Questions - Chapter Reviews Flashcards
Which type of estate cannot pass by inheritance?
A. fee simple estate
B. fee simple condition subsequent estate
C. conventional life estate
D. pur autre vie life estate
R1-1 C
A conventional life estate reverts back to the grantor automatically and immediately at the death of the life tenant. There is no interest remaining for the life tenant to pass on to their heirs.
Which of the following liens is/are considered a “specific lien” on real estate?
A. deed of trust
B. mechanic’s lien
C. real estate taxes
D. all of the above
R1-2 D
All of these liens are “specific.” That means that they are tied to a specific parcel of property. General liens include judgments and income tax liens.
Which of the following statements is/are correct regarding the Interstate Land Sales Full Disclosure Act? I. If a development contains 25 or more lots, the developer must furnish prospective buyers with a property report. II. The property report must be given to a prospective purchaser prior to a sales contract being signed. III. The purchaser can revoke, or rescind, the sales contract at his or her option until midnight of the fifth day following the signing of the contract. IV. This Act applies only to the sale of lots to consumers located in the state.
A. I and II
B. III and IV
C. II and IV
D. I and III
R1-3 A
The Interstate Land Sales Full Disclosure Act was meant to protect buyers purchasing property from outside the state. It only applies to the sale of developments containing 25 or more lots and the disclosure report must be provided to the prospective purchaser at least three business days before a contract is signed.
A rectangular-shaped parcel of land, which measures 400 feet by 600 feet, is divided into two equal lots by a creek that runs from the northeast corner to the southwest corner. What is the approximate acreage of each divided parcel?
A. .55 acres
B. 2.75 acres
C. 3.47 acres
D. 5.51 acres
R1-4 B
The total of both lots is 400 feet x 600 feet which equals 240,000 square feet. They are equal parcels, so each parcel contains 120,000 square feet (240,000÷2). There are 43,560 square feet in an acre. 120,000 square feet÷43,560 = 2.75 acres.
Assume annual real estate taxes amount to $1,800 and have been paid in advance for the calendar year by the seller. If closing is set for September 15, which of the following is correct?
A. credit seller $525; debit buyer $1,275
B. credit seller $1,275; debit buyer $525
C. credit buyer $525; debit seller $1,275
D. credit seller $525; debit buyer $525
R1-5 D
The annual taxes are $1,800. The daily amount is $1,800 divided by 360 = $5 per day. The seller has been in the property for 255 days. (From Jan - Aug - 240 days + 15 days for the month of September = 255). 255 days at $5.00 per day means the seller owes $1,275. The seller has already paid $1,800. $1,800 - $1,275 = $525. The seller will be credited for the $525 and the buyer will be debited that amount at closing.
Which of the following statements is/are true? I. A freehold estate and a nonfreehold estate will never exist at the same time on the same property. II. A life estate is a nonfreehold estate.
A. I only
B. II only
C. Both I and II
D. Neither I nor II
R1-6 D
A parcel could be utilized as both a freehold (ownership) and a non-freehold (less than ownership) if the owner of the property also decided to rent it. Therefore, the first statement is false. The second statement is also false because a life estate is a freehold interest. The life tenant is the owner of the property.
Title to real property may be transferred by which of the following?
A. bill of sale
B. oral agreement
C. ceremony of seizing
D. laws of intestate succession
R1-7 D
The law of intestate succession is a reference to the state laws which determine the heirs of an individual who dies without a will. This is a transfer of real estate. When real estate is transferred to the heirs from someone who died intestate it is called a “descent.”
Which of the following statements is/are correct? I. A “deed of gift” must be recorded within 3 years to be valid. II. A deed that warrants only against defects or encumbrances that have occurred “by, through, or under the grantor” is a special warranty deed.
A. I only
B. II only
C. Both I and II
D. Neither I nor II
R1-8 B
A deed does not have to be recorded to be valid. It is recorded to give constructive notice to third parties, not to make the transfer valid. Therefore, I. is incorrect. A deed whose warranties are limited to the time that the grantor owned the property is a special warranty deed.
Smith is interested in purchasing a warehouse for the storage of inventory from his business. If the building which he is considering purchasing is 30 feet high, 28 feet wide and 62 feet long, how many cubic feet of storage space will the building provide?
A. 52,080 cubic feet
B. 177,000 cubic feet
C. 18,000 cubic feet
D. 1,860 cubic feet
R1-9 A
The formula to calculate volume and cubic feet is length x width x height. 62x28x30 = 52,080 cubic feet.
Public land use controls include all of the following, EXCEPT:
A. subdivision regulations
B. environmental protection laws
C. master plan specifications
D. deed restrictions
R1-10 D
Deed restrictions are considered private land use restrictions, not public ones.
