Free North Carolina real estate practice exam

Answer key and explanations

Every answer, with the reasoning. Work through the ones you missed — that list is your study plan.

1. Question 1 — answer A

   A property owner installs a new fence that encroaches onto a neighboring property. What type of issue is this?

   An encroachment occurs when a property owner's improvement, such as a fence, extends onto a neighboring property without permission.

2. Question 2 — answer D

   Which of the following is an example of police power?

   Zoning ordinance is an example of police power, which is the authority of the government to regulate private property for the public good, without providing compensation to the property owner.

3. Question 3 — answer D

   Which of the following is an example of a police power?

   A zoning ordinance is an example of police power, which is the government's authority to regulate private property for the public good without providing compensation.

4. Question 4 — answer D

   A property owner's failure to pay property taxes can result in what type of action?

   If a property owner fails to pay property taxes, the government can sell the property at a tax lien sale to satisfy the debt.

5. Question 5 — answer A

   A property is located near a busy highway and is subject to noise pollution. What type of economic characteristic of land is this?

   External obsolescence refers to factors outside the property that affect its value, such as noise pollution from a nearby highway.

6. Question 6 — answer D

   What is the term for a government's power to take private property for public use, with just compensation?

   Eminent domain refers to the government's power to take private property for public use, with the requirement of providing just compensation to the property owner.

7. Question 7 — answer D

   A property owner installs a fence that encroaches onto neighboring property without permission. What is this an example of?

   An encroachment occurs when a property owner's improvement, such as a fence, extends onto neighboring property without permission.

8. Question 8 — answer D

   A property is described as being located in a specific section, township, and range. What type of legal description is this?

   The description refers to a specific section, township, and range, which is a type of government survey description.

9. Question 9 — answer D

   A property owner grants an easement to a neighbor to use a portion of their property. What type of interest is the neighbor receiving?

   The neighbor is receiving an easement interest, which is a non-possessory interest in the property that allows them to use a portion of the property for a specific purpose.

10. Question 10 — answer C

    A bundle of rights includes the right to:

    A bundle of rights includes the right to use, sell, gift, and lease the property, among other rights.

11. Question 11 — answer D

    Which type of estate is created when a property owner grants a tenant the right to use the property for a specific period of time?

    A leasehold estate is created when a property owner grants a tenant the right to use the property for a specific period of time, whereas a freehold estate is an ownership interest in the property.

12. Question 12 — answer D

    What type of estate is created when a property owner leases their property to a tenant?

    A leasehold estate is created when a property owner grants a tenant the right to use their property for a specified period.

13. Question 13 — answer D

    Which of the following types of estates is characterized by a bundle of rights that includes the right to use, sell, and dispose of the property?

    A freehold estate is a type of estate that includes a bundle of rights, such as the right to use, sell, and dispose of the property.

14. Question 14 — answer D

    A general warranty deed

    A general warranty deed warrants the title against all defects, past and present, providing the buyer with the greatest protection.

15. Question 15 — answer D

    What type of estate is created when a property owner grants a tenant the right to use the property for a specific period of time in exchange for rent?

    A leasehold estate is created when a property owner grants a tenant the right to use the property for a specific period of time in exchange for rent.

16. Question 16 — answer A

    A title search is the process of:

    A title search is the process of examining the chain of title to verify ownership and to identify any potential issues or defects in the title.

17. Question 17 — answer A

    A type of deed that warrants the title against all defects, including those that may have occurred before the seller acquired the property, is called a

    A general warranty deed provides the broadest protection for the buyer, warranting the title against all defects, including those that may have occurred before the seller acquired the property.

18. Question 18 — answer D

    A real estate agent is asked to provide a Broker's Price Opinion (BPO) for a property. What is the primary purpose of a BPO?

    A BPO is an estimate of a property's value provided by a real estate agent, typically for lending purposes, and is not a formal appraisal.

19. Question 19 — answer D

    A broker performs a BPO, or broker price opinion, for a client. What is the primary purpose of a BPO?

    A BPO provides an estimate of a property's market value, but it is not a full appraisal report and is typically less detailed.

