buyer when forming a legally binding contract is only required when the buyer has no representation.

Question 65

A broker has an exclusive buyer agency agreement that includes a 2.5 % commission and any bonuses offered. When must the buyer's agent to disclose the bonus offered for which they are aware before showing?

Answer 65

Correct Answer Prior to the preparation of the offer Explanation The bonus amount must be disclosed in time for the buyer to decide on making an offer. Oral disclosure is allowed when the buyer is considering an offer. Disclosure must be reduced to writing prior to preparation of an offer. So the very last minute would be before the agent prepares an offer for the buyer. It should be disclosed earlier rather than later. The best practice is before you show the property. NOTE: You must select the more correct answer.

Question 66

Which of the following is an example of a specific lien?

Answer 66

Correct Answer Real property tax lien Explanation Specific liens attach to a specific property. Examples include mortgage notes and deeds of trust, real property tax liens, and Mechanics liens. General liens impact everything an individual owns and include Federal income tax liens, State income tax liens, personal property tax liens, and judgments.

Question 67

Which of the following ads run by Marty Clark, a provisional broker with ABC Realty, would be acceptable according to Commission Rule and License Law including Fair Housing and Regulation Z?

Answer 67

Correct Answer Best deal in Knightdale available for a low, low price. Call Marty Clark, ABC Realty for details, 919.555.1212 Explanation A broker must include the firm name in advertising to ensure they do not place a blind ad. Truth-in-Lending Regulation Z restricts advertising financial terms without triggering full disclosure. An agent can state “great financing” or “low down payment” however should avoid specifics such as a $650 monthly payment. In addition, a broker must be careful not to violate fair housing with terms like “professional couple” as this could discriminate against families. The best advice is to "stick to facts about the property, not the people".

Question 68

A broker must enter into a written agency agreement with a buyer no later than:

Answer 68

Correct Answer preparation of a written offer to purchase. Explanation A broker may work with a buyer client with an express oral agreement. Before the preparation of an offer, the buyer agency agreement must be in writing. The new Working With Real Estate Agents Disclosure states: "You may begin with an oral agreement, but your agent must enter into a written buyer agency agreement with you before preparing a written offer to purchase or communicating an oral offer for you." NOTE: The rule changed 7/1/2021 from presentation to preparation.

Question 69

An exam candidate just passed the license examination. The Commission will issue:

Answer 69

Correct Answer A provisional broker license on inactive status Explanation Once a candidate passes the exam, the Commission will issue a provisional broker license on inactive status. To become active, the PB must affiliate under the supervision of a broker-in-charge, and the activation form needs to be sent to the Commission. Most real estate brokers act as independent contractors, not employees. Temporary status does not exist in North Carolina.

Question 70

A broker is holding an open house for a local builder. At what point must the broker provide the consumer with the Working With Real Estate Agents disclosure form?

Answer 70

Correct Answer Agency disclosure is not immediately required for an open house Explanation Agency disclosure must occur before a consumer shares any confidential information with the broker. School district questions and septic system questions do not rise to the level of confidential information. Questions about financing terms and down payment requirements trigger first substantial contact as confidential information that could weaken the buyer's bargaining position may be shared.

Question 71

A broker has retired after 40 years in the residential sales business and has allowed his license to go inactive. Occasionally a former client will reach out for assistance and is referred to an active broker in the area. Once a referred transaction is closed, and a commission is paid, the active agent sends a thank you note and a gift card to the retired broker. Which of the following is TRUE?

Answer 71

Correct Answer Referral fees of any amount require a license on active status Explanation To legally be paid for a brokerage activity, an active license is required. Even a nominal amount, including a gift card. Inactive or expired licensees should not be paid referrals fees. Remember earning compensation (a dime, a dollar, or a donut) on behalf of another is a brokerage activity and requires a license on active status.

Question 72

In North Carolina, a broker does not have to disclose information which could stigmatize a property voluntarily. Which of the following is an example of this?

Answer 72

Correct Answer Violent death Explanation Stigmatized properties include those that may be haunted, are near sex offenders, or experienced death in any capacity whether it be suicide, violent death like homicide, or natural causes. Meth labs, Exterior Insulation Finishing Systems, and foreclosures are all material facts in North Carolina.

Question 73

A broker with three pending transactions regretfully informed his BIC that he failed to take CE on time and is now inactive. The BIC takes over the three pending transactions. One contract closes the next day. Can the BIC pay the inactive broker?

Answer 73

Correct Answer Yes. So long as the broker immediately ceased all brokerage activity, then the BIC could choose to still pay him. Explanation Inactive and expired brokers are allowed to receive compensation for services they rendered while active. However, if these brokers render any brokerage services while inactive or expired, then they forfeit their claim to legal compensation. BICs are not required to pay compensation to brokers no longer affiliated with the brokerage. It is important to read the independent contractor agreement.

Question 74

Which of the following is a responsibility of a broker-in-charge?

Answer 74

Correct Answer Approving advertising for provisional and non-provisional brokers Explanation A BIC is responsible for all advertising. A BIC is responsible for 3 A's and 2 T's for all affiliated brokers (provisional and non-provisional), agency, advertising, active status, trust accounts, and transaction files. The BIC must directly supervise all provisional brokers. Some tasks can be delegated; however, ultimately, the BIC is responsible. The BIC needs to ensure that all affiliated brokers are on active status - renewed his/her license and completed the required education; however, the broker/entity is required to take the actions to renew. The individual licensee is required to notify the Commission within 10-days of name or address change. A brokerage is not required to maintain a trust account unless the services that are being offered require one (property management). The broker / BIC cannot decide who has the highest claim to the disputed earnest money. Earnest money is released when the transaction closes, the buyer and seller mutually agree to the release, court order, or transfer to the clerk of courts in the county that the property is located.

Question 75

Broker A is working with a buyer client under an oral buyer agency agreement. The buyer uses the services of Broker B to complete the purchase of a property that Broker A showed the consumer first. The property is listed in the local MLS, and Broker A and B are members. Which broker(s) is/are likely due a commission on the sale?

Answer 75

Correct Answer The listing agent and the selling agent Explanation The listing agent will be paid by the seller and then likely share with the selling agent. The selling agent is most often seen as the agent that brings the buyer into the transaction and completes the sale; the oral buyer agent, in this case, is not likely to be paid. The buyer is not obligated to pay or be loyal under an oral buyer agency agreement.

Question 76

A seller enters into an Exclusive Agency Listing Agreement with ABC Realty. The seller advertises the property on social media and locates a buyer for the property. Which of the following is TRUE?

Answer 76

Correct Answer The seller is not obligated to pay compensation as ABC Realty did not procure the buyer Explanation Under an Exclusive Agency Listing, ABC Realty competes against the seller to find a buyer. The seller is only obligated to pay ABC Realty if the firm locates the buyer. NOTE: Many students read the Exclusive Agency Agreement and mistake it for the Exclusive Right to Sell Listing Agreement. With an Exclusive Right to Sell Listing Agreement, the seller is obligated to pay ABC Realty no matter how the buyer is procured.

Question 77

A seller asks a broker to reduce the commission rate charged since she will hire the same broker as a buyer's agent. The agent states that the brokerage has a policy against reducing the commission. Which of the following is TRUE?

