301-CE-PREP

Question 1

You must get their permission in writing that it’s okay to limit their list of potential buyers

You are the broker-in-charge of a firm that represents sellers only. You like to cooperate with EZ Realty because the brokerage represents buyers as buyer agents, but you don’t enjoy working with Realty First, because those agents don’t represent buyers. Licensees from Realty First want to be
subagents of the listing brokerage, which can leave you liable-and you don’t want that. Which of these duties do you owe to your seller clients?

Answer 1

* You must get their permission in writing that it’s okay to limit their list of potential buyers.
* You must have them sign a form saying that they will allow dual agency.
* You must let them know that they are responsible for paying a finder’s fee to the brokerage that brings the buyer for their property.
* You must tell them that they can’t find their own buyers for their listings.

Many seller-only brokers-in-charge in North Carolina don’t like to work with other agents in a subagency capacity. In that case, their seller clients must be made aware of this preference and provide written permission saying that it’s okay to have their pool of potential buyers limited in this way.

Question 2

* The buyer must pay the broker a portion of the commission.

Which of the following statements is false regarding North Carolina’s protection agreement?

Answer 2

* The buyer must pay the broker a portion of the commission.
* The contract includes the agreed commission fee.
* The contract includes the named buyer.
* The contract includes the time allotted to secure the sales contract.

The contract focuses on the broker’s fee, and all other components set limits on time and named parties.

Question 3

The method can’t be used alone as an indication of value for residen

Which of the following is true about the GRM method?

Answer 3

• Appraisers rely solely on the GRM method to appraise small residential investment properties.
• Comparable rental properties play no part in the method.
  * The method can’t be used alone as an indication of value for residential property.
• The more rental properties there are in an area, the less reliable the method is.

Neither GRM nor GIM can stand by itself as an indication of value for residential property. The sales comparison approach is also needed.

Question 4

You represent the seller.

You’re working with Angela, your buyer customer. Since there’s no agency relationship in place, it’s important for her to understand which of the following?

Answer 4

• You can’t accept her earnest money check.
• You represent her.
• You represent neither the buyer nor the seller.
  * You represent the seller.

When there’s no agency agreement in place with a buyer, it’s important that she understands you represent the seller.

Question 5

She used at least three comparable properties with similar characteristi

North Carolina broker Karen is preparing a for-fee CMA. She made sure she complied with all of her brokerage’s policies and North Carolina laws for preparation. Which of the following must be true?

Answer 5

• Her report includes an automated valuation model.
• She is a broker-in-charge.
  * She used at least three comparable properties with similar characteristics.
• The property is not a commercial property.

North Carolina licensees are required to use at least three comparable properties with similar characteristics when preparing a for-fee CMA.

Question 6

A seller wants to net $40,000 after paying the broker’s commission of 5% and a loan balance of $170,000. Assuming no other closing costs, calculate the sales price of the property to the nearest whole dollar.
* $175,587
* $210,000
* $221,053
* $225,040

Answer 6

A seller wants to net $40,000 after paying the broker’s commission of 5% and a loan balance of $170,000. Assuming no other closing costs, calculate the sales price of the property to the nearest whole dollar.
* $175,587
* $210,000
* ** $221,053**
* $225,040

To calculate this, flip the net to seller equation to be: sales price = (net amount + mortgage or other expenses) x (100% commission rate). So, we have: sales price = ($40,000 + $170,000) ÷ (100% 5%) = $210,000 ÷ 95% = $210,000 ÷ 0.95 = $221,052.63, which rounds to the nearest dollar as $221,053.

Question 7

** Commission rate**

The formula for net to seller is sales price x (100% - _______).
* Commission rate
* Loan amount
* Market value
* Sales price

Answer 7

The formula for net to seller is sales price x (100% - _______).
* ** Commission rate**
* Loan amount
* Market value
* Sales price**

The formula for net to seller is sales price x (100% - commission rate). Remember that other closing expenses and an existing mortgage also affects the seller’s net proceeds.

Question 8

Stacy is a broker-in-charge in North Carolina. What must be true about her role?

Answer 8

• She’s a member of the North Carolina Real Estate Commission.
• She’s a sole proprietor.
• She’s not allowed to participate directly in real estate transactions.
  * She’s responsible for the actions of the affiliated provisional brokers at her firm.