20. Question 20 — answer D

    What approach to appraisal involves estimating the value of a property based on the cost to replace or reproduce it, minus depreciation?

    The cost approach involves estimating the value of a property based on the cost to replace or reproduce it, minus depreciation, and is often used for unique or special-purpose properties.

21. Question 21 — answer A

    A residential neighborhood with a mix of old and new homes, where the older homes are being renovated and updated, is an example of

    This is an example of progression, as the value of the older homes is increasing due to the influence of the surrounding new homes, which are pulling up the value of the entire neighborhood.

22. Question 22 — answer D

    Which approach to value focuses on the income a property generates?

    The income approach to value estimates a property's value based on its potential to generate income, such as through rental income or other sources.

23. Question 23 — answer A

    Which of the following is a key factor in determining a property's value using the cost approach?

    The cost approach estimates a property's value by calculating the cost to replace or reproduce the property, minus depreciation.

24. Question 24 — answer D

    What is the primary purpose of a Broker's Price Opinion (BPO)?

    A BPO is an estimate of a property's value provided by a licensed real estate broker, typically for use in lending or marketing decisions.

25. Question 25 — answer D

    The principle of substitution in real estate appraisal suggests that

    The principle of substitution states that a buyer will not pay more for a property than the cost of acquiring a similar property with the same utility.

26. Question 26 — answer D

    What type of depreciation occurs when a property's design or layout is no longer functional or desirable?

    Functional depreciation occurs when a property's design or layout is no longer functional or desirable, such as an outdated floor plan.

27. Question 27 — answer D

    What is a key requirement for ensuring appraiser independence in the appraisal process?

    Appraiser independence is essential to ensuring the integrity of the appraisal process, and requires that the appraiser be free from influence or pressure from any party involved in the transaction.

28. Question 28 — answer D

    A property's market value is determined by its

    Market value is the price a willing buyer pays a willing seller in an open and competitive market.

29. Question 29 — answer D

    An agent represents a seller in a real estate transaction. What fiduciary duty requires the agent to act in the seller's best interest?

    The fiduciary duty of loyalty requires the agent to act solely in the seller's best interest, avoiding conflicts of interest.

30. Question 30 — answer D

    A real estate contract must be in writing to be enforceable under the Statute of Frauds. What is the primary purpose of this requirement?

    The Statute of Frauds requires that certain contracts, including real estate contracts, be in writing to prevent fraudulent transactions and ensure that all parties are clear on the terms of the contract.

31. Question 31 — answer A

    A seller lists their property with a real estate agent, but does not provide a written agreement. What type of agency is created?

    A special agency is created when a seller lists their property with a real estate agent, even if there is no written agreement, as the agent is authorized to perform a specific task on behalf of the seller.

32. Question 32 — answer D

    A buyer's agent fails to disclose a known defect in the property to the buyer. What is the likely result?

    The buyer's agent has a fiduciary duty to disclose known defects to the buyer, and failure to do so may result in liability for any resulting damages.

33. Question 33 — answer D

    What happens to earnest money if a buyer backs out of a contract due to a contingency not being met?

    If a buyer backs out of a contract due to a contingency not being met, the earnest money is typically returned to the buyer.

34. Question 34 — answer D

    A seller's agent has a fiduciary duty to disclose all known facts about the property to potential buyers. What does this duty require the agent to do?

    The duty of disclosure requires the agent to reveal all known facts about the property to potential buyers.

35. Question 35 — answer A

    What is the effect of a buyer's failure to fulfill a contingency in a contract?

    If a buyer fails to fulfill a contingency, the contract is typically terminated, and the buyer is no longer obligated to purchase the property.

36. Question 36 — answer D

    An agent's fiduciary duty of loyalty requires them to act in the best interests of their client. What does this mean in practice?

    The duty of loyalty requires the agent to act in the best interests of their client, prioritizing the client's needs above their own.

37. Question 37 — answer D

    A buyer makes an offer on a property, and the seller responds with a counteroffer. What is the effect on the original offer?

    A counteroffer terminates the original offer, as it introduces new terms that must be agreed upon.

38. Question 38 — answer D

    What is the difference between a general agent and a special agent in real estate?