Answer 77

Correct Answer The brokerage can refuse to reduce the commission rate. Explanation Commission rates may be negotiated between the client and the firm. A brokerage can set a policy regarding compensation without violating the Sherman Antitrust Act. If the brokerage is colluding with other firms to maintain a certain rate of commission then the broker would violate antitrust laws. The Real Estate Commission, REALTOR Association and MLS have no say in the amount of compensation charged to a client.

Question 78

All listing agreements must contain:

Answer 78

Correct Answer an absolute termination date. Explanation All listing agreements must be in writing from the inception and must include the Fair Housing paragraph, disclose their license number and automatically terminate. Automatic renewals are strictly prohibited. NOTE: Compensation is not required. You could work for free.

Question 79

When must a broker on provisional status complete their 90 hours of post-license education to maintain active status?

Answer 79

Correct Answer Within 18 months of license issuance Explanation Do not confuse CE with the postlicense requirements. A provisional broker must complete 90-hours of postlicense education within 18 months of license issuance to remain on active status. To remain on active status a newly licensed provisional broker must compete continuing education before their second license renewal.

Question 80

A property owner wants to build a house on the only lot in a subdivision that has .98 acres. Under current zoning rules, lots must be at least 1 acre. The owner should request:

Answer 80

Correct Answer variance. Explanation A variance requires a hardship, and is a minor change in a rule (additional parking, smaller set back from the road), and not a change in use, which would require rezoning. Rezoning is a major change that changes the use of the property. A special use permit is used for anything that is good for the community.

Question 81

A broker on provisional status has a listing at 123 Elm Street in a very desirable neighborhood. His broker-in-charge represents a buyer who becomes interested in the listing. The brokers may legally proceed with which of the following actions?

Answer 81

Correct Answer The brokers representing must act as dual agents in this particular transaction. Explanation Dual agency is always an option (with the informed consent of the parties) for in-house sales, where the buyer and seller are represented by the same firm. Designated dual agency cannot be practiced by a provisional broker representing one party and his/her BIC representing the other party. While it is possible to terminate agency, it makes no sense as the buyer would lose representation and any personal information learned about the buyer would have to be disclosed to the seller. BICs can practice designated agency with brokers that are not on provisional status. An easy way to remember the limitations placed on dual agency is “No BIC and PB and Not P&C”. A BIC and provisional broker cannot act as designated agents. Having personal or confidential information about the other party would prevent designated dual agency.

Question 82

A buyer attends an open house for a property located at 1412 Oak Court. The buyer asks the listing agent about the list price, square footage, and school districts. The listing agent does not review the Working With Real Estate Agent's disclosure (WWREA). Has the broker violated North Carolina License Law or Commission Rules?

Answer 82

Correct Answer No. The conversation with the buyer has not reached first substantial contact. Explanation WWREA is triggered at First Substantial Contact (FSC). FSC is the point where the broker may become aware of information that could weaken a potential customer/client's bargaining position. FSC is triggered when question shift from facts about the property to personal/confidential information. NOTE: Had the buyer started to discuss how much they were approved for, motivations, timeline or personal circumstances, the listing broker would have to discuss WWREA. WWREA is not required in all real estate transactions (leasing / auctions are exempt). WWREA is required in ALL SALES TRANSACTIONS - whether residential or commercial. The review of WWREA occurs prior to getting an agency agreement in writing. NOTE: A buyer could choose oral buyer agency - which is non-exclusive / open-ended / must be reduced to writing prior to offer. In this circumstance, WWREA should be reviewed and signed prior to providing brokerage services. The buyer is not required to sign - in which case the broker must document the refusal on the signature panel. All documents must be retained for 3 years.

Question 83

With regard to tenant security deposits, all of the following statements are correct, EXCEPT:

Answer 83

Correct Answer a property management company is required to have all security deposit funds deposited in a trust or escrow account or be bonded. Explanation A licensed property management company is not allowed to be bonded and therefore would be required to have a trust or escrow account. The trust / escrow account must be in an insured bank that is approved to do business in North Carolina and agrees to make records available to the NC Real Estate Commission upon request. Note that the account can be with a virtual bank so long as it has been approved to do business in North Carolina.

Question 84

A provisional broker is working for a buyer with a written agency agreement and is acting as a designated agent for the buyer. The listing agent may be which of the following?

Answer 84

Correct Answer A full broker of the same firm Explanation Designated agency is a form of dual agency that can only occur on in-house sales. A broker from a different firm cannot act as a dual or designated dual agent for a different firm. A provisional broker may be designated to represent one party to the transaction while a full broker is designated to represent the other party in the transaction. The only limitation is that the BIC may not be designated opposite a provisional broker.

Question 85

Which of the following agency agreements can automatically renew unless notice to terminate is sent to either party?

Answer 85

Correct Answer Property Management Agreement Explanation The property management agreement is the only agency agreement that may automatically renew or be open-ended. The management agreement must have a method of termination in the agreement. The listing agreement must have a definite end date and required to be in writing from inception. The buyer's agency agreement and tenant representation agreement may be oral and non-exclusive; however, it must be reduced to writing no later than the presentation of an offer. A written buyer's agency agreement or tenant representation agreement must have a definite end date.

Question 86

Which of the following is a duty owed to a customer?

Answer 86

Correct Answer Honesty Explanation Agents owe CUSTOMERS three things - honesty, fairness, and disclosure of material fact only. OLD CAR is owed to clients. The fiduciary duties to the client are obedience, loyalty, disclosure, confidentiality, accounting, and reasonable skill, care, and diligence.

Question 87

A tenant vacated a property, with proper notice and in reasonable condition, on September 30th. The tenant had a security deposit of $1,200. Which of the following describes a Property Manager’s obligation regarding this security deposit?

Answer 87

Correct Answer Property Manager must account for the funds, to the tenant, within 30 days Explanation A property manager has 30-days to account for funds charged against the security deposit. When the property manager has not finalized the cost, they must give an interim accounting within 30-days and a final accounting within 60-days. The earnest money dispute resolution rules do not apply to security deposits since they are governed by the Tenant Security Deposit Act. Security deposits should not be held for normal cleaning but only cleaning that is required due to excessive filthiness, above normal wear and tear. Interest earned on trust accounts may be paid to the Property Manager to cover the costs of maintaining the account when agreed to in the property management and lease agreements.

Question 88

A buyer and seller enter into a lease with an option to purchase. Which of the following is TRUE?

Answer 88

Correct Answer The buyer and seller have entered into two different contracts, and a broker should consult an attorney Explanation A lease with an option to purchase is a complex transaction where the buyer is a tenant with possession, and the seller is a landlord with an obligation to maintain the property. The tenant also has an option (the choice) to buy or not. The seller holds title to the property until the buyer exercises the option. The terms of the purchase should be included in the option agreement. An attorney is required to tie the two contracts together and draft the option.

Question 89

An agency agreement will be terminated by which of the following events?

Answer 89

Correct Answer Death of an Independent Broker Explanation When an independent broker dies or goes insane, there is an impossibility of performance, which would result in a termination of the agency agreement. Note: When the agency agreement is with a brokerage / firm, the firm can appoint another agent to fulfill the duties. Agency agreements terminate by full performance, expiration, mutual agreement, etc. Damage to a property that is under contract would make the purchase contract voidable on behalf of the buyer. Termination of the purchase contract does not terminate the agency agreement. Constructive eviction terminates the lease agreement, not the property management agreement. When a buyer terminates a purchase contract during the due diligence period, it terminates the purchase contract, not the agency agreement.

