Questions - Chapter 10

Question 1

An agent proposes a preprinted sales contract form for use by the buyer and seller. The North Carolina Real Estate Commission prohibits the inclusion of which of the following in this contract form?

A. loan contingency
B. indefinite termination
C. broker compensation
D. liquidated damages

Answer 1

10-1 C

Question 2

According to the NCAR/NCBA Standard Offer to urchase and Contract form 2-T, if the seller is determined to be in breach of contract the day before the scheduled closing, which of the following is the seller liable to return to the buyer?

A. due diligence fee, earnest money deposit, and reasonable expenses of purchase
B. due diligence fee and earnest money deposit only
C. earnest money deposit and expenses of purchase
D. earnest money deposit only

Answer 2

10-2 A

Question 3

The buyer has contracted for the purchase of the seller’s home by utilizing the NCAR/NCBA Standard Offer to Purchase North Carolina Real Estate Commission form 2-T. Two days after the due diligence date, the buyer informs the seller that the lender has rejected his mortgage application and he will be unable to purchase the home. The buyer is entitled to a refund of:

A. earnest money deposit only.
B. due diligence fee only.
C. both earnest money deposit and due diligence fee.
D. neither earnest money deposit or due diligence fee.

Answer 3

10-3 D

Question 4

The buyer has contracted for the purchase of the seller’s home by utilizing the NCAR/NCBA Standard Offer to Purchase and Contract form 2-T. Five days after the scheduled closing date, the buyer informs the seller he will be unable to complete the purchase of the home. The seller is entitled to retain or recover …

A. earnest money deposit, due diligence fee, and reasonable attorney fees
B. earnest money deposit and due diligence fee
C. specific performance of the sale
D. earnest money deposit, due diligence fee, and all reasonable expenses related to the purchase

Answer 4

10-4 B

Question 5

A purchaser has submitted an offer to purchase that states the offer “shall remain open and in effect until 5:00 p.m. on Thursday, October 30” The offer further states the purchaser agrees not to withdraw the offer prior to that time. Late on Wednesday the 29th, the buyer informs the seller of his intent to withdraw the offer. This offer is:

A. irrevocable until 5:00 p.m. on the 30th•
B. revocable until such time as it becomes a contract regardless of what the offer states.
C. irrevocable once the seller or his agent actually receives the signed offer.
D. revocable until the seller or his agent actually receives the offer and even then not until 5:00 p.m on the 30th•

Answer 5

10-5 B

Question 6

Under the installment sales contract (contract for deed), what interest best describes the buyer’s rights in the property?

A. constructive title
B. fee simple title
C. equitable title
D. legal title

Answer 6

10-6 C

Question 7

The effective date is considered to be the date in which:

A. the buyer and seller have both signed the offer to purchase.
B. the purchaser has completed due diligence and decides to finalize the purchase.
C. the offeree has communicated notice of written acceptance to the offerer.
D. the parties convey legal title to the property.

Answer 7

10-7 C

Question 8

A buyer submits a written offer to purchase to the seller, who signs his acceptance without revision. The seller mails this agreement back to the buyer at his proper address. After it is mailed but before the buyer receives it, the seller faxes a notice to the buyer of his intent to revoke his signed agreement. Which of the following is correct?

A. This became a contract as soon as the seller signed the agreement, so the seller cannot revoke it.
B. This became a binding contract when the seller mailed the signed acceptance to the buyer, so the seller cannot revoke it.
C. The seller can terminate this agreement since he communicated his intent to withdraw prior to the buyer receiving his signed document.
D. The seller can terminate the agreement since the buyer has not communicated his notice of acceptance of the seller’s acceptance of his offer.

Answer 8

10-8 B

Question 9

Which of the following statements is correct in regards to the NCAR/NCBA Standard Offer to Purchase and Contract form 2-T?

A. The scheduled closing date in the contract is time is of the essence.
B. Proposed assessments are to be paid for by the seller if confirmed after the closing.
C. In the event of buyer breach of contract the seller is limited to buyer’s EMD as liquidated damages.
D. The contract provides a period of 13 days from the scheduled closing date for the “delaying party” to be able to close without being considered a breach.

Answer 9

10-9 C

Question 10

A buyer is informed by his lender five days after the due diligence date that his loan is not approved. Which of the following is true? The buyer can back out of the agreement:

A. and get a refund of his earnest money deposit.
B. and get a refund of his due diligence fee and his earnest money deposit.
C. but will not be entitled to a refund of his earnest money deposit.
D. and obtain a refund of his due diligence fee but not his earnest money deposit since his loan contingency has not been met.

Answer 10

10-10 C

Question 11

Which of the following is correct concerning an installment land contract?

A. The buyer receives legal title at closing.
B. The seller retains equitable title at closing.
C. The buyer conveys equitable title at closing.
D. The buyer receives equitable title at closing.