    A special agent has limited authority to act on behalf of the principal, whereas a general agent has broader authority.

39. Question 39 — answer D

    What is the primary purpose of an earnest money deposit?

    The earnest money deposit demonstrates the buyer's good faith and commitment to the purchase, and is typically forfeited if the buyer backs out of the contract without a valid reason.

40. Question 40 — answer D

    A buyer and seller enter into a contract with an earnest money provision. If the buyer breaches the contract, what can the seller do with the earnest money?

    If the buyer breaches the contract, the seller can keep the earnest money as liquidated damages, but this is not always the case and depends on the contract terms.

41. Question 41 — answer D

    A seller's agent has a duty of loyalty to the seller, but what other duty is also required?

    The OLD CAR acronym reminds us of the fiduciary duties owed by an agent to their client: Obedience, Loyalty, Disclosure, Confidentiality, and Reasonable care.

42. Question 42 — answer D

    A buyer and seller enter into a contract with a financing contingency. If the buyer is unable to secure financing, what happens to the contract?

    If the buyer is unable to secure financing, the contract is terminated and the buyer's earnest money is typically refunded, as the contingency was not met.

43. Question 43 — answer D

    A seller breaches a contract to sell their property, and the buyer sues for specific performance. What is the likely outcome?

    Specific performance is a remedy that requires the breaching party to perform their obligations under the contract, in this case, to sell the property to the buyer.

44. Question 44 — answer D

    A buyer's agent fails to disclose their agency relationship to the seller. What is the potential consequence?

    Failure to disclose agency relationship can make the transaction voidable, as it is a breach of the agent's fiduciary duty to the client.

45. Question 45 — answer A

    The Americans with Disabilities Act (ADA) requires that real estate offices be accessible to people with disabilities. What type of modifications might a real estate office need to make to comply with the ADA?

    The ADA requires that real estate offices be physically accessible to people with disabilities, which may include installing a ramp or elevator.

46. Question 46 — answer A

    A group of real estate agents agree to fix their commission rates at a certain percentage. What federal law are they potentially violating?

    The Sherman Antitrust Act prohibits price-fixing and other anti-competitive practices, including agreements among competitors to fix commission rates.

47. Question 47 — answer D

    A real estate brokerage is handling a transaction and receives a kickback from a title company. This is a violation of

    Receiving a kickback from a title company is a violation of the Real Estate Settlement Procedures Act, which prohibits kickbacks and referral fees in real estate transactions.

48. Question 48 — answer A

    What is the main purpose of the Do-Not-Call registry?

    The Do-Not-Call registry is a list of phone numbers that consumers can add to opt out of receiving telemarketing calls.

49. Question 49 — answer A

    A real estate agent is found to have engaged in price-fixing with other agents in the area. This is a violation of which federal law?

    The Sherman Antitrust Act prohibits price-fixing and other anti-competitive practices.

50. Question 50 — answer A

    What is the term for the practice of lenders refusing to make loans to borrowers who live in certain neighborhoods or areas?

    Redlining is the practice of lenders refusing to make loans to borrowers who live in certain neighborhoods or areas, often based on the racial or ethnic demographics of the area.

51. Question 51 — answer D

    Which federal law requires that handicapped individuals have equal access to commercial facilities and public accommodations?

    The Americans with Disabilities Act requires that handicapped individuals have equal access to commercial facilities and public accommodations.

52. Question 52 — answer A

    Which federal law prohibits real estate licensees from making false or misleading statements about the racial, ethnic, or religious characteristics of a neighborhood to influence a buyer's decision?

    The Fair Housing Act prohibits blockbusting, which involves making false or misleading statements about a neighborhood's characteristics to influence a buyer's decision.

53. Question 53 — answer D

    A sales agent is handling a transaction and receives earnest money from the buyer. The sales agent must

    The sales agent must hold the earnest money in a trust account until the transaction closes, to comply with the requirements for handling trust funds.

54. Question 54 — answer A

    A real estate agent is found to have engaged in price-fixing with other agents to artificially inflate commissions. What federal law has the agent likely violated?

    The Sherman Antitrust Act prohibits price-fixing and other anti-competitive practices.

