302 CE PREP

Question 1

North Carolina buyer Franco requested that he be allowed to move into the house he’s buying 10 days early. Which of the following addenda should be used for this?

Answer 1

• Additional Provisions Addendum
• Buyer Possession Before Closing Agreement
• Seller Possession After Closing Agreement
• Short Sale Addendum

Question 2

Seller Adelaide and buyer Colin close on a transaction for two rental condos on March 15. They live in a state where the seller is considered the owner of the property on the day of closing. The combined rental income per month is $4,000. How much rental income can Colin expect to earn in March?

Answer 2

• $2,011.56
  * $2,064.48
• $2,193.51
• $2,300.25

Question 3

What conditions must be met to avoid violating RESPA when receiving promotional or educational materials from a mortgage company or other settlement service provider?

Answer 3

• The materials are given as compensation for organizing an event the SSP is not publicly sponsoring.
• * The materials are not given in exchange for a referral and do not defray any cost you would normally have to pay.*
• The materials cannot be received at all, according to RESPA.
• The materials must exceed the value of any service the SSP offers.

Question 4

Demetri wanted to purchase a property by obtaining a VA financing, but the purchase price was more than the VA-established reasonable value. What can Demetri do in this case?

Answer 4

• He can apply for a larger VA loan.
• ** He must pay the excess amount in cash.**
• He must terminate the contract and receive his earnest money back.
• The seller must lower the purchase price of the property for the transaction to close.

Question 5

Under which of these circumstances will North Carolina contract terms prevail over an addendum’s terms if there is a conflict?

Answer 5

• A conflict exists between a mobile home’s VIN number as identified on the contract versus the addendum.
  * The buyer’s name is shown as Bob Jones in the addendum and as Robert M. Jones in the contract.
• The contract terms and provisions always prevail over the addendum’s terms.
• The date on the addendum is different from the date on the contract.

Question 6

Kenny, the listing broker, expects to receive multiple offers at the first open house. Which action best demonstrates good faith to his seller client?

Answer 6

* Kenny presents all oral or written offers as they come in, discussing the merits and drawbacks of each, but lets the seller decide what action to take.
* Kenny presents only the best offer to the seller so the others don’t cause confusion.
* Kenny reviews the offers that have come in and presents the top bids to the seller.
* Kenny waits a week after the open house before presenting offers to let as many offers come in as possible.

Question 7

Which of the following is NOT one of the required steps in creating a legally binding real estate sales contract in North Carolina?

Answer 7

• An offer is accepted in writing.
• An offer is made.
• The acceptance is communicated to the other party.
  * The final signatures to the accepted offer are notarized.

In North Carolina, creating a valid, legally binding real estate sales contract requires three steps: The offer must be made, accepted (in writing), and the acceptance must be communicated to the other party. There’s no need to have an offer notarized.

Question 8

Based on provisions in North Carolina’s Form 12-T, which of these costs is the seller’s responsibility?

Answer 8

• Attorney fees for the Closing Disclosure, seller disclosure, and other settlement statement preparation
• Owners’ association costs related to the buyer’s future use of the property
  * Special assessments that are approved before settlement
• Title insurance
• Section 4(b) outlines specific buyer cost responsibilities; section 6(k) notes that the seller is responsible for paying any special assessments that are approved prior to settlement, either as a lump sum at closing or in installment payments after closing.

Question 9

Marco enters into a contract to acquire real property in return for some form of consideration. On the contract, he’s regarded as the ______.

Answer 9

• Agent
• Broker
  * Buyer
• Seller

Question 10

Who is responsible for providing the information in the Owners’ Association Disclosure Addendum?

Answer 10

• The buyer
• The listing agent
• The owners’ association
  * The seller

Question 11

For transactions where the property is currently being built by the seller (but is not yet completed), which form should be used?

