Kap Real Estate Appendix A: North Carolina Real Estate License Law and Commission Rules

Question 1

In 1957, the North Carolina General Assembly enacted into law, effective July 1, 1957, the Real Estate Licensing Act, codified as Chapter 93A of the General Statutes of North Carolina.

Answer 1

this law created the North Carolina Real Estate Commission (NCREC) and empowered it to write and enforce reasonable rules and regulations concerning the business activities of real estate licensees. The real estate license applicant is required to be knowledgeable of the License Law and Commission Rules.

Question 2

A provisional broker generally may perform the same acts as a nonprovisional broker as long as the provisional broker is supervised by a broker-in-charge. ( t/f)

Answer 2

True

Question 3

An individual who sells one property a year for a neighbor does not need to acquire a North Carolina real estate license if the individual receives less than $500 for the service. (T/F)

Answer 3

False

The NCREC requires that anyone who provides a service of real estate for others for transactional compensation must be properly licensed—no matter how one is paid or how frequently one provides the service.

Question 4

A limited nonresident commercial broker can reside in a state other than North Carolina but still engage in real estate transactions in North Carolina under some conditions. (T/F)

Answer 4

True

A limited nonresident commercial broker can reside in a state other than North Carolina but still engage in real estate transactions in North Carolina under some conditions, such as being supervised by an active North Carolina broker.

Question 5

A salaried assistant who provides factual information about listings to prospective buyers does not need to have a North Carolina real estate license. (T/F)

Answer 5

True

Question 6

A current licensee is one who takes any required post-licensing or continuing education course (T/F)

Answer 6

False

A current licensee is one who has paid his renewal fees on time.

Question 7

A licensed individual can choose to be inactive (T/F)

Answer 7

True

An individual can voluntarily choose not to complete educational requirements (and thus become inactive voluntarily) and may also forget or be unable to do so (involuntary). However, an individual with an inactive license who fails to take appropriate education can lose his license to activate, depending on various circumstances.

Question 8

A brokerage firm advertisement for a listed property on social media that reads “Contact Eric for more information about this property by clicking here” has fulfilled NCREC rules regarding advertising (T/F)

Answer 8

False

All advertising of brokerage services must have as a minimum the brokerage firm name (or the name of the sole proprietorship.)

Question 9

A buyer wishes his brokerage/agent to add some special language to an offer. The broker does not have a form that will provide that language, so the broker drafts the language himself. This practice is acceptable and lawful. (T/F)

Answer 9

False

This practice is acceptable and unlawful because North Carolina brokers are not allowed to draft contract language.

Question 10

All real estate licenses expire on June 10. (T/F)

Answer 10

False

All real estate licenses expire on June 30.

Question 11

If a provisional broker fails to complete postlicensing courses by the appropriate time, the license will be placed on expired status. (T/F)

Answer 11

False

If a provisional broker fails to complete the postlicensing course by the appropriate time, the license will be placed on inactive status.

Question 12

(T/F) A broker-in-charge must be a full broker with at least two years of full-time real estate brokerage experience within the last 10 years.

Answer 12

False

A broker-in-charge must be a full broker with at least two years of full-time real estate brokerage experience within the last five years.

Question 13

(T/F) A firm has five different branch offices. There must be a BIC at each branch office.

Answer 13

True

A BIC must be present at any office where brokerage activities take place, so a BIC must be at each branch office.

Question 14

(T/F) Escrow monies in the form of a check must be deposited within three days of receipt.

Answer 14

False

Escrow monies in the form of a check must be deposited into the escrow account within three days of the effective date of the contract.

Question 15

(T/F) Brokers must maintain separate escrow accounts for tenant monies and for buyer monies.

Answer 15

False

Brokers can maintain one account for both tenant and buyer monies. However, brokers must maintain separate escrow accounts for different homeowners associations whose money they may manage.

Question 16

(T/F) The principal purpose of the NCREC is to protect the public in real estate transactions involving brokers.