Stacy is responsible for the actions of the affiliated provisional brokers at her firm. There’s no rule that prohibits the broker-in-charge from participating directly in real estate transactions. Stacy could be a member of NCREC or be a sole proprietor, but doesn’t have to be.

Question 9

Sherman Antitrust Act.

The 1950 case involving the District of Columbia’s Washington Board of Realtors and the National Association of REALTORS® determined that real estate boards that set schedules of fixed or mandatory real estate commissions or fees violated this law.

Answer 9

• Fair housing laws
• Licensing laws
• The Federal Trade Commission Act
  * The Sherman Antitrust Act

Setting schedules of fixed or mandatory real estate commissions or fees was found to be a violation of antitrust law under the Sherman Antitrust Act.

Question 10

Jack keeps current buyer tastes in mind when touring a home during a pre-listing appointment. This helps him to ______.

Answer 10

• Block out any dated features
• Compile a list of current buyers who would like the home
• Determine whether he wants to list a home that’s too dated
  * Make a note of any recommended updates to discuss with the sellers

It’s best to make a note of any upgrades or updates needed during the pre-listing appointment. Your
knowledge of current buyer tastes will come in handy when offering suggestions to the sellers.

Question 11

* An adverse material fact

A fact related to the property or transaction that negatively affects the value of a property is known as _______.

Answer 11

• A confidential fact
• A material fact
  * An adverse material fact
• An immaterial fact

Agents must disclose any adverse material facts about which they know or should know.

Question 12

Jules wants to receive the most representation from a single agent. Which type of buyer agency
agreement does she want?

Answer 12

• Exclusive agency
  * Exclusive right-to-represent
• Limited agency
• Open agency

Jules wants an exclusive right-to-represent agreement, which offers the buyer the highest level of exclusive representation.

Question 13

A four-unit rental property has a sales price of $700,000. Monthly gross rent is estimated at $7,000. What is the gross rent multiplier?

Answer 13

• 10
• ** 100**
• 83
• 8.3

Gross rent multiplier is sales price divided by monthly gross income. Improperly calculating GRM could lead an investor to purchase a property that turns out to be a poor investment.

Question 14

What is the purpose of overlay zones?

Answer 14

• Defines what ornamental accents may decorate a property to keep with the area’s
• “feel.”
  *** Designates additional regulations over existing base zones to protect special features
• or areas.**
• Extends regulations over additional areas where no other zoning exists.
• Grants a developer more building density on the condition that the developer includes
• certain amenities.

Overlay zones designate special zones over existing base zones to protect special features or areas.

Question 15

Pay just $33 per $1,000 borrowed.

Which section of this ad is a trigger term according to Regulation Z? HOME FOR SALE 4567 Busco
Lane, Durham, NC. List Price: $525,000. Beautiful home in the highly sought-after community of
Busco Beach. Master and bath on main, large island kitchen, deck, amazing backyard. A true oasis! This home offers lots of extras! Community features a huge pool, tennis courts, and playground. Lots of activities for everyone! Pay just $33 per $1,000 borrowed. Contact Joey, CanDo Realty, at 919-111-111 .”

Answer 15

• Beautiful home in the highly sought-after community of Busco Beach.
• Community features a huge pool, tennis courts, and playground.
  * Pay just $33 per $1,000 borrowed.
• There are no trigger terms in this advertisement.

“Pay just $33 per $1,000 borrowed” is a trigger term. If advertising for available financing includes a trigger term, then the ad must include the required disclosures.

Question 16

Seller Bob is selling his Maryville house with the help of his agent, Carol. Buyer Ted, with the help of
his agent, Alice, is purchasing Bob’s house. To which of the parties does Alice owe the duties of
obedience and loyalty?

Answer 16

• Only to Bob
  * Only to Ted
• To Bob, Carol, and Ted
• To both Bob and Ted

Because Alice is buyer Ted’s agent, she only owes the fiduciary (agency) duties of obedience and loyalty to Ted.

Question 17

Providing a disclosure stating that you are acting as a limited service

If you are acting as a limited service agent, then you must act within the guidelines of a written
brokerage agreement by:

Answer 17

• Conducting the home inspection yourself
• Disclosing the number of years you have been a real estate professional
  * Providing a disclosure stating that you are acting as a limited service agent
• Providing personal legal advice

If you are acting as a limited service agent, then you must act within the guidelines of a written brokerage agreement by providing a disclosure stating that you are acting as a limited service agent. Refer to Lesson: Limited Service Agencies.