Question 90

Which of the following is considered a material fact?

Answer 90

Correct Answer The buyer is incapable of securing a loan and has no other means to purchase the property as promised Explanation Stigmatizing factors are not a material fact in North Carolina. Things that may stigmatize a property include death (in any manner), hauntings, and sex offenders. A party's ability to follow through with a transaction is material. For sellers, this refers to their ability to convey clear title usually. For buyers, this refers to their ability to pay the promised contract price usually.

Question 91

In the North Carolina Association of REALTORS® and North Carolina Bar Association joint standard offer form 2-T, closing is defined as:

Answer 91

Correct Answer recording of the deed. Explanation In standard form 2-T, closing is the recording of the deed. The grantor (seller) signs the deed and delivers it to the grantee (buyer) at the settlement meeting. Still, the transaction is not closed until someone, usually the buyer's attorney, records the deed.

Question 92

A broker receives multiple offers on a property that they have listed through an Exclusive Right to Represent listing contract. Which of the following is TRUE?

Answer 92

Correct Answer The broker can request the highest and best terms upon approval from the seller. Explanation A broker must deliver ALL offers to the seller immediately but no later than 3 calendar days from receipt. The seller, upon review of the offers, must make a decision on how to respond - accept, reject, counter one offer or call for highest and best. The broker is then directed by the seller. A broker cannot disclose the price or other material terms contained in an offer without the express permission of the buyer that made the offer.

Question 93

With regard to tenant security deposits, all of the following statements are correct, EXCEPT:

Answer 93

Correct Answer a property management company is required to have all security deposit funds deposited in a trust or escrow account or be bonded. Explanation A licensed property management company is not allowed to be bonded and therefore would be required to have a trust or escrow account. The trust / escrow account must be in an insured bank that is approved to do business in North Carolina and agrees to make records available to the NC Real Estate Commission upon request. Note that the account can be with a virtual bank so long as it has been approved to do business in North Carolina.

Question 94

A broker on provisional status has a listing at 123 Elm Street in a very desirable neighborhood. His broker-in-charge represents a buyer who becomes interested in the listing. The brokers may legally proceed with which of the following actions?

Answer 94

Correct Answer The brokers representing must act as dual agents in this particular transaction. Explanation Dual agency is always an option (with the informed consent of the parties) for in-house sales, where the buyer and seller are represented by the same firm. Designated dual agency cannot be practiced by a provisional broker representing one party and his/her BIC representing the other party. While it is possible to terminate agency, it makes no sense as the buyer would lose representation and any personal information learned about the buyer would have to be disclosed to the seller. BICs can practice designated agency with brokers that are not on provisional status. An easy way to remember the limitations placed on dual agency is “No BIC and PB and Not P&C”. A BIC and provisional broker cannot act as designated agents. Having personal or confidential information about the other party would prevent designated dual agency.

Question 95

According to the North Carolina Tenant Security Deposit Act, what restriction applies to collecting security deposits from tenants?

Answer 95

Correct Answer A maximum of 2 weeks worth of rent may be collected on a weekly lease Explanation The security deposit act places restrictions on the maximum, not the minimum, amount of security deposit a landlord may collect. The maximums are 2 weeks of rent in a weekly lease, 1.5 months of rent in a monthly lease, and 2 months rent for any lease greater than a month. The $15 or 5% refers to the maximum placed on late fees. Security deposits cannot be deposited into checking accounts; they must be placed into trust accounts or performance bonds.

Question 96

On the NCAR/NCBAR standard Offer to Purchase, closing is defined as which of the following?

Answer 96

Correct Answer When the deed is recorded Explanation The NCAR offer to purchase defines closing as the recording of the deed. The Good Funds Settlement Act requires recordation before cash and keys are delivered. NOTE: When the question is about the validity of a deed, the deed is not required to be recorded. An unrecorded deed may be unenforceable.

Question 97

Which of the following statements is true concerning the North Carolina Association of Realtors and the North Carolina Bar Associations standard offer to purchase and contract 2-T?

Answer 97

Correct Answer The buyer may terminate the agreement for any reason, or no reason during the due diligence period and be entitled to a refund of the earnest money. Explanation The buyer may terminate the agreement during the due diligence period for any reason or no reason, and be entitled to a refund of the earnest money, but NOT the due diligence fee. The due diligence fee belongs to the seller. When a lender declines the buyer's loan after the due diligence period ends, the buyer will forfeit the due diligence fee and the earnest money. If the FHA or VA loan addendum is attached and the buyer's FHA or VA loan is declined after the due diligence date, the buyer will be entitled to a refund of the earnest money. This question does not address FHA and VA. Closing is defined as the recording of the deed, and the attorney may NOT disburse funds until after the deed is recorded. 2-T also requires the seller to deliver marketable title via GENERAL warranty deed.

Question 98

A broker receives multiple offers on a listing and would like to tell the other agents there are multiple offers. Which of the following is TRUE?

Answer 98

Correct Answer The broker must have the sellers permission to disclose multiple offers Explanation In NC, a broker must have the sellers permission to disclose multiple offers to agents and buyers.

Question 99

The most common insurance policy for a single family residential home does not cover:

Answer 99

Correct Answer flood damage. Explanation A Homeowner policy does not cover flood damage. An owner will need to purchase flood hazard insurance. It is a material fact that the property is located in a flood hazard area and a lender may require flood insurance, especially when the property is located within the 100-year flood plain (designated as 1% risk of flood). The typical homeowner policy covers damage to the structure as well as liability coverage when someone is hurt at the property.

Question 100

A non-provisional broker affiliates with two firms. Which of the following is TRUE?

Answer 100

Correct Answer A broker must have the consent of the brokers in charge of both firms Explanation A non-provisional broker may affiliate with multiple firms. The only requirement is that the brokers in charge give permission. The permission may be oral, but it is always best practice to get permission in writing.

Question 101

Which of the following reports generated by a property manager is a projection of income and expenses for the upcoming year?

Answer 101

Correct Answer Operating budget Explanation An operating budget is a projection about the income and expenses for the upcoming year. It looks ahead to the future. A budget comparison statement looks into the past and compares what happened to the forecast amount. Cash flow reports and profit/loss statements provide insight into the current financial situations.

Question 102

Which of the following is a duty owed to a customer?

Answer 102

Correct Answer Fairness Explanation Agents owe customers three things - honesty, fairness, and disclosure of material facts only. OLD CAR is owed to principals/ clients. OLD CAR - obedience, loyalty, disclosure of all relevant information, confidentiality, accounting of all money, and reasonable skill/care/diligence.

Question 103

A property manager hires an unlicensed W-2 employee to assist him. The unlicensed assistant misrepresents information about the property. Who is liable?

Answer 103

Correct Answer The licensed broker is subject to disciplinary action by the Real Estate Commission. Explanation The supervision licensed broker is liable for the actions taken by an unlicensed assistant. It is the duty of the licensed broker to supervise. The broker is required to train and supervise all unlicensed assistants including matters relating to fair housing and ADA compliance.

