NC Brokerage Relationships: Laws and Practice

Question 1

A buyer’s agent in North Carolina is showing homes to her buyer client. Her buyer has several small children. Her buyer wants to know if convicted sex offenders live in the neighborhoods they are viewing. The buyer’s agent should

A)
advise the buyer to check with the appropriate authorities.
B)
check the appropriate websites and report back to the buyer.
C)
tell the buyer that the information is confidential and cannot be disclosed.
D)
ask the neighbors.

Answer 1

A)
advise the buyer to check with the appropriate authorities.

Explanation
The buyer’s agent is not required to discover and disclose. If she does know for a fact, she must answer honestly if asked. The best course is for the buyer’s agent to refer the buyer’s inquiries to the sheriff’s office or website.

Reference: Brokerage Relationships: Laws and Practice

Question 2

The North Carolina Real Estate Commission’s Working with Real Estate Agents Disclosure form allows for the buyer to sign after the licensee has

A)
emailed the disclosure form to the prospect.
B)
met the buyer.
C)
reviewed the disclosure form with the prospect.
D)
showed the buyer some properties.

Answer 2

C)
reviewed the disclosure form with the prospect.

Explanation
The buyer signs after the agent reviews the disclosure form with the buyer.

Reference: Brokerage Relationships: Laws and Practice

Question 3

An agent representing a buyer would probably be required to disclose to an unrepresented seller his agency status at

A)
no time because disclosure is not required for FSBO.
B)
presentation of the first offer.
C)
initial contact with the unrepresented seller.
D)
settlement.

Answer 3

C)
initial contact with the unrepresented seller.

Explanation
A buyer’s agent should inform an unrepresented seller immediately that the agent is representing the buyer before the seller reveals confidential information.

Reference: Brokerage Relationships: Laws and Practice

Question 4

When must a broker’s agency status be disclosed to a potential buyer?

A)
At first substantial contact
B)
At settlement
C)
At presentation of the first offer
D)
At initial contact

Answer 4

A)
At first substantial contact

Explanation
A buyer has a right to know that the seller’s agent is speaking to and for the seller.

Reference: Brokerage Relationships: Laws and Practice

Question 5

The requirement for a broker to present and review the Working with Real Estate Agents Disclosure form with a consumer is at a point in time called

A)
settlement date.
B)
first substantial contact.
C)
first showing.
D)
contract date.

Answer 5

B)
first substantial contact.

Explanation
First substantial contact occurs when a consumer begins to act as though there is already a fiduciary relationship with an agent even without disclosing confidential information or when the consumer begins to disclose personal or confidential information or share specific needs and desires.

Reference: Brokerage Relationships: Laws and Practice

Question 6

A broker has a listing in Charlotte, North Carolina. The broker wants to buy her listing. The broker talks to her broker-in-charge, who allows this practice. How can the broker proceed?

A)
Whatever the seller and broker agree to
B)
Remain as the listing agent
C)
Not remain as the listing agent
D)
As a dual agent

Answer 6

C)
Not remain as the listing agent

Explanation
According to a.0104(p), the broker cannot remain the listing agent and will have to step down. The broker-in-charge may assign the listing to another agent or release the seller from the listing agreement.

Reference: Brokerage Relationships: Laws and Practice

Question 7

Mary Jo is a new broker. She finished her postlicensing classes quickly and has been in the business for a year. One of her friends wants to buy a beach house at the coast. Mary Jo lives and works in Greensboro, but has vacationed at the coast. She checks Zillow and finds several listings for her friend and together they drive to the coast to view the properties. The properties are listed by various brokers in the coastal market. Mary Jo does not explain flood zones, flood insurance, and buildable areas to her clients as those are not issues in her market. The clients finds out about these doing her due diligence and realizes that she cannot afford the home. Who is to blame?

A)
The buyer
B)
No one is to blame; things happen.
C)
Mary Jo
D)
The listing broker

Answer 7

C)
Mary Jo

Explanation
The agent needs to be informed and competent so she can tell her buyer what the buyer needs to know. It is not the duty of the listing agent to counsel the buyer.

Reference: Brokerage Relationships: Laws and Practice

Question 8

A disclosure of agency status should be made by a buyer’s agent to the seller

A)
at each contact with the seller or the seller’s agent, orally or in writing.
B)
anytime before closing.
C)
with a written confirmation in the purchase and sale agreement because a declaration of agency status is included in the standard Offer to Purchase and Contract form.
D)
only if requested.

Answer 8

C)
with a written confirmation in the purchase and sale agreement because a declaration of agency status is included in the standard Offer to Purchase and Contract form.