Answer 11

10-11 D

Question 12

An option contract:

A. requires the buyer to buy if the seller decides to sell.
B. states that if the seller decides to sell, the buyer will have the first right to purchase.
C. requires the buyer to buy and the seller to sell.
D. requires the seller to sell if the buyer decides to buy.

Answer 12

10-12 D

Question 13

According to the Standard Offer to Purchase and Contract when is “closing”?

A. at the attorney’s office when documents are signed
B. at delivery of the deed
C. at distribution of the sale proceeds
D. when the deed is recorded

Answer 13

10-13 D

Question 14

Which of the following will NOT typically terminate an offer?

A. acceptance
B. counterfoffer
C. death of offeror
D. performance

Answer 14

10-14 D

Question 15

Which of the following is NOT an allowed means of payment for an (Additional) earnest money deposit as indicated in paragraph l(d) of the NCAR/NCBA Offer to Purchase and Contract form 2-T?

A. cash
B. personal check
C. wire transfer
D. official bank check

Answer 15

10-15 B

Question 16

A North Carolina provisional broker obtained an offer for a property listed with his firm along with a check for earnest money. The provisional broker should:

A. give the earnest money check to the sellers within three banking days of their acceptance of the offer
B. hold the check until the settlement meeting
C. deposit the check into his trust account within three days of acceptance
D. immediately turn the check over to his broker-in-charge

Answer 16

T10-1 D

Provisional brokers must always deliver all monies received to their broker-in-charge immediately. The broker-in-charge has 3 days to deposit the money, not the provisional broker.

Question 17

A prospective buyer makes a written purchase offer through a buyer’s agent at ABC Realty. The seller accepts the offer as written. The seller communicates to a listing agent at XYZ Realty that the offer was signed. At this point in time, the:

A. seller is contractually bound
B. buyer is contractually bound
C. both parties are contractually bound
D. buyer can still withdraw the offer

Answer 17

T10-2 D

Offers become contracts when the offer is signed, initialed and that acceptance is communicated back to the offeror and/or their agent. Here the acceptance was communicated only to the listing agent, it must still be communicated to the buyer and/or their agent for the contract to become binding.

Question 18

On Monday, the seller receives a written offer on his vacant lot for $52,000. On Tuesday, the seller counteroffers to sell for $54,500. On Friday, the seller withdraws the counteroffer and accepts the original offer of $52,000. Under these circumstances:

A. there is a valid agreement because the seller accepted the buyer’s offer exactly as it was originally made
B. there is no valid agreement because the seller’s counteroffer was a rejection of the buyer’s original offer
C. there is no valid agreement because the seller accepted the offer before the buyer withdrew the original offer
D. there is no valid agreement because the buyer’s original offer was not accepted within 72 hours

Answer 18

T10-3 B

Any change to an offer creates a counteroffer which terminates the original offer and relieves the parties of all liability.

Question 19

A broker has an exclusive right to sell listing on a building. An offer to purchase the building is received while the owner is out of town. The offer requires a commitment from the seller before the seller is scheduled to return to the city. Under these circumstances, the:

A. broker may create a binding agreement on behalf of the seller
B. broker may collect a commission even if the transaction falls through because of the seller’s absence from the city
C. buyer is obligated to keep the offer open until the seller returns
D. broker must obtain the signature of the seller to effect a contract

Answer 19

T10-4 D

Licensees may not accept or reject offers on behalf of clients. Only the seller can accept the offer and their signature will be required to create a valid contract.

Question 20

A real estate Offer to Purchase and Contract becomes valid when:

A. the written offer has been signed by both the offeror and offeree
B. communication of acceptance is given to the offeror or the offeror’s agent
C. communication of acceptance is given to the offeree or the offeree’s agent
D. earnest money has been deposited into the escrow agent’s trust account

Answer 20

T10-5 B

The communication of acceptance can occur in many forms including electronic, verbal or written manner. The communication of acceptance must be to the offeror or the offeror’s agent.

Question 21

The listing agent received a full price offer that she faxed to the out-of-town seller. The seller signed the faxed copy, and faxed the signed copy back to the listing agent. The agent faxed the signed offer to the buyer’s agent. Has a contract been formed?

A. No, because there is not one copy that has ink signatures of both parties.
B. No, because the buyer has not been notified of the acceptance yet.
C. Yes, because the Uniform Electronic Transaction Act states that faxed signatures are as binding as ink signatures.
D. Yes, because faxed signatures are binding for 48 hours until ink signatures can be obtained.

Answer 21

T10-6 C

Any form of communication of the acceptance is permissible. This is due to the Uniform Electronic Transactions Act (UETA).