Answer 11

• New Construction Addendum
  * Offer to Purchase and Contract – New Construction
• Offer to Purchase and Contract – Vacant Lot/Land
• Offer to Purchase and Contract without any added addenda

Question 12

Which of the following addenda can broker Lucy draft for her buyer clients?

Answer 12

• A lead-based paint notice
• Any addendum they need
• Only brokers-in-charge have the authority to draft addenda
  * Only North Carolina lawyers may draft addenda

Under North Carolina law, real estate brokers are not permitted to draft addenda or contracts. Only North Carolina attorneys may draft addenda.

Question 13

Why should a title search be conducted?

Answer 13

* To determine if there are any defects on the title
* To discover any cash-flow issues for buyers
* To find out about any past issues with crimes committed on the property
* To learn what services are available on the property

Question 14

North Carolina broker Megan is helping her client to prepare a six-month lease. Given the situation, which one of the following statements is true?

Answer 14

• In North Carolina, all leases, regardless of their terms, must be written and signed by both parties.
• Leases, regardless of their terms, don’t have to be written or signed, because they’re not permanent property transfers.
  * The lease doesn’t have to be written because it’s for a term of fewer than three years in North Carolina.
• The lease must be written and signed by both parties because the lease’s term is at least six months.

The North Carolina statute of frauds doesn’t require leases of fewer than three years to be written or signed to be enforceable.

Question 15

Brokers should use Form 12-T In which of these situations?

Answer 15

• A buyer is purchasing an acreage with the intention of subdividing it.
• A developer is selling a newly constructed home in a new subdivision.
  * A North Carolina builder is selling a single vacant lot that he owns. He’ll construct a single-family residence on the lot for the buyer after closing.
• A seller has divided some lots off of his existing property and is selling each one individually. He has agreed to sell one of the lots on an option contract.

Question 16

North Carolina buyer Carl wrote a personal check for the due diligence payment to seller José. Carl’s check was dishonored by his bank, and two days later, he received written notice of the dishonored payment. If he doesn’t submit an acceptable payment within one banking day, what recourse does José have?

Answer 16

• Because the due diligence fee is an optional fee in North Carolina, José can only have his agent file an addendum to the contract stating that the due diligence period no longer applies to the transaction.
• José can require that Carl pay double the original due diligence amount.
  * José can sue Carl. If José wins, he’s entitled to receive from Carl three times the original due diligence amount, as well as reasonable attorney fees and court costs.

Question 17

Page four of the Closing Disclosure lists specific disclosures about the loan, such as the penalty for late payments, whether a demand feature applies, whether the loan can be assumed, and ______.

Answer 17

• An amortization table
• Refinancing options
• The total interest percentage amount
  * Whether partial payments are accepted

Question 17

You’ve reviewed an offer with your seller client. The offer is pretty good, and the seller finds most of the terms agreeable but wants to counter on the price. What’s your next step after working up a counter-offer?

Answer 17

• Hold it for 24 hours to create a better negotiating position.
  * Submit it promptly to the buyer’s agent.
• Submit it within two business days to the buyer’s agent.
• Wait to submit it until your client has reviewed the next offer that came in.

Question 18

North Carolina broker Isaac prepared his buyer client Jenn’s sales contract improperly, and because of this, he failed to protect Jenn’s interests. Did Isaac violate real estate license law? If so, how?

Answer 18

• No, Isaac didn’t violate license law.
  * Yes, Isaac violated license law by acting incompetently as a broker.
• Yes, Isaac violated license law by completing his client’s contract on her behalf.
• Yes, Isaac violated license law by revealing confidential information.

Question 19

Ruthie is explaining the termination option to her buyer client. How would she explain that “time is of the essence” is for the discharge under operation of law option?

Answer 19

* “This means that if the seller doesn’t decide by the deadline, the buyer is no longer held to the contract.”
* “This means that the timeframe for the offer acceptance period must be three days.”
* “This means that you can negotiate the time period for this option with the seller.”
* “This means that you must comply with these terms within a reasonable amount of time.”

