Test Questions for Review Flashcards
Regarding BPO’s (Broker Price Opinions) all of the following statements are correct EXCEPT:
Correct Answer
A provisional broker may prepare a BPO for a lender, for a fee, so long as they are supervised by the broker-in-charge.
Explanation
A provisional broker cannot complete a BPO for a fee. A full broker can complete a BPO for a fee. The BPO must contain language indicating that the bank cannot use the BPO for the purpose of originating a debt. A BPO is typically performed for a lender, while a CMA is typically performed for a buyer or seller. Both calculate the probable sales price for a property and the price is often reported as a range.
An agent is working under an oral buyer’s agency agreement. The agent knows the buyer is strongly interested in one of the homes seen by the buyer. The buyer is ready to write the offer but refuses to sign a buyer’s agency agreement. At this point the agent may:
Correct Answer
write the offer but advise the buyer that they are now a sub-agent of the seller and anything the buyer has revealed must be provided to the seller.
Explanation
When a buyer refuses to sign a written buyers agency agreement, the agent can no longer represent the buyer. The agent should warn the buyer that failure to sign the agreement will result in the agent becoming an agent for the seller. If this occurs, they will need to see if the seller will permit seller sub-agency. If so, the agent must disclose all personal / confidential information that they learned about the buyer to the seller. The oral agreement must be reduced to writing prior to the presentation of an offer - not prior to contract or closing.
Henry, a buyer from Kentucky was hesitant to enter into a written buyer agency agreement at the inception of his relationship with his agent. All of the following are true, EXCEPT?
Correct Answer
An agent cannot insist that a buyer sign an Exclusive agency agreement before the agent will work for the buyer
Explanation
Agents and Firms, as a business practice, can choose to work only with buyers who enter into Exclusive agreements which would be required to be in writing from inception. A client can choose to be represented under an oral buyer agency agreement so long as the agreement is non-exclusive and open-ended. The agreement must be reduced to writing prior to presentation of an offer. Under an oral agreement, the buyer must agree to compensation, determine if dual/designated dual agency will be authorized, etc. The agent can SHOW property while under oral agency, but the agreement must be reduced to writing prior to the presentation of the offer.
A broker has an exclusive buyer agency agreement that includes a 2.5 % commission and any bonuses offered. When must the buyer’s agent to disclose the bonus offered for which they are aware before showing?
Correct Answer
Prior to the preparation of the offer
Explanation
The bonus amount must be disclosed in time for the buyer to decide on making an offer. Oral disclosure is allowed when the buyer is considering an offer. Disclosure must be reduced to writing prior to preparation of an offer. So the very last minute would be before the agent prepares an offer for the buyer. It should be disclosed earlier rather than later. The best practice is before you show the property. NOTE: You must select the more correct answer.
Which of the following entities would be EXEMPT from obtaining a separate firm license?
Correct Answer
Mary Jones, Broker
Explanation
The best answer is a sole proprietor, therefore the single broker named is correct. A sole proprietor is not required to obtain a separate firm license. All other entities - LLC’s, corporations and partnerships would required a firm license.
All of following activities can be performed by an unlicensed employee, EXCEPT:
Correct Answer
create the marketing for a new listing based on information found in the public record.
Explanation
An unlicensed employee cannot create advertising without the direction of a licensed broker. The remaining activities can be performed by a W-2 employee that does not hold an active real estate license. To see the complete list, see page 3-4 of License Law and Commission Rule Comments.
A licensee lists a property for sale and learns that the neighborhood has a registered sex offender. A family with young children ask to view the property and ask the licensee about criminal activity in the area. The broker responds that they cannot release those statistics and encourages the buyer to perform research if that is a concern. Did the licensee act appropriately?
Correct Answer
Yes. The broker has not violated license law by failing to disclose the sex offender.
Explanation
A broker has a duty to disclose material facts. It is not a material fact in North Carolina that a registered sex offender lives in the area. A broker cannot lie when asked specifically by the buyer about a registered sex offender, however can refuse to answer the question. A broker cannot disclose crime statistics to the buyer as this is a violation of the Federal Fair Housing Act.
A broker manages several rental units for various owners and routinely employs Ajax Cleaning Service to clean the units after the tenant moves out. The broker pays Ajax a $50 per unit fee for its services out of rental proceeds received and deposited in his trust account. Ajax then refunds to the broker $10 for each $50 fee it receives. Which of the following is TRUE?
Correct Answer
A broker may receive compensation for procuring any services for properties managed by the broker with informed, written consent of the property owner
Explanation
A broker doing property management may receive fees for procuring services on behalf of the owner with the owner’s written consent.