Explanation
Agency status disclosure should be made by a buyer’s agent to the seller at the initial contract with the seller or the seller’s agent (orally or in writing), and this agency status is to be confirmed before presentation of an offer to purchase.

Reference: Brokerage Relationships: Laws and Practice

Question 9

After several months of unsuccessful showings, the owner of the property asked the listing broker if she would buy his property at a reduced price. The listing broker thought it over and decided she would like to make an offer. What would the listing broker’s position be in this transaction?

A)
A principal
B)
A customer
C)
A dual designated agent
D)
A dual agent

Answer 9

A)
A principal

Explanation
Rule A,0104 (p) requires the listing broker to remove her listing agent hat and act as a principal only.

Reference: Brokerage Relationships: Laws and Practice

Question 10

In North Carolina, a broker is advised that if the firm practices dual agency, all associates in that firm should discuss dual agency with buyers and sellers at

A)
the time of closing.
B)
first substantial contact.
C)
after viewing several properties.
D)
when the sales contract is signed.

Answer 10

B)
first substantial contact.

Explanation
Dual agency is to be discussed up front at first substantial contact. The potential of, or possibility of, dual agency is to be discussed and agreed to, or not agreed to, by the member of the public.

Reference: Brokerage Relationships: Laws and Practice

Question 11

Provisional brokers may accept compensation of their predetermined share of the commission from

A)
a cooperating broker.
B)
the multiple listing service.
C)
the owner of the property.
D)
their employing broker.

Answer 11

D)
their employing broker.

Explanation
Provisional brokers can receive money only from their employing brokers; they cannot take even a special bonus directly from a principal.

Reference: Brokerage Relationships: Laws and Practice

Question 12

In North Carolina, a material fact

A)
does not need to be disclosed by the agent.
B)
should be disclosed only if the agent deems it necessary.
C)
must be disclosed regardless of representation status.
D)
should be disclosed only to agent’s client.

Answer 12

C)
must be disclosed regardless of representation status.

Explanation
A material fact is to always be disclosed by the agent to the public if the agent has knowledge of the material fact. If the agent should have known about the material fact but did not, she can be found guilty of negligent omission by the North Carolina Real Estate Commission.

Reference: Brokerage Relationships: Laws and Practice

Question 13

A broker who has completed all of her post-licensing classes is showing a property listed by her broker-in-charge. Which of the following agency options are available in this scenario?

A)
Both agents becoming transaction brokers, representing neither party
B)
Exclusive buyer representation, if the firm practices designated agency
C)
Subagency of the buyer by the broker-in-charge
D)
Nonexclusive buyer representation, if the firm practices dual agency

Answer 13

B)
Exclusive buyer representation, if the firm practices designated agency

Explanation
A full broker may be designated opposite her broker-in-charge.

Reference: Brokerage Relationships: Laws and Practice

Question 14

The broker owes an obligation to do which of the following?

A)
Keep the property in top condition.
B)
Present to the principal all written offers the broker receives, including all the terms and conditions of each offer signed by a prospective buyer.
C)
Divulge to the buyer the lowest price at which the seller will sell.
D)
Divide the commission with another broker chosen or preferred by the buyer.

Answer 14

B)
Present to the principal all written offers the broker receives, including all the terms and conditions of each offer signed by a prospective buyer.

Explanation
The broker may not decide which offer would be the best to present to the seller. In fact, even if an offer were oral, the agent must still present it; although per the statute of frauds, it would have to be reduced to writing before it was enforceable.

Reference: Brokerage Relationships: Laws and Practice

Question 15

A broker notices a new firm listing. She decides she wants to make an offer. What does the broker need to do?

A)
Have the listing agent disclose her position and interest to the seller
B)
Hire her own buyer’s agent
C)
All of these
D)
Get as much confidential information on the seller as she can

Answer 15

A)
Have the listing agent disclose her position and interest to the seller

Explanation
In addition, the broker needs to discuss this with her BIC. The firm will act in some dual agency capacity.

Reference: Brokerage Relationships: Laws and Practice

Question 16

A broker is showing a buyer’s property in Winston Salem, North Carolina. The broker has a signed buyer agency agreement but not a consent for dual agency. The broker’s buyers want to see a property listed by another agent in the broker’s firm. The sellers have agreed to dual agency. What does the broker need to do now?

A)
The broker needs to get permission for dual agency signed before showing the property.
B)
The broker can get an oral agreement and get the dual agency permission signed before closing.
C)
Nothing, the broker will not be a dual agent because it is not the broker’s listing.
D)
The broker cannot show this property.

Answer 16

A)
The broker needs to get permission for dual agency signed before showing the property.

Explanation
Because the broker has his buyer agency agreement in writing, he needs to get the consent for dual agency in writing before undertaking dual agency (showing the property).