When an old service station is located in an area that has been rezoned for residential use only, the station may be permitted to continue to operate as a service station under a: I. Legal nonconforming use II. Variance III. Illegal nonconforming use
A. I only
B. II only
C. III only
D. Both I and II
R1-11 A
When zoning changes, pre-existing uses and buildings which were legal, but following the change do not meet current zoning codes, are allowed to remain as legal non-conforming use. It is also known as grandfathered use. The owner does not have to get a variance, apply for a permit or take any action in order to continue their previous use of the property.
Which of the following would be considered a “material fact” by law in NC? I. Recorded lien on the property II. Information about a pending zoning change that would enhance the value of a seller’s property even if the agent is a buyer’s agent.
A. I only
B. II only
C. Both I and II
D. Neither I nor II
R1-12 C
A material fact is information which affects the seller’s willingness to sell or a buyer’s willingness to buy. Both of these items are material facts. Material facts must always be disclosed to all parties in the transaction.
Aunt Fran decides to sell her property to a church with a fee simple interest, but Aunt Fran reserved or excepted a conventional life estate. Which of the following statements is true regarding this transfer?
A. The church is the life tenant and Aunt Fran has a reversionary interest.
B. Aunt Fran is the life tenant and the church has a remainder interest.
C. The church owns the property and Aunt Fran has established a non-freehold interest.
D. This is best referred to as a life estate pur autre vie.
R1-13 B
Aunt Fran is the life tenant and she owns a freehold interest. It is a conventional life estate. When Aunt Fran dies the property will not revert back to her as the grantor, it will pass automatically and immediately at the time of her death to the church. The church has a remainder interest in the life estate created by Aunt Fran.
The basic premise for controlling the use of land is to protect and promote the health, safety, welfare and morals of the general public. As imposed under the government’s right to police power, zoning ordinances do NOT regulate:
A. the use to which a property may be put
B. the placement of buildings on the property
C. the bulk and density of buildings
D. minimum acceptable material and construction standards
R1-14 D
Acceptable material and construction standards are usually regulated by building codes, not zoning restrictions.
Joe, Moe and Harry are joint tenants owning a parcel of land. Harry conveys his interest to his long-time friend, Will. After the conveyance, Joe and Moe:
A. become tenants in common
B. continue to be joint tenants with Harry
C. become joint tenants with Will
D. remain joint tenants with Will becoming a tenant in common
R1-15 D
A joint tenant can convey their interest in the property without the approval or consent of the other joint tenants. Joe and Moe will remain joint tenants. Will cannot be a joint tenant because his ownership does not meet the four unities required of joint tenancy. He did not come into ownership at the same time or on the same title as Moe and Joe. Will, therefore, would have to hold title to the property as a tenant in common.
Land is sold to a church so long as the land is used only for religious purposes. What type of freehold estate is described?
A. tenancy for years
B. fee simple absolute
C. conventional life estate
D. defeasible fee
R1-16 D
A transfer in which the grantor imposes conditions on the grantee, such as “so long as the land is used for religious purposes” is a defeasible fee. The ownership has conditions imposed by the grantor.
Deed restrictions are a means by which:
A. local zoning laws are enforced
B. the planning commission controls developers
C. municipalities enforce building restrictions
D. grantors control the future use of the property
R1-17 D
Deed restrictions are private land use restrictions created by a previous grantor. They are not created, enforced or regulated by the government or municipalities.
Which of the following would terminate a Tenancy by the Entireties?
A. Divorce
B. A partition action
C. Legal separation
D. A unilateral sale of an interest in the property
R1-18 A
Only married couples can hold title as tenants by the entireties. Therefore, a divorce would end that form of ownership. A legal separation is not the end of the marriage. Tenants by the entireties do not have the right to file an action for partition and neither of them may convey their interest without the consent of the other party. Therefore a unilateral transfer is not possible.
Which of the following items would be included in the bundle of rights of a land owner? I. Mineral rights II. Easements III. The land IV. The privilege or right to sell the land.
A. III and IV
B. I, II and III
C. III only
D. I, II, III and IV
R1-19 D
The bundle of rights includes the land, the mineral and air rights and all other rights and privileges which are appurtenances and get transferred with the land. The easements and right to sell the land are part of the bundle of rights as well.
What type of ownership is an individual unit owner’s parking space at a condominium complex?
A. Amenity utilization of the common area.
B. Limited common area with a fractional undivided interest as tenants in common.
C. Proprietary lease of common areas.
D. Joint tenancy with right of survivorship of the the common area.
R1-20 B
An owner of a condominium owns a fee simple interest in their unit and an undivided interest as a tenant in common of the common area. Limited common areas are those areas and facilities that may be available for use by one or more of the tenants, but not all.