Question 104

A listing agent has a closing scheduled for July 2nd. The listing agent takes two CE electives for a total of 8 hours but fails to take the GENUP. The listing agent pays his renewal fee and asks his broker in charge to take over his duties on July 1st. Which of the following is TRUE?

Answer 104

Correct Answer The brokerage can pay the listing broker because the brokerage completed the work and his license was current and active status when the commission was earned Explanation Attending a settlement meeting on behalf of a consumer is a brokerage activity and requires a license on active status. The listing agent stopped working on the transaction when his license went inactive, and the broker in charge took over. Both the firm and the listing broker may legally be paid.

Question 105

Broker John writes an offer on behalf of his buyer for $195,000 with a settlement date in 45-days. Broker John's emails the offer to the listing agent, Provisional Broker Jane. Provisional Broker Jane meets with the seller to present the offer. The seller reviews the terms, agreeing to everything except the settlement date, which he changes to 35-days. The provisional broker emails the buyer's agent to inform them that the seller has accepted the offer and attached a copy of the signed documents. Broker John calls the buyer to inform them that the offer has been accepted and that they are now under contract. Has a legally binding contract been formed?

Answer 105

Correct Answer No. A legally binding contract has not been formed. Explanation To form a legally binding contract, there must be an offer, unconditional acceptance and communication back to the offering party. In addition, the contract must be in writing and signed by all parties. The seller did not unconditionally agree to the offer. A counter-offer was created when the seller changed the settlement date. The buyer would need to unconditionally accept and then communicate acceptance to the seller for a legally binding contract to be formed. Communication can be by email, personal delivery, fax, etc.

Question 106

Broker A and B are acting as dual agents in a purchase transaction. When can broker A or B disclose information to the buyer in the transaction?

Answer 106

Correct Answer The seller cannot provide a clear title to the property Explanation It is a material fact that the seller cannot provide clear title to the property. A broker would have to disclose this no matter how the type of representation. Material fact disclosure is required for all parties in the transaction. Under dual agency, there is a reduction in the advice that can be provided. Specifically, the agent(s) cannot advocate for one party over the other. They are required to keep information that is not material; however, it could weaken a persons bargaining position confidential. The fact that a seller is behind on the mortgage is only a material fact when the seller lacks the funds to pay off the loan.

Question 107

A broker has received multiple offers on a listing, and the seller instructs the broker to share the highest offer with the other buyers to encourage a bidding war. Which of the following is TRUE?

Answer 107

Correct Answer The broker must have the buyer's permission to disclose the amount of the buyer's offer Explanation In NC, a broker is prohibited from disclosing the terms of a buyer's offer to another without the offeror buyer's permission. It makes no difference that the broker represents the seller. The NCREC says, "No shopping offers."

Question 108

Carlos recently gave a listing presentation to a potential seller. The seller agreed to list the house. At the time of the signing, Carlos and the seller could not come to an agreement on price and rate of commission. The seller signed the agreement with the two items left blank, with the understanding that the agent and seller would agree to the terms later. Carlos congratulated the seller and replied that he was now acting as the seller’s agent. Given this scenario, which of the following is TRUE?

Answer 108

Correct Answer The listing agreement is not valid as it lacks essential terms Explanation Contracts are based on the concept of well-defined terms and the two most essential terms were not agreed upon; the listing price and the commission rate. The agent misrepresented that he was acting as a seller’s agent based on the facts identified at that point. The agency agreement is not binding, therefore, the seller is still able to work with another agent. A listing agreement must be in writing, provide a definite end date, contain the prescribed anti-discrimination language and disclose the agent’s license number. It also must be signed by all owners that have an interest in the property to be legally enforceable.

Question 109

A licensee is preparing to list a property for sale. The CMA indicates a probable sales price of $175,000. The seller says he wants to list the property for $140,000. The licensee offers to purchase the lot for $140,000 without disclosing the CMA, which the seller accepts. Is the broker subject to discipline?

Answer 109

Correct Answer Yes. The courts can force the broker to pay the seller $35,000, and the Commission may revoke the broker's license. Explanation The broker has violated his/her fiduciary duties to the seller. The Commission can close & warn, reprimand, suspend or revoke a broker's license. The Commission cannot force a broker to repay a client. Only the courts can enter a judgment against a broker, file a writ of attachment to seize assets, and order a writ of execution to force the sale. The listing agent acts as a special agent with no decision making authority, however, must fulfill his/her fiduciary duties. The listing agent must advise the seller about the probable sale price. Embezzlement occurs when a broker steals or misappropriated the funds of another.

Question 110

A broker is working with a buyer under an oral agreement. After showing many properties, the broker prepares an offer and asks the buyer to sign a written buyer agency agreement. The buyer refused to sign the agency agreement. Which of the following is TRUE?

Answer 110

Correct Answer The buyer could take the offer and present the offer, excluding the oral buyer agent from the transaction Explanation The broker may not present the offer because the rule requires the buyer agency agreement to be in writing before presenting an offer. The buyer could allow the broker to act as a subagent of the seller, with permission of both the buyer and seller. The broker must tell the buyer that all of the information the agent knows about the buyer must be disclosed to the seller. The buyer could eliminate the oral buyer agent from the transaction and go directly to the listing agent and negotiate a deal minus a buyer agent piece of the commission.

Question 111

Which of the following is TRUE regarding retention of transactional records?

Answer 111

Correct Answer Transaction records must be kept in a legible and reproducible format for a minimum period of three years. Explanation Transaction records may be on paper or in a digital format as long as they are legible and reproducible. The WWREA brochure is a mandatory disclosure and would need to be retained for 3 years by Commission rule.

Question 112

Designated Agency occurs when:

Answer 112

Correct Answer A firm is acting as a dual agent and has a written policy allowing designated agency Explanation Designated dual agency is a form of dual agency. It only occurs when a firm has informed consent to do dual agency AND has a written company policy allowing designated dual agency. Both dual agency and designated dual agency require the informed consent of all parties to the transaction.

Question 113

A broker lists a property for sale and advertises square footage at 1,800 square feet, which he obtained from the tax records. The buyer's agent viewed the property with the buyer and made no representations about square footage. The buyer purchases the property and later learns that it has 1,400 square feet. Which broker is liable?

Answer 113

Correct Answer Both brokers are responsible for misrepresentation Explanation When a listing agent makes a representation about a property, they need to ensure that it is accurate. A 400 square foot difference on a 1,400 square foot house should have raised a "red flag" that would indicate a further review is needed. While the listing broker is held to a higher standard, both brokers may face action from the Commission as well as a civil lawsuit for damages.

Question 114

An agent promises a prospective tenant that the owner will repaint the property if the tenant signs the lease. The tenant is upset when they move in and discover the house is not painted. The agent:

Answer 114

Correct Answer Is guilty of making false promises Explanation A broker should never promise anything that the agent may have difficulty delivering. The promise must be kept to avoid discipline. Always under-promise and over-deliver. A broken promise is not a negligent misrepresentation. At a minimum, it is willful. There is no requirement to repaint a unit for lease, but if a broker promises to paint, the broker must paint. The broker should simply say, we will try to have it painted before you move in. Your move-in may be delayed if we have a problem.

Question 115

In which of the following transactions is a seller exempt from providing the Residential Property and Owners' Association Disclosure?