Reference: Brokerage Relationships: Laws and Practice

Question 17

A broker has a listing on a house that contains a provision that the house is to be sold in an “as is” condition. The broker learns of a major hidden defect in the property. When showing the house to a prospective purchaser, the broker should

A)
point out only that the house will be sold in an “as is” condition.
B)
inform the buyer that the seller has disclosed no defects.
C)
mention the defect to the buyer only if asked.
D)
advise the buyer of the defect.

Answer 17

D)
advise the buyer of the defect.

Explanation
The use of the words “as is” does not protect the seller or the broker from liability for misrepresentations owing to concealment of material defects that cannot be easily observed. In essence, this phrase informs the buyer that the seller intends to make no repairs to the obvious problems with the structure.

Reference: Brokerage Relationships: Laws and Practice

Question 18

Designated agency can be practiced within the same firm in all of the following situations EXCEPT

A)
a broker-in-charge working with a provisional broker in the office.
B)
a broker working with another broker in the office.
C)
a provisional broker working with a broker in the office.
D)
a provisional broker working with another provisional broker in the office.

Answer 18

A)
a broker-in-charge working with a provisional broker in the office.

Explanation
The designated agency rule clearly states that the broker-in-charge of the firm cannot practice designated agency with a provisional broker within the firm. The other situations are permissible.

Reference: Brokerage Relationships: Laws and Practice

Question 19

An agent tells a buyer that the home has hardwood floors throughout. Most of these floors can be seen, but two rooms are covered in wall-to-wall carpeting. The seller assures the agent there is hardwood beneath both. It turns out that one room has hardwood floors but the other room does not. What, if anything, is the agent guilty of?

A)
Willful omission
B)
None of these
C)
Willful misrepresentation
D)
Negligent misrepresentation

Answer 19

D)
Negligent misrepresentation

Explanation
The agent thought that the seller knew but should have checked.

Reference: Brokerage Relationships: Laws and Practice

Question 20

A buyer tells the agent that he likes a home because it is so quiet and peaceful. The agent knows that a busy shopping center is ready to start construction next door. The buyer does not ask about the surrounding property, so the agent says nothing. What, if anything, is the agent guilty of?

A)
Negligent misrepresentation
B)
Willful misrepresentation
C)
Willful omission
D)
Negligent omission

Answer 20

C)
Willful omission

Explanation
The use of property in the immediate area is a material fact and must be disclosed.

Reference: Brokerage Relationships: Laws and Practice

Question 21

A listing agent in North Carolina and a buyer’s agent works for the same firm. The buyer’s agent has a buyer who is interested in the listing agent’s listing. They are working as designated agents. Two weeks ago, during a sales meeting, the listing agent, in response to a question from one of the agents in the office, shared that the sellers of this home were getting a divorce and needed to sell as soon as possible but had lots of equity in the home. The buyer’s agent shared this with her buyers who made low offers but eventually went on to contract on this home. Did anyone make any mistakes here?

A)
Yes, the listing agent should have kept the seller’s motivation confidential.
B)
Yes, both agents incorrectly shared confidential information.
C)
No, it went to contract, so no problem.
D)
Yes, the buyer’s agent should not have shared that seller information with her buyers.

Answer 21

B)
Yes, both agents incorrectly shared confidential information.

Explanation
The listing agent, knowing that her firm practices designated agency, should have kept confidential information to herself. The buyer’s agent, realizing that she received confidential information before her client was interested, should have discussed this with the listing agent, and perhaps they should not have practiced designated agency but dual agency.

Reference: Brokerage Relationships: Laws and Practice

Question 22

Designated agency in North Carolina is

A)
mandatory in North Carolina.
B)
is a decision of the individual agents in the office.
C)
not allowed in North Carolina.
D)
a form of dual agency.

Answer 22

D)
a form of dual agency.

Explanation
Designated agency is a form of dual agency. Designated agency is optional. The broker-in-charge decides whether the firm will practice designated agency.

Reference: Brokerage Relationships: Laws and Practice

Question 23

An agent promises a buyer that the utility bills will be low on a house because it is newly constructed. The agent does not have actual knowledge of the utility bills. It turns out that the utility bills are high, due to shoddy construction. What, if anything, is the agent guilty of?

A)
Negligent misrepresentation
B)
None of the these
C)
Willful omission
D)
Willful misrepresentation

Answer 23

A)
Negligent misrepresentation

Explanation
The agent spoke without verifying the truth.

Reference: Brokerage Relationships: Laws and Practice

Question 24

Can a broker be a dual agent if the broker has 50% ownership interest in the property for sale?