A developer owns 2 acres and plans to subdivide them into 6 individual lots. If the six lots are all equal in size and each one is 100 feet wide, what is the depth of the lots?
A. 189.60 feet
B. 249.50 feet
C. 145.20 feet
D. 329.25 feet
R1-21 C
The entire parcel is 2 acres. There are 43,560 square feet in an acre. 43,560x2 = 87,120 square feet. There are six lots, each one is 100 feet side so the frontage of the parcel is 600 feet. 87,120 square feet (total of the parcel)÷600 = 145.20 feet is the depth of the lots.
What is true about eminent domain?
A. The Department of Transportation is exempted from compensating land owners for critical road widening projects.
B. In order to establish eminent domain the government must meet the elements of adverse possession.
C. Should the government condemn a rental property, the lease is automatically terminated.
D. Eminent domain is the process by which the government condemns land.
R1-22 C
Eminent domain terminates the lease and the government may owe compensation to both the property owner and the tenant as a result of exercising eminent domain over a property occupied by a tenant.
A city evicts tenants of an apartment complex by the power of eminent domain because of a planned highway expansion. Does the city have to pay compensation and does the city have to let the tenants finish their lease terms.
A. The city would have to allow the tenants to complete their lease term and must pay them compensation.
B. The city may never condemn an apartment building or other facility that is currently occupied.
C. The city does not have to allow the tenants to complete their lease term, but the city will have to compensate the tenants.
D. The city does not have to allow the tenants to finish their lease terms and because they are not the owner of the apartment building, the tenants have no right to compensation.
R1-23 C
The right of the government to exercise eminent domain is absolute. The just compensation may include compensation to both the owner and to tenants adversely affected by the condemnation proceeding.
A neighbor regularly mows a vacant lot next door. After several years the neighbor erects a fence on the vacant lot. After several more years the neighbor wishes to claim adverse possession of the vacant lot. Can the neighbor claim adverse possession?
A. No, his use was not open and notorious.
B. Yes, assuming the neighbor met the minimum number of years to claim adverse possession.
C. Yes, because all the neighbor had to do was physically occupy the land.
D. No, because the neighbor has failed to pay vacant lot’s property taxes.
R1-24 B
The neighbor is not required to pay the taxes. In order to claim adverse possession, he must meet the statutory requirements of OCEAN, open, continuous, exclusive, adverse and notorious. If he meets these requirements and the minimum number of years (20 in NC) then he may be able to claim ownership through adverse possession.
Which method of land measurement uses meridians and range lines?
A. Government plat maps.
B. Assessor’s parcel numbers.
C. Government metes and bounds.
D. Government rectangular survey.
R1-25 D
The government rectangular survey uses meridians, base lines, township lines and range lines. It is the grid used in states other than North Carolina.
What is the system of land measurement that uses stakes, markers and monuments?
A. Lot and block.
B. Metes and bounds.
C. Government rectangular survey.
D. Recorded plat.
R1-26 B
A developer requires all builders within the subdivision to build a certain standard home and also requires that no home may be built smaller than 4,000 square feet. What type of restriction has the developer created and how may it be enforced?
A. Building permits, enforced through the city or county in which the property is located.
B. Private deed restrictions, enforced through a court of law.
C. Building codes, enforced through state and city building councils.
D. Zoning, enforced through the zoning board.
R1-27 B
The government will have no involvement in the enforcement of these restrictions. They will appear as private deed restrictions from the grantor or developer and will have to be privately enforced with a court action. They will not be enforced by zoning or the permitting departments.
Two friends are interested in purchasing a piece of real estate as co-owners. What is the MOST likely way that they will hold title in North Carolina?
A. Severalty.
B. Joint tenants.
C. Tenants in common.
D. Tenancy by the entireties.
R1-28 C
Tenants in common is the presumed and most common method of co-ownership for unmarried co-owners in North Carolina.
A “Quiet Title Action” can best be described as a lawsuit which is:
A. used by a seller to convey title to a buyer through a quit claim deed.
B. filed to establish ownership or interests of real property and/or to remove a cloud on title.
C. used to evict a disruptive tenant.
D. used by a buyer to force a seller to sell the property because the seller is in breach
R1-29 B
Quiet title actions are lawsuits to resolve disputes or interests about the ownership or use of real property. When concerns arise about adverse possession, easement interests and the reversionary interests of defeasible fees a quiet title action is utilized to resolve the dispute.
Which of the following adds land due to natural changes along non-navigable streams?
A. Accretion
B. Avulsion
C. Erosion
D. Reliction
R1-30 A
When accretion occurs (the natural increase of land along waterways) the size of the land is automatically increased and the owner does not have to take any legal actions to benefit from this increase in land.
