North Dakota Real Estate Broker Exam — All Questions

A new environmental ordinance leaves a landowner with no economically viable use of a parcel, although the government takes no title to it. The owner's strongest constitutional claim is:

• a.The ordinance is void because zoning cannot restrict use
• b.A regulatory taking entitling the owner to payment✓
• c.Escheat has occurred and the state now owns the parcel
• d.Spot zoning, since only this parcel lost its value

Regulation that goes so far it denies an owner all economically viable use is treated as a regulatory taking, and just compensation is owed even though the government never took title. Arguing that zoning simply cannot restrict use fails, because regulating land is a valid exercise of the police power and owners have no right to the most profitable use. Escheat moves property to the state only when an owner dies with no will and no heirs, which has nothing to do with an ordinance. Spot zoning describes singling out one parcel for a different classification, not a general environmental rule applied to a class of land.

Reviewing a title report, a broker finds an old recorded covenant, written decades ago, that bars resale of the lot to members of a specified race. Its legal effect today is:

• a.It binds the buyer because it was recorded before purchase
• b.It is void, so a court will never enforce it or enjoin it✓
• c.It stays valid until the homeowners association removes it
• d.It is enforceable by the association but not by an owner

A private restriction that discriminates on a protected basis is void and unenforceable under the federal Fair Housing Act and the Civil Rights Act of 1866, so no court will order compliance or enjoin a violation, and the association has no power the courts would back. Recording rescues nothing, because an illegal restriction gains no force from sitting in the public record. No association vote is required to strip it of effect, although many states let an owner have the language formally struck. Valid CC&Rs, by contrast, are enforced privately by injunction brought by an owner or the association. A broker must never repeat or give effect to such language.

A grantor signs and notarizes a deed naming a nephew as grantee, locks it in a safe deposit box, and tells no one. The grantor later dies. What is the deed's effect?

• a.Title passed when the grantor signed the deed
• b.Title passed because the deed was acknowledged
• c.No title passed, because delivery never occurred✓
• d.Title passes when the estate later records it

A deed operates only when the grantor delivers it with the present intent to pass title and the grantee accepts, and both must happen while the grantor is alive. Signing accomplishes nothing while the instrument stays under the grantor's control in a box no one knows about. Acknowledgment before a notary serves recording, not validity, so notarizing it changes nothing here. An estate representative cannot supply the delivery the grantor failed to make, and recording an undelivered deed does not revive it. The nephew takes only through the will or the intestacy statute, which is why closings hand over the executed deed rather than merely signing it.

A deed is signed by a competent grantor and handed to a grantee who accepts it, but the grantor's signature was never notarized. As between those two parties, the deed is:

• a.Void, since notarizing is a validity requirement
• b.Valid, though it cannot be recorded as it stands✓
• c.Valid only if the grantee later pays a recording fee
• d.Voidable at the option of the grantor's creditors

Acknowledgment is a recording requirement, not an element of a valid deed. Delivered and accepted, the deed transfers title between grantor and grantee even with no notary, but the recorder will reject it, leaving the grantee exposed to later purchasers and lienholders who record first. Calling it void confuses the two ideas: validity turns on a competent grantor, an identifiable grantee, words of conveyance, an adequate legal description, the grantor's signature, and delivery and acceptance. Paying a fee cannot cure a missing acknowledgment, because the recorder cannot accept the instrument at all. Creditors of the grantor gain no power to undo a completed conveyance.

In a deed, which clause opens with the words 'to have and to hold' and defines the extent of the estate the grantee is receiving?

• a.The granting clause containing the words of conveyance
• b.The habendum clause, following the granting clause✓
• c.The acknowledgment taken before a notary public officer
• d.The legal description identifying the land conveyed

The habendum clause follows the granting clause, begins with the traditional phrase 'to have and to hold,' and spells out the estate conveyed, for example a fee simple absolute or a life estate. The granting clause holds the words of conveyance that actually transfer the interest and names the grantee. The acknowledgment is the notary's certificate that the signature is genuine, which the recorder requires but the transfer does not. The legal description identifies the land by metes and bounds, lot and block, or government survey, and it fixes what is conveyed rather than how much of an estate. Reading both clauses tells a broker exactly what the buyer is getting.

A relocation company that has owned a home for three months conveys it, warranting title only against defects that arose during its own ownership. The deed it delivers is a:

• a.Bargain and sale deed implying ownership without covenants
• b.General warranty deed covering the entire chain of title
• c.Quitclaim deed conveying only the interest actually held
• d.Special (limited) warranty deed covering the grantor's period✓

Warranting only against defects created or suffered while the grantor held title describes the special or limited warranty deed, the customary instrument for corporate, relocation, and fiduciary sellers who cannot vouch for what earlier owners did. A general warranty deed reaches back through the whole history of the property and offers the broadest protection, which is more than this seller is giving. A quitclaim carries no warranties at all and passes only whatever interest the signer happens to hold. A bargain and sale deed implies that the grantor owns the property but adds few or no covenants. A buyer taking narrower covenants should lean on an owner's title policy.

A title search shows that a seller's former spouse may still hold a possible interest in the property. What is the usual instrument used to release that interest and clear the record?

• a.A quitclaim deed from the former spouse✓
• b.A general warranty deed from the former spouse
• c.A trustee's deed issued after a foreclosure
• d.A correction deed fixing the legal description

A quitclaim releases whatever interest the signer may hold, with no warranties attached, which makes it the standard tool for removing a cloud such as a possible marital interest, a stale easement claim, or a name discrepancy. Demanding a general warranty deed asks the former spouse to guarantee title he or she may never have owned, and it is normally refused. A trustee's deed is what the trustee under a deed of trust issues to the purchaser at a foreclosure sale. A correction deed reforms a mistake in an earlier deed between the same parties and cannot release an outsider's claim.