Answer 16

True

Question 17

(T/F) The NCREC arbitrates compensation disputes among brokers and establish commission rates for North Carolina.

Answer 17

False

The NCREC does not arbitrate compensation disputes among brokers nor does it establish commission rates for North Carolina.

Question 18

An employing broker who hires a broker or salesperson as an employee must

Answer 18

withhold Social Security taxes.

**Social Security taxes must be withheld from an employee’s pay.

Question 19

An active real estate broker in North Carolina is obligated under license law to meet which of the following requirements?

A) The annual real estate license renewal fee must be received by the Commission no later than June 10.

B) Any change in a licensee’s address must be reported to the North Carolina Real Estate Commission within 30 days.

C) The licensee must be able to produce a license pocket card anytime when conducting brokerage activity.

D) Only active licensees must pay the annual real estate license renewal fee.

Answer 19

C) The licensee must be able to produce a license pocket card anytime when conducting brokerage activity.

21 NCAC 58A .0101 Proof of Licensure states that “the pocket card issued by the Commission annually to each broker shall be retained by the broker as evidence of licensure, which must be produced whenever requested while engaging in real estate brokerage.”

Question 20

The North Carolina Real Estate Commission may, after a hearing, take disciplinary action against a North Carolina licensee who has

I. violated any of the provisions of the North Carolina license law.

II. committed acts prohibited by license law when licensed individuals sell or buy their own properties.

A) Both I and II

B) II only

C) Neither I nor II

D) I only

Answer 20

A) Both I an II

If the Commission finds probable cause that a licensee has violated any of the provisions of the license law, the Commission may hold a hearing on the allegations and has the power to suspend or revoke a license. The Commission may suspend or revoke any license if the licensee has violated any of the provisions of G.S. 93A-6(a) when selling, leasing, or buying the licensee’s own property.

Question 21

A real estate agent gets a call from an out-of-state agent looking to refer a buyer client moving into the area. A referral fee is negotiated, and the contact information is passed on. After several phone calls, the buyer decides to spend a few weeks in the new location to get to know the area and to look at the properties available. The buyer orally agrees to become a buyer client and agrees to pay the agent a $50 retainer fee to cover gas while they look. Surprisingly, on the second outing, the buyer finds the perfect property. Before submitting the offer, the buyer signs the agent’s buyer representation agreement as discussed over the phone. The agent submits the offer on behalf of the buyer, and it is accepted. When the commission check arrives, the agent mails the out-of-state agent the agreed referral fee. Did the agent violate North Carolina license law?

A)The agent does not have to comply with North Carolina license law because the buyer client is from out of state.

B)The agent is in compliance.

C)The agent is in violation.

D)The agent is in compliance because referral fees may be paid to actively licensed agents regardless of residence.

Answer 21

C) The agent is in violation

The agent is in violation of North Carolina law because an agent cannot obligate a buyer for time or money with an oral buyer agency agreement.

Question 22

Appointments to the North Carolina Real Estate Commission are made

I. by the Governor, the President Pro Tempore of the State Senate

II. and the Speaker of the State House of Representatives.
for three-year staggered terms.

A) I only

B) II only

C) Both I and II

D) Neither I nor II

Answer 22

C) Both I and II

The Commission consists of nine members—seven members appointed by the governor, one member appointed by the General Assembly upon the recommendation of the president pro tempore of the Senate, and one member appointed by the General Assembly upon the recommendation of the Speaker of the House of Representatives. At least three members of the Commission must be licensed real estate brokers. At least two members of the Commission must be persons who are not involved directly or indirectly in the real estate or real estate appraisal business. Members of the Commission serve three-year terms.

Question 23

The North Carolina Real Estate Commission is responsible for:

A) creation, approval, and interpretation of real estate sales contracts.

B) working with all licensees to set fair and honest commission rates for all the state’s brokerage firms.

C) protecting the public by setting rules for broker licensing, education, and discipline.