Which of the following would be considered emblements?
A. Oil and minerals
B. Wheat and corn
C. Water and air
D. Trees and bushes
R1-31 B
Emblements are the right of a tenant farmer or previous owner to re-enter the land and harvest the crops for the current growing season.
Liens, easements, mechanic’s liens and restrictive covenants are all examples of:
A. estates
B. encumbrances
C. estovers
D. emblements
R1-32 B
An encumbrance is a right or an interest by someone other than the owner. Each of these items is a right or interest held by someone other than the owner of the property.
The condemnation of private property for public use is exercised under which government right?
A. Escheat
B. Taxation
C. Eminent Domain
D. Manifest Destiny
R1-33 C
Eminent domain is the right of the government to take private property for public use by paying just compensation. The process by which the government does so is called condemnation.
The recording of a deed:
A. insures the interest in a parcel of real estate.
B. warrants the title to real property.
C. gives constructive notice of the ownership of real property.
D. is all that is required to transfer the title to real estate.
R1-34 C
Recording is never required to have a valid transfer. It is required in order to give constructive notice against 3rd parties and to create a deed which is enforceable.
Which of the following is less than a freehold estate?
A. Life estate
B. Leasehold estate
C. Defeasible fee estate
D. Fee simple absolute estate
R1-35 B
There are two major categories of estates. Freehold (ownership) estates which include, fee simple, life estates and defeasible fees. The other category includes leasehold estates which are less than freehold ownership interests.
What type of deed is normally used to convey real estate in a typical sale of residential real estate?
A. Special warranty deed
B. Bargain and sale deed
C. General warranty deed
D. Quit claim deed
R1-36 C
The highest and best deed is a general warranty deed and it is typically used in residential sales transactions.
John and Marsha each owned property prior to their marriage. The individual parcels that they owned were held in severalty. Once John and Marsha got married what is the status of the title to the property?
A. The property will remain in their individual names as property held in severalty.
B. They will hold title to the property as joint tenants with a right of survivorship.
C. They will hold title to the property as tenants in common.
D. They will automatically hold the property as tenants by the entireties.
R1-37 A
The fact that John and Marsha got married does not automatically change the form of ownership. Although married couples in NC typically hold property as tenants by the entireties, the act of getting married does not automatically change the manner in which title was held.
What is the size of a section of real estate?
A. 640 acres
B. 43,560 square feet
C. 6 miles square
D. 460 acres
R1-38 A
A section of land contains 640 acres and measures one mile by one mile.
How many acres are contained in the following legal description: the SW1/4 of the NE 1/4 of the NW 1/4 and the SW 1/2 of the NW 1/4?
A. 160 Acres
B. 70 Acres
C. 120 Acres
D. 90 Acres
R1-39 D
There are two parcels, separated by the word “and.” The first parcel has 640 acres÷4,÷4,÷4 = 10 acres, plus the second parcel which is 640 acres÷4,÷2 = 80 acres. 80 acres + 10 acres is a total of 90 acres.
What is the amount of the excise taxes charged to a seller who sells a property for $143,250?
A. $287
B. $300
C. $242
D. $378
R1-40 A
The amount of the excise tax is $1 for each $500 of value. The sales price must be rounded up to the nearest $500. $143,500÷$500 = $287
The owner of a property wants to build a garage which is in violation of the existing setback requirements for the parcel of real estate. In order to build the garage and eliminate issues with the setback requirements, the homeowner will need to obtain:
A. an easement from their neighbor.
B. approval from the local HOA.
C. a license issuing them permission.
D. a variance.
R1-41 D
Setback requirements are enacted pursuant to the police power by municipalities and are part of zoning requirements. Because they are governmental restrictions, the homeowner will need to obtain a variance.
Subdivision regulations in North Carolina are administered and enforced by:
A. the city and county local municipalities.
B. through the state office of Code Enforcement.
C. the state Department of Transportation.
D. the developer and the local homeowner’s association.
R1-42 A
In NC subdivision regulations are enforced at the local level by cities, counties and municipalities.
With regard to road disclosures in North Carolina:
A. a public street is guaranteed to be approved and maintained by NCDOT.
B. a licensee must disclose whether the streets are public or private and who has the responsibility for maintaining the street.
C. the buyer representative and the listing agent are not required to make street disclosures. Such disclosures are the seller’s responsibility.
D. all public streets are maintained by NCDOT or they are automatically maintained by the municipality where the streets are located.
R1-43 B
Licensees must disclose to prospective buyers whether the streets are public or private and who has the responsibility for maintaining the street. Just because a street is public does not mean the government maintains it in North Carolina.