Answer 115

Correct Answer Fiduciary transfer from an executor Explanation Exemptions to the Residential Property and Owners' Association disclosure statement include foreclosures, bank transfers, fiduciary transfers such as with an executor or trustee, transfers of ownership between co-owners such as in a divorce, new construction, and anything not residential.

Question 116

Which of the following events would trigger the requirement to provide and review the Working With Real Estate Agents disclosure form?

Answer 116

Correct Answer Discussing a seller's motivation for placing his home on the market Explanation When a conversation with a potential buyer or seller turns to the motivation to buy or sell, first substantial contact will have occurred and the WWREA disclosure form (previously a brochure) must be given and reviewed. Meeting a buyer would be considered initial contact and would not require disclosure until discussions about turn to money or motivation. Providing publicly available information to a buyer would not trigger disclosure. There is no obligation to provide the WWREA disclosure to a tenant, in a residential or commercial transaction.

Question 117

A provisional broker enters into a property management agreement on behalf of her firm. The Broker-in-Charge asks for a copy of the Working with Real Estate Agents disclosure signed by the property owner. The provisional broker states one was not signed. Has the provisional broker violated license law?

Answer 117

Correct Answer No. The Working with Real Estate Agents disclosure is not required in leasing transactions. Explanation WWREA is required in ALL sales transactions. It is not required in leasing transactions or auctions. WWREA is disclosed at First Substantial Contact, the point in time that the conversation has shifted from questions about the property to personal / confidential information that could weaken the client/customer's bargaining position.

Question 118

Which of the following would terminate an agency relationship?

Answer 118

Correct Answer Death of the client Explanation Agency agreements terminate by the death of the client or the firm. They also terminate when a new deed is recorded as the agency relationship is fully performed (closed). Agency relationships are not terminated by the death of listing agent, buyer agent, subagent, BIC, or selling agent.

Question 119

Which contract best describes the creation of a general agency relationship?

Answer 119

Correct Answer Independent contractor agreement between a broker and firm Explanation When a salesperson affiliates with a brokerage it creates a general agency relationship. The salesperson has the limited ability to sign agency agreements that bind the brokerage to the agreement (buyer, seller, tenant, property management). Open listing agreements, non-exclusive buyer agency agreements, and exclusive buyer agency agreements all create special agency where the agent is authorized to represent the principal in a specific act. The independent contractor agreement between a firm and a broker creates general agency because the broker is authorized to represent the firm in a broad range of matters.

Question 120

Which of the following properties is subject to real property ad valorem taxation?

Answer 120

Correct Answer A fully annexed mobile home Explanation Ad valorem taxes are levied against real property, such as annexed mobile homes. When mobile homes are annexed, they fully and officially convert personal property vehicles into stationary real property. RVs, motorboats, and even personal pets are examples of items subject to personal property taxation. NOTE: For a mobile home to become real property, the wheels and hitch removed, it is placed on a permanent foundation, on land owned, and delisted from the DMV.

Question 121

Can a brokerage legally retain the interest earned on client funds that are deposited into the brokerage trust account?

Answer 121

Correct Answer Yes. When the client grants permission in the listing/buyer agency agreement. Explanation The client can give the brokerage the authority to retain the interest earned on the trust account to cover the expenses of maintaining the account. The trust account is "other peoples money" and only a limited amount of brokerage money can be deposited into the account (typically $100). The NCAR Exclusive Right to Sell Listing Agreement addresses the ability of the firm to retain the interest.

Question 122

Which of the following would be required, by law, when selling a new home?

Answer 122

Correct Answer Mineral,Oil and Gas Rights disclosure Explanation New home sales are not exempt from the Mineral and Oil and Gas Rights Disclosure. New homes are exempt from RPOADS. Case law has determined that builders owe to a buyer a minimum “one year warranty of habitability”, however are not required to provide a home warranty. Although the maintenance of roads does have to be disclosed (whether roads are public or private and if private if there is a road maintenance agreement), a new home does not have to be located on public roads. Roads become public when they have been built according to NCDOT requirements, the roads have been dedicated to NCDOT and NCDOT has accepted them.

Question 123

Broker A is acting as a designated agent for the buyer. Provisional broker B is working as a designated agent for the seller. When can broker B disclose information to broker A?

Answer 123

Correct Answer Foreclosure notice has been received. Explanation The listing broker is required to disclose material facts to the buyer/buyer's agent - therefore, the correct answer will be a material fact. A foreclosure notice is a material fact. A broker would have to disclose this no matter how the type of representation. Material fact disclosure is required for all parties in the transaction. A designated dual agency occurs when the firm represents the buyer and seller in the transaction. The BIC appoints a licensee to represent the buyer and another licensee to represent the buyer. Once a designated agency is established, the two brokers act similar to exclusive representation. The listing agent has to conceal personal information such as divorce or willingness to accept less than the listing price. A licensee can never disclose HIV/AIDS as it would violate fair housing laws.

Question 124

Which of the following is a property management agreement LEAST likely to contain?

Answer 124

Correct Answer The definite end date of the agency agreement Explanation Property management agreements are the only agency agreements in North Carolina which may auto-renew instead of terminate at a definite end date, unlike sales agency. Property management agreements will cover reporting expectations, a compensation structure, and how much authority the property manager holds.

Question 125

A seller is aware that the finished basement leaks in periods of heavy rain. He discloses this information to the listing agent and demands that she not disclose this information to potential buyers, believing that recent grading has corrected the issue. The listing agent complies with the seller's request. The buyer purchases the property after a home inspector found only minor issues. After the closing, the basement took on water when a tropical storm passed through the area of the home. Has the listing agent violated NC License Law?

Answer 125

Correct Answer Yes. The listing agent has omitted a material fact from the buyer. Explanation The listing agent must follow the seller's LAWFUL instructions. It is not lawful to ask the listing agent to conceal material facts. NOTE: The seller may select "No Representation" on the property disclosure form; however the listing agent would still have a duty to disclose material facts. An agent must disclose what they know or what they reasonably should have known.

Question 126

Which of the following is TRUE regarding an agent’s obligation regarding agency disclosure?

Answer 126

Correct Answer An auctioneer who sells real property is exempt from the agency disclosure obligations regarding agency status to bidders at an auction sale Explanation Auctioneers are exempt from the normal agency disclosure to buyers due to the peculiarities of an auction sale where it would be impractical to review the Working with Real Estate Agents brochure with every bidder. WWREA is not required in ALL real estate transactions but it is required in ALL real estate SALES transactions. The exemption for new home sales extends to corporate employees, not agents acting as independent contractors, therefore the WWREA must be reviewed with potential buyers. A buyer’s agent must disclose his status to the seller/listing agent at initial contact (this is the only case where initial contact comes up). The latest point that initial contact can occur is the presentation of an offer. An agent designated for the buyer should disclose his name to the seller no later than the first offer to purchase.

Question 127

A broker in North Carolina creates My Commissions, LLC for the sole purpose of collecting compensation the broker earns as an agent for ABC realty. The broker is the only member and the manager of the LLC. Which of the following is TRUE?