D) arbitrating commission and other disputes between brokers and brokerage firms.

Answer 23

C) protecting the public by setting rules for broker licensing, education, and discipline.

The North Carolina Real Estate Commission protects the public by setting rules for broker licensing, education, and discipline.

Question 24

In North Carolina, all real estate brokers must

A) include their firm’s name in advertisements of a client’s property.

B) complete continuing education each year in order to keep the license current.

C) maintain a trust account.

D) belong to the local Association of REALTORS®

Answer 24

A) include their firm’s name in advertisements of a client’s property.

A broker may not advertise any brokerage service for another without the consent of the broker-in-charge and without including in any advertisement the name of the firm or sole proprietorship with which the broker is associated. All advertising by a licensee must indicate that it is the advertisement of a broker or brokerage firm.

Question 25

A license is issued on December 2. In what order are the educational and renewal requirements due? A) License renewal is due by June 30; post-licensing education, by December 2; and continuing education, by the following June 10. B) Post-licensing education is due by the first anniversary date, with continuing education and renewal due by June 10. C) Continuing education requirements are due by June 10; first license renewal, by June 30; and post-licensing education, by December 2. D) Post-licensing education is due by June 30; renewal, by June 30; and continuing education, by December 2.

Answer 25

A) License renewal is due by June 30; post-licensing education, by December 2; and continuing education, by the following June 10. Always renew by June 30. Provisional brokers must complete the first 30 hours of post-licensing education before the first anniversary of license issuance, and eight hours of continuing education must be completed before the second renewal.

Question 26

Unlicensed assistants or secretaries working in a real estate office may perform which of the following duties? A) Sign a listing contract for a broker with the broker's permission B) Help negotiate a sales contract as long as she explains that she is unlicensed C) Answer questions from callers asking if the seller of one of the firm's listings will accept an offer below the list price D) Schedule a showing appointment for the firm's listings

Answer 26

D) Schedule a showing appointment for the firm's listings Only a licensed individual is allowed to list or offer to list, sell or offer to sell, buy or offer to buy, or negotiate the purchase or sale or exchange of real estate. Unlicensed assistants and office secretaries may not engage in any of those activities.

Question 27

Unlicensed assistants may do all of the following EXCEPT A) offer opinions, advice, explanations, or interpretations. B) deposit funds in trust accounts. C) place routine phone calls and confirm, coordinate, and schedule appointments. D) submit and change listing information in the MLS.

Answer 27

A) offer opinions, advice, explanations, or interpretations. **Giving anything more than published information requires an active license.

Question 28

Active real estate brokers are required to do all of the following EXCEPT A) inform the Commission of any changes in brokerage office policies. B) pay a yearly license renewal fee to the NCREC. C) take eight hours of continuing education each year. D) notify the NCREC of any change in business name.

Answer 28

A) inform the Commission of any changes in brokerage office policies. The responsibilities required of active real estate brokers do not include informing the Commission of changes in office policies. Brokers are required to take eight hours of continuing education each year, pay a yearly license renewal fee, and notify the NCREC of any change in business name.

Question 29

Which individual is exempt from needing a North Carolina real estate license when performing real estate services for others? A) A nephew who finds a buyer for his uncle's house and is paid a finder's fee. B) A salaried real estate assistant who shows listed property to interested buyer prospects. C) An individual who offers his office complex for sale. D) An individual who receives a gift certificate from a broker for referring the broker to a friend.

Answer 29

C) An individual who offers his office complex for sale. There are several exemptions to licensing under the North Carolina license act, including any individual owner who personally leases or sells the owner's own property.

Question 30

If the earnest money is in dispute, the escrow agent holding the funds may do all of the following EXCEPT A) hold the funds until receiving a written agreement signed by all parties telling how the funds are to be disbursed. B) disburse the funds as told upon receipt of a court order. C) wait 120 days and, if no settlement has been determined, return the funds to the buyer. D) deposit the funds with the clerk of court in the county where the property is located upon giving notice to the parties.