Question 18

He prefers to take the seller’s word for square footage over tax records

Bob always conducts a pre-listing appointment with his clients. This is likely for all of the following
reasons EXCEPT _______.

Answer 18

• He finds it helps him prepare a more accurate list price
• He likes to see the property firsthand and ask questions to determine its condition
  * He prefers to take the seller’s word for square footage over tax records
• He uses the additional time to develop trust with the seller

A pre-listing appointment does not eliminate the need to consult other sources.

Question 19

Which of these situations is an example of designated agency?

Answer 19

• Cindy’s broker at Homeworks Realty appoints her as the buyer’s agent in a transaction. Tim’s broker at Great Homes Real Estate appoints him as the seller’s broker in the same transaction.
• Meredith’s broker appoints her to represent both the buyer and the seller in a single transaction.
• Michele is the firm’s managing broker. She’s the designated dual agent in all dual agency transactions.
  * The broker-in-charge at ABC Realty appoints Mark to represent the buyer and Todd to represent the seller in the same transaction.

In a dual agency situation, designated agency means the firm designates one of the firm’s licensees to represent the buyer and a different licensee to represent the seller, keeping the transaction “in house.”

Question 20

$220,000 ÷ .94 = $234,042.55, or $234,043

Your seller wants to net $220,000 after the 6% commission is paid. Assuming no closing costs, at
what price does the home need to sell for the seller to net this amount (rounded to the nearest whole
dollar)?
$206,800
$226,592
$231,000
$234,043

Answer 20

Your seller wants to net $220,000 after the 6% commission is paid. Assuming no closing costs, at
what price does the home need to sell for the seller to net this amount (rounded to the nearest whole
dollar)?
$206,800
$226,592
$231,000
** $234,043**

$220,000 ÷ .94 = $234,042.55, or $234,043 when rounded to the nearest whole dollar.

Question 21

Give Leonard the “Working with Real Estate Agents” disclosure

Clarke, a North Carolina licensee, just met with Leonard over coffee. Leonard said that he’s interested
in buying a house and wants to know if Clarke can help. What should Clarke do next?

Answer 21

• Give Leonard some advertisements about houses in the area.
  * Give Leonard the “Working with Real Estate Agents” disclosure form and explain its contents.
• Make an appointment to show Leonard some houses.
• Orally disclose how his commission will be paid.

When Leonard asked Clarke for help, that became their first substantial contact. Clarke should provide Leonard with the WWREA disclosure form and discuss agency options with him.

Question 22

The North Carolina Residential Property Disclosure Act applies to which type of transaction?

Answer 22

• A sale by foreclosure or auction
• A transfer of a single-family residential real property to a family member as part of an estate
• The initial sale of a single-family residential property that has never been occupied
  * The sale of single-family residential real properties that includes four or fewer units

This act applies to the sale of residential properties that include four or fewer units.

Question 23

Which of the following statements may indicate a price fixing violation?

Answer 23

• “I base my price on my services.”
• “My price is non-negotiable.”
• “This is the price my brokerage requires me to charge.”
  * “This is the standard price for a full-service listing.”

Discussing or even implying that there is a standard commission in the industry alludes to price fixing, which is an antitrust violation.

Question 24

Danae must not give one client an advantage over the other.

Licensee Danae is going to work as a dual agent in a condominium sale. Which of the following statements is true regarding Danae’s dual agent role?

Answer 24

• Danae cannot legally work as a dual agent.
• Danae does not owe fiduciary duties to the buyer.
  * Danae must not give one client an advantage over the other.
• Danae should favor the seller in the transaction since the seller will pay her commission.

Dual agents must not give one client an advantage over the other.

Question 25

Property manager Donna is preparing a property management agreement for her new client, Tom.
What must she ensure is included in the agreement, in accordance with North Carolina statutes?

Answer 25

• A complete list of renters
• A legal property description
  * An expiration date
• The property tax amount

Property management agreements must include an expiration date.