A)
Yes, with full disclosure
B)
Yes, if the buyer will sign a dual agency agreement and the BIC approves
C)
Yes, if the broker owns less than 66%
D)
No, the broker may not act as a dual agent

Answer 24

D)
No, the broker may not act as a dual agent

Explanation
Rule A.0104 (o) prohibits the broker with this ownership interest to act as a dual agent.

Reference: Brokerage Relationships: Laws and Practice

Question 25

If a first substantial contact occurs over the internet, what is the recommended procedure for proceeding to assist the consumer and make sure proper disclosure is given?

A)
Ask the consumer whether he has a house to sell before he can buy
B)
Explain that the market is quite active and that he will need to move quickly when you find him the right house
C)
Email and then explain the Working with Real Estate Agents Disclosure form, and ask whether he has representation before asking any qualifying or confidential questions
D)
First ask the consumer how much he is qualified for to assist in finding the right houses and then send the Working with Real Estate Agents Disclosure form

Answer 25

C)
Email and then explain the Working with Real Estate Agents Disclosure form, and ask whether he has representation before asking any qualifying or confidential questions

Explanation
The rule requires presentation of the disclosure form before providing any real estate services to the public or asking any questions that might harm consumers in a negotiating position. This rule applies no matter what venue the contact.

Reference: Brokerage Relationships: Laws and Practice

Question 26

The broker is showing property in Jacksonville, North Carolina. The broker has an oral buyer agency agreement. The broker’s buyer clients want to see one of the broker’s firm’s listings. The buyers have agreed to dual agency. When must they sign an agency agreement pertaining to their consent to dual agency?

A)
At the time they put their agency agreement in writing
B)
No later than closing
C)
Before they see the property
D)
Before they make an offer

Answer 26

A)
At the time they put their agency agreement in writing

Explanation
In North Carolina, a consent to dual agency must be in writing when the agency agreement is put into writing. In this example, it is no later than when the first offer is made. If the broker gets the buyer agency agreement signed before then, the acknowledgment of dual agency needs to be done at that time. If the broker started with a signed buyer agency agreement but without permission for dual agency, then the broker would need to get that in writing before undertaking dual agency, (showing the property).

Reference: Brokerage Relationships: Laws and Practice

Question 27

An agent in North Carolina has a listing of a property now owned by the bank. The agent is told by the neighbors that the home is haunted. The agent should

A)
spend the night there to see if there are ghosts.
B)
refuse to answer.
C)
answer inquiries honestly if asked about ghosts by prospects or agents.
D)
bring in a priest for more information.

Answer 27

C)
answer inquiries honestly if asked about ghosts by prospects or agents.

Explanation
The agent does not have to discover and disclose if the home is haunted, nor is the agent responsible for exorcising spirits.

Reference: Brokerage Relationships: Laws and Practice

Question 28

The licensee, after giving and reviewing the Working with Real Estate Agents Disclosure form to the prospects, must keep the form that the prospects sign (or refuse to sign)

A)
for a minimum of three years.
B)
for a minimum of three months.
C)
until the transaction is complete.
D)
for a minimum of three days.

Answer 28

A)
for a minimum of three years.

Explanation
The disclosure form is to be kept by the firm for a minimum of three years, whether the consumer signs the form or not. Additionally, the Q and A on Working With Real Estate Agents document is to be given to the prospects for reference and information, but it does not need to be retained in the firm’s records.

Reference: Brokerage Relationships: Laws and Practice

Question 29

If the listing firm and the selling firm split the commission 50/50, how much compensation will the individual broker with the listing firm receive?

A)
A base amount, plus a negotiated percentage of the firm’s 50%
B)
A base amount, plus a flat fee negotiated a contract formation
C)
A flat fee negotiated at settlement
D)
A negotiated amount of the firm’s 50%

Answer 29

D)
A negotiated amount of the firm’s 50%

Explanation
The broker’s commission is the negotiated amount from the firm’s share of the commission.

Reference: Brokerage Relationships: Laws and Practice

Question 30

A licensee in North Carolina can be disciplined for

A)
not taking continuing education.
B)
failing to disclose a material fact.
C)
all of these.
D)
sending in renewal fees late.

Answer 30

B)
failing to disclose a material fact.

Explanation
The others do not require disciplinary action.

Reference: Brokerage Relationships: Laws and Practice

Question 31

A North Carolina listing agent lists a home with three bedrooms and a den. The listing agent decides to call the den a bedroom, although there are no closets. The agent advertises the house as a four-bedroom home. A buyer’s agent is showing this home to a potential buyer. The buyer’s agent looks up the tax records and sees it is shown as a three-bedroom home. The buyer’s agent speculates that the listing agent is calling the den a bedroom. The den is small but might work for a baby’s nursery. The buyer’s agent shows the home as a four bedroom. Has either agent done something wrong?