A broker recently listed a house acquired by a married couple in 2008 as tenants by the entirety. At the time of the listing presentation, the wife was overseas and not available to sign the listing agreement. Accordingly, does a valid listing agreement exist?
Correct Answer
No. The lack of the wife’s signature could prevent the husband from conveying title.
Explanation
Agreements to sell property owned as tenants by the entirety must be signed by both spouses to be valid. The property is said to be owned by the marital entity, i.e., the husband and wife do not have separate, distinctive shares - each owns 100%. A spouse may act as Attorney-in-Fact or under a Power-of-Attorney to sign on behalf of a spouse that is traveling. Oral consent does not constitute acceptance as the listing agreements must be in writing from inception and signed by all parties that have an interest in order to be legally binding. The word “never” should throw up a flag to be cautious about the answer as a person can be appointed as an attorney-in-fact or power-of-attorney.
Can a brokerage legally retain the interest earned on client funds that are deposited into the brokerage trust account?
Correct Answer
Yes. When the client grants permission in the listing/buyer agency agreement.
Explanation
The client can give the brokerage the authority to retain the interest earned on the trust account to cover the expenses of maintaining the account. The trust account is “other peoples money” and only a limited amount of brokerage money can be deposited into the account (typically $100). The NCAR Exclusive Right to Sell Listing Agreement addresses the ability of the firm to retain the interest.
A manufactured dwelling is built to which of the following standards?
Correct Answer
Federal
Explanation
Manufactured or mobile homes are built to federal (HUD) standards. Manufactured homes become real property when the wheels and hitch are removed, it is placed on a permanent foundation, and on land that is owned. The manufactured home must be removed from the DMV. Modular homes are built to state building codes. Site-built homes must meet local city/county building codes.
Which of the following statement is TRUE about agency representation?
Correct Answer
A Provisional broker and his/her broker-in-charge may act as dual agents in a transaction.
Explanation
A provisional broker and his/her supervising broker-in-charge cannot act as designated agents, however they can act as dual agents. An easy way to remember this is “no BIC and PB and no P&C” - no broker-in-charge & provisional broker and no personal & confidential information about the other side. All other combinations may act as designated agents when the firm practices dual & designated agency, buyer and seller have consented and no BIC & PB and no P&C.
Which of the following statements is most accurate regarding the Exclusive Right to Sell Listing Agreement?
Correct Answer
The seller has no legal right to terminate the listing agreement during the term of the agreement
Explanation
It is true that a seller has no legal right to terminate during the term of the listing agreement. The seller may fire the listing agent, but s/he would be in breach if the agent is performing in accordance with the terms of the contract. Listing agents may be paid in 2 circumstances beyond the end date of the listing agreement: under the provision of the “extender clause” and if the buyer was procured during the listing agreement but did not close until after the end date. Listing agreements, by rule, cannot automatically renew.
A listing agent has a closing scheduled for July 2nd. The listing agent takes two CE electives for a total of 8 hours but fails to take the GENUP. The listing agent pays his renewal fee and attends the settlement meeting on July 2nd. Which of the following is TRUE?
Correct Answer
Neither the listing broker nor the firm may be paid because the listing broker engaged in real estate activities while on inactive status
Explanation
Attending a settlement meeting on behalf of a consumer is a brokerage activity and requires a license on active status. Neither the firm nor the listing may legally be compensated for this transaction because the listing broker was on inactive status. To accept the fee would be an illegal brokerage activity of both the listing broker and the firm.
A broker is showing a property inside the city limits, and the buyer is interested in making an offer on a beautiful home with a large corner lot. The buyer told the broker they will be running a landscaping business from home and will need to park three dump trucks on site. Which of the following is TRUE?
Correct Answer
The broker must discover and disclose any restrictions, public or private, that may interfere with the buyer’s intended use.
Explanation
A broker must discover and disclose material facts. The need to park three dump trucks in the yard is a material fact for this buyer. Also, brokers are not allowed to draft (or craft) paragraphs in a sales contract for others. Remember, property in the city is regulated by the city, county, and private land use controls and the most restrictive rules.
A broker is working for a buyer as a buyer’s agent. The buyer tells the broker to offer $210,000 for the property, but I will pay $220,000. The broker must:
Correct Answer
keep the buyer’s confidential information confidential.
Explanation
The broker is a buyers agent. The buyer is the principal, and the broker must keep confidential information confidential. The price the buyer is willing to pay is confidential information. Common courtesy does not apply, and this is why we have agency disclosure.
Once licensed, a provisional broker must:
Correct Answer
Complete three thirty-hour postlicense classes to remove provisional status
Explanation
A provisional broker needs to complete 90 hours of postlicense education to remove the provisional status. Failure to complete postlicense courses will cause a license to go inactive. A licensee can remain on inactive status as long as they pay the license renewal fee by June 30th each year. Continuing Ed is not due until the second renewal. A provisional broker license is always inactive absent a BIC.