55. Question 55 — answer D

    A real estate broker is handling a transaction where the buyer is paying $500,000 for a property. The broker is also acting as the escrow agent and is holding the buyer's deposit in a trust account. What is the broker's responsibility regarding the deposit?

    The broker has a fiduciary duty to hold the buyer's deposit in a trust account and to release it only in accordance with the terms of the sale contract.

56. Question 56 — answer A

    A sales agent is working with a seller who wants to sell their property 'as-is'. The sales agent

    The sales agent must disclose all known defects in the property to potential buyers, regardless of whether the seller is selling 'as-is', to comply with the requirements for disclosure.

57. Question 57 — answer A

    A real estate agent is handling a transaction and is required to deposit the buyer's earnest money into a trust account. What is the primary purpose of this requirement?

    The primary purpose of depositing earnest money into a trust account is to protect the buyer's funds from misappropriation and ensure that they are held in a secure and separate account until the transaction is complete.

58. Question 58 — answer D

    A real estate broker fails to maintain accurate records of client funds in the trust account. What is the most likely consequence of this failure?

    Failing to maintain accurate records of client funds in the trust account is a serious violation of real estate license law and may result in the broker's license being suspended or revoked.

59. Question 59 — answer A

    A buyer purchases a property that was formerly used as a gas station, and later discovers that the soil is contaminated with petroleum products. What law may hold the buyer responsible for the cleanup costs?

    CERCLA, or the Comprehensive Environmental Response, Compensation, and Liability Act, is a federal law that holds property owners responsible for environmental cleanup costs, even if they did not cause the contamination.

60. Question 60 — answer D

    A buyer is purchasing a property that was formerly used as a gas station. What is the buyer's primary concern regarding environmental hazards?

    The buyer's primary concern regarding environmental hazards when purchasing a property that was formerly used as a gas station is the potential presence of underground storage tanks, which could have leaked hazardous substances into the soil or groundwater.

61. Question 61 — answer D

    What is the purpose of the CERCLA law in relation to residential real estate transactions?

    The CERCLA law holds property owners and buyers liable for environmental hazards on the property, even if they did not cause the hazard, in order to encourage the cleanup of contaminated sites.

62. Question 62 — answer D

    A seller of a single-family home built in 1960 must provide a federal disclosure about what potential environmental hazard?

    The federal lead-based paint disclosure is required for homes built before 1978.

63. Question 63 — answer A

    A buyer is purchasing a property built in 1950 and asks the seller about the presence of asbestos. What is the seller's obligation?

    The seller's obligation is to disclose any known presence of asbestos, as asbestos is a potential environmental hazard.

64. Question 64 — answer A

    A property is located in a flood zone, but the seller does not disclose this information to the buyer. What can the buyer do?

    The buyer can sue the seller for damages if the seller fails to disclose known information about the property, including flood zone information.

65. Question 65 — answer D

    What is the purpose of the lead-based paint disclosure form required for properties built before 1978?

    The lead-based paint disclosure form is required to disclose the presence of lead-based paint, the risks associated with it, and to provide the buyer with a 10-day period to inspect for lead-based paint.

66. Question 66 — answer D

    The Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) is a federal law that:

    CERCLA is a federal law that holds property owners liable for environmental contamination, including the cleanup of hazardous substances, and provides a framework for responding to environmental emergencies.

67. Question 67 — answer A

    The Truth-in-Lending Act (TILA) requires lenders to disclose which of the following to borrowers?

    TILA requires lenders to disclose the loan's interest rate and terms, including the annual percentage rate (APR) and finance charges.

68. Question 68 — answer D

    What is the purpose of the Real Estate Settlement Procedures Act (RESPA)?

    The Real Estate Settlement Procedures Act prohibits kickbacks and referral fees in residential real estate transactions and requires lenders to provide borrowers with a detailed breakdown of settlement costs.

69. Question 69 — answer D

    What is the primary purpose of the Truth-in-Lending Act (TILA) and Regulation Z?

    TILA and Regulation Z require lenders to disclose loan terms, including the annual percentage rate and total finance charge, to borrowers.

70. Question 70 — answer D

    What is the main difference between a conventional loan and an FHA loan?