Answer 127

Correct Answer My Commissions, LLC will require a firm license and a qualifying broker Explanation A firm license is required when a broker creates an entity. A partnership, limited liability company, or a corporation all require a firm license. A firm license requires a non-provisional broker license on active status. A qualifying broker is not required to be the broker in charge, nor be qualified to be a broker in charge. A Firm with only one broker for the sole purpose of collecting compensation is not required to have a broker in charge.

Question 128

One advantage of investing in real estate is the premium some buyers are willing to pay for one parcel over another. This could result from perceptions of noise, views, or similar. Which economic characteristic does this best describe?

Answer 128

Correct Answer Situs Explanation Location, or situs, refers to a buyer's personal preference on location and the resulting willingness to pay a premium or not. Permanence refers to the longevity of land and improvements upon it. A mnemonic to remember the economic characteristics of property is SLIP - scarcity, location, improvements, and permanence. Scarcity refers to the supply and demand dynamic. There's only so much land to exist, and more cannot be made. Improvements generally refer to the human-made structures such as houses.

Question 129

When is the Working with Real Estate Agents disclosure form required in a commercial purchase transaction?

Answer 129

Correct Answer Before learning personal/confidential information Explanation The WWREA disclosure form (previously a brochure) is required in ALL sales transactions. The trigger for disclosure is the first substantial contact. With a seller, the latest point is before the start of the listing presentation. With a buyer, the latest point is before opening the door to show a property for sale NOTE: WWREA is not required in lease transactions, whether residential or commercial. Auctions are exempt as well.

Question 130

A broker receives 3 offers on a property he has listed. The broker presents all offers to the seller. The seller instructs the listing broker to disclose the highest offer to all buyers and seek the "highest and best" offer. The broker refuses. Has the broker violated license law?

Answer 130

Correct Answer No. The seller has not given a lawful instruction. Explanation A broker can only follow his/her client's lawful instructions. License Law and Commission Rules do not allow a broker to disclose the offer amount to another buyer without the express permission of the offering party. While the listing broker has a duty to obtain the best offer for the seller, they cannot violate laws/rules.

Question 131

A provisional broker has completed all required courses for the current license year and paid his renewal fee. The provisional broker's BIC forgot to take the Broker-in-Charge Update course. On July 1, what will be the status of the provisional broker's license?

Answer 131

Correct Answer Inactive Explanation A provisional broker license is inactive absent a BIC, so when a BIC expires or goes inactive, all provisional brokers affiliated with the BIC go inactive.

Question 132

Which of the following liens have the highest priority if the property is sold to a private party?

Answer 132

Correct Answer Public Special Assessment Explanation Local property taxes and public special assessments are paid first prior to all other liens. The remaining liens are paid in order of recordation - first mortgage lien, federal tax lien, mechanics lien. Note: A mechanics lien can jump back to the first date labor or materials were provided to a job, assuming all other criteria were met (appointment of a lien agent - file lien in 120 days - sue to enforce in 180 days). Private assessments do not receive the special lien priority treatment that public special assessments have; they fall in line with other recorded liens.

Question 133

Which of the following LEAST likely illustrates a licensee acting unworthy or incompetently?

Answer 133

Correct Answer Failure to return a phone call or email within the client's preferred communication window of 2 hours Explanation A wide range of behavior may serve as the basis for finding a license unworthy or incompetent, including conduct which violates other specific provisions of license law. A few examples include failure to use paperwork appropriately, failure to provide agency services as outlined in the agency agreement, failure to provide an accurate closing disclosure, and more. Delayed communication or reasonable delays in responses is generally not considered a sign of unworthiness and incompetence.

Question 134

A broker is using the NCAR standard form 2-T, and the buyer would like to add a very simple contingency to the agreement that is not part of the pre-printed form. Which of the following is TRUE?

Answer 134

Correct Answer The broker should encourage the buyer to consult an attorney, and the broker must refuse to draft the contingency Explanation Brokers cannot draft any portion of contract terms on behalf of others. A broker should always recommend the consumer consult an attorney. Alternatively, parties to the transaction could make changes in his/her handwriting.

Question 135

A valid listing agreement must include:

Answer 135

Correct Answer the list price and anti-discrimination language. Explanation A valid agreement must address all terms including the listing price and amount of compensation - they cannot be left blank and decided later. The broker may be aware of the lowest amount the seller would accept, but that is not required. When property is owned tenancy by the entirety, both spouses need to sign. A seller does not HAVE to authorize dual agency - they may elect not to authorize it. When that occurs the listing firm cannot represent a buyer in the transaction. The firm could ask for subsequent approval to act as a dual agent - and the buyer agency agreement will determine when the subsequent authorization has to be in writing.

Question 136

Which of the following would be a duty of a licensee?

Answer 136

Correct Answer Measuring the square footage of a home for a seller when disclosed in the MLS. Explanation The Commission does not require that a licensee measure a home unless the licensee discloses the square footage in the Multiple Listing Service. Measuring a home for a seller client would fall within the agent's skill set and would be expected as a fiduciary act of a listing agent (agent can hire someone with greater expertise to do this task). Agents would not draft contracts as that would be practicing law. Similarly, an agent should be careful offering tax advice unless they have expertise in that area.

Question 137

Which of the following is an example of a specific lien?

Answer 137

Correct Answer Real property tax lien Explanation Specific liens attach to a specific property. Examples include mortgage notes and deeds of trust, real property tax liens, and Mechanics liens. General liens impact everything an individual owns and include Federal income tax liens, State income tax liens, personal property tax liens, and judgments.

Question 138

All written agency agreements in North Carolina:

Answer 138

Correct Answer must be in writing when the agreement seeks exclusivity from a buyer or prior to offering services to a seller. Explanation An agreement to list a property for sale or for rent must be in writing prior to any brokerage services being provided. An exclusive buyer agency agreement must be in writing. Written agreement must have a definite end date, except for property management agreements. The statement in this question implies that all agency agreements can automatically renew - however, written buyer agency and listing agreements for sales must have a definite end date. A broker cannot discriminate and the owner of the property agrees not to discriminate even if they meet one of the state exceptions. The agency agreement must contain the license number of the agent that signs on behalf of the firm to bind the firm to the agency agreement - not the broker-in-charge.

Question 139

Two agents with XYZ Realty are correctly practicing dual agency as designated agents. When is the latest that a seller should be informed of the identity of the agent designated for the buyer?

Answer 139

Correct Answer At initial contact with the buyer's designated agent Explanation A buyer’s agent needs to disclose his / her status as an agent to the buyer at initial contact. First substantial contact (FSC) relates to agency disclosure between an agent and a prospective client. The last point FSC can arise with a seller is prior to beginning the listing presentation. The last point that FSC occurs with a buyer is the point that the agent is opening the door for the prospective buyer.

Question 140

A broker shows property and deliberately withholds information about an encroachment. The buyer fails to investigate the property condition and fails to have a survey. After settlement and closing, the buyer discovers the problem and learns that the broker was aware of the issue with the encroachment and failed to disclose. Which of the following best describes the violation?

Answer 140

Correct Answer The broker is guilty of omission Explanation There is no suit for specific performance. The seller sold the property, so the buyer has title. The best answer is a willful omission because the broker knew and failed to disclose. The broker could be sued under Unfair and Deceptive Trade Practices and potentially face treble damages, but that is not what the question asked. The seller is liable for the actions of his agent through vicarious liability so that the seller may be named in the litigation.