A court-appointed personal representative sells a decedent's home during probate, and the buyer's broker asks what instrument will convey title. The answer is:

• a.A trustee's deed given after a nonjudicial foreclosure
• b.A sheriff's deed issued following a judicial sale
• c.A general warranty deed with full title covenants
• d.An executor's or personal representative's deed✓

Estate property is conveyed by an executor's deed when a will names the executor, or by a personal representative's or administrator's deed when the court makes the appointment; these deeds recite the court authority and give only limited covenants. A trustee's deed comes from the trustee under a deed of trust after a nonjudicial foreclosure sale. A sheriff's deed, called a referee's deed in some states, follows a judicial sale ordered by a court. A general warranty deed is not used, because a fiduciary will not personally guarantee title against the acts of the decedent or of owners further back in the chain.

After closing under a general warranty deed, a buyer discovers a recorded utility easement that the deed never disclosed. Which covenant did the grantor breach?

• a.Quiet enjoyment, a promise against eviction by better title
• b.Seisin, a promise that the grantor owns the estate conveyed
• c.Against encumbrances, a promise of no undisclosed burdens✓
• d.Further assurance, a promise to sign curative papers

The covenant against encumbrances promises that no liens, easements, or similar burdens exist beyond those the deed discloses, so a recorded easement left unmentioned breaches it at the moment of delivery. Seisin promises the grantor actually owns the estate being conveyed, which is not the trouble when ownership is sound but burdened. Quiet enjoyment shields the grantee from later eviction by someone holding superior title, and an easement holder's use is not an eviction. Further assurance obliges the grantor to sign additional documents needed to perfect title. A general warranty deed carries all of these along with the right to convey and warranty forever.

A neighbor has openly farmed and fenced a strip of an absentee owner's land, excluding others and never asking permission. To take title by adverse possession the neighbor must prove:

• a.Payment of the owner's property taxes for every year
• b.Open, notorious, continuous, hostile, and exclusive possession✓
• c.A written agreement signed by the record title owner
• d.A recorded deed describing the disputed strip of land

Adverse possession requires possession that is open and notorious, continuous, hostile in the sense of being without permission, and exclusive, held for the statutory period set by state law. Some states add payment of taxes or color of title, but those elements are not universal, so a broker should never assume them from another state's rule. A written agreement from the record owner would destroy the claim outright, since permission defeats hostility. Recording a deed creates no possession and cannot manufacture the required years of use. Adverse possession is one form of involuntary alienation, alongside descent, escheat, foreclosure, eminent domain, and accretion.

An owner dies leaving no will, and after a diligent search no heirs can be located. A broker asked to list the property should understand that title:

• a.Passes by devise to the beneficiaries named in a will
• b.Descends to the decedent's nearest surviving creditors
• c.Vests permanently in the administrator the court appoints
• d.Escheats to the state, an involuntary transfer of title✓

Escheat is the state's claim to property when an owner dies intestate and no heirs can be found, and it is a classic involuntary transfer rather than a voluntary one by deed or will. Devise is a gift of real property by will, so it cannot operate where there is no will and no named beneficiary. Descent carries property to heirs under the intestacy statute, but creditors are paid as claimants out of the estate and never inherit the land itself. An administrator has authority to manage and convey estate property during probate, not to own it permanently. Each state sets its own escheat procedure and waiting period.

A search reveals an old mortgage of record that was paid off but never released, and the lender no longer exists. Which step clears that cloud so title is marketable?

• a.Ordering an abstract of title with an attorney's opinion
• b.Buying an owner's title policy that insures over it
• c.Filing a quiet title action asking a court to clear it✓
• d.Recording a correction deed signed by the current seller

A quiet title action asks a court to determine ownership and extinguish a stale or unreleasable claim, which is the practical cure when the mortgagee has vanished and no release can be obtained. An abstract of title with an attorney's opinion summarizes and evaluates the recorded chain; it reports the cloud rather than removing it, and it offers no indemnity. An owner's policy may insure over a known risk, but insurance pays for loss and leaves the defect on the record for the next buyer to confront. A correction deed fixes a drafting error between the original parties and cannot release a third party's lien.

A seller deeds a parcel to one buyer and later deeds the same parcel to a second buyer, who records first. Which framework decides who owns the land?

• a.A federal recording statute applied in all fifty states
• b.The state's recording act, race, notice, or race-notice✓
• c.The order in which the two deeds were signed and dated
• d.The county recorder's discretion over competing claims

Priority between competing grantees is governed by the recording act of the state where the land lies, and the schemes differ: a pure race state protects whoever records first, a notice state protects a later purchaser who took without notice of the earlier deed, and a race-notice state protects one who took without notice and recorded first. No federal statute governs land recording. Signing dates do not decide the contest, which is precisely why a public recording system exists. Recorders act ministerially and have no power to resolve claims. Because the gap between closing and recording is the danger zone, a broker should press for prompt recording.

A buyer pays for a lender's title policy at closing and asks the broker whether it also protects the buyer's equity in the home. The correct answer is that the policy:

• a.Protects both parties equally up to the full purchase price
• b.Protects the buyer once the mortgage has been fully repaid
• c.Protects the buyer against defects arising after closing
• d.Protects only the lender, declining with the balance✓

A lender's, or mortgagee's, policy insures only the lender's security interest, and its coverage shrinks as the principal is paid down, ending altogether when the loan is satisfied. It never covers the buyer's equity, which is why a separate owner's policy is offered at closing for a one-time premium and lasts as long as the insured holds an interest. Repaying the mortgage does not convert the lender's coverage into the buyer's; it extinguishes it. And no title policy insures defects that first arise after its date. Brokers should explain this plainly before a buyer waives owner's coverage to save money.