An agent is working under an oral buyer’s agency agreement. The agent knows the buyer is strongly interested in one of the homes seen by the buyer. The buyer is ready to write the offer but refuses to sign a buyer’s agency agreement. At this point the agent may:
Correct Answer
write the offer but advise the buyer that they are now a sub-agent of the seller and anything the buyer has revealed must be provided to the seller.
Explanation
When a buyer refuses to sign a written buyers agency agreement, the agent can no longer represent the buyer. The agent should warn the buyer that failure to sign the agreement will result in the agent becoming an agent for the seller. If this occurs, they will need to see if the seller will permit seller sub-agency. If so, the agent must disclose all personal / confidential information that they learned about the buyer to the seller. The oral agreement must be reduced to writing prior to the presentation of an offer - not prior to contract or closing.
Which of the following would terminate an agency relationship?
Correct Answer
Death of the principal
Explanation
Agency agreements terminate by the death of the principal/client or the firm. Agency agreements terminate by the death of the principal/client or the firm. Listing agreements also terminate when a new deed records, as the agency relationship is fully performed (closed). Agency relationships are not terminated by the death of the listing agent, buyer agent, subagent, BIC, or selling agent unless the agency agreement is with an independent sole proprietor broker.
A broker must enter into a written agency agreement with a buyer no later than:
Correct Answer
preparation of a written offer to purchase.
Explanation
A broker may work with a buyer client with an express oral agreement. Before the preparation of an offer, the buyer agency agreement must be in writing. The new Working With Real Estate Agents Disclosure states: “You may begin with an oral agreement, but your agent must enter into a written buyer agency agreement with you before preparing a written offer to purchase or communicating an oral offer for you.”
NOTE: The rule changed 7/1/2021 from presentation to preparation.
A licensee is writing an offer using the Standard NCAR / NCBA 2-T for a home that she is purchasing. Which of the following statements is TRUE?
Correct Answer
The licensee is permitted to make the change to the Standard 2-T.
Explanation
This is tricky. A licensee is not permitted to draft terms in a contract where they are not a party to the agreement. Since the licensee is the buyer, they are a party to the contract and therefore may draft language. It is still recommended that the licensee seek the advice of an attorney. The Commission and REALTOR Association do not approve personal real estate transactions.
A broker is holding an open house for a local builder. At what point must the broker provide the consumer with the Working With Real Estate Agents disclosure form?
Correct Answer
Before the consumer asks about the down payment needed to purchase the property
Explanation
Agency disclosure must occur before a consumer shares any confidential information with the broker. School district or septic system questions do not rise to the level of confidential information. Questions about financing terms and down payment requirements cross the first substantial contact line.
A broker is involved in a sale transaction using the NCAR/NCBAR standard 2-T Offer to Purchase and Contract, where the buyer terminated by the due diligence date. Which of the following is TRUE?
Correct Answer
The buyer is entitled to a refund of the earnest money
Explanation
Standard form #2 says that if the buyer terminates the offer to purchase before the due diligence deadline (BY that date), the buyer is entitled to the return of the earnest money deposit. The due diligence fee pays for the time to decide, and the buyer forfeits the due diligence fee when the buyer terminates the agreement. When the buyer terminates after the due diligence period for any reason, the seller keeps both the due diligence fee and the earnest money.
Oral buyer agency must:
Correct Answer
be express.
Explanation
Express agency is agreed to, and may be oral or written. Oral buyer agency is an example of an express agency. The implied agency is born out of actions and behaviors, rather than an express agreement. Implied agency is illegal in North Carolina. Â Apparent agency occurs when an agent, either acting beyond the scope of the agency agreement, or acting as an agent with an absence of any agency agreement. General agency grants authority to an agent to sign certain agreements on behalf of the client (property management/affiliation with a brokerage).
A broker lists a new construction home for sale based on the builder’s plan, stating the home will be 5,000 square feet. Before closing, an appraiser calculates that the house is 4,500 square feet. The buyer wants the seller to reduce the price. Which of the following is TRUE?
Correct Answer
Both the listing broker and buyer broker are responsible for misrepresentation
Explanation
When a listing agent markets a property, they need to ensure that it is accurate. The listing broker can use the builder plan; however, he/she would need to verify the square footage once framing has occurred. The buyer’s agent is also responsible as a 500 square foot difference on a 4,500 home is substantial. A reasonably prudent agent should have discovered the discrepancy.
Which property ownership right sets a boundary at the mean high tide water mark?