    FHA loans are insured by the Federal Housing Administration, which provides a guarantee to the lender in case of default, while conventional loans are not insured by the government.

71. Question 71 — answer A

    A lender agrees to subordinate its lien to a new loan, allowing the borrower to obtain additional financing. What is this process called?

    Subordination is the process by which a lender agrees to subordinate its lien to a new loan, allowing the borrower to obtain additional financing.

72. Question 72 — answer D

    A buyer is obtaining a mortgage with a loan-to-value ratio of 82%. What will the lender likely require to mitigate the risk of the higher LTV?

    Lenders typically require PMI for mortgages with an LTV ratio above 80% to protect against potential losses in case of default.

73. Question 73 — answer D

    A borrower is considering a loan with a subordination clause. What does this clause do?

    A subordination clause subordinates the lender's lien to another lienholder, such as a home equity lender, allowing the other lienholder to have a higher priority.

74. Question 74 — answer D

    A lender charges 2 discount points on a $210,000 loan. One point equals 1% of the loan amount. What is the cost of the points?

    2 points = 2% of $210,000 = $4,200.

75. Question 75 — answer A

    A tenant paid $2,600 rent for the full month. The sale closes on day 14 of a 30-day month. How much unearned rent must the seller credit the buyer at closing?

    Daily rent = $2,600 ÷ 30 = $86.67. The buyer owns the property for the 16 remaining days, so the credit = $86.67 × 16 = $1,386.67.

76. Question 76 — answer D

    A commercial property has a net operating income of $57,000 and the market cap rate is 6%. Using the income approach, what is its estimated value?

    Value = NOI ÷ cap rate = $57,000 ÷ 6% = $950,000.

77. Question 77 — answer A

    How many square feet are in a 1-acre parcel? (1 acre = 43,560 sq ft)

    1 × 43,560 = 43,560 sq ft.

78. Question 78 — answer D

    How many square feet are in a 0.5-acre parcel? (1 acre = 43,560 sq ft)

    0.5 × 43,560 = 21,780 sq ft.

79. Question 79 — answer D

    A commercial property has a net operating income of $49,000 and the market cap rate is 8%. Using the income approach, what is its estimated value?

    Value = NOI ÷ cap rate = $49,000 ÷ 8% = $612,500.

80. Question 80 — answer A

    Annual property taxes are $5,100. Using a 365-day year, the seller is responsible for 193 days. What is the seller's prorated share?

    Daily tax = $5,100 ÷ 365 = $13.97. Seller's share = $13.97 × 193 = $2,696.71.

81. Question 81 — answer D

    A provisional broker in North Carolina must complete how many hours of postlicensing education to remove their provisional status?

    In North Carolina, a provisional broker must complete 90 hours of postlicensing education to remove their provisional status.

82. Question 82 — answer A

    To become a licensed real estate broker in North Carolina, an individual must be at least how old?

    According to Chapter 93A, an individual must be at least 18 years old to apply for a real estate broker license in North Carolina.

83. Question 83 — answer D

    What is the difference between an active and inactive license status in North Carolina?

    In North Carolina, an active license allows a broker to engage in real estate activities, while an inactive license does not.

84. Question 84 — answer D

    A broker represents both the buyer and the seller in a transaction with their written consent. This is an example of

    When a broker represents both the buyer and the seller with their written consent, it is an example of dual agency.

85. Question 85 — answer D

    What type of agency relationship is established when a broker designates an agent to represent the buyer and another agent to represent the seller?

    In North Carolina, designated agency is a type of agency relationship where a broker designates an agent to represent the buyer and another agent to represent the seller, with written consent from both parties.

86. Question 86 — answer D

    In North Carolina, which of the following is a fiduciary duty owed by a real estate agent to their client?

    In North Carolina, a real estate agent owes a fiduciary duty of confidentiality to their client, which means keeping all information about the client confidential.

87. Question 87 — answer D

    What is the purpose of the 'WORKING WITH REAL ESTATE AGENTS DISCLOSURE' in North Carolina?

    The 'WORKING WITH REAL ESTATE AGENTS DISCLOSURE' is a required disclosure in North Carolina that informs buyers and sellers about the different types of agency relationships and the duties owed to clients and customers.