Six months after closing, a contractor the buyer hired records a mechanic's lien against the home. The buyer files a claim under the owner's title policy. The insurer will most likely:

• a.Deny, because the defect arose after the policy was issued✓
• b.Pay, because owner's policies cover all future liens
• c.Pay, because the standard exceptions were removed
• d.Deny, because only a lender may file a title claim

Title insurance looks backward: it covers defects that already existed when the policy was issued but were not discovered or excepted, not events that happen later. A lien for work the buyer ordered after closing is a new problem the buyer must resolve directly. Buying extended coverage removes standard exceptions and broadens what is insured as of the policy date, but it does not push coverage forward in time. Owners plainly may claim under their own policies; the lender's policy is the one limited to the lender. Extended coverage typically depends on a current survey, which reveals encroachments and boundary issues a records search alone cannot.

A buyer tours a house and finds an occupant who is not the seller living there under an unrecorded lease. What kind of notice does that occupancy give the buyer?

• a.Actual notice, given by the seller's written disclosure
• b.Constructive notice, given by the public record
• c.No notice at all, since the lease was not recorded
• d.Inquiry notice, requiring the buyer to ask about it✓

Someone in possession who is not the seller puts a buyer on inquiry notice: the buyer is charged with whatever a reasonable investigation of that occupancy would have turned up, including an unrecorded lease or an option to purchase. Actual notice is what a party genuinely knows, typically from a disclosure or a conversation, and no one has told this buyer anything. Constructive notice comes from the public record, which by definition cannot reveal an unrecorded lease. Treating an unrecorded interest as invisible is the classic error, because possession is itself notice. A broker should always ask who occupies a property and on what terms.

Which body issues, renews, and disciplines real estate broker licenses in North Dakota?

• a.The North Dakota Association of Realtors
• b.The North Dakota Department of Financial Institutions
• c.The North Dakota Secretary of State
• d.The North Dakota Real Estate Commission✓

North Dakota Century Code section 43-23-05 says a person may not act as a real estate broker or salesperson "without a license issued by the real estate commission," and section 43-23-11.1 gives that same commission the power to investigate, suspend, revoke, fine, require course attendance, or reprimand. The state association of Realtors is a private membership body: it may hold members who join it to a code of ethics, but it cannot grant or take away a license. The Department of Financial Institutions supervises banks and other financial businesses under a different body of law. The Secretary of State receives corporate filings, so a brokerage may register there as a business entity, but that filing does not license the people who practice.

How is the North Dakota Real Estate Commission composed under N.D.C.C. section 43-23-01?

• a.Five members, three of whom must be active real estate brokers, appointed by the governor✓
• b.Five members, all of whom must be active real estate brokers, elected by the state's licensees
• c.Seven members, four of whom must be active real estate brokers, appointed by the state's licensees
• d.Seven members, four of whom must be members of the public, appointed by the attorney general

Section 43-23-01 reads: "The state real estate commission consists of five members, three of whom must be active real estate brokers, appointed by the governor." Section 43-23-02 fills in the rest: the governor appoints each member for a five-year term, terms are staggered so one expires each year, and a commissioner may not serve more than two consecutive five-year terms. The same section provides that a majority of the commission in a duly assembled meeting may exercise all of the commission's duties and powers. Nothing in the chapter makes the seats elective, gives the appointment to the attorney general, or sets the membership at seven.

Under N.D.C.C. section 43-23-11.1(1), when is the North Dakota Real Estate Commission required to investigate a licensee?

• a.When a district court has first ordered the commission to open an investigation
• b.When two or more separate complainants have named the same licensee in a year
• c.When it receives a verified written complaint about that licensee's activities✓
• d.When a licensee's transaction volume passes a threshold the commission sets by rule

The operative sentence draws a line between what the commission may do and what it must do: "The commission upon its own motion may investigate, and upon the verified complaint in writing of any person, shall investigate the activities of any licensee." A verified written complaint therefore triggers a duty, while the commission's own suspicion triggers only a power. North Dakota Administrative Code section 70-02-01-16(1) sets the form: complaints must be in writing on forms furnished by the commission, verified, and must name both parties and state the facts alleged, including times, places, and the persons involved. No provision keys an investigation to transaction volume, to a court order, or to a minimum number of complainants.

A North Dakota licensee receives a complaint filed with the commission. Within what time must the licensee file an answer?

• a.Sixty days from receipt of the complaint
• b.Twenty days from receipt of the complaint✓
• c.Ten days from receipt of the complaint
• d.Thirty days from receipt of the complaint

North Dakota Administrative Code section 70-02-01-16(2) provides that the licensee against whom a complaint has been filed "must, within twenty days from receipt of complaint, file the licensee's answer on forms furnished by the commission," in affidavit form, properly certified, responding factually to the allegations. The same rule sets the other steps: if the investigation shows no violation the complaint is dismissed without a formal hearing and both sides are told in writing, and if it may justify discipline a formal hearing is held on at least twenty days' notice served with a copy of the complaint. Section 43-23-11.1(3) applies the Administrative Agencies Practice Act, chapter 28-32, to those proceedings.

What is the largest monetary fine the North Dakota Real Estate Commission may direct a licensee to pay in a disciplinary order?

• a.Twenty-five thousand dollars, plus the commission's actual costs
• b.Five thousand dollars, plus the commission's actual costs✓
• c.One thousand dollars, plus the commission's actual costs
• d.Ten thousand dollars, plus the commission's actual costs

Section 43-23-11.1(4) provides that in an order imposing discipline "the commission may direct the licensee to pay a fine not to exceed five thousand dollars and actual costs, including attorney's fees, incurred by the commission in the investigation and prosecution of the case," and that all fines collected go into the commission's license fee account. The ceiling applies to the fine alone; costs and attorney's fees are recovered on top of it, so the total a licensee pays can exceed five thousand dollars. Subsection 3 adds the procedural guard: no fine, suspension, revocation, required course attendance, or letter of reprimand may issue except after a hearing on charges duly served on the licensee.