Correct Answer
Littoral
Explanation
Littoral water rights involve bodies of water with tides such as the ocean. Property boundaries are up to the high tide mean mark. The foreshore is the strip of land exposed during low tide and is public land. Riparian water rights refer to non-navigable bodies of water where adjacent owners own up the middle of the water source and all the land below. Lateral rights refer to the right that a neighbor’s construction or excavation will continue to support the natural boundaries of the property.
All of the following are true regarding broker trust accounts, EXCEPT:
Correct Answer
Trust money must be held in a North Carolina bank or savings and loan institution.
Explanation
A recent law and rule change allows brokerages and property managers to keep trust money in accounts outside of the State as long as the bank is lawfully doing business in the State of NC and will allow audit privileges to the Commission. A BIC may delegate tasks associated with the maintenance of the trust account, however, is still responsible for any mistakes. A brokerage can retain the interest earned on balances in the trust account when it has been agreed to in the agency contract. A brokerage may place money in the trust account to cover account maintenance and returned check fees. While this question does not address commingling, conversion and embezzlement it is important to know these terms. Commingling is mixing client and brokerage money. Conversion is using money in the trust account to cover a client’s expense in excess of the balance that the client has in the trust account. Embezzlement is fraud, where a broker steals the property of another.
A broker at ABC Realty forms a team, Best Brokers Team Inc., and takes a listing. Which of the following is TRUE?
Correct Answer
The listing agreement must include the name of ABC Realty and Best Brokers, Inc. The listing agent must include a license number. All marketing must include the name of both companies.
Explanation
When a team (firm) takes a listing on behalf of an overarching firm, BOTH firm names must appear on the agency agreements and all marketing.
An attorney’s title examination would, most likely, discover which of the following?
Correct Answer
a 9-year old IRS lien against the property that has yet to be settled
Explanation
The title search would discover recorded liens against the property, such as an IRS lien. Unrecorded liens would not be on the public record. A survey would discover an encroachment. While the title exam would uncover mortgages, it would not be able to determine the current balance.
An agent lists a parcel of undeveloped property which is currently zoned for single-family use. The agent knows the property is scheduled to be rezoned for multi-family use. The agent offers to buy the property from the seller and tells the seller that he wants to acquire the property as a long-term investment. Several months later and after the rezoning has taken effect, the agent sells the property for a substantial profit. In this case the agent:
Correct Answer
acted improperly because this would be considered “self-dealing” and the agent has a duty to disclose the possible conflict of interest.
Explanation
Self-dealing is defined as taking secret profits by failing to disclose the appropriate value of a property to his/her client. A broker must disclose all material facts to all parties in the transaction. It is improper not to disclose the scheduled change in use and a potential substantial increase in value. There are no rules from the NC Real Estate Commission precluding an agent from purchasing the property. A brokerage may impose this rule through their company policies
A broker in North Carolina has a limited listing agreement with the seller to put a for sale sign in the yard, install a lockbox, and enter the property into the MLS. Which of the following is TRUE?
Correct Answer
A limited listing obligates the broker to provide full fiduciary duties to the seller
Explanation
A limited service listing limits services provided, but it does not limit the broker’s fiduciary duties, the broker’s obligation to discover and disclose material facts, or the broker’s liability. Brokers that together decide not to show another firm’s listings for any reason are participating in an illegal group boycott, which violates the Sherman antitrust laws.
When a listing firm has multiple offices, and one broker from location A has a listing agreement, and a broker from location B has a buyer customer with no agency agreement. What type of agency are the firm and all brokers practicing?
Correct Answer
Exclusive seller agency
Explanation
This is an example of exclusive seller agency since the buyer is not represented. The two agents will act on the seller’s behalf. Transaction brokerage is not permitted in North Carolina.
Which of the following activities would increase the equity in a property?
Correct Answer
Appreciation to the property due to favorable market conditions in an area
Explanation
Equity is the difference between market value and the amount owed, so therefore an increase in value due to appreciation would increase equity. Other things that increase equity are paying down one’s debt on a property and adding a needed capital improvement. Paying the interest only on the loan and maintaining a property hold value but do not increase the value. Depreciating a property is a tax concept and does not affect the actual value
A buyer’s agent advises a buyer to skip a termite inspection as it is not required by a lender. The buyer subsequently finds out that $40,000 in damage from an active termite infestation. The buyer’s agent:
Correct Answer
may be liable for the damage for breaching fiduciary responsibilities.
Explanation
A licensee should never discourage inspections. In North Carolina, termite infestation is prevalent. The only way to determine if an active or past infestation is to have a qualified inspector check the property. Advising a client/customer not to complete an inspection is a breach of agent duties.