88. Question 88 — answer D

    A broker has a duty of loyalty to their client. What does this duty require the broker to do?

    The duty of loyalty requires the broker to act in the best interest of the client, which means putting the client's interests above the broker's own interests and the interests of other parties.

89. Question 89 — answer D

    In a designated agency relationship, which of the following is true?

    In North Carolina, designated agency occurs when a broker designates an agent to represent the buyer and another agent to represent the seller, with the written consent of both parties.

90. Question 90 — answer A

    What is the requirement for a buyer-agency agreement in North Carolina when the buyer is ready to make an offer?

    In North Carolina, a buyer-agency agreement must be in writing when the buyer is ready to make an offer.

91. Question 91 — answer D

    In a designated agency relationship, the broker-in-charge designates an agent to represent the

    In a designated agency relationship, the broker-in-charge designates an agent to represent either the buyer or the seller, but not both.

92. Question 92 — answer D

    What is required for a dual agency relationship in North Carolina?

    In North Carolina, dual agency is permitted with written consent from the client.

93. Question 93 — answer D

    A broker is working with a buyer who wants to purchase a property. The broker also represents the seller of that property. What type of agency relationship is this, and what is required for it to be valid?

    This is an example of dual agency, where the broker represents both the buyer and the seller. In North Carolina, dual agency is allowed with written consent from both parties.

94. Question 94 — answer D

    What is the requirement for a provisional broker in North Carolina to provide the Working with Real Estate Agents Disclosure?

    A provisional broker in North Carolina must provide the Working with Real Estate Agents Disclosure at first substantial contact.

95. Question 95 — answer D

    Which of the following is a fiduciary duty owed by a broker to their client in North Carolina?

    A broker owes several fiduciary duties to their client, including loyalty, obedience, disclosure, confidentiality, accounting, and reasonable care/skill. Disclosing all material facts known to the broker is one of these duties.

96. Question 96 — answer D

    In North Carolina, what is the requirement for a buyer-agency agreement before a buyer makes an offer?

    In North Carolina, a buyer-agency agreement can be oral until the buyer makes an offer, at which point it must be in writing.

97. Question 97 — answer A

    A buyer is working with a provisional broker who has a written buyer-agency agreement. What is the broker's duty to the buyer in this situation?

    As an agent for the buyer, the broker has a duty to disclose all material facts about the property to the buyer.

98. Question 98 — answer A

    A broker has a client who is selling a property. What is the broker's duty to disclose to potential buyers?

    Brokers have a duty to disclose material facts about a property to potential buyers, which includes any information that could affect the buyer's decision to purchase.

99. Question 99 — answer D

    In North Carolina, what is the requirement for disclosing material facts about a property?

    In North Carolina, the real estate agent has a duty to disclose all known material facts about the property to the buyer.

100. Question 100 — answer A

     Who can receive a referral fee in a North Carolina real estate transaction?

     In North Carolina, only licensed brokers can receive a referral fee in a real estate transaction.

101. Question 101 — answer D

     May a North Carolina real estate broker pay a referral fee to an unlicensed person?

     Referral fees may only be paid to licensed brokers, not to unlicensed persons.

102. Question 102 — answer D

     To be eligible for a Broker-in-Charge (BIC) designation in North Carolina, a broker must have

     A broker must have 2 years of full-time experience and complete a BIC course to be eligible for a BIC designation.

103. Question 103 — answer D

     To be eligible for a Broker-in-Charge designation in North Carolina, a broker must have how many years of full-time experience?

     A broker must have 2 years of full-time experience to be eligible for a Broker-in-Charge designation in North Carolina.

104. Question 104 — answer A

     A buyer's agent is working with a buyer who wants to purchase a property listed by another brokerage. What must the buyer's agent do before advertising the property?

     In North Carolina, a buyer's agent must obtain the written permission of the listing broker before advertising a property listed by another brokerage.

105. Question 105 — answer D

     A North Carolina broker creates a social media advertisement for a listing without including the firm's name. What is the primary issue with this advertisement?

     North Carolina requires that all advertisements include the firm's name and be under the supervision of the broker-in-charge.

