NC

Question 1

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

A. increase taxes on all citizens to cover the cost of installation.
B. charge the current owner a special assessment.

Answer 1

B. charge the current owner a special assessment

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 2

A non-exclusive buyer agency agreement must be which of the following?

A. Free from restrictions on whom the buyer may work with
B. Reduced to writing before showing a property

Answer 2

A. Free from restrictions on whom the buyer may work with

Non-exclusive buyer agency means the buyer is free to work with any many agents or sellers as s/he sees fit and is not restricted on the amount of time to work with an agent. Non-exclusive buyer agency may be oral or written in North Carolina. Buyer agency does need to be in writing prior to presenting an offer, however, the written agency could be written non-exclusive or written exclusive; either is acceptable. A buyer may view property an under oral buyer agency agreement.

Question 3

A prudent buyers agent would ask a FSBO seller to sign:

A. a protection agreement prior to showing the home to a buyer client.
B. a listing agreement prior to showing the home to a buyer client.

Answer 3

A. A protection agreement prior to showing the home to a buyer client.

A protection agreement outlines the payment of compensation to a buyer’s agent when the buyer decides to purchase a FSBO (For Sale by Owner). Commission or compensation cannot be included in the Offer to Purchase as the broker is not a party to the transaction. The seller is not required to sign a listing agreement or a limited-service agreement.

Question 4

Which of the following is NOT required by North Carolina Real Estate Commission rules for exclusive agency contracts?

A. Agency agreements must include the agent’s name and license number
B. Agency agreements must include the signature of the firm’s Broker-in-Charge on all agreements signed by a broker on provisional status

Answer 4

B. Agency agreements must include the signature of the firm’s BIC on all agreements signed by a broker on provisional status

Agents, including PBs, act as general agents of the firm and are given the right to sign on behalf of the firm to enter into agency agreements. All remaining options are true and are spelled in Commission rule 104 (NCAC 58A .0104). An agreement that seeks exclusivity must be in writing, provide a definite end date, contain the anti-discrimination language and the disclosure of the broker’s license number.

Question 5

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

A. The listing agent earns his/her commission only at the time that the transaction closes
B. The seller has no legal right to terminate the listing agreement during the term of the agreement

Answer 5

B. The seller has no legal right to terminate the listing agreement during the term of the agreement

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 6

A broker would violate the Do Not Call Laws when:

A. soliciting the listing a seller that has already entered into an exclusive listing agreement.
B. calling a For Sale by Owner to seek the listing when the seller is on the registry.

Answer 6

B. Calling a For Sale by Owner to seek the listing when the seller is on the registry

A broker will violate Do Not Call when they seek to solicit business from someone on the registry when they do not qualify for one of the exemptions - past business relationship (18-months), invitation (3 months) or personal relationship. Soliciting a seller that is already under a listing contract is a violation of the REALTOR Code of Ethics and is considered tortious interference with a contract. Can-SPAM requires a prominent opt-out, not the Do Not Call laws. Read carefully as the exam may try to mix these items.

Question 7

A provisional broker is representing the buyer in the purchase of a property. The provisional broker earns compensation:

A. when the seller communicates acceptance of the offer to purchase and contract.
B. when the buyer completes the purchase of a property where the broker is procuring cause.

Answer 7

A. When the seller communicates acceptance of the offer to purchase and contract

A broker representing a buyer earns compensation when the buyer enters into a legally binding contract with the seller. A contract is formed when acceptance is communicated to the offering party. A seller is not obligated to accept a full price offer, however may owe compensation to the listing firm.

Question 8

Which of the following requires a broker’s license if done on behalf of another for compensation?

A. A salaried employee assisting her parents in buying a retirement home
B. Entering dictated data to the local MLS and printing the information for the back of a flyer

Answer 8

A. A salaried employee assisting her parents in buying a retirement home

Data entry, balancing financials, and showing available rentals are not considered brokerage activities. Brokerage activities include LL BEANS: listing, leasing, buying, exchanging, auctioning, negotiating, and selling on behalf of another for compensation.