Answer 30

C) wait 120 days and, if no settlement has been determined, return the funds to the buyer. Disputed earnest money funds cannot be returned without written mutual agreement of the parties or a court decision. With a 90-day notice to both parties, the disputed funds can be sent to the clerk of court in the county where the property is located.

Question 31

A real estate license must be renewed no later than every A) June 30. B) June 10. C) December 31. D) anniversary of licensure.

Answer 31

A) June 30 All real estate licenses issued by the Commission under G.S. 93A, Article 1 expire on June 30 following issuance.

Question 32

Under license law, a North Carolina real estate broker is responsible for I. the timely delivery of the Closing Disclosure to the buyer and seller. II. the accuracy of the Closing Disclosure entries of which the broker should be aware. A) I only B) Both I and II C) II only D) Neither I nor II

Answer 32

B) Both I and II In North Carolina, brokers are responsible for both the delivery and the accuracy of the Closing Disclosure.

Question 33

Which of the following is an example of commingling? A) The broker deposits commissions earned in her business account. B) The broker deposits earnest money in her trust account. C) The broker deposits earnest money in her business account. D) The broker deposits a tenant's security deposit in a property management trust account.

Answer 33

C) The broker deposits earnest money in her business account Trust funds may not be placed in the broker's business account

Question 34

A licensee was issued a provisional broker license in September. The following June, she completed eight hours of continuing education and paid her quarterly MLS dues. As of July 1, what is the status of her license? A) Inactive B) Expired C) Referral only D) Active

Answer 34

B) Expired Failing to pay the renewal fee results in an expired license. No money = no license.

Question 35

Which of the following is NOT considered to be a material fact in North Carolina? A) A pending foreclosure sale B) A convicted sex offender residing nearby C) An upcoming change to the zoning of the property D) A structural defect in the property

Answer 35

B) A convicted sex offender residing nearby A convicted sex offender residing nearby. The Commission has historically interpreted "material facts" under the Real Estate License Law to include facts about the property itself (such as a structural defect or defective mechanical systems); facts relating directly to the property (such as a pending zoning change or planned highway construction in the immediate vicinity); and facts relating directly to the ability of the agent's principal to complete the transaction (such as a pending foreclosure sale). An agent is not required to volunteer to a prospective buyer or tenant any information about registered sex offenders.

Question 36

A licensee who pays the annual license renewal fee but does NOT complete any education will be on what status? A) Expired B) Active, referral only C) Suspended D) Inactive

Answer 36

D) Inactive Paying the renewal fee keeps a license current. Failing to meet educational requirements results in a current license of inactive status.

Question 37

How long is a broker required to retain records relating to brokerage transactions? A) Two years B) Three years C) One year D) Five years

Answer 37

B) Three years "Brokers shall retain records of all sales, rental, and other transactions conducted in such capacity, whether the transaction is pending, completed, or terminated. The broker shall retain records for three years after all funds held by the broker in connection with the transaction have been disbursed to the proper party or parties or the conclusion of the transaction, whichever occurs later." 21 NCAC 58A .0108 Retention of Records.

Question 38

Demarcus has just completed all 75 hours of prelicensing and passed his end-of-course exam. About a week after passing both sections of the North Carolina real estate licensing exam, he receives his license in the mail. What is the status of Demarcus's license? A) Broker-in-training B) Broker C) Broker-in-charge D) Provisional broker

Answer 38

D) Provisional broker Once a person has passed both sections of the North Carolina real estate licensing exam and receive the license in the mail, the license is on provisional broker status. It is inactive, and in order to become active, the provisional broker must be affiliated with a broker-in-charge.

Question 39

A broker-in-charge must have A) a minimum of three years' full-time real estate brokerage experience. B) a bonded bookkeeper. C) a trust account for each office he supervises. D) an active nonprovisional broker's license.