Under N.D.C.C. section 43-23-17, a person who acts as a real estate broker in North Dakota without a license is guilty of:

• a.A class A misdemeanor
• b.A class C felony
• c.A class B misdemeanor✓
• d.An infraction

Section 43-23-17 assigns two different penalties in two sentences: "Any person violating section 43-23-05 is guilty of a class B misdemeanor. Any person violating section 43-23-14.1 is guilty of an infraction." Section 43-23-05 is the license requirement, so unlicensed practice is the class B misdemeanor; section 43-23-14.1 is the broker trust-account section, so mishandling the account is the infraction. A class C felony is the penalty in a different chapter, section 43-23.1-23, for a willful violation of the Subdivided Lands Disposition Act. The license law names no class A misdemeanor at all. Note also that the criminal penalty is separate from the commission's own power to fine, suspend, or revoke.

Under N.D.C.C. section 43-23-14.1, when may the commission examine a North Dakota broker's trust account records?

• a.At any time during regular business hours at the broker's usual place of business✓
• b.Only after the commission has first obtained an administrative subpoena for them
• c.Only while a disciplinary proceeding is pending against that particular broker or firm
• d.Only once in each license year, and then on thirty days' written notice

The closing sentence of section 43-23-14.1 reads: "Trust accounts and other records must be open to inspection by the commission and the commission's duly authorized agents at all times during regular business hours at the broker's usual place of business." The same section requires the broker to keep the books, records, contracts, and other necessary documents at that place of business "so the adequacy of the account may be determined at any time." Administrative Code section 70-02-01-15(1)(c) makes the point again by requiring every broker to sign an authorization form consenting to examination and audit of the account. Section 43-23-11.1(1)(h) makes failing or refusing on demand to produce a document, book, or record a ground for discipline, so refusal is itself the offense rather than a way to force a subpoena.

Which statement best distinguishes a North Dakota broker from a North Dakota salesperson?

• a.A broker and a salesperson hold the same authority under the state license law
• b.A broker may operate a brokerage and supervise the salespersons licensed under the broker✓
• c.A salesperson may hold clients' earnest money in the salesperson's own escrow account
• d.A salesperson may be licensed under two supervising brokers at the same time

Section 43-23-06.1(11) defines a salesperson as a person "employed or engaged by a licensed real estate broker" to act for that broker, and section 43-23-12(1) says a license "may not authorize the licensee to transact business under any other broker," so a salesperson works under one broker at a time. Section 43-23-14.1 puts the trust account on the broker, and section 43-23-11.1(1)(s) makes it a disciplinary ground for a salesperson to fail to place trust money with the employing broker, which is why the salesperson never holds an escrow account. The two credentials therefore cannot carry identical authority: the state would have no reason to issue two licenses that permit the same acts.

What is a North Dakota broker associate permitted to do under N.D. Admin. Code section 70-02-01-09?

• a.Maintain a separate trust account for the earnest money on the associate's own listings
• b.Supervise the designated broker of the firm with which the broker associate is affiliated
• c.Perform real estate service with the full knowledge and consent of the supervising broker✓
• d.Act independently as a broker while remaining affiliated with another licensed broker

The rule describes a broker "who does not have an office under the broker's own name, but is affiliated with another licensed broker and performs service similar to that of a salesperson," and says that person "must not at any time act independently as a broker, and shall not perform any real estate service without full consent and knowledge of the broker's supervising broker." It closes by making the designated broker responsible for the affiliated broker associate "to the same extent as though the affiliated broker were an affiliated salesperson," which is the opposite of the associate supervising the designated broker. Because responsibility for a separate trust account rests on the employing broker under Administrative Code section 70-02-01-15(1)(g), the associate does not run one.

Which person is expressly outside the definition of "real estate broker" in N.D.C.C. section 43-23-07?

• a.A person selling real estate at a sale advertised as a bona fide public auction✓
• b.A person who lists other owners' property for a flat fee paid at the closing
• c.A person who refers buyer prospects to a brokerage for a share of the commission
• d.A person who publicly markets an equitable interest in a purchase contract

Section 43-23-07(1)(c) exempts "Any person selling real estate as an auctioneer, provided the sale is advertised as a bona fide public auction." The other three are inside the definition rather than outside it. Listing another owner's property for compensation is section 43-23-06.1(9)(a); referring a prospect for compensation is subdivision (h), which covers a person who "Assists or directs in the procuring of prospects or refers a prospect, calculated to result in the sale, exchange, or leasing of real estate"; and publicly marketing an equitable interest in a purchase contract is subdivision (i), which subsection 2 of section 43-23-07 then confirms is not exempted. The other exemptions in the section cover owners and lessors, attorneys handling court-supervised sales, banks and trust companies, holders of a power of attorney, fiduciaries acting under court order, and public officers.

Under N.D. Admin. Code section 70-02-01-06, when will North Dakota recognize another state's licensee for a reciprocal license?

• a.Whenever the applicant holds a license in good standing in any other state
• b.Whenever the applicant's own state grants licenses to North Dakota residents
• c.Only if the applicant has held the other state's license for at least five years
• d.Only if the commission has a reciprocity agreement with that state's regulator✓

Subsection 4 states the rule negatively and exactly: "North Dakota will not recognize the licensee from another state for a reciprocal license unless an agreement granting reciprocal privileges to North Dakota licensees has been made by the commission with the proper regulatory authorities of that state. The agreement shall set out the terms and the regulations to be followed." Reciprocity is therefore a negotiated instrument between two regulators, not a status an applicant earns by holding a license elsewhere or by pointing to how the other state treats North Dakota licensees. Subsection 5 covers the applicant with no such agreement: someone currently licensed in a nonreciprocal state who has passed that state's licensing examination "need only take the state portion of the examination in North Dakota," and no prelicensure course is required. Good standing and no pending complaints are conditions of any nonresident application under subsection 2, not a substitute for an agreement.

When do North Dakota real estate licenses expire, and by when must the renewal application be made?