Betty, an independent broker, is working with a buyer customer. Betty failed to review the Working with Real Estate Agents disclosure form. She explains to the buyer that she is working for his best interest and “will help him get the best deal possible” should the buyer purchase one of her firm’s listings. In this case:
Correct Answer
Betty is acting as an undisclosed dual agent if she shows the buyer one of her firm’s listings.
Explanation
Betty may represent both the buyer and seller with the express permission of the client. Consent to dual agency representation must be obtained prior to being allowed to act as a dual agent. A broker must disclose the Working with Real Estate Agents disclosure form at first substantial contact. A buyer may consent to oral buyer agency representation, which is non-exclusive and open-ended. The agent and buyer must discuss dual / designated agency authorization and how compensation will be paid. Since Betty is acting as an undisclosed dual agent she is not entitled to compensation.
A licensee has listed a property for sale with the seller authorizing dual and designated agency. A prospective buyer expresses an interest in making an offer. The buyer has disclosed a proposed use that would violate restrictive covenants. Is the licensee required to disclose the issue to the buyer?
Correct Answer
Yes. A licensee is required to disclose material facts to all parties to the transaction.
Explanation
A licensee is expected to recognize RED FLAG situations such as a violation of zoning or problems with restrictive covenants. Material facts must be disclosed to all parties to the transaction. When representing a 3rd party customer, a broker is not required to determine if this is the best property available for the buyer to purchase, however is required to disclose material facts - such as the restrictive covenants.
Jane is a provisional broker affiliated with XYZ Realty. Tom, who is also affiliated with XYZ Realty, takes a listing. Jane holds an open house and locates a potential buyer that is considering an offer. In this instance:
Correct Answer
Jane will act as a subagent of the seller unless dual agency is authorized.
Explanation
Jane is automatically a subagent to the seller, as she is affiliated with XYZ Realty. When Tom signs the listing agreement, binding the firm, all agents of the firm represent the seller. Jane cannot act as an exclusive agent for the buyer, as XYZ Realty already has the listing. XYZ Realty will have to work under dual or designated dual agency if they represent both the buyer and seller in the transaction. Transaction brokerage is not permitted in North Carolina; a broker must represent at least one party to the transaction. A BIC and PB cannot act as designated dual agents. The limitations for designated agent: No BIC & PB and No P&C. Designated agency is not allowed when one agent is the broker-in-charge, and one agent is on provisional status. Also, the agents cannot have personal & confidential information about the other party.
The NCAR Property Management Agreement:
Correct Answer
permits the property manager to prorate rent when a unit is not habitable.
Explanation
The property management agreement outlines the duties and responsibilities of the property manager and the property owner. The property manager may prorate rent when a unit is damaged and is not inhabitable. The owner agrees not to enter the property without contacting the property manager so that proper notice can be provided to the tenant. The owner may set the amount of rent, length of time to enter a lease, etc., however, the standard agreement does not restrict the amount of time. A property manager does not have the authority to make changes to the property without the owner’s permission. The property manager has a duty to advise the seller about improvements, especially if the changes will lower the amount of rent that can be charged.
A broker lists a property for sale and agrees in the listing contract to place the listing in the local MLS, to advertise the property for sale, and to use his best efforts in good faith to find a buyer. The broker places a “For Sale” sign on the property, but fails to place the property in the MLS for more than 30 days and fails to otherwise advertise the property during the listing period. Which of the following is TRUE?
Correct Answer
The broker has failed to exercise reasonable skill, care, and diligence on behalf of his client as required by the listing contract and the Law of Agency.
Explanation
This broker has not exercised reasonable skill, care, and diligence, which violate the laws of agency. This does not violate Fair Housing laws, but it does likely violate most MLS rules. The broker did not willfully misrepresent as there is no statement about completing the task.
Provisional broker Q assists buyer L in the writing of an offer to purchase, where buyer L desires possession of the home prior to closing. Provisional broker Q is asked to place language in the offer to purchase that would make the offer to purchase contingent upon acceptance of a lease agreement and write up a lease that is contingent upon the acceptance of the offer to purchase. In this situation provisional broker Q should:
Correct Answer
Advise buyer L that an attorney may be consulted to prepare the requested change.
Explanation
A broker should always recommend that a client seek legal advice before a client makes changes to an offer to purchase. The changes could have serious unintended consequences. A broker is not permitted to draft terms in a contract, only fill in the blanks in the preprinted form. A broker cannot DRAFT provisions in an Offer to Purchase when they are not a party to the agreement.
The client can make changes to the offer in his/her own handwriting. The broker needs to make it clear that the client and not the broker added the additional language. The broker should strongly recommend the consultation with an attorney.
Technically a broker is permitted to DRAFT provisions in the Buyer Agency, Listing Agreement and Property Management Agreement. It is not advisable, however since they are a party to the agreement, it is permitted. A prudent brokerage will have policies against this practice - however best practice for a brokerage is not something typically covered on the exam.