106. Question 106 — answer D

     A broker is found to have engaged in misrepresentation in a real estate transaction. What is the possible consequence of this action?

     Misrepresentation is a serious violation of NC rules and may result in disciplinary action, including license revocation.

107. Question 107 — answer D

     A buyer and seller agree on a purchase price, and the buyer submits earnest money. Where must the earnest money be deposited?

     Earnest money must be deposited into the firm's trust account within three banking days after acceptance or receipt, as required by North Carolina Real Estate Commission rules.

108. Question 108 — answer D

     A North Carolina broker is found to have engaged in self-dealing in a real estate transaction. What is a possible sanction from the North Carolina Real Estate Commission?

     The North Carolina Real Estate Commission may impose sanctions, including a reprimand, suspension, or revocation of a broker's license, for engaging in self-dealing or other prohibited conduct.

109. Question 109 — answer D

     A broker is accused of misrepresenting a property's features to a buyer. What is the first step in the disciplinary process?

     The first step in the disciplinary process is for the Commission to investigate the complaint.

110. Question 110 — answer D

     A broker is advertising a property on social media and does not include the firm's name in the advertisement. What is the consequence of this action?

     Failing to include the firm's name in an advertisement, including social media, is a violation of North Carolina Real Estate Commission rules and may result in disciplinary action.

111. Question 111 — answer D

     A buyer and seller have entered into a contract, and the buyer has paid an earnest money deposit. Where must the broker deposit the earnest money?

     The broker must deposit the earnest money into the firm's trust account within 3 banking days of receipt to avoid commingling.

112. Question 112 — answer D

     A broker is required to maintain transaction records for a certain period. What is the minimum duration for retaining these records?

     The broker is required to maintain transaction records for at least 3 years, as mandated by the Commission's rules on recordkeeping.

113. Question 113 — answer D

     A provisional broker receives earnest money from a buyer. What should the broker do with the funds?

     The broker should deposit the funds into the firm's trust account within 3 banking days, as required by the North Carolina Real Estate Commission, to separate the funds from the broker's personal and operating accounts.

114. Question 114 — answer D

     A North Carolina real estate broker is found to have commingled personal funds with client funds in the trust account. What is the most likely consequence of this action?

     Commingling personal funds with client funds in the trust account is a serious violation of North Carolina Real Estate Commission rules and can result in the suspension or revocation of the broker's license.

115. Question 115 — answer A

     A broker receives a complaint from a client alleging that the broker made a misrepresentation about a property. What is the first step the broker should take?

     The broker should respond to the client and try to resolve the issue in a professional and timely manner.

116. Question 116 — answer B

     In North Carolina, which party is responsible for paying the excise tax at closing?

     The seller is responsible for paying the excise tax, which is $1.00 per $500 of value, at closing.

117. Question 117 — answer D

     Why is flood insurance required for some properties in North Carolina?

     Flood insurance is required for properties located in a flood zone, as designated by FEMA, because these areas are at high risk for flooding.

118. Question 118 — answer D

     How does the ad valorem tax system work in North Carolina?

     In North Carolina, the ad valorem tax system is based on a percentage of the property's value, with the owner paying annually.

119. Question 119 — answer A

     What is the purpose of the ad valorem tax in North Carolina?

     The ad valorem tax is used to fund local schools and government services, and is based on the value of the property.

120. Question 120 — answer D

     In North Carolina, who is responsible for conducting the settlement of a real estate transaction?

     In North Carolina, real estate closings are conducted by a licensed attorney.

121. Question 121 — answer D

     Which of the following statements about the due diligence period in a North Carolina Offer to Purchase and Contract is TRUE?

     During the due diligence period, the buyer may terminate the contract for any reason and receive a refund of the earnest money, but not the due diligence fee, which is generally non-refundable.

122. Question 122 — answer D

     How does the Due Diligence Period differ from the overall contract period in the NC Offer to Purchase and Contract?

     The Due Diligence Period is a specific timeframe within the contract period during which the buyer may terminate the contract for any reason and receive a refund of their Earnest Money.

123. Question 123 — answer D

     According to the NC Offer to Purchase and Contract (Form 2-T), what happens to the earnest money if the buyer terminates the contract during the due diligence period?