• a.They expire two years after issue; renewal must be made sixty days before that date
• b.They expire December thirty-first; renewal must be made on or before November fifteenth✓
• c.They expire June thirtieth; renewal must be made on or before May fifteenth
• d.They expire on the licensee's birthday; renewal must be made thirty days before that date

North Dakota Administrative Code section 70-02-01-04 opens: "All licenses expire on December thirty-first of each year. Persons desiring to continue in business must make proper application for renewal on or before November fifteenth of each year." The rule then states the cost of missing it: loss of the right to charge a commission and possible prosecution for doing business without a license after December thirty-first, and a person whose license was canceled for failure to renew must submit a new application with fees and pass the examinations again. Section 43-23-13.1(1) allows a late renewal, with a late fee for each month or fraction of a month, up to a date the commission sets, after which the license "must be canceled" without notice or opportunity for hearing.

A licensed North Dakota salesperson moves to a new supervising broker. What does N.D.C.C. section 43-23-12(2) require?

• a.Written notice to the commission within five days of the change of broker✓
• b.Written notice to the commission within thirty days of the change of broker
• c.Notice to the former broker only, who then reports the change to the commission
• d.No notice, because the new broker reports the change at the next renewal

The operative sentence is: "Prompt notice in writing, within five days, must be given to the commission by any real estate salesperson of a change of broker, and of the name of the licensed broker into whose supervision the salesperson is about to enter." The same subsection supplies the sanction: "The change of broker by any licensed real estate salesperson, without notice to the commission, automatically cancels that person's license," and it is unlawful for the salesperson to act after supervision ends until the license is reissued to the new broker. The former broker has a duty of its own to notify the commission in writing on termination, so notifying that broker does not discharge the salesperson's duty. Administrative Code section 70-02-01-08 supplies the transfer and release form signed by the licensee and both brokers.

What prelicense education does N.D.C.C. section 43-23-08(4) require of a North Dakota broker applicant?

• a.A sixty-hour broker course of study taken instead of the salesperson course
• b.One hundred twenty approved hours completed within the two prior years
• c.The ninety-hour salesperson course of study plus an additional sixty approved hours✓
• d.The ninety-hour salesperson course of study only, with no further coursework

Subsection 4 sets a floor for the salesperson license of "at least ninety hours in courses of study approved by the commission," then adds: "An applicant for a broker's license must have successfully completed an additional sixty hours in courses of study approved by the commission." The word "additional" is what makes the broker requirement cumulative rather than a substitute, so the broker applicant's total is one hundred fifty approved hours. The same subsection lets an applicant sit the examination before finishing the coursework but bars the commission from issuing the license until satisfactory evidence of completion is furnished. Subsection 5 permits the commission to waive the two-year experience requirement in narrow circumstances but says flatly that "The educational requirements of subsection 4 may not be waived by the commission." A prelicensure course stays valid for two years from completion under Administrative Code section 70-02-01-03(6).

How much continuing education must a North Dakota broker complete in order to renew a license?

• a.Eight hours in each continuing education period, which runs twelve months
• b.Fifteen hours in each continuing education period, which runs twenty-four months
• c.Thirty hours in each continuing education period, which runs twenty-four months
• d.Twelve hours in each continuing education period, which runs twelve months✓

North Dakota Administrative Code section 70-02-04-02 provides that to qualify for renewal "each broker or salesperson must complete twelve hours of continuing education in approved courses every continuing education period," and defines that period as "twelve months preceding the renewal application deadline date." The commission may direct that some or all of those hours fall in named areas such as fair housing and antitrust, environmental issues, license law and ethics, agency law and principles, or contracts. An hour means fifty minutes of instruction, with break time excluded, under section 70-02-04-03. Two exemptions matter at the start of a career: under section 70-02-04-15 a broker is exempt for the period in which the broker passed the broker licensing examination, and a salesperson who completed the ninety prerequisite hours is exempt for the first renewal.

Under N.D. Admin. Code section 70-02-03-02.1, whose name must be most prominent in a North Dakota licensee's advertising?

• a.The name of the licensee who took the listing, as the agent responsible for it
• b.The team's name, wherever the licensees advertise their services as a team
• c.The brokerage agency's trade name, as it is licensed with the commission✓
• d.The designated broker's own name, since that broker supervises the advertising

Subsection 2 reads: "Advertising must be done in the real estate brokerage agency's trade name as licensed with the commission and the trade name must be equal to or greater than, in size and visibility, the name of any salesperson, associate broker, or team on the advertising." A licensee's or a team's name may appear, but never larger or more visible than the firm's. Subsection 3 requires the advertising to say how the public can reach the agency, and subsection 4 puts all licensee advertising under the designated broker's supervision while still requiring the agency's registered or trade name and contact information. Subsection 8 adds that teams "may not advertise in any manner which suggests a team is an independent real estate brokerage firm," and subsection 5 forbids deception about the terms of a sale or about the agency's services.

A licensed North Dakota broker advertises, in the broker's own name, a house that the broker owns. The advertisement must include:

• a.The words "Owner/Licensed Broker" following the broker's name in the advertisement✓
• b.The words "For Sale By Owner" in type larger than the broker's name in the advertisement
• c.A statement that the real estate commission has reviewed and cleared the advertisement
• d.The name and license number of a second, unrelated brokerage supervising the sale

Subsection 6 of North Dakota Administrative Code section 70-02-03-02.1 permits a broker to advertise the broker's own property in the broker's own name "provided that following the licensee's name where it appears in the advertisement, the words 'Owner/Licensed Broker' must also appear," and it applies that duty to active and inactive broker licensees alike. Subsection 7 gives the parallel wording for a salesperson, "Owner/Licensed Salesperson." The point of the tag is that the public should know it is dealing with a licensee, which is why a plain owner label understates the position rather than disclosing it. No rule allows a licensee to represent that the commission has approved an advertisement; the commission's rules elsewhere expressly forbid implying its endorsement, for example in section 70-02-02-09 for approved schools.

When may a newly licensed North Dakota salesperson begin licensed activity?