Property tax liens:
Correct Answer
are paid before all other liens against the property.
Explanation
Real property taxes and special public assessments receive special treatment and are paid before all other liens. The remaining liens are paid in order of recordation, except for mechanics liens, which may jump in priority. Mechanics liens cannot jump in front of real property taxes and public assessments. The mechanic’s lien must be filed within 120 days from the last date labor or materials are provided, and the contractor must sue to enforce the lien within 180 days from the last date labor or materials were provided. An adequately filed mechanics lien will jump back to the first date labor or materials were provided. Federal tax liens do not receive special treatment and will be paid based on lien priority. Federal tax liens are considered a general lien against all property that the owner has.
A seller signs the Wire Fraud Addendum to the listing contract. The broker:
Correct Answer
must deliver a copy to the BIC within 3 calendar days of the document being signed to the customer or client and BIC
Explanation
A broker must deliver a copy of transaction documents within 3 calendar days of the document being signed to the customer or client and BIC. The broker has 3 days from receipt to deliver a copy of written agency agreements, offers, contracts, leases, property management agreements, lease agreements, etc.thin 3 calendar days of the seller signing the form.
A broker takes a listing, and then the seller sells the property directly to a buyer to avoid paying a commission. The type listing agreement used is:
Correct Answer
an exclusive agency listing agreement.
Explanation
With an exclusive right to sell listing agreement, the seller pays a commission no matter who sells the property. An exclusive agency listing agreement gives the seller the right to sell it directly to a buyer and avoid paying a commission. The Multiple listing service is a mechanism brokers use to co-broker sales. The MLS is NOT a type of listing agreement. An open-ended listing agreement is illegal.
A licensee in North Carolina has an affirmative obligation to:
Correct Answer
disclose material facts that may put their client at a disadvantage when negotiating a sale with a customer.
Explanation
A broker in NC has an affirmative obligation to discover and disclose material facts to all parties to the transaction, both customers and clients, no matter who the broker represents, and no matter where the information comes from. If a deal falls apart because of information on the home inspection report, the report may or may not be shared determined by the owner of the report. However, IF the seller refuses to repair the problem, the issue is now a known material fact that must be disclosed to all buyers!
A licensee is representing a seller through an Exclusive Right to Sell listing agreement. At the settlement meeting the seller refuses to pay commission to the listing firm. The licensee:
Correct Answer
must advise the seller that this is a breach of the listing contract.
Explanation
The principal / client has a duty to act in good faith and to compensate the listing firm according to the listing contract. A licensee should never advise a buyer to cancel a contract or refuse to close when a seller is withholding compensation. Compensation to a broker/brokerage is NEVER referenced in the purchase contract.
A seller has received three very good offers on her listing. Unable to decide between the offers, the seller instructs her agent to disclose to each of the buyers the highest offer received. The listing agent should do which of the following?
Correct Answer
Explain to the seller that this request violates Commission rule
Explanation
A licensee cannot disclose the price or other material terms contained in a buyer’s offer without the express written permission of the party that made the offer. The licensee cannot ignore his/her client, however can only follow the client’s lawful instructions. The seller may elect to request that buyers bring their highest and best offer. A broker should never advise countering to multiple offers as this could result in the property being under contract with multiple buyers. One way to avoid this is to send a Response to Buyer’s Offer or Memo to Buyer that lists terms that the seller would favorably consider.
When a tenant vacates a long-term residential rental, how long does the property manager or property owner have to account for the security deposit?
Correct Answer
30 days, or with written notification during the 30 days, a maximum of 60 days
Explanation
30 days is a good answer unless the landlord notifies the tenant in writing during the 30-day window that he needs more time. The maximum with written notice given is 60 days. NOTE: You must select the most right answer.
With regard to tenant security deposits, all of the following statements are correct, EXCEPT:
Correct Answer
a property management company is required to have all security deposit funds deposited in a trust or escrow account or be bonded.
Explanation
A licensed property management company is not allowed to be bonded and therefore would be required to have a trust or escrow account. The trust / escrow account must be in an insured bank that is approved to do business in North Carolina and agrees to make records available to the NC Real Estate Commission upon request. Note that the account can be with a virtual bank so long as it has been approved to do business in North Carolina.
Grace decides to sell her property “For Sale by Owner”. She asks a friend, Kennedy to show the home to prospective buyers. In return, Grace will allow Kennedy to stay for 2-weeks at her beach house, only charging her a cleaning fee. Does Kennedy require an active real estate license?
Correct Answer
Yes. A license is required when a party earns compensation in a transaction when acting on behalf of another.