A)
Yes, the listing agent is wrong.
B)
Both the listing agent and the buyer’s agent are wrong.
C)
No, a room can be used however a buyer chooses.
D)
Yes, the buyer’s agent should have questioned the information.

Answer 31

B)
Both the listing agent and the buyer’s agent are wrong.

Explanation
The listing agent listed it incorrectly, and the buyer’s agent should have questioned it.

Reference: Brokerage Relationships: Laws and Practice

Question 32

If designated agency is to be practiced, then the agents involved must be identified

A)
anytime before the closing of the transaction.
B)
before showing any property.
C)
only when asked by the parties.
D)
no later than the presentation of the first offer to purchase or sell.

Answer 32

D)
no later than the presentation of the first offer to purchase or sell.

Explanation
The law and North Carolina Real Estate Commission rules clearly state that the agents involved must be named and who they represent be made known to all parties no later than the presentation of the first offer to purchase or sell.

Reference: Brokerage Relationships: Laws and Practice

Question 33

In handling a real estate transaction, a broker should

A)
not reveal building code violations to the client.
B)
reveal only the items requested by the seller.
C)
provide the client with a statement of the receipts and disbursements of the client’s money.
D)
reveal only those things that are part of the public record.

Answer 33

C)
provide the client with a statement of the receipts and disbursements of the client’s money.

Explanation
One of the fiduciary duties is to account for client monies. The agent can be liable for failure to reveal any pertinent fact about the property.

Reference: Brokerage Relationships: Laws and Practice

Question 34

A broker has a cabin he owns in Boone, North Carolina, with his brother. The broker is working with some buyers who are looking for a second home in Boone. The broker mentions his cabin and his buyers ask to see it. They like it and want to make an offer. The broker calls his brother and they agree on a listing price. The broker tells the buyers and they would like to move forward. How can the broker proceed?

A)
He will be a designated agent.
B)
He will be a dual agent.
C)
He cannot represent these buyers on this purchase.
D)
It will be whatever he and his buyer agree to.

Answer 34

C)
He cannot represent these buyers on this purchase.

Explanation
Per rule a.0104 (o), the broker cannot represent these buyers if he has ownership in the property that his buyer clients want to buy. The broker’s BIC will provide direction on who will represent the buyers. It may be another agent in the firm, it may be the BIC, or the BIC may release the buyers from their agency agreement with the firm.

Reference: Brokerage Relationships: Laws and Practice

Question 35

A provisional broker deliberately misrepresents a material fact about a home that she has listed. Who can be held liable for this?

A)
The provisional broker
B)
The provisional broker’s employing broker (the firm)
C)
All of these
D)
The seller of the home

Answer 35

C)
All of these

Explanation
A provisional broker is a subagent of the owner and agent of the firm. A provisional broker and her employing broker can all be held liable, as well as the seller, because of the law of torts.

Reference: Brokerage Relationships: Laws and Practice

Question 36

A North Carolina broker thinks a convicted sex offender is living with family next door to the property he has listed. What should the broker do?

A)
Refer inquiries to the appropriate authorities to answer
B)
Go next door to find out
C)
Tell prospects about these suspicions
D)
Confirm this information and then disclose to all prospects

Answer 36

A)
Refer inquiries to the appropriate authorities to answer

Explanation
The broker is not required to discover and disclose. If he does know for a fact, he must answer honestly if asked. The best course is for the broker to refer inquiries to the sheriff’s office or website.

Reference: Brokerage Relationships: Laws and Practice

Question 37

A licensee takes a new listing. The seller refuses to allow dual agency. Which of the following is TRUE ?

A)
Any agent in the same firm can show this property to buyer clients.
B)
Only agents from other firms can be designated buyer agents.
C)
Only another agent can show this property to buyers.
D)
Only agents from other firms can show this property to buyer clients.

Answer 37

D)
Only agents from other firms can show this property to buyer clients.

Explanation
All agents in the firm are subagents of the seller and cannot represent buyers without informed consent for dual agency.

Reference: Brokerage Relationships: Laws and Practice

Question 38

A listing agent representing a seller is required to disclose agency status to a buyer when the buyer

A)
inquires about who built the house.
B)
asks about the number and age of children in the neighborhood.
C)
states that she is from the area.
D)
says she is a first-time homebuyer.

Answer 38

D)
says she is a first-time homebuyer.

Explanation
When the discussion turns to anything that might affect the buyers’ negotiating position, sellers’ agents have to disclose their status before the buyers disclose any further information.