Jason, a buyer, is purchasing a property and is concerned about the location of a fence and the exact size of the parcel. He expresses his concerns about these items to his buyer representative. What is the BEST response of the licensee who is representing Jason?
A. Reassure Jason that the closing attorney will provide him with a full opinion letter that will address these issues.
B. Advise Jason that if he is concerned about encroachments and property lines he should obtain a survey.
C. Advise Jason that when the property is appraised, the appraiser will verify these items.
D. Tell him that title insurance provides coverage for such defects and issues.
R1-44 B
Jason should be advised to get a survey. Title insurance generally excludes coverage for errors or encroachments, which a survey would have revealed. The attorney’s opinion letter does not usually address such issues. The attorney’s opinion letter and the title insurance are usually based only on review of the recorded documents.
Which of the following is an example of an encumbrance?
A. A lis pendens filed at the register of deeds.
B. A driveway that is shared by two neighbors.
C. A lien which has been satisfied and paid in full.
D. A fence that is extending two feet over the property line.
R1-45 A
The lis pendens is an encumbrance. The rights of a hunter to use the land of another is a license or a personal easement in gross. The driveway is not an encumbrance, because driveways can be shared without the creation of a formal easement. A fence which is over the property line is considered an encroachment.
The Marketable Title Act of NC is best summarized by which of the following statements?
A. The seller is assuring that they have good marketable title and the buyer, in turn, will have good marketable title.
B. A fixture always remains personal property until it has been paid for in full.
C. A deed is considered to be of good quality if an unbroken chain of title can be documented for the past 30 years.
D. The attorney shall disburse no funds from closing until the buyer’s deed has been properly recorded.
R1-46 C
The Marketable Title Act requires the attorney or closing agent to document the chain of title for a 30 year period in order for it to be considered marketable.
Which of the following debts or liens would be subject to the Homestead Exemption Act of NC?
A. Liens of judgment creditors.
B. A mechanic’s lien which has been appropriately recorded.
C. Past due taxes which have not been paid.
D. A first deed of trust on which the lender is attempting to foreclose.
R1-47 A
The NC Homestead Exemption only applies to the liens of judgment creditors. It would have no effect on past due taxes, a mortgage or deed of trust being foreclosed or a mechanic’s lien.
When do real property taxes become a lien in North Carolina?
A. September 1st
B. Once they are past due
C. July 1st
D. January 1st
R1-48 D
The property taxes become a lien on January 1st for the coming calendar year. Tax bills get issued in July and the taxes are due September 1.
Karen purchased a property and has a written and recorded document that gives her permanent ingress and egress to her parcel across an adjacent property. Which of the following statements is correct regarding Karen’s situation?
A. Karen has a license which will end when her term of ownership terminates.
B. Karen has an easement in gross which is an appurtenance and travels with the property.
C. She owns the dominant parcel and the adjacent property is the servient parcel.
D. She owns the servient parcel and the parcel over which the easement runs is the dominant parcel.
R1-49 C
What Karen possesses is a permanent right to use the property of another. It is an easement appurtenant. Her parcel benefits from the existence of the easement and is the dominant parcel. The adjacent parcel which is being utilized for the easement is the servient one.
The North Carolina Real Estate Commission consists of nine members, three of which must have a license and two which must be members of the public and not licensed. Which of the following is also true regarding the NCREC?
A. The NC Real Estate Commission will not hear commission disputes between the agent and their client, but they will assist in the resolution of fee disputes between real estate licensees
B. The terms of the NC Real Estate Commission are life-long appointments.
C. Seven of the NC Real Estate commission members are appointed by the Governor, one is appointed by the house and one is appointed by the senate.
D. The NC Real Estate Commission is led by a commission chair that is also appointed by the Governor.
R1-50 C
The Real Estate Commission does not get involved in disputes between agents and their clients. They are appointed to three year terms, three expire each year. They can be reappointed. Seven are appointed by the Governor, one by the house and one by the senate. The commission chair is selected by the members.
If a seller’s agent or subagent has been informed of a latent defect in the property and the seller on the property disclosure statement checks “No Representation” and the agent fails to inform the buyer of the defect who is liable?
A. seller
B. the seller’s agent
C. both seller and agent
D. neither seller nor agent
R2-1 B
The seller does not have a duty to disclose. However, the seller’s agent has a duty to disclose all defects which they know about or should have known about.
Broker Ron Thompson listed and sold Mr. Simpson’s property. Thompson did not disclose to Mr. Simpson that there was a potential zoning change in the works that would allow the property to be used as a convenience store. The new use would substantially increase the value of Mr. Simpson’s property. Which of the following is/are true? I. Thompson did not have to divulge the zoning change since it had not been put into effect. II. Thompson did not have to divulge the zoning change since the property sold at its fair market value.