     During the due diligence period, the buyer may terminate the contract for any reason and receive a refund of the earnest money.

124. Question 124 — answer D

     What happens to the earnest money deposit if the buyer terminates the contract during the due diligence period?

     If the buyer terminates the contract during the due diligence period, the earnest money deposit is refunded to the buyer, but the due diligence fee is not.

125. Question 125 — answer D

     What happens to the due diligence fee if the buyer terminates the contract during the due diligence period?

     The due diligence fee is generally non-refundable and is forfeited to the seller if the buyer terminates the contract during the due diligence period.

126. Question 126 — answer D

     In a North Carolina residential real estate transaction, what is the primary purpose of the due diligence fee paid by the buyer?

     The due diligence fee is a non-refundable payment made by the buyer to the seller, which compensates the seller for the time the property is off the market during the due diligence period.

127. Question 127 — answer D

     Is self-help eviction, such as changing the locks or removing a tenant's property, allowed in North Carolina?

     Self-help eviction is prohibited in North Carolina, and landlords must follow the summary ejectment process.

128. Question 128 — answer D

     How long does a landlord in North Carolina have to provide an accounting of a tenant's security deposit after termination of the rental agreement?

     The NC Tenant Security Deposit Act requires landlords to provide an accounting of the security deposit within 30 days.

129. Question 129 — answer D

     Where must a landlord in NC hold a tenant's security deposit?

     The NC Tenant Security Deposit Act requires landlords to hold security deposits in a trust account at a bank.

130. Question 130 — answer D

     A real estate broker is working with a buyer who is looking for a home in a specific neighborhood. The buyer expresses a preference for a neighborhood with a certain racial composition. What should the broker do?

     The broker should inform the buyer that they cannot discriminate based on race and show them properties in all available neighborhoods, as discrimination based on race is prohibited by the Fair Housing Act.

131. Question 131 — answer A

     What disclosure statement are sellers of residential property in North Carolina required to provide to buyers?

     Sellers of residential property in North Carolina are required to provide a Residential Property and Owners' Association Disclosure Statement to buyers.

132. Question 132 — answer A

     A seller in North Carolina fails to disclose the presence of mineral rights on their property. What disclosure are they likely required to provide?

     In North Carolina, sellers are required to provide a Mineral/Oil/Gas Rights Disclosure to inform buyers about the presence of mineral rights on the property.

133. Question 133 — answer A

     What is the Recovery Fund administered by the NC Real Estate Commission used for?

     The Recovery Fund is used to reimburse consumers who have obtained an unsatisfied judgment against a licensee for fraud or misrepresentation.

134. Question 134 — answer D

     What is the name of the disclosure that sellers in North Carolina are required to provide to buyers regarding the property's ownership and any applicable associations?

     Sellers in NC must provide a Residential Property and Owners' Association Disclosure Statement to buyers.

135. Question 135 — answer A

     What is the NC Real Estate Commission's role in rulemaking and enforcement?

     The NC Real Estate Commission is responsible for creating and enforcing rules for the real estate industry to protect the public.

136. Question 136 — answer A

     What type of disclosure is required of sellers in North Carolina regarding mineral, oil, and gas rights?

     Sellers in North Carolina are required to provide a disclosure statement regarding mineral, oil, and gas rights, which informs buyers about any rights or leases associated with the property.

137. Question 137 — answer D

     Which of the following statements about the NC Real Estate Commission is TRUE?

     The NC Real Estate Commission has 9 members and administers the Real Estate Education and Recovery Fund.

138. Question 138 — answer D

     How many members are on the North Carolina Real Estate Commission?

     The North Carolina Real Estate Commission consists of 9 members.

139. Question 139 — answer A

     A real estate broker in North Carolina is subject to which of the following laws?

     A real estate broker in North Carolina is subject to Chapter 93A, which regulates the real estate profession.

140. Question 140 — answer A

     What is the Recovery Fund established by the North Carolina Real Estate Commission used for?

     The Recovery Fund is used to reimburse consumers who have suffered losses due to a licensee's fraud or misrepresentation.

Common questions