Reference: Brokerage Relationships: Laws and Practice

Question 39

In North Carolina, dual agency means that

A)
either the buyer or the seller is a former client.
B)
the seller and the buyer are equally represented by the same firm.
C)
the seller and the buyer are not equally represented.
D)
no one is represented.

Answer 39

B)
the seller and the buyer are equally represented by the same firm.

Explanation
Dual agency in North Carolina means that the seller and the buyer are equally represented in the same transaction by one brokerage firm.

Reference: Brokerage Relationships: Laws and Practice

Question 40

The North Carolina Real Estate Commission’s Working with Real Estate Agents Disclosure form is to be furnished

A)
to sellers and buyers before closing.
B)
by the closing attorney at closing to all parties.
C)
to sellers and buyers at first substantial contact.
D)
to tenants at first substantial contact.

Answer 40

C)
to sellers and buyers at first substantial contact.

Explanation
The disclosure form is to be furnished to both buyers and sellers no later than first substantial contact.

Reference: Brokerage Relationships: Laws and Practice

Question 41

A broker at ABC Realty is working with a buyer client. ABC practices all kinds of agency. The client tells the broker he saw a property on the internet that is listed with another broker at ABC and he wants to be shown this house. The buyer’s agent informs his client that the listing agent said it was a great house and he did not expect it to stay on the market long. Which of the following is TRUE ?

A)
The broker can be a designated agent or dual agent.
B)
The broker can only be a dual agent.
C)
The broker cannot be a designated agent because he knows confidential information about the seller.
D)
The broker can be a designated agent, dual agent, or seller subagent.

Answer 41

A)
The broker can be a designated agent or dual agent.

Explanation
The broker can be a designated or dual agent but not a seller subagent. No confidential information was disclosed.

Reference: Brokerage Relationships: Laws and Practice

Question 42

An example of first substantial contact between a broker and a customer would MOST likely be a

A)
buyer asking a real estate broker the asking price of a home.
B)
potential homebuyer coming to an open house hosted by a broker.
C)
homeowner calling a real estate company to inquire about what fees the company charges for listing a home.
D)
broker’s friend starting a conversation at a party about buying a house and asking whether the broker will help the friend with the purchase.

Answer 42

D)
broker’s friend starting a conversation at a party about buying a house and asking whether the broker will help the friend with the purchase.

Explanation
When a consumer begins to act as if there is already an agency relationship with a broker, this is first substantial contact, even without disclosing confidential information.

Reference: Brokerage Relationships: Laws and Practice

Question 43

The North Carolina Real Estate Commission’s Working with Real Estate Agents Disclosure form is designed to

A)
take the place of an agency agreement.
B)
explain agency relationships.
C)
act as a compensation agreement with FSBOs.
D)
create a contract with the firm and the public.

Answer 43

B)
explain agency relationships.

Explanation
The purpose of the disclosure form is to explain agency relationships in a consumer-friendly format. It is not intended to create a contract of any type, and a consumer doesn’t have to sign it. Whether the consumer signs it or not, the form must be retained by the brokerage for three years.

Reference: Brokerage Relationships: Laws and Practice

Question 44

A North Carolina broker is an onsite agent. An unrepresented buyer came in and eventually bought a home from the agent. The buyer wanted a quiet, private lot. The broker found a house located at the back of a neighborhood. It backed up to vacant land. After the buyer moved in, the buyer discovered that a six-lane above-grade highway would be built 150 feet from the backyard. When the buyer complained to the broker, the agent said this was public knowledge, and the buyer should have known. That’s why there was all that vacant land. What was the agent’s obligation to this buyer?

A)
It was public knowledge; the buyer should have checked.
B)
The agent has no obligation to this buyer; the seller was the agent’s client.
C)
The agent should have disclosed this information to the buyer.
D)
If the buyer asked, the agent should have disclosed this information.

Answer 44

C)
The agent should have disclosed this information to the buyer.

Explanation
This is a material fact that an agent must disclose to anyone. When the buyer commented on the quiet location, it should have reminded the agent to disclose this information.

Reference: Brokerage Relationships: Laws and Practice

Question 45

In North Carolina, the proposed widening of a highway

A)
needs to be disclosed only when the road is complete.
B)
needs to be disclosed only to the agent’s client.
C)
is a material fact and needs to be disclosed by agents.
D)
is not a disclosure issue.

Answer 45

C)
is a material fact and needs to be disclosed by agents.

Explanation
The possibility or potential of a road widening is a material fact in North Carolina. Buyers have a right to know about this situation before they buy property. Agents should verify with the city or county department in charge of roads.

Reference: Brokerage Relationships: Laws and Practice

Question 46

The North Carolina Real Estate Commission’s Working with Real Estate Agents Disclosure form discusses

A)
agency relationships in North Carolina.
B)
the standard commission rates charged in North Carolina.
C)
usury.
D)
terms of the agency agreement.