Answer 39

D) an active nonprovisional broker's license. Every real estate firm must designate one broker-in-charge (BIC) for its principal office and one BIC for each of its branch offices. In order for brokers to be designated as a BIC, they must submit an application and include certification of compliance that the broker license is on active status.

Question 40

The members of the North Carolina Real Estate Commission I. must include at least three licensed real estate brokers. II. form an arbitration appeal board for licensees dealing with compensation disputes. A) II only B) Both I and II C) Neither I nor II D) I only

Answer 40

D) I only The Commission consists of nine members—seven members to be appointed by the governor, one member appointed by the General Assembly upon the recommendation of the president pro tempore of the Senate, and one member appointed by the General Assembly upon the recommendation of the Speaker of the House of Representatives. At least three members of the Commission must be licensed real estate brokers. At least two members of the Commission must be persons who are not involved directly or indirectly in the real estate or real estate appraisal business. Members of the Commission serve three-year terms.

Question 41

A time-share developer and his agents have violated the North Carolina Time Share Act. The North Carolina Real Estate Commission may do all of the following EXCEPT A) make the developer pay the buyer up to $3,000 of the purchase price. B) make the developer pay the buyer up to 15% of the purchase price. C) fine the developer $500 for each violation of the Act. D) take the real estate licenses of those found guilty.

Answer 41

B) make the developer pay the buyer up to 15% of the purchase price. The developer may be fined up to 10% of the purchase price, not 15%.

Question 42

A licensee must notify the commission of all of the following EXCEPT A) having a suspension of licensee's cosmetology license. B) a change in business name. C) being arrested for a DWI. D) a change in residence address.

Answer 42

C) being arrested for a DWI. Only convictions need to be reported, not arrests. Licensees are required to report to the Commission any criminal convictions for a felony or misdemeanor, any disciplinary action taken against them by any other occupational licensing board, or any restriction, suspension, or revocation of a notarial commission within sixty (60) days of the final judgment or order in the case.

Question 43

Regarding brokers-in-charge, all the following statements are true EXCEPT A) a broker-in-charge is required to supervise provisional brokers affiliated with them. B) if there is a trust account, a broker-in-charge must maintain the trust or escrow account of the firm and the records pertaining thereto. C) a broker-in-charge may supervise more than one firm even if they are at different locations; they just need permission. D) a broker-in-charge is required to supervise all brokers employed at the office with respect to adherence to agency agreement and disclosure requirements.

Answer 43

C) a broker-in-charge may supervise more than one firm even if they are at different locations; they just need permission. A broker-in-charge may only supervise more than one firm as long as the firms are in the same building/location

Question 44

After being active in the real estate business for three years, Broker Larry wants to become a broker-in-charge (BIC). All these are requirements that Larry must meet to become a BIC, EXCEPT A) have two out of the last five years of active real estate practice. B) complete the 12-hour BIC course prior to becoming a BIC. C) file a designation form with the NCREC. D) have completed all of his postlicensing requirements and not be in provisional status.

Answer 44

B) complete the 12-hour BIC course prior to becoming a BIC. Larry must take the 12-hour BIC course; however, he does not have to complete the course before becoming a BIC. If he meets the other eligibility requirements, he will have 120 days within which to take the 12-hour course.

Question 45

Which of the following statements about real estate education is TRUE? A) The license of a provisional broker who has not completed all post-licensing courses by the third license anniversary date will expire. B) Post-licensing courses can count toward satisfaction of the continuing education requirement. C) A broker's continuing education requirement must be completed by midnight on June 30. D) All real estate licensees must, after their first renewal, take eight hours of continuing education annually to remain active.

Answer 45

D) All real estate licensees must, after their first renewal, take eight hours of continuing education annually to remain active. An individual licensed as a real estate broker is required to complete continuing education requirements in an amount not to exceed eight classroom hours of instruction a year during any license renewal period in subjects and at times the Commission deems appropriate.