Question 9

With regard to the activation of licenses, all of the following statements are true, EXCEPT:

A. When a licensee asks to become active they can immediately begin representing clients, however they must cease if notification is not received from the Commission in 30 days.
B. A non-provisional broker must complete 8-hours of CE prior to June 30th deadline.

Answer 9

B. A non-provisional broker must complete 8-hours of CE prior to June 30th deadline

A non-provisional broker must complete CE by the June 10th deadline. Not CE is offered between June 11th and June 30th. A broker must cease operation if they have not received an acknowledgement from the Real Estate Commission within 30 days.

Question 10

A provisional broker obtains a real estate license on May 15th of the current year. The provisional broker must:

A. complete 8-hours of CE prior to the June 30th deadline.
B. pay the $45 license renewal fee.

Answer 10

B. Pay the $45 license renewal fee

All licenses expire on June 30th unless renewed during the 45-day renewal period that begins May 15th and ends June 30th. To renew his/her license, payment must be made online to the Real Estate Commission. In order to be legally engaged in brokerage activity, a broker must maintain an active real estate license. A newly licensed broker is not required to take CE prior to his/her first license renewal (GENUP + Elective). To maintain an active license, the broker must complete 8-hours by the June 10th deadline following his/her first license renewal. A provisional broker desiring active status must complete a minimum of 1 post class per year prior to his/her license anniversary date.

Question 11

Which of the following activities can be performed by an assistant whose license is on inactive status?

A. Take a listing for a property that is available for rent.
B. Assist a licensee in assembling documents for closing.

Answer 11

B. Assist a licensee in assembling documents for closing

Gathering documents is one example of an administrative task that can be performed by an unlicensed assistant. An unlicensed assistant cannot take a listing, however can show a property that is available for rent. The assistant cannot show property that is available for sale. Unlicensed employees must be W-2 employees and cannot be paid on a per closing basis (they cannot be independent contractors). To see the complete list, see page 3-4 of License Law and Commission Rule Comments.

Question 12

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?

A. Yes. A license is required when a party earns compensation in a transaction when acting on behalf of another.
B. Yes. A license is required when anyone other than the owner is involved in a real estate sales transaction.

Answer 12

A. Yes. A license is required when a party earns compensation in a transaction when acting on behalf of another

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 13

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?

A. Yes. The agent is required to detail the amount of compensation that will be earned.
B. No. The amount of compensation cannot be referenced in the purchase contract.

Answer 13

B. No. The amount of compensation cannot be referenced in the purchase contract.

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 14

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?

A. Best deal in Knightdale available for a low, low price. Call Marty Clark, ABC Realty for details, 919.555.1212
B. 3 BR, 2 BA house in Knightdale available for $160,000. Call Marty at 919.555.1212

Answer 14

A. Best deal in Knightdale available for a low, low price. Call Marty Clark, ABC Realty for details, 919.555.1212

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 15

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

A. A property management company may deposit monies from all tenants and the various owners they manage into a single trust or escrow account.
B. A property management company is required to have all security deposit funds deposited in a trust or escrow account or be bonded.

Answer 15

B. A property management company is required to have all security deposit funds deposited in a trust or escrow account or be bonded.

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 16

Prior to attending the listing appointment a broker should ask the seller to gather all the following, EXCEPT:

A. property insurance documents.
B. balance remaining on the seller’s mortgage.

Answer 16

A. Property insurance documents

A broker does not need current insurance documents prior to listing a property for sale. They should review a copy of the Seller’s deed, have a copy of the restrictive covenants as restrictions are appurtenant to the property, and gather mortgage balance info to prepare a seller net sheet.

Question 17

Real estate agents should carefully follow the guidelines set out in the Residential square footage guidelines brochure. Which of the following statements is CORRECT regarding living area?

A. The lowest height that can be included in living area is five feet when other criteria are met.
B. The minimum height underneath ductwork must be five feet with at least half the room a minimum of seven feet to be counted as part of the home’s heated living area.

