North Carolina · state portion

Free North Carolina Taxes & Insurance practice questions

10 original questions with full explanations. 4 of the 60 scored state-portion questions (about 7%) come from this area.

1. 1

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

   • A. Buyer
   • B. Seller
   • C. Both buyer and seller
   • D. Neither buyer nor seller
   Show answer & explanation

   Answer: B

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

2. 2

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

   • A. Because the property is located in a high-risk area
   • B. Because the property is located near a body of water
   • C. Because the lender requires it
   • D. Because the property is located in a flood zone, as designated by FEMA
   Show answer & explanation

   Answer: D

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

3. 3

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

   • A. A fixed amount is paid annually by all property owners
   • B. The tax rate is determined by the buyer
   • C. The tax rate is determined by the seller
   • D. A percentage of the property's value is paid annually by the owner
   Show answer & explanation

   Answer: D

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

4. 4

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

   • A. To fund local schools and government services
   • B. To pay for the broker's commission
   • C. To pay for the attorney's fee
   • D. To fund the state's real estate commission
   Show answer & explanation

   Answer: A

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

5. 5

   In North Carolina, who typically pays for the title insurance policy?

   • A. Buyer
   • B. Seller
   • C. Lender
   • D. Title company
   Show answer & explanation

   Answer: A

   In North Carolina, the buyer typically pays for the title insurance policy, but this can vary depending on the terms of the sale.

6. 6

   Which of the following is NOT a type of insurance typically involved in a real estate transaction?

   • A. Title insurance
   • B. Homeowners insurance
   • C. Flood insurance
   • D. Life insurance
   Show answer & explanation

   Answer: D

   Life insurance is not typically involved in a real estate transaction, whereas title, homeowners, and flood insurance are all relevant to the transaction.

7. 7

   What is the rate of the excise tax in North Carolina?

   • A. $0.50 per $100 of value
   • B. $5.00 per $1000 of value
   • C. $2.00 per $1000 of value
   • D. $1.00 per $500 of value
   Show answer & explanation

   Answer: D

   The excise tax rate in North Carolina is $1.00 per $500 of value.

8. 8

   A seller in North Carolina is responsible for paying which of the following taxes at closing?

   • A. Income tax
   • B. Property tax
   • C. Capital gains tax
   • D. Excise tax
   Show answer & explanation

   Answer: D

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

9. 9

   In North Carolina, what is the purpose of the excise tax on real property transfers?

   • A. To fund local government services
   • B. To fund public education
   • C. To punish sellers for transferring property
   • D. To generate revenue for the state
   Show answer & explanation

   Answer: D

   The excise tax on real property transfers in North Carolina generates revenue for the state.

10. 10

    What is the primary purpose of hazard insurance in a North Carolina real estate transaction?

    • A. To protect against title defects
    • B. To protect against property tax increases
    • C. To protect against flood damage
    • D. To protect against damage to the property
    Show answer & explanation

    Answer: D

    Hazard insurance protects against damage to the property, such as from fire or windstorms, and is typically required for a mortgage.