Answer 46

A)
agency relationships in North Carolina.

Explanation
The North Carolina Real Estate Commission agency disclosure form discusses agency relationships. It is illegal to discuss standard commission rates.

Reference: Brokerage Relationships: Laws and Practice

Question 47

An agent in North Carolina told a buyer client that the new construction in the neighborhood being considered was for a new elementary school. The buyer’s child would be attending this new school. The buyer liked knowing that the school was so close and bought in the neighborhood. A couple of months later the buyer found out that the construction was in fact a Budweiser beer bottling plant and trucks would be coming and going all the time. The buyer was understandably upset and would not have purchased the house had this been known. The agent said the seller had provided the information and therefore didn’t question the validity. Did the agent error in this situation?

A)
Yes, this is willful misrepresentation.
B)
No, the buyer should have checked it out if it was a deal breaker.
C)
Yes, this is negligent misrepresentation.
D)
No, the agent didn’t need to question the information provided by the seller.

Answer 47

C)
Yes, this is negligent misrepresentation.

Explanation
The agent should have confirmed the information for the buyer.

Reference: Brokerage Relationships: Laws and Practice

Question 48

When practicing dual agency in North Carolina, the licensee is obligated to make full

A)
explanation of the relationship and have informed consent of both parties.
B)
disclosure to those parties who request it.
C)
disclosure to the seller client only.
D)
disclosure to the buyer client only.

Answer 48

A)
explanation of the relationship and have informed consent of both parties.

Explanation
The licensee is obligated to make full disclosure of the relationship and full explanation of the relationship to have informed consent.

Reference: Brokerage Relationships: Laws and Practice

Question 49

A broker has a listing on a house, and the MLS contains an as-is statement. The broker discovers a major problem with the roof. When showing a prospective buyer the property, the broker should

A)
obey the seller’s instruction to conceal the defect.
B)
wait until the buyer asks about the roof.
C)
limit her disclosure to the fact that the house is sold as is.
D)
point out the problem to the buyer.

Answer 49

D)
point out the problem to the buyer.

Explanation
The as-is statement means the property is sold in its present condition with obvious and disclosed defects. Although the seller can indicate “no representation” on the North Carolina Residential Property and Owners’ Association Disclosure form, if sellers know of a defect, they cannot indicate they do not know of any defects by checking “no” on the form or use the as-is clause to defraud a buyer. An agent who knows of defects (hidden or otherwise) with the property must disclose such problems to the buyer. Even though brokers are required to obey their client’s lawful instructions, brokers may never hide facts they know or should know about the property. It is no defense to a fraud action that the broker was just obeying the seller’s instruction to conceal the defect.

Reference: Brokerage Relationships: Laws and Practice

Question 50

A seller asks a broker at a listing appointment to explain why the brokerage is the asking for an 8% commission. Which of the following is an acceptable response for the broker to make?

A)
The local REALTOR® association sets the fees.
B)
Let me show you what I will be doing for my fee.
C)
This is the ‘‘going rate’’ among full-service companies.
D)
Rates are set by the North Carolina Real Estate Commission.

Answer 50

B)
Let me show you what I will be doing for my fee.

Explanation
Commission fees may not be set between brokerage firms without being in violation of the Sherman Antitrust Act, which prohibits price-fixing. Fees are never set by real estate commissions or REALTOR® associations.

Reference: Brokerage Relationships: Laws and Practice

Question 51

A listing agent has knowledge of a foreclosure proceeding and does not disclose this fact. The agent knew that this information was a material fact. The agent is guilty of

A)
willful misrepresentation.
B)
willful omission.
C)
negligent misrepresentation.
D)
negligent omission.

Answer 51

B)
willful omission.

Explanation
A foreclosure proceeding is a material fact in North Carolina. The agent knew this information and willfully and intentionally withheld this important fact. The agent is guilty of willful omission.

Reference: Brokerage Relationships: Laws and Practice

Question 52

The North Carolina Real Estate Commission’s Working with Real Estate Agents Disclosure form is to be given to

A)
buyers and sellers at first substantial contact.
B)
buyers at time of closing.
C)
sellers at time of closing.
D)
sellers at time of the offer.

Answer 52

A)
buyers and sellers at first substantial contact.

Explanation
The mandatory North Carolina Real Estate Commission agency disclosure form is to be given at the first substantial contact with the prospect.

Reference: Brokerage Relationships: Laws and Practice

Question 53

Which of the following would NOT trigger the broker’s required presentation of the Working with Real Estate Agents Disclosure form?