Question 20

The North Carolina Response to Buyer’s Offer Form permits the seller to _______.

Answer 20

• Notify the buyer of any extraordinary circumstances for termination, such as death
  * Recommend changes to the buyer’s offer
• Submit a counter-offer to the buyer’s offer
• Tell the buyer the offer has expired

Question 21

Which of these statements accurately describes the standard terms for proration of property taxes and other items?

Answer 21

• After interest is paid, the monthly mortgage payment is prorated
  * Property taxes and other items are prorated up until closing, and the buyer or seller is responsible for paying the prorated costs that remain.
• Supplemental tax bills received by the buyer after transfer of title and possession shall be billed directly to the seller.
• The seller is obligated to prepay all property taxes in full prior to close of escrow.

Question 22

North Carolina resident Kim made an offer on a property owned by Jacob. Before Jacob accepted the offer, Kim was killed in a car accident. What happens to the offer?

Answer 22

• Jacob may accept the offer within 48 hours of notification of Kim’s death. If he chooses to accept it, Kim’s heirs are held to the terms of the contract. If he doesn’t accept it, the offer is terminated.
• The offer is invalid and must be terminated by Kim’s broker.
• The offer is suspended until Kim’s heirs determine whether or not they wish to purchase Jacob’s property.
  * The offer is terminated upon Kim’s death.

Question 23

Which of these items will be either accrued or prepaid?

Answer 23

Credit
Debit
Prepaid
** Prorated**

Prorated items are either accrued or prepaid.

Question 24

Which party is bound by a bilateral contract?

Answer 24

* Both the seller and the buyer
* Neither the seller nor the buyer
* The buyer
* The seller

Question 25

North Carolina broker Sierra is helping her client Jeff complete an Offer to Purchase and Contract form. Jeff is full of questions, and Sierra is fielding them as they come. Which of the following questions may Sierra answer?

Answer 25

“How should I take title to this house?”
“What are my legal rights here?”
“What are the legal implications of this purchase?”
** “What does this provision mean?”**

Question 26

Cassie is helping her buyer client, Gus. As they discuss preparations for closing, she cautions Gus, “Make sure you review the Closing Disclosure as soon as you receive it and ______.”

Answer 26

• Bring any questions you have about it to the closing so we can discuss them with your lender
• Contact your attorney immediately if you find errors or have any questions
  * Contact your lender immediately if you find errors or have any questions
• Let me know immediately if you have any questions about it

Question 27

What makes the North Carolina sales contract so important?

Answer 27

• It establishes the buyer’s agent’s and the seller’s agent’s contractual duties.
• It establishes the buyer’s and the buyer’s agent’s contractual duties.
  * It establishes the buyer’s and the seller’s contractual duties.
• It establishes the seller’s and the seller’s agent’s contractual duties.

Question 28

When multiple offers are received, which of the following is something you should do?

Answer 28

• Encourage the seller to accept the highest-priced offer
• Give preference to the first offer
  * Present all offers
• Reject the lowest offer

Question 29

North Carolina property seller Julian got news that the title search that was recently performed on his property uncovered some defects. What must Julian do next?

Answer 29

• Adjust the sales price to compensate the buyer for a damaged title.
• Nothing. As the seller, Julian has no obligations related to title defects.
  * Resolve the title defects before the settlement date.
• Terminate the transaction and relist the property when the title has been cleared by a professional.

Question 30

For the Terms and Definitions section under the (o) Closing category, a broker should consult legal counsel for all of the following except for which one?

Answer 30

• Abstracting or passing on titles
• Advising or giving an opinion upon the legal rights or obligations of any person, firm, or corporation
• Preparing or aiding in preparation of deeds, deeds of trust, lien waivers or affidavits, or other legal documents
  * Presenting and identifying the documents necessary to complete a North Carolina residential real estate closing

Question 31

Which of the following statements about the property description in the Agreement for Purchase and Sale of Land is true?