Question 141

An unlicensed assistant is prohibited from doing which of the following?

Answer 141

Correct Answer Filling in the blanks of a preprinted offer to purchase when directed by the buyer or seller. Explanation A salaried unlicensed employee or assistant can peform many task, however cannot engage in brokerage practice. They can type an offer to purchase at the direction of the licensee, however cannot meet directly with a buyer or seller. NOTE: Under property management a salaried unlicensed employee may fill out a preprinted lease form, however cannot negotiate the terms. For a complete list of permitted activities for unlicensed employees see page 3-4 of License Law and Commission Rule Comments.

Question 142

During a listing presentation walk-through, the seller told the agent the roof leaks, and the agent made a note of this. The seller asked the listing agent not to share this with a buyer. While entering the information into the MLS, the agent did not include the note about the roof. Later, when a buyer's agent inquired if there was anything wrong with the property, the listing agent remarked everything seemed fine. What is the listing agent guilty of?

Answer 142

Correct Answer Willful misrepresentation Explanation Willful refers to intent and having actual knowledge of something. In this case, the agent made a note of the defect and still chose to say something contrary to the fact. This is willful statement that is false. That is a misrepresentation. Omissions, by contrast, are a failure to say anything. Negligent, by contrast, would be a situation where the agent reasonably could have or should have known, and yet the agent did not have actual knowledge of the item in question.

Question 143

Which of the following is TRUE regarding an agent’s obligation regarding agency disclosure?

Answer 143

Correct Answer An auctioneer who sells real property is exempt from the agency disclosure obligations regarding agency status to bidders at an auction sale Explanation Auctioneers are exempt from the normal agency disclosure to buyers due to the peculiarities of an auction sale where it would be impractical to review the Working with Real Estate Agents brochure with every bidder. WWREA is not required in ALL real estate transactions but it is required in ALL real estate SALES transactions. The exemption for new home sales extends to corporate employees, not agents acting as independent contractors, therefore the WWREA must be reviewed with potential buyers. A buyer’s agent must disclose his status to the seller/listing agent at initial contact (this is the only case where initial contact comes up). The latest point that initial contact can occur is the presentation of an offer. An agent designated for the buyer should disclose his name to the seller no later than the first offer to purchase.

Question 144

A broker is communicating with a buyer by phone. At what point will first substantial contact occur?

Answer 144

Correct Answer When the buyer discloses that they are looking for a house and must close before school starts Explanation Agency disclosure must occur before a consumer shares any confidential information with the broker. Statements about the number of bedrooms wanted do not rise to the level of confidential information. Questions about price terms and motivation cross the first substantial contact line. First substantial contact always occurs BEFORE you show the house. The only exception is a model home or an open house.

Question 145

All residential listing agreements must contain which of the following?

Answer 145

Correct Answer The Fair Housing paragraph Explanation All listing agreements must be in writing from the inception and must include the Fair Housing paragraph and automatically terminate. Automatic renewals are strictly prohibited.

Question 146

A buyer makes an offer using a buyer's agent. The buyer's agent delivers the offer to the listing agent of the same firm. The listing agent and the seller meet to discuss the offer, and the seller accepts the offer as written. Before communication of acceptance to the buyer, the buyer calls to withdraw the offer. Which of the following is TRUE?

Answer 146

Correct Answer The buyer may not withdraw the offer Explanation When the seller unconditionally accepts the offer and communicates with a dual agent, the agreement is a binding contract. When you communicate with a dual agent, you are communicating with the buyer and the seller. Notification of acceptance to the buyer when forming a legally binding contract is only required when the buyer has no representation.

Question 147

A valid listing agreement must include:

Answer 147

Correct Answer the list price and anti-discrimination language. Explanation A valid agreement must address all terms including the listing price and amount of compensation - they cannot be left blank and decided later. The broker may be aware of the lowest amount the seller would accept, but that is not required. When property is owned tenancy by the entirety, both spouses need to sign. A seller does not HAVE to authorize dual agency - they may elect not to authorize it. When that occurs the listing firm cannot represent a buyer in the transaction. The firm could ask for subsequent approval to act as a dual agent - and the buyer agency agreement will determine when the subsequent authorization has to be in writing.

Question 148

When a firm offers to represent both the buyer and the seller in the same transaction, which of the following statements is TRUE?

Answer 148

Correct Answer The firm must have the informed consent of all the parties before engaging in dual agency. Explanation Dual agency occurs when one firm has a listing agreement with a seller and a buyer agency agreement with a buyer in the same transaction. One broker may act as a dual agent for both. Do not confuse Dual agency with Designated dual agency. Only designated dual agency limits the BIC. In a straight dual agency transaction, the BIC and provisional broker must keep confidential information about both sides confidential. You must have informed consent for dual agency from all parties in advance.

Question 149

Broker A represents a buyer, and Broker B represents a seller, as exclusive agents in a purchase transaction. What information may Broker A disclose to Broker B and the seller in the transaction?

Answer 149

Correct Answer The lender has denied the buyer financing; however, the buyer is pursuing other options Explanation It is a material fact that the buyer has been denied financing. A broker must disclose this information regardless. Material fact disclosure is required for all parties in the transaction. The exclusive buyer's agent has a duty to conceal confidential, personal information about the buyer, such as the ability to pay more, time constraints, or the buyer's intention to seek rezoning for the property.

Question 150

When a broker receives notice of lis pendens on a property he has listed, which of the following statements is TRUE?

Answer 150

Correct Answer The broker should be concerned since the seller does not have marketable title. Explanation Lis pendens is a notice of litigation pending. Lis pendens is a material fact and will likely stop or stall a transaction as it is a recorded lien against the property. Recall that liens are paid in order of recordation (except property taxes and public assessments). The title may transfer with lis pendens, but the new buyer may lose the property based on the outcome of the litigation. A prudent broker will recommend that the buyer call a lawyer.

Question 151

A buyer and seller enter into a lease with an option to purchase. Which of the following is TRUE?

Answer 151

Correct Answer The buyer and seller have entered into two different contracts, and a broker should consult an attorney Explanation A lease with an option to purchase is a complex transaction where the buyer is a tenant with possession, and the seller is a landlord with an obligation to maintain the property. The tenant also has an option (the choice) to buy or not. The seller holds title to the property until the buyer exercises the option. The terms of the purchase should be included in the option agreement. An attorney is required to tie the two contracts together and draft the option.

Question 152

A firm establishes a policy that the agents in the firm may not show properties listed by a new, limited-services company. Which of the following would best describe this practice?

Answer 152

Correct Answer This would be a violation of the Sherman Antitrust Act Explanation This would most likely be a violation of antitrust acts for suggesting a boycott against a competitor. Market allocation is illegal as well but not descriptive of this example (market allocation occurs when companies agree to stay out of each others territory, thus reducing options to clients). CAN SPAM relates to sending unsolicited emails.

Question 153

A new home community is offering a new Subaru Outback when a broker sells 3 homes within 1 year. The broker:

Answer 153

Correct Answer must disclose the bonus to all buyers no later than the point that the buyer is considering an offer. Explanation A broker has a duty to disclose any commissions, referral fees, kickbacks and similar payments from third parties, which include new home communities. Additional compensation must be disclosed to all buyers so they can make an informed decision. The discloser may be oral at the point that the buyer is considering an offer. Disclosure must be reduced to writing prior to the presentation of an offer.