A)
Showing a home to a potential buyer who called on desk duty
B)
Having a phone conversation with an out-of-state buyer who wishes to learn about the market in the area before deciding where to move
C)
Greeting potential buyers at an open house
D)
Meeting with sellers at their home to discuss listing the home

Answer 53

C)
Greeting potential buyers at an open house

Explanation
The rule requires presentation of the disclosure form before providing any real estate services to the public and at first substantial contact. Greeting a buyer who has not yet spoken is not first substantial contact.

Reference: Brokerage Relationships: Laws and Practice

Question 54

In North Carolina, first substantial contact typically applies to

A)
sellers or buyers.
B)
none of these.
C)
other agents.
D)
broker-in-charge.

Answer 54

A)
sellers or buyers.

Explanation
In North Carolina, first substantial contact occurs the moment the buyer or the seller begins to reveal confidential or motivational information about housing needs. The agent must provide the Working with Real Estate Agents Disclosure form before this event.

Reference: Brokerage Relationships: Laws and Practice

Question 55

A licensed auctioneer must disclose his agency status to a buyer

A)
before the buyer signs the buyer agreement.
B)
never because there is no required agency disclosure.
C)
before the auction begins.
D)
before the property goes to settlement.

Answer 55

B)
never because there is no required agency disclosure.

Explanation
An auctioneer is exempt from disclosing that he is representing the seller at an auction.

Reference: Brokerage Relationships: Laws and Practice

Question 56

All of the following are examples of first substantial contact EXCEPT

A)
a seller states that he needs to sell quickly to avoid foreclosure on the house.
B)
a buyer asks a broker how much snow is typical for the area or inquires about employment opportunities in the area.
C)
a buyer states that she needs to live in a particular area for her job.
D)
a buyer states that she has some credit issues but believes she might qualify for a loan.

Answer 56

B)
a buyer asks a broker how much snow is typical for the area or inquires about employment opportunities in the area.

Explanation
Disclosing any information that could be used against someone at a negotiating table is beyond first substantial contact. First substantial contact is reached when the buyer starts revealing confidential information or specific needs or when the broker starts asking defining questions.

Reference: Brokerage Relationships: Laws and Practice

Question 57

In North Carolina, the company agency policy is determined by the

A)
broker-in-charge.
B)
client.
C)
North Carolina Real Estate Commission.
D)
individual agents.

Answer 57

A)
broker-in-charge.

Explanation
Each firm has a company policy. The broker-in-charge of the firm decides how the firm will handle agency policies and procedures. Some firms may set policy and procedures in conjunction with their agent’s wishes, but it is the broker-in-charge who is ultimately responsible for those policies and procedures.

Reference: Brokerage Relationships: Laws and Practice

Question 58

A broker works for a local real estate company that practices all kinds of agency. At a weekly sales meeting, another broker in the firm tells all the agents that the sellers of a home he has listed are getting impatient, and he thinks they are about to lower the asking price. Which of the following could the first broker be?

A)
The broker could be a buyer’s agent as long as the parties agree in writing.
B)
The broker could be a designated agent or a dual agent.
C)
The broker could be a designated agent because the listing agent isn’t sure whether the sellers will lower the price.
D)
The broker could be a dual agent as long as she doesn’t tell a buyer that the seller is considering lowering the price.

Answer 58

D)
The broker could be a dual agent as long as she doesn’t tell a buyer that the seller is considering lowering the price.

Explanation
Dual agents must keep confidential information (PTM) confidential.

Reference: Brokerage Relationships: Laws and Practice

Question 59

A broker wishes to sell a piece of land he owns with his wife, who is also a broker. He has been working with a buyer as a buyer’s agent and the buyer has expressed interest in the broker’s land. How should the broker proceed?

A)
The broker should sign a dual agency agreement and disclose he is a part owner.
B)
The broker should tell the buyer he cannot represent him and advise the buyer to seek counsel.
C)
The broker should have his spouse handle the client.
D)
Any of these are choices, if the buyer agrees.

Answer 59

B)
The broker should tell the buyer he cannot represent him and advise the buyer to seek counsel.

Explanation
NCREC Rule A.0104 (o) prohibits a broker from representing a client when the broker has ownership. Because the broker’s wife is also a broker, she is under the same rule.

Reference: Brokerage Relationships: Laws and Practice

Question 60

Designated agency can be practiced

A)
within one firm.
B)
when an individual sales agent represents both the buyer and the seller.
C)
between two firms.
D)
when one agent is the BIC and the other is a provisional broker.

Answer 60

A)
within one firm.

Explanation
Designated agency can only be practiced within one firm because designated agency exists only when one firm is representing more than one client in a transaction.

Reference: Brokerage Relationships: Laws and Practice