Question 26

REALTOR® Pete gets a call from REALTOR® Sue. Sue wants to know if Pete has an exclusive listing on a certain property. Pete refuses to answer any of Sue’s questions. Which of the following is a true
statement?

Answer 26

• Pete can rest assured that he acted in his client’s best interest.
• Pete has successfully protected his exclusive listing.
  * Sue can contact the property owner directly.
• Sue will never be able to find out if Pete has an exclusive listing on the property.

Per Article 16, other REALTORS® must respect exclusive representation agreements, but if you refuse to divulge the nature of the listing agreement and the expiration date, the REALTOR® can contact the property owner to find out the information.

Question 27

Do Not Call Implementation Act of 2003

North Carolina resident Emily has her home and cell numbers registered on the Do Not Call Registry. She recently received a call from a real estate agent in the city and told the licensee that her number was on the Do Not Call Registry and not to call again. A few days later, she received another call from
the same agent. Which law does the licensee appear to be violating?

Answer 27

• Anti-Solicitation Act of 2003
• CAN-SPAM Act of 2003
  * Do Not Call Implementation Act of 2003
• Junk Fax Prevention Act of 2005

It’s illegal for telephone solicitors to call numbers on the Do Not Call Registry unless they have a business relationship with the household or express permission to do so.

Question 28

Honesty is to everyone involved

North Carolina licensee Tyler is providing brokerage services to Gayle Owens, who is selling her 1992 ranch. Tracey and Brian, who are represented by agent Jessica, made an offer on Gayle’s home. To whom does Tyler owe the duties of honesty?

Answer 28

• Gayle
• Gayle, Tracey, and Jessica
  * Gayle, Tracey, Brian, and Jessica
• Tracey and Brian

North Carolina licensees owe the duty of honesty to all parties in a transaction.

Question 29

The agent MUST disclose this issue not the client

Consuela is listing her house with agent Mimi. They both know that the porch roof must be replaced soon. Which of the following is true about this situation?

Answer 29

* Consuela doesn’t have to disclose this, but Mimi does.
* Consuela has an obligation to disclose this fact on the North Carolina disclosure form.
* Mimi must follow Consuela’s instructions about whether or not to disclose this fact to potential buyers.
* When asked about the roof directly, Mimi should answer, “Legally, I’m not allowed to discuss this.”

Sellers in North Carolina don’t have to disclose property defects, but agents do.

Question 30

inferior, adjust upward. superior, adjust downward

If the comparable is inferior to the subject house, _______.

Answer 30

• Adjust the sales price downward for the comparable
• Adjust the sales price downward for the subject property
  * Adjust the sales price upward for the comparable
• Adjust the sales price upward for the subject property

Only the comparable sales price is adjusted. If it is inferior, adjust upward. If it’s superior, adjust downward.

Question 31

No firm name is a blind Ad

Mark received his BIC’s approval and the green light from the owners on his marketing plan, then posted this ad: “HOME FOR SALE 555 Sandburg Lane, Hendersonville, NC; priced to sell at $400,000. SPRING into your fabulous 3 BR, 3BA, country cottage, 4350SF with hard to find tree-lined private backyard. Two gas fireplaces. Remodeled kitchen. RV/boat parking. Make an offer! Don’t let this one get away! Contact Joey at 919-111-111.” Did Mark’s ad violate 21 NCAC 58A .0105?

Answer 31

• It’s a violation to include, “Make an offer! Don’t let this one get away!”
• No, Mark’s ad is in compliance with NCREC’s advertising rules.
• Yes, he can’t include the phrase “priced to sell at $400,000.”
  * Yes, Mark’s ad is a “blind ad.” He did not include the name of his brokerage or broker-in-charge.

It must be clear who the public is contacting. The name of Mark’s firm must appear somewhere in the advertisement, therefore his ad doesn’t comply with 21 NCAC 58A .0105(b).

Question 32

Net to seller equals the ______ multiplied by the percent to seller.

Answer 32

• Closing costs
• Commission rate
  * Sales price
• Tax rate

The net to seller formula calculates what the seller will receive after the commission is paid. Net to seller = sales price × percent to seller.

Question 33

No. Without informed consent, it’s illegal.

Frieda is practicing dual agency, and neither party seems to mind, even though she didn’t obtain written informed consent. Is this legal?