• a.After the salesperson finishes the ninety-hour prelicense course of study
• b.After the broker receives notification of licensure from the commission✓
• c.On the date the salesperson passes both portions of the licensing examination
• d.On the date the salesperson mails the application and the required fees

North Dakota Administrative Code section 70-02-01-10 opens: "A salesperson shall not commence work until the salesperson's broker receives notification of licensure from the commission." Passing the examination and completing the coursework are prerequisites rather than authorizations, and section 43-23-08(4) bars the commission from issuing a license at all until proof of the education is furnished. The consequence of starting early falls on both sides: section 43-23-11.1(1)(r) makes it a ground for discipline where a broker allows an unlicensed salesperson to do any act regulated by the chapter in the broker's name. The same rule adds that a licensee leaving a broker may not take or use agreements secured through that office without the former broker's authorization and must return the former broker's materials and records.

What written policy does N.D. Admin. Code section 70-02-01-21 require of a North Dakota designated broker?

• a.A policy that sets the firm's commission rates for each class of listed property
• b.A policy requiring each licensee to carry independent errors and omissions coverage
• c.A policy that assigns each new listing to a licensee chosen by rotation in the firm
• d.A policy that identifies and describes the agency relationships the firm may offer✓

The rule opens: "The designated broker must have a written company policy that identifies and describes the types of real estate agency relationships in which the agency may engage." A firm that offers representation to both buyers and sellers must also address in that manual how it prevents mishandling of information through formal and informal sharing inside the agency, how office space is arranged, and how personal relationships between agents representing adverse clients are managed. The same section makes the designated broker responsible for supervising teams, requires a written team policy, and requires a chronological written record of all teams and team membership to be produced to the commission on request. Rate-setting is the opposite of what the rules contemplate: section 70-02-01-18 says the commission "neither recommends nor recognizes any agreement to fix or impose uniform rates of commission."

What does N.D. Admin. Code section 70-02-03-05 require of every North Dakota listing contract?

• a.It must state the amount of brokerage as a specific amount or a specific percentage✓
• b.It must state a commission rate no higher than the rate prevailing in that market
• c.It must state that the real estate commission has approved the compensation charged
• d.It must state that the seller may cancel the listing on ten days' written notice

The whole rule is one sentence: "All listing contracts or sales contracts must state the amount of brokerage agreed; either a specific amount or a specific percentage." What it does not do is set or cap the number. Section 70-02-01-18 says the commission "neither recommends nor recognizes any agreement to fix or impose uniform rates of commission on any real estate transaction," so there is no prevailing rate a contract must respect, and section 70-02-01-17 says the commission is not authorized to consider or conduct hearings on disputes over fees or commissions between licensees. Section 70-02-03-04 supplies the related listing requirements: a definite expiration date, and no provision requiring the signer to notify the broker of an intention to cancel after that date.

When must a North Dakota licensee make the written agency disclosure in a one- to four-family residential transaction?

• a.After the purchase agreement has been signed by both the buyer and the seller
• b.At the closing, together with the rest of the transaction paperwork
• c.Only where the party has asked the licensee for representation
• d.At the time of the first substantive contact with the party to the transaction✓

North Dakota Administrative Code section 70-02-03-15.1(2) requires the licensee to "make an affirmative written disclosure identifying which party that person represents in the transaction," and provides that "The disclosure must be made at the time of the first substantive contact between the licensee and any party to the real estate transaction. The disclosure must be represented by a separate written document, and offered to the party to the real estate transaction for signature," with true copies kept in the broker's file. The rule then defines substantive contact: for a seller, before the listing agreement is signed; for a buyer, before the buyer's broker agreement is signed; and for anyone else, before personal financial information is discussed or negotiations begin. Waiting for a signed purchase agreement or for the closing puts the disclosure after the point at which it could have changed anything, and no party can ask for a relationship that has not been explained. For agricultural, commercial, five-or-more-unit residential, and commercial leasehold transactions, section 70-02-03-15 makes the licensee the seller's agent unless all parties agree otherwise in writing.

North Dakota permits a brokerage firm to act as a dual agent in one transaction only where:

• a.The two clients are each represented by a different licensee inside the same firm
• b.Both parties consent in a written agreement made before the representation✓
• c.The designated broker approves the arrangement internally before it is undertaken
• d.The buyer signs a waiver of the agency disclosures otherwise required by the rules

North Dakota Administrative Code section 70-02-03-15.1(7)(c) provides that if a party selects dual agency, "it must be explained that the licensee must enter into a written agreement obtaining the consent of both parties before such representation is authorized," and that the agreement must set out who pays the licensee's fee. Section 43-23-06.1(6) supplies the definition and confirms that dual agency "does not exist unless both the seller and the buyer in a real estate transaction have written agency agreements with the same real estate brokerage firm." That definition also treats two licensees of the same broker each representing a party as dual agency, unless the firm makes written appointments under section 43-23-12.3, which then removes the dual-agent status. A firm cannot consent for its own clients, and a waiver of disclosure removes the very information that would make consent informed. Section 43-23-11.1(1)(d) makes acting for more than one party without the knowledge and consent of all a disciplinary ground.

A North Dakota licensee never made the required written agency disclosure and now sues for the commission. That licensee:

• a.May recover the commission where the disclosure was made orally at the outset
• b.May recover half the commission, the balance being forfeited as a penalty
• c.May not maintain an action to recover any commission, fee, or other compensation✓
• d.May recover the commission where the client can show no actual harm resulted

North Dakota Administrative Code section 70-02-03-15.1(8) provides that "No person required to be licensed by North Dakota Century Code chapter 43-23 may maintain any action to recover any commission, fee, or other compensation with respect to the purchase, sale, lease, or other disposition or conveyance of real property... unless that person's agency relationship has been disclosed to the party or parties to the transaction in accordance with the requirements of this section." The bar is written on the disclosure rather than on damage, so the absence of harm does not restore the claim, and the rule provides for no partial recovery. An oral disclosure suffices only in the narrow case described in subsection 2(c), where obtaining a signed written statement at first substantive contact is impossible as a practical matter, such as telephone contact with an absent party, and only if the written disclosure follows as soon as practicable.