Answer 17

A. The lowest height that can be included in the living area is five feet when other criteria are met.

In order to be counted as living area the space must be heated, finished and directly accessible. Note that the space does not need to be air conditioned. The ceiling must be at least 7 feet tall unless there is a duct or beam, which allows the height to change to 6 ft 4 in. A room with sloped ceilings must have 50% or more of the space at with at least 7 ft ceiling height to be included in the living area, and then the broker can include in the square footage to where the ceiling height is five feet.

Question 18

The broker-in-charge appoints a provisional broker to act as a designated agent for the buyer while another provisional broker is appointed to represent the seller. Has the broker-in-charge violated license law and rules?

A. No. The broker-in-charge can appoint any affiliated agent of the firm to act as a designated agent in a transaction.
B. No. The broker-in-charge has acted in accordance with license law and rules.

Answer 18

B. No. The broker-in-charge has acted in accordance with license law and rules.

Any combination of affiliated brokers can act as designated agents except the broker-in-charge and a provisional broker. A PB and BIC cannot act as designated agents in a transaction as they directly supervise the PB and will become aware of personal/confidential information about the PB’s client. The BIC can act as a designated agent when the other broker in the transaction is a broker. Brokers cannot designated if they have personal / confidential information about the other party. An easy way to remember this is “No BIC and PB and no P&C”.

Question 19

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

A. Fiduciary transfer from an executor
B. Short-sale of a single-family residential property

Answer 19

A. Fiduciary transfer from an executor

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 20

A buyer signs a copy of the Vacation Rental Addendum that is included in an Offer to Purchase and Contract. The buyer’s agent:

A. has 3 calendar days from acceptance of the offer to deliver a copy to the buyer.
B. has 3 calendar days to deliver a copy to the buyer.

Answer 20

B. has 3 calendar days to deliver a copy to the buyer.

A broker has a duty to deliver any written agency and transaction documents within 3 calendars days of the broker’s receipt of the executed (signed) documents. The broker must give the buyer a copy of any documents the buyer signs within 3 calendar days. An offer may be accepted and verbal notice may be given to form the legally binding contract. The broker has a duty to deliver a copy of an executed offer within 3 calendar days of receipt. The question is silent as to the receipt of the signed contract - it only states that the offer has been accepted. It does not matter what transaction document has been signed by the client, a copy must be delivered within 3 calendar days to the client and the Broker-in-Charge.

Question 21

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

A. A caller who phones a real estate office to inquire about a listing
B. A buyer’s agent setting an appointment with a seller to show his home

Answer 21

B. A buyer’s agent setting an appointment with a seller to show his home

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 22

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 brochure signed by the property owner. The provisional broker states one was not signed. Has the provisional broker violated license law?

A. No. The Working with Real Estate Agents brochure is not required in leasing transactions.
B. Yes. The Working with Real Estate Agents Brochure is required at first initial contract.

Answer 22

A. No. The Working with Real Estate Agents brochure is not required in leasing transactions

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 23

Which of the following statements regarding agency agreements is CORRECT?

A. All written agency agreements must provide for a definite end date except for the property management agreement which can automatically renew.
B. A listing agent working with a buyer must still disclose the Working with Real Estate Agents Brochure at initial contact.

Answer 23

A. All written agency agreements must provide for a definite end date except for the property management agreement which can automatically renew.

Property management agreements can include an automatic renewal clause. All other written agency agreements must provide for a definite end date. Oral buyer agreements must be non-exclusive, open-ended and reduced to writing prior to presentation of an offer. Oral agreements have to include agreements about compensation and agency representation. Agency agreements must include the non-discrimination language and disclosure of the agent’s license number. A listing agent working “with” a buyer only represents the seller, however would have to disclose WWREA at first substantial contact. Initial contract relates to a buyer’s agent disclosing his/her status to the seller or seller’s agent at first contract which can extend all the way to submission of an offer. A broker acts under General Agency and has the ability to bind the firm to listing / buyer agency agreements without needing the signature of the BIC.