Answer 33

• It’s only legal if she doesn’t get caught.
• No. Dual agency is always illegal.
  * No. Without informed consent, it’s illegal.
• Yes, if the parties are agreeable.

Frieda needs to obtain informed consent in writing in order to practice dual agency legally.

Question 34

Which phrase from the listing below should be edited to meet fair housing guidelines and avoid an MLS violation? “Nestled away in a neighborhood of gracious pre-war mansions-many now converted to offices-Beatrice Place, built in 2004, emulates its predecessors in scale, and to some extent in visual expression. The peaked roofline is Tudor in effect, capped by our ancestors’ signature copper roofing. The handsome interiors are ample, not oversized, with 10-foot ceilings and high-quality features:

Answer 34

• “Emulates its predecessors in scale”
• “Interiors are ample, not oversized”
  * “Our ancestors’ signature copper roofing”
• “Pre-war mansions”

Whose ancestors? Fair housing laws apply to the MLS, and implying that the ancestry of the builders is the same as the ancestry of desired buyers is a subtle but clear message of preference. Rudy could have said something like “capped by the copper roofing often used in pre-war buildings.

Question 35

What is the Rule of Three, as it pertains to comparables?

Answer 35

* At least three comparables should be used.
* Comparables should be no more than three blocks away.
* Comparables should have sold no more than three miles apart from one another.
* No more than three comparables should be selected.

The Rule of Three says that at least three comparables should be used, and they should have sold
within the last three months, if possible.

Question 36

Telephone Consumer Protection Act of 2003

What is the name of the federal law that sets forth guidelines regarding telephone solicitation?

Answer 36

• Bitphone
• Telecommunication Device Act of 2003
• Telecommunications Information Act
  * Telephone Consumer Protection Act of 2003

The federal act dealing with telephone solicitation is known as TCPA, or the Telephone Consumer Protection Act.

Question 37

Want

Amanda’s client, Roger, was sure he didn’t want a house with popcorn ceilings. But when he finally found his dream home, it did indeed have popcorn ceilings, which he spent $3,000 to remove. Which of the following best describes the popcorn ceiling issue for Roger?

Answer 37

• Deal breaker
• Determining factor
• Need
  * Want

Wants are untempered desires, whereas unfulfilled needs can be deal breakers.

Question 38

Broker Daniel’s seller client confided to him that the reason he and his wife are selling their home is because they hate their neighbor, who has a large and boisterous family. As soon as Daniel discovered this information, he added it to the MLS listing. Did Randy correctly market his client’s listing?

Answer 38

• No, because he should always conceal any negative aspects of the property.
  * No, because the information his clients shared with him was confidential.
• Yes, because Daniel is obligated to treat all parties honestly, even if it’s not in his
• client’s best interests.
• Yes, because he is not required to protect and promote his client’s interests.

Daniel must be careful not to disclose confidential information about a client. The client’s reason for
selling is a confidential matter.

Question 39

As a North Carolina property manager, which of the following is Luisa required to do?

Answer 39

• Act as the landlord’s representative in all matters, including legal counsel.
• Advocate for the tenants’ interests above all others.
• Avoid performing any actions that would constitute a landlord’s duties.
  * Perform the duties of a landlord, as laid out in statute and the lease.

North Carolina property manager Luisa, as an agent of the property owner, is required to perform the duties of a landlord, as laid out in statute and the lease. Her representation does not extend to acting as legal counsel, as that would constitute the unauthorized practice of law.

Question 40

* Ursula is allowed to make general mailings as long as she is unaware

Ursula, a REALTOR®, is sending postcards to her contact list and includes an old lead, Henry. Henry is currently working with Jan, another REALTOR®, but Ursula has no knowledge of their relationship. Which of the following is true?

Answer 40

• REALTORS® are not allowed to send postcards to anyone who is not a past client.
  *** Ursula is allowed to make general mailings as long as she is unaware of Henry’s **
• relationship with Jan.
• Ursula is not allowed to send any mailings unless a consumer specifically requested
• them.
• Ursula is required to screen the contacts on her mailing list to ensure they are not
• currently working with another agent.

REALTORS® are allowed to make general mailings, telephone calls, and direct, individual solicitation
for business.

Question 41

Michonne is an unrepresented buyer who calls you about one of your listings. What should you tell her?