A. I only
B. II only
C. Both I and II
D. Neither I nor II
R2-2 D
Changes in zoning, new highways and changes in the neighborhood are all material facts and they must be divulged or disclosed to all parties in the transaction, regardless of whom the licensee represents.
Under which type of listing agreement does the seller lose his/her right to compete for the commission?
A. open listing
B. exclusive agency listing
C. exclusive right to sell listing
D. net listing
R2-3 C
Under an exclusive right to sell listing agreement, the firm will be entitled to compensation regardless of who sells the property. Even if the owner sells the property themselves, they will still be obligated to pay the firm a commission.
A contract that binds the owner of real estate to hold an offer to sell open for a set period of time, and gives the buyer the legal right to either accept or withdraw is a(n):
A. right of first refusal
B. option to purchase contract
C. backup offer
D. installment land contract
R2-4 B
In an option to purchase, the seller is obligated to sell and the buyer is not obligated to buy. Another way of saying this is to say that an offer is binding on the optionor (the person giving the option) but not binding on the offeree (the person receiving the option).
An oral real estate sales contract is unenforceable under:
A. Real Estate Licensing Law
B. Statutes of Limitations
C. Law of Agency
D. Statute of Frauds
R2-5 D
Not all contracts must be in writing in order to be enforceable, only certain types of agreements. However, the transfer of any interest or ownership in real estate must be in writing in order to be enforceable. This is due to application of the statute of frauds.
Which of the following is not required for a contract to be valid and enforceable?
A. legal capacity
B. consideration
C. mutual assent
D. witnesses
R2-6 D
This question is not asking about a specific type of agreement. It is asking about contracts in general. In general, an enforceable contract must only have the elements of mutual assent, consideration, legal capacity and be for a legal purpose.
Which of the following statements is/are correct? I. In dual agency, the seller client and buyer client are aware and understand that the firm’s dual agency role is to provide balanced and fair representation of the seller client and buyer client and to encourage and effect communication between them rather than as an advocate or exclusive agent or representative. II. In designated agency, the firm designates an agent to represent the seller client and another agent in the firm to represent the buyer client as long as both agents have not actually received confidential information concerning the other client and shall represent the interests of the parties to the extent permitted by law.
A. I only
B. II only
C. Both I and II
D. Neither I nor II
R2-7 C
Dual agency limits the representation that a licensee may provide because they cannot advocate and must remain fair and impartial to both the seller and the buyer. Designated agency, while still a form of dual agency, helps alleviate this limited representation by allowing each of the licensees to fully advocate on behalf of and represent their client, so long as they have not already received confidential information regarding the client.
Several months ago, Bill purchased four lots for $24,000 each. He later divided the lots into six lots and sold each for $20,000. What was Bill’s percent of profit (loss)?
A. 20%
B. 25%
C. 80%
D. 125%
R2-8 B
Bill’s total investment was $96,000 (4 lots at $24,000 each). He divided the lots and sold a total of 6 at $20,000 a piece and received $120,000. His total profit was $24,000 ($120,000-$96,000). If he invested $96,000 and made $24,000, then the amount he made of $24,000 divided by his original investment of $96,000 = 25%.
Lucy Jones, a subagent of the seller and provisional broker with ABC Realty, sold a property listed with XYZ Realty. The buyer made a low offer but told Lucy they would be willing to offer more money and better terms if the sellers did not accept the original offer. Lucy presented the offer to Joe Baker, listing agent, and repeated to Joe the buyer’s statement that, “They would be willing to offer more money and better terms.” Joe presented the offer, making no mention that the buyers would be willing to go higher. Which agent(s) violated the Law of Agency? I. Joe, the listing agent II. Lucy, working with a buyer, as a seller’s subagent
A. I only
B. II only
C. Both I and II
D. Neither I nor II
R2-9 A
Only Joe, as the listing agent. Lucy was not representing the buyer. She was working with the buyer as a seller’s subagent. She had an absolute duty to disclose the buyer’s comments because she owed duties to the seller through subagency. She owed no such duties to the buyer. Joe, who was the listing agent, also had fiduciary duties to the seller and his failure to inform the sellers of the buyer’s comments breached his duties of loyalty to his client.
Jones is acting as a buyer’s agent under a signed buyer agency agreement. Jones assists the buyer in preparing an offer to purchase, which the buyer signs. The buyer then immediately leaves town on business. Jones presents the offer to the listing agent. The seller signs the offer without any changes, and Jones is notified of the acceptance at 4 p.m. Jones checks his voice mail messages at 5 p.m. and discovers that the buyer left him a message at 2 p.m. withdrawing his offer. Which of the following statements regarding this situation is true?