Explanation
The license triggering event is earning compensation on behalf of another. Note that there is no exception for representing family or friends when compensation has been paid. A party can offer to do the work for free and not trigger the requirement to have a license. The NC Real Estate Commission could seek an injunction against Kennedy for practicing real estate without a license. Compensation can come in many forms including cash, gift cards, travel, vehicles, iPads, etc.
A broker that specializes in residential sales for ABC Realty, and agrees to help a seller in distress procure a tenant for a property that has been on the market for an extended period . The broker has the tenant make the rent check payable to the landlord, and the broker gives the tenant keys to the property and delivers the rent check directly to the owner. Which of the following is TRUE?
Correct Answer
The broker is in violation of commission trust account rules
Explanation
A broker must deposit all funds collected on behalf of others for properties for sale or lease into a trust account. The only exceptions are the due diligence fee paid by means other than cash made payable to the seller and earnest money paid by means other than cash payable to the closing attorney. The broker in charge is strictly responsible for the trust funds.
Carlos recently gave a listing presentation to a potential seller. The seller agreed to list the house. At the time of the signing, Carlos and the seller could not come to an agreement on price and rate of commission. The seller signed the agreement with the two items left blank, with the understanding that the agent and seller would agree to the terms later. Carlos congratulated the seller and replied that he was now acting as the seller’s agent. Given this scenario, which of the following is TRUE?
Correct Answer
The listing agreement is not valid as it lacks essential terms
Explanation
Contracts are based on the concept of well-defined terms and the two most essential terms were not agreed upon; the listing price and the commission rate. The agent misrepresented that he was acting as a seller’s agent based on the facts identified at that point. The agency agreement is not binding, therefore, the seller is still able to work with another agent. A listing agreement must be in writing, provide a definite end date, contain the prescribed anti-discrimination language and disclose the agent’s license number. It also must be signed by all owners that have an interest in the property to be legally enforceable.
Which of the following is an unlawful activity of an unlicensed assistant that assists a licensed broker?
Correct Answer
Negotiating lease terms
Explanation
An unlicensed assistant is very limited and strictly prohibited from negotiating lease price and terms. They may show a property for lease, but not for sale. The broker is responsible for the trust funds but may delegate the duty to an unlicensed assistant. A broker must prepare the offer, while an unlicensed assistant may type it up from a draft. Unlicensed assistants may only communicate basic factual information and should NOT be allowed to discuss market trends or market value information.
A provisional broker has received multiple offers on a property listed recently. The provisional broker must:
Correct Answer
present all offers immediately, but in no event later than 3 days.
Explanation
All offers must be presented immediately, but in no event later than 3 days to the seller. The seller may evaluate all offers simultaneously with no respect to which offer came in first. There is no rule requiring the provisional broker to notify the BIC, so while answer 2 is not a bad idea, the question says must, and notifying the BIC is not mandatory.
A broker is showing a property outside the city limits, and the buyer is interested in making an offer on a beautiful home with a beautiful view of the park. The buyer will be running a landscaping business from home and will need to park three dump trucks on site. Which of the following is TRUE?
Correct Answer
The broker must disclose any know restrictions and assist the buyer in discovering any restrictions, public or private, that may interfere with the buyer’s intended use.
Explanation
A broker must discover and disclose material facts. The need to park three dump trucks in the yard is a material fact for this buyer. Also, brokers are not allowed to draft (or craft) paragraphs in a sales contract for others. Remember, property in the city is regulated by the city, county, and private land use controls and the most restrictive rules. The extraterritorial jurisdiction gives the municipality the ability to regulate property outside the city limits up to three miles.
A buyer makes an oral offer, and the seller unconditionally accepts. The resulting contract is:
Correct Answer
Unenforceable
Explanation
A valid offer must be in writing. The Statute of Frauds states oral agreements that transfer an interest in real property are unenforceable. While this agreement is technically voidable by both parties, unenforceable is the best answer.
Unenforceable
The standard 2-T Offer to Purchase and Contract:
Correct Answer
allows for a 7-day delay in settlement before the contract can be terminated.
Explanation
Settlement is NOT time is of the essence as the delaying party has 7-days to correct the issue. A brokerage can, when members of NCAR, use the form or hire an attorney to prepare an offer that meets Commission rules. NCAR / NCBA created the Standard 2-T Offer to Purchase, not the Commission. The Commission sets the rules for what needs to be included in a standard form. When a buyer desires to purchase land they would use the Vacant Lot and Land offer.
A non-provisional broker affiliates with two firms. Which of the following is TRUE?
Correct Answer
A broker must have the consent of the brokers in charge of both firms
Explanation
A non-provisional broker may affiliate with multiple firms. The only requirement is that the brokers in charge give permission. The permission may be oral, but it is always best practice to get permission in writing.