What must a North Dakota licensee do with a written offer to purchase under N.D. Admin. Code section 70-02-03-06?

• a.Tender it promptly to the seller, then deliver executed copies to both parties✓
• b.Hold it until the deadline on the seller's current offer has passed, then present it
• c.Present it to the seller only where it is at or above the property's listed price
• d.Present it to the seller's attorney for review rather than to the seller directly

The rule reads: "A licensee shall promptly tender to the seller every written offer to purchase obtained on the property involved and, upon obtaining a proper acceptance of the offer to purchase, shall promptly deliver true executed copies of same, signed by the seller and purchaser, to both seller and purchaser." The word "every" removes any screening role for the licensee, so price is not a filter. Section 43-23-11.1(1)(t) makes it a disciplinary ground to fail to reduce an offer to writing when a proposed purchaser asks that it be submitted, or to fail to submit all offers received before the seller has accepted an offer in writing and the broker knows of the acceptance. Section 43-23-11.1(1)(k) adds a duty to furnish, on demand, copies of any document to a person whose signature is on it, and section 70-02-03-08 tells the licensee to recommend legal counsel rather than to substitute a lawyer for the client.

May a North Dakota licensee accept a promissory note as the earnest money deposit on an offer to purchase?

• a.Not in any circumstance, since only cash or certified funds may be taken
• b.Yes, provided the note comes due within thirty days of the offer's acceptance
• c.Yes, provided the note is placed in the broker's trust account within one day
• d.Not unless the licensee's principal knows of and permits that arrangement✓

North Dakota Administrative Code section 70-02-03-14 provides that "A broker or salesperson shall not accept any note or any nonnegotiable instrument or anything of value not readily negotiable as a deposit on a contract or offer to purchase without the knowledge and permission of the broker's or salesperson's principal." The rule is a consent rule, not a prohibition: it neither confines deposits to cash and certified funds nor fixes a maturity for the instrument. Nor does routing the note into the trust account cure the omission, because what the rule protects is the principal's informed decision about accepting something that is not readily negotiable. Section 70-02-01-15(2)(c) is the related restraint on the deposit itself: the broker is not entitled to any part of the earnest money as a fee until the transaction has been consummated or terminated.

Before advertising a listed North Dakota duplex, a licensee must hold a written listing agreement containing:

• a.The price, the commission, and the buyer's written preapproval from a lender
• b.The price, the commission, all parties' signatures, and a definite expiration date✓
• c.The price, the commission, and a clause requiring notice to cancel after expiration
• d.The price and the commission, with the remaining terms agreed orally before closing

North Dakota Administrative Code section 70-02-03-04 applies to residential real property of one through four dwelling units and requires the licensee to "obtain a signed listing agreement in writing from the seller, properly identifying the listed property and containing all of the terms and conditions under which the property is to be sold; including the price, the commission to be paid, the signatures of all parties concerned, and definite expiration date prior to the time that the property is advertised or offered for sale." The same rule forbids the opposite of a definite date: the agreement "shall contain no provision requiring a party signing the listing to notify the broker of the party's intention to cancel the listing after such definite expiration date." An exclusive agency or exclusive right to sell listing must say so clearly and a copy goes to the owner at signing. Section 43-23-11.1(1)(n) makes omitting a fixed expiration date, or failing to leave a copy with the principal, a disciplinary ground.

Under N.D. Admin. Code section 70-02-03-05.1, when must a North Dakota licensee obtain a signed buyer's broker agreement?

• a.Before the buyer's loan application goes to a lender for approval
• b.Before the buyer's earnest money is placed in the broker's trust account
• c.Before performing any act at all as that buyer's representative✓
• d.Before writing the buyer's first offer on a particular property

The rule provides that for residential real property of one through four dwelling units "a licensee must obtain a signed buyer's broker agreement from a buyer before performing any act as a buyer's representative." Each of the other moments named comes well after representation has already begun. The rule then lists what the agreement must contain: a definite expiration date; the amount of commission or other compensation; a clear statement explaining the services to be provided and the events or conditions that will entitle the licensee to compensation; and, if the licensee represents both buyers and sellers in the same transaction, a separate dual agency disclosure statement under section 70-02-03-15.1. Section 70-02-03-11 adds that a licensee may not negotiate a buyer representation contract with someone the licensee knows is already bound by an unexpired exclusive right to buy with another broker.

What does N.D. Admin. Code section 70-02-01-11 require of a North Dakota broker's branch office?

• a.It must be managed by a licensee who holds a broker license of that person's own
• b.It must be located in a county other than the county of the principal office
• c.It must maintain a trust account separate from the principal office's account
• d.It must be operated under the same name as the broker's principal office✓

Subsection 8 states it in one line: "The branch office must be operated under the same name as the principal office." Subsection 7 governs display: the branch license is displayed in the branch office or listed on the broker's website, bears the branch address, and bears the name of the licensee designated to actively manage that office. Subsection 3 lets the applicant broker designate either the broker or another licensee as branch manager, and lets the broker manage all branches, so a separate broker credential is not required. Subsection 1 defines a branch as any additional office where a broker maintains more than one, and adds that where the broker maintains a regular office the broker's home is not a branch. The trust account belongs to the broker rather than to a location under section 43-23-14.1, and subsection 4 requires notice to the commission within five days of a change of branch address or supervisor.

A buyer asks a North Dakota licensee whether a listed house was the site of a homicide. The licensee must:

• a.Decline to answer, the subject not being a material defect in the property
• b.Answer from the licensee's own knowledge of the property's past history
• c.Order a public records search and give the buyer the written result
• d.Ask the owner about it and tell the buyer what the owner answered✓

North Dakota Administrative Code section 70-02-01-20 says a psychologically impacted property is "not a material or substantial fact that is required to be disclosed" and that licensees need not volunteer it. The question from the buyer changes that: "However, if the prospective purchaser asks whether the real property may be psychologically impacted, the licensee is required to inquire of the owner whether there are any facts or suspicions that the property is in fact psychologically impacted, and to advise the prospective purchaser of the owner's response. If the owner refuses to answer the inquiry, the prospective purchaser must be so advised." So the duty triggered is a duty to ask and to relay, not a duty to investigate or to answer from memory, and declining to respond ignores the trigger. Section 70-02-01-19 defines the term to cover a suicide, homicide, or other felony and expressly excludes the fact or suspicion that an occupant had HIV or AIDS.