Answer 41

• Nothing; you cannot speak to her about the listing unless you get the seller’s permission
• That since you represent the seller, she should secure her own representation and
• have that agent call you for information about the listing
  * That you represent the seller only, and that she has options regarding her own representation
• That you will represent her as well

Make sure the unrepresented buyer understands that you represent the seller and only the seller and the buyer has several choices regarding representation.

Question 43

When consumers want to do most of the work to sell their home and just want a licensee to post the listing on the MLS and perform a few other “a la carte” services, what type of listing agreement would likely be the best fit?

Answer 43

• Exclusive right-to-sell
• Limited brokerage agreement
  * Limited service or flat fee
• Net listing

This describes a limited services or flat fee listing. It’s important for licensees who engage in limited service agreements to disclose the services they will and will not provide to their clients to prevent misunderstandings and legal woes.

Question 44

What does a CMA determine?

Answer 44

• Availability of funding
• Cost of replacement
• Cost per square foot
  * Market price range

A CMA helps to determine the appropriate list price through a market price range. CMAs are NOT estimates of value.

Question 45

Must be disclosed on the listing contract

During your discussions with a new seller client, the seller tells you that the property has a mechanic’s lien against it. This fact _____.

Answer 45

• Doesn’t need to be disclosed
• Must be disclosed on the listing contract
• Only needs to be disclosed if the listing is a commercial property
• Only needs to be disclosed if the listing is a residential property

Mechanic’s liens are something that all sellers must disclose, regardless of whether the seller’s property is residential or commercial.

Question 46

North Carolina licensee Amelia recently prepared a CMA for a seller client. A few days later, she received an angry phone call from the client claiming that she’d over-priced his property. “I hired an appraiser, and he told me the house was only worth $225,000. You appraised it at between $235,000 and $250,000. It’ll never sell at this rate!” What’s the best way for her to respond?

Answer 46

* “As a real estate broker, I don’t perform appraisals, What I did for you was a CMA, which helps determine a listing price range, not the property’s value or worth. Only an appraiser can do an appraisal.”
* “As a real estate professional, my appraisal is just as valid as the one done by a certified appraiser.”
* “If I had known you wanted an appraisal, which determines value, rather than a CMA, which helps determine a listing price range, I could have done an appraisal for you instead.”
* “I used the market analysis method, which is more accurate for this type of property. Appraisers don’t generally use that method.”

A CMA provides an approximate sale or lease price range and can’t be used to value properties, whereas an appraisal does determine value. CMAs also can’t be used for appraisal purposes, such as to support a mortgage loan amount. And remember that only certified appraisers can perform appraisals.

Question 47

Providing clients with quality, knowledgeable, and prudent service, and living up to the trust they
placed in the agent describes which fiduciary duty?

Answer 47

• Confidentiality
• Loyalty
• Obedience
  * Reasonable skill and care

Reasonable skill and care implies a higher level of care than would be demanded of a non-licensee. With the license comes responsibility.

Question 48

Under limited service or flat fee listing agreements, the licensee provides only certain services for
whatever limited services the seller. Often, the seller pays a flat fee, rather than a percentage of sale
price. wants in exchange for a flat fee rather than a commission. Who is responsible for performing the
remainder of the work necessary to sell the property?

Answer 48

• The buyer
• The buyer and the buyer’s licensee
• The buyer’s licensee
  * The seller

Question 49

Alma’s family is getting assistance from the Section 8 program in Arizona. What organization provides
the funds for this program?

Answer 49

• Arizona Department of Housing
• Arizona Public Housing Authority
• Project-Based Rental Assistance
  * The U.S. Department of Housing and Urban Development

The U.S. Department of Housing and Urban Development (HUD) provides the funds for the Section 8 program. The funds are distributed to the states, and the states manage the Section 8 programs at the local level through their public housing authorities.

Question 50

When a comparable property has a feature that the subject property doesn’t have, what should the
licensee preparing a CMA do?

Answer 50

* Adjust the comparable’s price down
* Adjust the comparable’s price up
* Adjust the subject’s price down
* Adjust the subject’s price up

To determine the value of a subject property, start with the comparable’s value (selling price) and adjust from there. If the comparable has a feature the subject property doesn’t have, that feature’s “value” needs to be deducted