An agent knows that the approximate probable sales price of a house is $223,000, but tells the property owner that the home is worth $250,000 in order to obtain a listing. In this case the agent:
Correct Answer
has committed willful misrepresentation.
Explanation
This is an example of willful misrepresentation – purposefully lying to a client. Willful vs negligent actions depend upon the agent’s intent; did he/she intentionally withhold information or lie. Misrepresentation vs Omission depends upon the agent making a representation or not saying anything at all (orally or in print). Make sure to review examples provided in NC License Law and Commission Rule Comments.
Which of the following businesses are NOT required to obtain a firm license?
Correct Answer
A sole proprietorship with 10 affiliated provisional brokers.
Explanation
The question is asking which entity requires a license, not which activity would require a broker in charge. All businesses other than sole proprietorships are required to have a separate firm license. LLC’s, partnerships and corporations must have a firm license when engaged in real estate activity where they will earn compensation on behalf of another. A BIC is required when money will be held in a trust account, more than one broker is affiliated with the firm (regardless of provisional or non-provisional status), or advertising (signs, business cards, social media posts, orally offering services)
A broker is in a multiple offer situation and has reason to believe the buyers will make higher offers if they knew that multiple offers are coming in. Which of the following is TRUE?
Correct Answer
The broker must have the seller’s permission to disclose a multiple offer situation.
Explanation
In a multiple offer situation, a broker must have the sellers permission to disclose multiple offers. The broker must have the BUYER’s permission to disclose the terms of the buyer’s offer to another buyer.
A broker is representing a client at the settlement meeting under the standard NCAR Exclusive Buyer Agency Agreement. Which of the following would the broker be responsible for at the settlement meeting?
Correct Answer
Verifying the accuracy of the contract terms on the closing disclosure
Explanation
Brokers are responsible for the accuracy of the Closing disclosures to the extent that they can verify. This would include any items that are memorialized in the contract, which is the best resource to use to determine accuracy. Brokers do not sign closing documents (which could include loan documents) without a Power of Attorney. The buyer would not receive the keys at settlement as this is just the signing of documents, the transfer would occur after closing (recording where cash and keys change hands). The attorney is responsible for notifying the IRS about the property transfer.
A buyers agent is showing a limited services listing in a co-broker sale, and the seller has many questions about the process, the value and is unable to attend inspections without assistance. Which of the following is TRUE?
Correct Answer
A buyer’s agent may provide customer level service to a seller the buyer’s agent does not represent. The buyer’s agent may not give advice or insights on value. The agent should remind the seller not to share confidential information.
Explanation
In a limited services listing situation the listing agent is likely limiting their services to providing a sign, lock box and access to MLS. The MLS info directs cooperating brokers to call the seller directly. A buyer agent may provide customer level service to the seller and assist their buyer client in the purchase of the property.
A municipality is extending city water and sewer services to a neighborhood previously serviced by well and septic. The municipality would most likely:
Correct Answer
charge the current owner a special assessment.
Explanation
A city would most likely charge each owner a special assessment to cover the cost of installation. Bonds are commonly issued for school construction and may be used to expand services, however, it is more common to charge the party that will directly receiving the benefit.
A buyer makes an offer using a buyer’s agent. The buyer’s agent delivers the offer to the listing agent of the same firm. The listing agent and the seller meet to discuss the offer, and the seller accepts the offer as written. Before communication of acceptance to the buyer, the buyer calls to withdraw the offer. Which of the following is TRUE?
Correct Answer
The buyer may not withdraw the offer
Explanation
When the seller unconditionally accepts the offer and communicates with a dual agent, the agreement is a binding contract. When you communicate with a dual agent, you are communicating with the buyer and the seller. Notification of acceptance to the buyer when forming a legally binding contract is only required when the buyer has no representation.
A broker has an exclusive buyer agency agreement that includes a 2.5 % commission and any bonuses offered. When must the buyer’s agent to disclose the bonus offered for which they are aware before showing?
Correct Answer
Prior to the preparation of the offer
Explanation
The bonus amount must be disclosed in time for the buyer to decide on making an offer. Oral disclosure is allowed when the buyer is considering an offer. Disclosure must be reduced to writing prior to preparation of an offer. So the very last minute would be before the agent prepares an offer for the buyer. It should be disclosed earlier rather than later. The best practice is before you show the property. NOTE: You must select the more correct answer.
Which of the following is an example of a specific lien?
Correct Answer
Real property tax lien
Explanation
Specific liens attach to a specific property. Examples include mortgage notes and deeds of trust, real property tax liens, and Mechanics liens. General liens impact everything an individual owns and include Federal income tax liens, State income tax liens, personal property tax liens, and judgments.