When may a North Dakota broker share a commission with a broker licensed only in another state?

• a.Where the out-of-state broker's share does not exceed half of the total fee
• b.Where the out-of-state broker has filed a consent to service with the commission
• c.Where the out-of-state broker carries on no negotiations in this state by any means✓
• d.Where the out-of-state broker belongs to a recognized multiple listing service

North Dakota Administrative Code section 70-02-03-03 permits the split "if the latter broker does not carry on any of the negotiations in this state either by physically entering the state or by communicating with the broker electronically or through other media." Section 43-23-06.1(9)(h) states the same limit inside the definition of broker. The rule counts remote participation as carrying on negotiations here, so a telephone call or an email into North Dakota defeats the split just as a trip across the state line would. Nothing keys the arrangement to a listing service, to a percentage, or to a filing; a consent to suit belongs to the separate nonresident licensing route in section 43-23-10. Section 43-23-11.1(1)(l) makes paying a commission to a person not licensed under the chapter a disciplinary ground, which is what a broker risks by sharing with someone who has crossed that line.

A North Dakota broker wants to buy a property that is listed with the broker's own firm. Before doing so, the broker must:

• a.Pay the owner the full listed price rather than a price reached by negotiation
• b.Make the broker's true position clearly known to the owner of the property✓
• c.Obtain the real estate commission's written approval of the intended purchase
• d.Release the listing and wait for it to expire under its own written terms

North Dakota Administrative Code section 70-02-03-13(1) provides that a broker "shall not, either directly or indirectly, buy for oneself property listed with the broker or as to which the broker has been approached by the owner to act as broker, nor shall the broker acquire interest in any other property therein, either directly or indirectly, without first making the broker's true position clearly known to the owner," and satisfactory written proof must be produced on request. Subsection 2 applies the same requirement to taking an option, and subsection 4 requires a licensee selling property in which the licensee owns an interest to make that interest known to the purchaser. Section 43-23-11.1(1)(m) makes failing to disclose that intention or true position a disciplinary ground, and subdivision (g) reaches any secret or undisclosed compensation. The commission does not pass on individual purchases, and no provision compels a released listing or a full-price offer.

A North Dakota broker receives earnest money on a listing. Where must the broker place those funds?

• a.In the firm's operating account, tracked there by a separate written ledger entry
• b.In an interest-bearing account, with the interest credited to the buyer at closing
• c.In the broker's office safe as cash until the transaction closes or is canceled
• d.In a separate noninterest-bearing trust account at an insured institution in this state✓

Section 43-23-14.1 requires every broker to "maintain in the broker's name or firm name, a separate, noninterest-bearing trust account designated as such in a federally insured financial institution in this state in which the broker immediately shall place as a demand deposit all funds not the broker's own coming into the broker's possession," and says the requirement includes earnest money deposits. North Dakota Administrative Code section 70-02-01-15(1)(a) requires the account name to carry the words "trust account" or "escrow account," and subdivision (h) repeats that all trust accounts must be noninterest bearing, which is why crediting interest to a party is not an option. The same statute bars commingling and allows only up to five hundred dollars of the broker's own money in the account, specifically identified, to cover service charges, so a ledger entry inside the operating account does not answer the requirement. Cash in a safe leaves no depository record for the commission to examine.

A North Dakota salesperson takes an earnest money check on Tuesday morning. The license law requires that:

• a.The broker deposit it in the trust account within twenty-four hours of its receipt✓
• b.The broker deposit it in the trust account within five banking days of its receipt
• c.The salesperson hold it until the seller has accepted or rejected the buyer's offer
• d.The salesperson endorse it over to the buyer's lender for inclusion in the closing file

North Dakota Administrative Code section 70-02-01-15(1)(f) provides that "Each broker shall deposit all real estate trust money received by the broker or the broker's salesperson in the trust account within twenty-four hours of receipt of the money by the broker or the salesperson unless otherwise provided in the purchase contract." The clock therefore starts when the salesperson takes the check, not when it reaches the broker's desk. Section 43-23-11.1(1)(s) makes the same period a disciplinary standard on both sides: the salesperson must place trust money with the employing broker within twenty-four hours of receipt, and the employing broker must deposit it within twenty-four hours of receiving it from the salesperson. Where the money arrives the day before a holiday or another day the depository is closed, it goes in on the depository's next business day. Nothing permits holding the check to await acceptance or handing it to a lender.

May a North Dakota broker operate without maintaining a designated trust account?

• a.Yes, where every closing in the firm is handled by a title company or an attorney
• b.No, because every licensed broker must keep an open trust account at all times
• c.Yes, where the broker has applied for and received a waiver from the commission✓
• d.Yes, where each salesperson in the firm maintains an escrow account of that person's own

Section 43-23-14.1 provides that "A broker that does not accept trust funds in real estate brokerage transactions and which has applied for and received a waiver from the real estate commission is not required to maintain a designated trust account." The same paragraph closes the gap: if the broker later receives trust funds the broker "shall open a designated trust account as required by this section and deposit any trust funds in accordance with rules adopted by the commission." It also requires a broker to "maintain a record tracking the earnest money associated with all transactions even if the funds are deposited directly with the title company and the broker does not take possession of the funds," so using a title company relieves the broker of the account but not of the record. Salespersons never hold client money in their own accounts under section 43-23-11.1(1)(s). Administrative Code section 70-02-01-05(3) provides separately that an inactive broker need not maintain an active trust account.