Answer 31

• A sales contract only needs the street address in the property description.
• Property descriptions are only needed when a structure is present.
• The Agreement for Purchase and Sale of Land only requires a rendering of what the land will be developed into for the property description.
  * The property’s street address and full legal description must be included in the commercial sales contract.

Question 32

The closing agent recorded the prorated property taxes on the closing statement. The closing date is October 12 and the seller hasn’t paid any of the taxes for the year. When the seller’s broker reviews the client’s closing statement for accuracy, which of these should be confirmed for this proration?

Answer 32

• A credit for his seller in the amount of taxes for the time period of 281 days
• A credit for his seller in the amount of taxes for the time period of 79 days
• A credit for his seller in the amount of taxes for the time period of January 1 through October 12
  * A debit for his seller in the amount of taxes for the time period of January 1 through October 12

The seller is responsible for the taxes from January 1 through October 12, since the seller owns on the day of closing.

Question 33

In which of the following paragraphs in the North Carolina Standard Form 2-T can buyers or sellers be contacted directly—rather than though their agents—if their contact information is provided in the Notice Information section?

Answer 33

• Assignments
  * Conduct of Transaction
• Execution
• Parties

Question 34

To avoid any unnecessary risks, licensees are highly encouraged to ______ when working with contract addenda.

Answer 34

• Delete and add provisions directly within the purchase contract as needed
• Never add unique provisions to a purchase contract, even with an attorney’s help
  * Use standard, pre-printed forms
• Write up customized conditions and provisions for every client

Question 35

If a seller requests access to the property long term after closing, the parties should _______.

Answer 35

• Attach a Buyer Possession Before Closing Agreement to their purchase contract
• Attach a Seller Possession After Closing Agreement to their purchase contract
• Attach both a Buyer Possession Before Closing Agreement and a Seller Possession After Closing Agreement to their purchase contract
  * Not attach a possession agreement addendum to their purchase contract

The Buyer Possession Before Closing Agreement and the Seller Possession After Closing Agreement should not be used for long-term occupancy, lease purchase, or lease option transactions.

Question 36

Which of the following best describes the function of the Real Estate Settlement and Procedures Act?

Answer 36

• It forces brokers to make certain disclosures to their clients.
  * It protects borrowers from predatory lenders by providing a transparent statement of closing costs.
• It protects brokers from litigious clients.
• It protects sellers from brokers by providing a transparent statement of closing costs.

Question 37

On Friday, North Carolina resident Eli made an offer on Olivia’s property and gave her a deadline of 11:59 p.m. on the following Tuesday to accept it. On Sunday, while waiting for Olivia’s response, Eli happened by an open house down the street from him and immediately fell in love with it. He decided to revoke his offer on Olivia’s property and make an offer on this new property instead. Which of the following is true of this situation?

Answer 37

* He can revoke his offer on Olivia’s property any time before he is notified that she accepted the offer in writing.
* He can revoke his offer on Olivia’s property until midnight on Wednesday.
* He can revoke his offer provided Olivia hasn’t yet accepted it and Olivia signs a written statement agreeing to the revocation.
* Offers are irrevocable in North Carolina.

Question 38

_______ is an example of circumstances that are beyond the buyers’ control, meaning they can’t practically do what they’ve agreed to do, and the offer terminates.

Answer 38

• A counter-offer
  * Destruction of property
• Rejection
• Revocation

Question 39

Which of the following terms is NOT a name for the Offer to Purchase and Contract in North Carolina?

Answer 39

* Listing agreement
* Purchase agreement
* Purchase contract
* Sales contract

Question 40

Property taxes in North Carolina are paid in arrears. Your client is buying a multi-family property in Burlington. How will the property taxes for the current year be prorated at closing?

Answer 40

• Debit buyer, credit lender
• Debit buyer, credit seller
• Debit seller, credit broker
• ** Debit seller, credit buyer**

The property tax for the year closing takes place will be paid by the buyer. Therefore, the seller’s column is debited, and the buyer’s column is credited.