Question 22

The optionee in an option to purchase real estate:

A. has no obligation to purchase the property
B. must purchase the property at any time within the option period
C. must be willing to renegotiate contract terms during the option period
D. is the prospective seller of the property

Answer 22

T10-7 A

When an option exists, the optionor is bound, but the optionee has no obligation to purchase the property. For this reason options are considered unilateral contracts where only one party is bound.

Question 23

During the due diligence period in the North Carolina standard offer to purchase and contract, the buyer who was attempting to obtain a conventional loan did not receive final loan approval, but chose not to terminate the contract based on favorable communications from the lender. A week before closing, the buyer’s loan application is denied. If the buyer terminates the contract at this point, the buyer:

A. will forfeit the earnest money deposit and due diligence fee because it would be a buyer breach
B. will receive a refund of the earnest money, since the termination was related to financing
C. can be sued by the seller for specific performance
D. will receive a refund of the earnest money and the due diligence fee

Answer 23

T10-8 A

The buyer must complete all of their due diligence during the due diligence period. If the buyer cancels after the expiration of the due diligence period for any reason the seller will retain the due diligence fee and also be entitled to the earnest money.

Question 24

Carl and Hannah enter into a real estate sales contract. Under the contract terms, Carl will pay Hannah $500 a month for 10 years. Hannah will continue to hold the legal title to the property. Carl will live on the property and pay all real estate taxes, insurance premiums and regular upkeep costs. What kind of contract do Carl and Hannah have?

A. option to purchase contract
B. contract for mortgage
C. unilateral contract
D. installment land contract

Answer 24

T10-9 D

When the seller retains title and the buyer will not receive title until making the last payment the parties have used a Contract for Deed, also known as a land contract or an installment land contract.

Question 25

Under an installment land contract, which title does the buyer hold during the repayment period? l. Legal title ll. Equitable title

A. l only
B. ll only
C. Both l and ll
D. Neither l nor ll

Answer 25

T10-10 B

When a buyer is acquiring property with a land installment contract or a Contract for Deed they do not yet have legal title. The seller is still in title to the property. The buyer does have rights or interests in the property which are referred to as equitable title.

Question 26

Under North Carolina licensing law, a licensee may disclose the content of multiple offers on the property:

A. only with the consent of the seller
B. only with the consent of the buyers who have made the offers and the agreement of their seller
C. a broker may never disclose the content of multiple offers
D. only if the broker determines that disclosure would be in the best interest of his client

Answer 26

T10-11 B

The existence of multiple offers is not a material fact and do not have to be disclosed. If the seller instructs the licensee to disclose the existence of the offers, the licensee may not disclose their terms and conditions without the consent of the offerors (buyers).

Question 27

All of the following are contained in the standard NCBA/NCAR Offer to Purchase & Contract Form 2T, EXCEPT:

A. A confirmation of agency status of the licensees
B. A disclaimer of liability for actions of the brokerage
C. Buyer representations and warranties
D. Possible delays in settlement date

Answer 27

T10-12 B

The NCREC prohibits limitations of liability from being included in the Offer to Purchase and Contract.

Question 28

Janice wrote a full price offer on a property and her buyer’s representative submitted the offer to the seller. The next day Janice changed her mind and wanted to withdraw her offer. Which of the following is correct?

A. Janice cannot withdraw an offer that has already been submitted to the seller
B. Janice may withdraw her offer, but she will forfeit her due diligence fee
C. Janice is entitled to withdraw her offer at any time prior to acceptance and will receive a refund of both her due diligence fee and her earnest money
D. Janice can only withdraw her offer after she has given the seller notice of her intentions and provides the seller a reasonable time to act

Answer 28

T10-13 C

Question 29

Harold, a real estate licensee took a listing on a property. Later one of Harold’s buyers wanted to make an offer on the property. Harold obtained the proper dual agency disclosure and consent from the buyer and seller. Harold emailed the offer to the seller who signed and initialed it without any changes and returned the accepted offer to Harold. Is there a binding contract in this situation?

A. No, there cannot be a binding contract until the acceptance is communicated to the buyer
B. No, because Harold does yet have the contract with the original signatures on it
C. Yes, because once a seller signs and initials the offer is becomes a contract
D. Yes, because Harold is a dual agent and communication of the acceptance to the agent is the same as communication to the buyer client

Answer 29

T10-14 D

Question 30

When should parties to a purchase contract in NC utilize the NCBA/NCAR Contingent Sale Addendum?

A. When there are multiple offers pending in a short sale transaction
B. When the buyer wants to make multiple offers on several properties at the same time
C. When the buyer conditions their offer upon the sale of another property that they currently own
D. When the seller is also purchasing a property and needs that property to close before they can sell and transfer a current property to a buyer

Answer 30

T10-15 C

The contingent sale addendum is for use when the buyer has to sell a currently owned property in order to complete their transaction with a seller.