Question 154

Which of the following would trigger the need to have an active real estate license?

Answer 154

Correct Answer An assistant that shows property for lease and sale to clients or customers Explanation An unlicensed assistant can show a property for rent, however, they cannot show a property for sale. The assistant will need an active license to show the property for sale. The license trigger event is earning compensation on behalf of another. There are no exceptions when working for friends and family. When a family member is NOT receiving compensation for managing property for a family member, there is no license triggering event. A free apartment is considered compensation. W-2 employees that are acting on behalf of his/her employer is exempt from licensing requirements. The tenant receiving 2-months of free rent is not earning compensation on behalf of another, so no license is required. An attorney does not need a real estate license when being paid to settle an estate. The mere crier of a sale at an auction and assistants in many circumstances are not required to be licensed.

Question 155

All of the following would require disclosure of agency status at first substantial contact, EXCEPT:

Answer 155

Correct Answer A buyer’s agent setting an appointment with a seller to show his home Explanation A buyer’s agent is not required to review the Working with Real Estate Agent’s Brochure with the seller. The buyer’s agent does need to disclose that he/she is acting on behalf of the buyer at initial contact with the seller or sellers agent. NOTE: This question is making sure you understand the distinction between first substantial contact (licensee to potential client) versus initial contact (buyer's agent to seller or seller's agent notifying that the agent represents the buyer).

Question 156

A licensee is required to disclose the Working With Real Agent's disclosure form at first substantial contact. Which of the following LEAST illustrates an example of first substantial contact?

Answer 156

Correct Answer A buyer tells a licensee that he is considering a purchase in the coming year. Explanation Based on the examples provided in the question, the fact that a buyer or seller is considering the purchase or sale of a home in a year or so would not necessarily rise to the level of material fact. The remaining options are disclosing personal / confidential information that could weaken the bargaining position of either the buyer or seller.

Question 157

In a commercial sales transaction, agency disclosure is:

Answer 157

Correct Answer required at first substantial contact ``` Explanation Agency disclosure (WWREA) is required in ALL SALES transactions with every buyer and every seller every time at first substantial contact. The sale may be residential or commercial; it makes no difference. First substantial contact occurs when the conversation shifts from facts about the property to personal/confidential information. Auction and lease transactions are exempt from WWREA requirements. NOTE: A licensee that represents a buyer/tenant has a duty to inform the owner/listing agent at initial contact. The latest point for initial contact to occur is before presentation of an offer. ```

Question 158

A broker shows property and deliberately withholds information about an encroachment. The buyer fails to investigate the property condition and fails to have a survey. After settlement and closing, the buyer discovers the problem and learns that the broker was aware of the issue with the encroachment and failed to disclose. Which of the following best describes the violation?

Answer 158

Correct Answer The broker is guilty of omission Explanation There is no suit for specific performance. The seller sold the property, so the buyer has title. The best answer is a willful omission because the broker knew and failed to disclose. The broker could be sued under Unfair and Deceptive Trade Practices and potentially face treble damages, but that is not what the question asked. The seller is liable for the actions of his agent through vicarious liability so that the seller may be named in the litigation.

Question 159

Current zoning laws state that a property must be used for single-family residential purposes. A developer wants to build office townhomes with a loft apartment above the business. The developer should seek:

Answer 159

Correct Answer a rezoning. Explanation Since the developer is seeking a change in use (single-family residential to mixed-use), they should seek to rezone the property. A variance is a minor change that does not impact the current use; for example, an office building that needs additional parking spaces would seek a variance, not a rezoning. A special use exception is provided for in the zoning rules for an area; there is not sufficient information to select this option. Lis pendens is a notice of pending litigation that could impact whoever owns the property.

Question 160

A listing agent affiliated with a brokerage firm neglected to pay her $45 renewal fee, and now her license expired. What will most likely happen to her listing as a result?

Answer 160

Correct Answer The listing is still active as long as the firm's license did not expire. Explanation Listing agreements terminate for the following reasons: death of the seller, death of the firm/brokerage (licensure loss or going out of business), destruction of the property, operation of law, mutual agreement, or breach. A listing agent whose license expires does not terminate the listing. The BIC may appoint another broker to fulfill the firm's duties.

Question 161

A seller signs an exclusive right to sell listing agreement and refuses to allow dual agency. The listing firm may do which of the following?

Answer 161

Correct Answer Show the property to a buyer customer Explanation When a seller refuses to allow dual agency, None of the agents in the firm may show buyer clients the property. The firm may only show buyer customers and encourage other firms to show the property.

Question 162

In which of the following transactions is a seller exempt from providing the Residential Property and Owners' Association Disclosure?

Answer 162

Correct Answer Fiduciary transfer from an executor Explanation Exemptions to the Residential Property and Owners' Association disclosure statement include foreclosures, bank transfers, fiduciary transfers such as with an executor or trustee, transfers of ownership between co-owners such as in a divorce, new construction, and anything not residential.

Question 163

The buyer's agent has included the amount of compensation he expects to receive in the Offer to Purchase. Has the buyer's agent acted appropriately?

Answer 163

Correct Answer No. The amount of compensation cannot be referenced in the purchase contract. Explanation An agent cannot disclaim liability or reference compensation/commission or disclaim liability in the purchase contract as the agent is not a party to the agreement. The purchase contract is between the seller and the buyer, not the broker. Compensation is outlined in the listing contract or buyer agency contract.

Question 164

A provisional broker should do which of the following when listing a townhouse for sale?

Answer 164

Correct Answer Determine an estimate of seller net proceeds at various sales prices. Explanation A prudent broker should calculate an estimate of the seller proceeds at various sale prices to ensure that the seller can pay off all liens against the property. Square footage, when represented, should be calculated according to the Commission guidelines. A broker should not use tax records or previous MLS listings to obtain square footage. A buyer owns the airspace of a unit when purchasing a condo, not a townhouse. The WWREA brochure should be signed at first substantial contact, not prior to closing the transaction.

Question 165

Grace located an in-house listing for her buyer client. She and her client were working under an oral buyer agency agreement when they decided to view the property. Prior to showing the property Real Estate Commission rules require which of the following to occur?

Answer 165

Correct Answer The broker and buyer must, minimally, enter into an oral dual agency agreement before viewing the house. Explanation Please note the timeline; oral dual agency can only arise out of oral buyer agency and must be agreed upon prior to the agent showing the property. While the agreement authorizing dual agency must be made prior to showing the property, the agreement does not have to be in writing until presentation of an offer. Dual agency is a possibility where the firm practices dual agency, and both the buyer and seller have agreed to such representation. North Carolina does not allow transaction brokers, where a real estate broker acts as a professional assistant rather than an agent of the buyer or seller. The agent can show the property, prepare an offer and submit it to the seller however does not advocate for one over the other.

Question 166

Which of the following services should a property manager avoid?

Answer 166

Correct Answer Establishing a depreciation schedule Explanation Typical property manager duties include establishing rental schedules, finding and qualifying potential tenants, and maintaining the property and making repairs as needed. Property managers should no to determine depreciation schedules for the properties they manage, not even in their expense reports. The property manager should refer the client to an accountant.