Question 41

The ________ is money used by the seller or independent contractor to complete any additional improvements requested by the buyer in the New Construction Addendum.

Answer 41

• ** Building deposit**
• Down payment
• Earnest money deposit
• New construction fee

Question 42

A local utility provider has an easement across a seller’s property. What impact does this easement have on the seller’s ability to deliver clear, marketable title?

Answer 42

* A utility easement doesn’t impact the seller’s obligation to provide good title.
* The buyer may require that the easement be removed before closing.
* The buyer must form an agreement with the utility provider to accept the easement.
* The seller must mark the location of the utility easement for the buyer.

Question 43

North Carolina licensee Tara is completing the Offer to Purchase and Contract, Standard Form 2-T, for her married buyer clients Bob and Maggie McKenzie, who are listed in LinkedIn and Facebook as Robert “Bobby Mack” McKenzie and Margaret (née Harper) McKenzie. Their legal names are Robert H. McKenzie and Margaret E. McKenzie. How should Tara list their names in the contract?

Answer 43

• Mr. and Mrs. Robert H. McKenzie
• Robert “Bobby Mack” McKenzie and Margaret (née Harper) McKenzie
  * Robert H. McKenzie and wife, Margaret E. McKenzie
• The McKenzies

Question 44

North Carolina buyer Amy, represented by broker James, makes an offer on Blake’s property on July 5. James makes a copy of Amy’s earnest money check and attaches that copy to the offer, which he provides to Blake’s agent on July 6. On July 7, Blake accepts the offer in writing, and Amy is notified of the acceptance. By when must James deliver the earnest money check to the escrow agent?

Answer 44

**
* July 10**
* July 12
* July 8
* July 9

Question 45

Which of the following statements about the due diligence fee in North Carolina is true?

Answer 45

• The due diligence fee is refundable if the buyers change their mind about paying it, provided this occurs before the expiration of the due diligence period.
• The due diligence fee is the property of the seller until closing.
  * The due diligence fee is the property of the seller upon the effective date, and is a credit to the buyer at closing.
• The due diligence fee must be an amount that’s equal to or greater than 1% of the purchase price.

The due diligence fee is the seller’s property upon the effective date, and is a credit to the buyer at closing. The due diligence fee is an optional amount the buyer may choose to pay to the seller for the buyer’s right to terminate the contract for any reason or no reason before the expiration of the due diligence period.

Question 46

For transactions that require the New Construction Addendum, the general contractor for the property must be _____.

Answer 46

• An unlicensed contractor
  * Either the seller or a licensed contractor hired by the seller
• Only someone hired by the seller, but not the seller
• The seller only

Question 47

Morgan has agreed to sell his home to Dierks, and they’ve signed a contract. Which of these actions changes the contract from executory to executed?

Answer 47

• Dierks delivered the earnest money to Morgan’s broker.
  * Dierks’ lender funded the loan, and closing took place.
• Dierks’s lender approved the mortgage loan.
• Morgan completed the inspection repairs that Dierks requested.

Question 48

In North Carolina, who usually acts as the closing agent?

Answer 48

* An attorney
* The broker
* The lender
* The seller

Question 49

North Carolina broker Don Minor is acting in the capacity of dual agent for a buyer and seller. The buyer is a movie star whose last film netted her a cool $15 million. She doesn’t want the seller to know who she is, for fear the seller will hike up the property’s asking price. Don agrees to represent this buyer as an undisclosed buyer-principal. Which of the following is true of this situation?

Answer 49

* A dual agent acting on behalf of the buyer and seller must not act as the agent for an undisclosed buyer-principal in North Carolina.
* Dual agency is illegal in North Carolina.
* This is legal and permissible in order to ensure the buyer gets a fair deal.
* With his broker-in-charge’s permission, Don can fill in the “buyer” line of the sales contract with “Don Minor, agent for an undisclosed principal.”