A. The contract became legally binding when Jones was notified of the seller’s acceptance.
B. No contract was legally created because the buyer withdrew his offer before his agent was notified of the seller’s acceptance.
C. The contract is voidable because the buyer was not notified personally of the acceptance.
D. The contract is voidable because the buyer withdrew the offer before it had been accepted.
R2-10 A
A buyer may withdraw their offer at any time prior to acceptance. In order to be effective, the withdrawal must be communicated to either the listing agent or the seller. That did not occur. The seller accepted the offer and the acceptance was communicated to the buyer’s agent before the withdrawal was communicated to the listing agent or the seller.
Mary Smith is broker-in-charge of Smith Realty, which has several affiliated agents. Mary is actively involved in listing and selling properties. Sue Long, a provisional broker with Smith Realty, has a buyer client who has expressed interest in one of Mary’s listings. Which of the following agency agreements is permissible in this situation?
A. Mary and Sue may act as dual agents.
B. Mary and Sue may act as designated agents.
C. Mary and Sue may both represent the seller, treating the buyer as a customer.
D. Mary may represent her seller, and Sue may represent her buyer.
R2-11 A
Mary and Sue work for the same firm. Therefore, they cannot be single agents. The relationships formed will be either dual agency or designated agency. However, under the law of designated agency, a broker-in-charge cannot be a designated agent with a provisional broker whom they are required to supervise. When a BIC and a provisional broker are representing parties in the same transaction they will always be dual agents.
At an open house, the seller’s agent must disclose his/her agency status to a prospective buyer:
A. when the prospect first walks into the house and shows interest in the property .
B. when the prospect asks questions about the price of the property and its features
C. when the prospect begins to talk about his/her property needs and ability to purchase
D. prior to giving the prospect a tour of the property and providing detailed information about the features of the property
R2-12 C
The disclosure and use of the WWREA brochure must occur at first substantial contact and that does not occur simply because the buyer walked into an open house. It does occur when the prospect begins to discuss their motivations, confidential information, individual needs or wants concerning the transaction.
Which of the following would be used to terminate a contract in a situation where the buyer is entitled to be relieved of all liability and have all of their money returned?
A. Rescission
B. Relegation
C. Reversion
D. Revision
R2-13 A
Rescission is the process of restoring the parties to their original condition before the contract was executed.
A deed was not properly recorded. This would best be described as:
A. Failure of privity, but valid between the parties
B. Failure of contract, but valid between the parties
C. Failure of notice, but valid between the parties
D. Failure of estate, but valid between the parties
R2-14 C
In NC the Conner Act requires a deed to be recorded in order to be enforceable against third parties. However, a deed and the transfer of real estate is complete between the parties once a deed is signed, delivered and accepted. A deed can be valid between parties, but unenforceable as to claims by third parties who were not provided with constructive notice of the transfer due to the non-recordation of the deed.
An agent works for Smith & Wesson Realty and is acting as a buyer’s agent. The buyer is interested in a property that is listed with Jones Realty. From whom will the agent receive her commission check?
A. The Smith & Wesson Realty firm.
B. Either firm may pay the licensee.
C. The licensee will be paid directly by the buyer/client.
D. The Jones Realty firm.
R2-15 A
All compensation passes through the firm with which the licensee is affiliated.
A broker receives two offers on a property that he has listed. He submits the first offer at 9:00 AM to the seller but does not submit the second offer until the seller has decided how to respond to the first offer. The actions of the broker would best be described as:
A. allowed, providing he notifies the buyer’s agents.
B. allowed, if the company policy specifically permits this conduct.
C. not allowed, because the broker must submit all offers to the seller.
D. not allowed, because the seller must notify each buyer of the other offer.
R2-16 C
A licensee must submit all offers immediately, but never later than 5 days. The licensee must submit all offers in their possession at the same time to fulfill the fiduciary duties to their client. Such conduct would be a breach of the licensee’s fiduciary duties to the principal.
Once a binding contract exists between two parties, the document that the licensee would use to make any changes or modifications to an already existing contract or to add to the terms of a contract would be called a(an):
A. contingency clause
B. adaptation
C. addendum
D. counteroffer
R2-17 C
An addendum changes or alters the terms of an existing contract. All changes, alterations or modifications must be in writing pursuant to the statute of frauds and the parties must mutually agree to the changes.
A seller entered into an Exclusive Right to Sell Listing Agreement. A qualified buyer presented an offer for the listed price. The seller refused to sell to the buyer. Which of the following is a correct statement?
A. The seller can refuse to sell, but a commission may still be owed to the firm.
B. The seller can refuse to sell and has no legal liability to anyone.
C. The seller must accept the offer because it was for the listed price.
D. The seller must still sell based on the obligation he agreed to in the Exclusive Right to Sell Listing Agreement.
R2-18 A
The Exclusive Right to Sell Listing Agreement is not an agreement to sell the property. It is an employment contract hiring the broker to find a ready, willing and able buyer. The seller cannot be forced to sell and has not agreed to sell anything. If the broker fulfils the terms of the agreement by finding a ready, willing and able buyer, the firm may be entitled to a commission.
According to North Carolina law, what are the buyer and seller allowed to negotiate after contract formation?
A. The buyer and seller may renegotiate, but only during the due diligence period.
B. Assuming that they are both interested in negotiating, all terms of the contract may be renegotiated during the contractual period.
C. Nothing. The buyer and seller are bound to the terms of the agreed to contract.
D. The buyer and seller may renegotiate, but they will need to create a new contract through novation.
R2-19 B
Contracts are mutual agreements. The parties may renegotiate any terms to which they can mutually agree. They need to document their alterations, modifications and changes by executing a written and signed addendum to the contract.
A seller notified his listing agent that the water heater was not working properly. The agent failed to mention this to a buyer’s agent. Which of the following would be at fault if the buyer is harmed due to the malfunctioning water heater?
A. Seller and listing agent.
B. Listing agent and buyer’s agent.
C. Buyer’s agent.
D. Listing agent
R2-20 D
Only the listing agent. The seller is never required to disclose any defects, so long as they make no representations to the buyer or the buyer’s agent. The listing licensee must disclose everything they know and should have known. The buyer’s agent is not liable because this type of defect is not something that the buyer’s agent exercising a reasonable standard of care should have known.
Sam, a prospective buyer, signs an option contract and pays the seller $500 for an option fee. Which term best describes this contract?
A. Voidable
B. Void
C. Unenforceable
D. Valid
R2-21 A
Options are unilateral contracts which bind only one party. An option binds the seller, but the buyer is under no obligation to buy. Since the contract can be made void by one of the parties, the contract is considered voidable by the buyer should they so choose.
All of the following are true regarding the “Working with Real Estate Agents Brochure” EXCEPT:
A. the brochure must be provided at first substantial contact.
B. if first substantial contact is by phone, the brochure must be mailed within 3 days
C. the brochure includes a place for disclosure of seller subagency and an acknowledgement of such agency status by the prospective buyer.
D. the buyer must sign the brochure before the agent can work as a buyer’s agent
R2-22 D
It is not required that the client/customer sign the brochure. The licensee, however, should document the date and retain the tear off flap in the real estate file as evidence of a proper agency disclosure with the consumer.
Barney Buyer made an offer to a seller which was accepted. Three days prior to closing, Barney dies. What is the status of the agreement between the buyer and the seller?
A. The contract was automatically voided at the time of Barney’s death.
B. The seller will have to enforce the contract through a court order for specific performance.
C. Barney’s heirs have the option of making the contract voidable.
D. The contract is still valid and enforceable. The contract is now an obligation of the estate and the probate court will direct the proper way to proceed with the agreement.
R2-23 D
Death of one of the parties does not end a purchase contract. The contract is still valid and enforceable and will become an obligation of the estate.
Jim, a provisional broker, is an agent for ABC Realty. While discussing agency with a prospective buyer which of the following would be a correct statement that Jim can make to the buyer?
A. Once you hire me, I agree to protect and promote your interests and to protect your confidential information, even if our agreement is oral.
B. I can present your offer so long as we have a buyer’s agency agreement in writing before closing.
C. Our firm practices designated agency. If we look at a home that is listed by my BIC, then my BIC will act as the designated agent for the seller and I can fully represent you as your designated agent.
D. You don’t have to decide you want to hire me until you are ready to write an offer. Let’s start out by me just showing you homes.
R2-24 A
Whether working under an oral or written agreement, a licensee who is hired by a buyer must work to protect and promote the buyer’s interest. The licensee owes fiduciary duties to the buyer including confidentiality.
When must a licensee get an Exclusive Right to Sell Listing Agreement signed?
A. before the seller receives an offer
B. at first substantial contact
C. prior to closing
D. at the time of employment or the start of the relationship
R2-25 D
There is no such thing as an oral listing agreement. The listing agreement must be in writing at the time of employment or the start of the relationship. If the licensee does not have a written listing agreement, they do not have a listing and may take no actions on behalf of the seller.
A buyer’s agent is permitted to have an oral agency employment agreement with a buyer so long as the licensee gets the written employment agreement no later than the:
A. date of closing
B. time an offer is submitted
C. time an offer is accepted
D. formation of a contract between the seller and buyer
R2-26 B
A written buyer brokerage agency agreement must exist at the time an offer is submitted.
