North Carolina Real Estate Broker Exam — All Questions

A homeowner installs custom bookshelves that are bolted into wall studs and built to fit a specific alcove. In a sale, how are these most likely treated?

• a.Personal property the seller always removes
• b.Fixtures that transfer with the real property unless excluded in writing✓
• c.Trade fixtures the seller may remove regardless of the contract
• d.Emblements that pass to the buyer at closing

Items permanently attached and adapted to the property are fixtures and pass with the real estate unless the contract specifically excludes them. Personal property would move with the seller, but bolting into studs and custom fitting show intent for the items to become part of the realty. Trade fixtures apply to a commercial tenant's business equipment, and emblements refer to annual crops, neither of which fits a homeowner's bookshelves.

Two unmarried business partners take title so that if one dies, the survivor automatically owns the whole property. Which form of co-ownership accomplishes this?

• a.Tenancy in common
• b.Tenancy by the entirety
• c.Joint tenancy with right of survivorship✓
• d.Severalty

Joint tenancy with right of survivorship passes a deceased owner's interest automatically to the surviving joint tenant, avoiding probate. Tenancy in common has no survivorship, so a decedent's share goes to their heirs. Tenancy by the entirety is reserved for married couples, and severalty means sole ownership by one person, so neither fits two unmarried partners seeking survivorship.

An appraiser adjusts comparable sales when using the sales comparison approach. To which property is the adjustment always applied?

• a.The comparable, never the subject property✓
• b.The subject property, never the comparable
• c.Whichever property has the higher value
• d.Both properties equally

In the sales comparison approach the subject has no known sale price, so adjustments are made to the comparables to make them resemble the subject. If a comparable is superior, its price is adjusted downward; if inferior, upward. The subject is never adjusted because its value is the unknown the appraiser is trying to estimate.

Which appraisal approach is generally given the most weight when valuing a single-family owner-occupied home?

• a.Income capitalization approach
• b.Cost approach using replacement cost
• c.Gross rent multiplier approach
• d.Sales comparison approach✓

For owner-occupied homes, buyers act on prices of similar recently sold homes, so the sales comparison approach best reflects market behavior and is weighted most heavily. The income and gross rent multiplier approaches suit rental or investment property because they rely on income the home does not generate. The cost approach is most useful for new construction or special-purpose buildings that lack comparable sales.

A broker's fiduciary duties to a client include loyalty, obedience, disclosure, confidentiality, accounting, and reasonable care. Which best describes the duty of confidentiality after agency ends?

• a.It ends the moment the transaction closes
• b.It continues indefinitely as to the client's confidential information✓
• c.It applies only to the purchase price
• d.It is waived automatically once a commission is paid

The duty to keep a client's confidential information private survives the termination of the agency relationship and generally continues indefinitely. Closing the transaction or paying a commission does not release the broker to reveal a former client's motivations, financial limits, or bargaining position. The duty is not limited to the price; it covers any confidential information learned during the agency.

A buyer signs an offer, and before the seller accepts, the buyer notifies the seller in writing that the offer is withdrawn. What is the legal effect?

• a.The seller may still accept because the offer was in writing
• b.The buyer is liable for damages for revoking the offer
• c.The offer is revoked and there is no contract✓
• d.The offer converts into an option contract

An offer may be revoked by the offeror any time before it is accepted, and once revoked there is no contract to enforce. The seller cannot accept an offer that has already been withdrawn, and the buyer owes no damages for revoking because no binding agreement existed. An option would require separate consideration to keep the offer open, which was not present here.

Under the federal Fair Housing Act, which of the following is a protected class?

• a.Familial status✓
• b.Occupation
• c.Political affiliation
• d.Source of a tenant's furniture

The federal Fair Housing Act protects race, color, religion, sex, national origin, disability, and familial status (households with children under 18 or a pregnant person). Occupation and political affiliation are not federally protected classes. Refusing to rent because a family has children would violate the familial status protection.

A broker tells prospective buyers that a neighborhood is 'changing' and they should buy now before values fall due to new residents moving in. This practice is called:

• a.Redlining
• b.Puffing
• c.Steering
• d.Blockbusting✓

Blockbusting is inducing owners to sell or buyers to act by suggesting that people of a particular protected class are entering the neighborhood and will affect values, and it is illegal under fair housing law. Redlining is denying loans or services in certain areas, and steering is directing buyers toward or away from areas based on protected characteristics. Puffing is legal opinion-based sales talk and does not involve protected classes.

Federal law requires disclosure of known lead-based paint hazards for residential dwellings built before which year?

• a.1968
• b.1978✓
• c.1988
• d.1992

The federal Residential Lead-Based Paint Hazard Reduction Act requires sellers and landlords of housing built before 1978 to disclose known lead-based paint and hazards and to provide the EPA pamphlet. Lead-based paint was banned for residential use in 1978, so pre-1978 homes are the concern. The 1968 date relates to the Fair Housing Act, and 1988 and 1992 are not the lead-paint threshold.

A borrower obtains a mortgage loan with a fixed interest rate and equal monthly payments that fully repay the loan by the end of the term. This is best described as:

• a.An interest-only loan
• b.A balloon loan
• c.A fully amortizing loan✓
• d.A negative amortization loan

A fully amortizing loan uses level payments that cover both interest and principal so the balance reaches zero at the end of the term. An interest-only loan leaves the principal untouched during the interest-only period, and a balloon loan requires a large lump-sum payoff before amortization would complete. Negative amortization occurs when payments are too small to cover interest, causing the balance to grow.

A home sells for $340,000. The listing brokerage charges a 6% commission, split equally between the listing and selling firms. How much does the listing firm receive?

• a.$10,200✓
• b.$20,400
• c.$5,100
• d.$13,600

The total commission is 6% of $340,000, which equals $20,400. Splitting that equally between the listing and selling firms gives each firm half, or $10,200. The $20,400 figure is the full commission before the split, and the other options do not match a 50/50 division of the 6% fee.

A rectangular lot measures 150 feet by 200 feet. How many acres is the lot, rounded to the nearest hundredth? (One acre = 43,560 square feet.)

• a.0.55 acres
• b.0.69 acres✓
• c.1.38 acres
• d.0.34 acres

The lot area is 150 x 200 = 30,000 square feet. Dividing 30,000 by 43,560 square feet per acre yields about 0.69 acres. Answers such as 0.34 or 1.38 result from halving or doubling the area incorrectly, and 0.55 does not match the correct division.

Under North Carolina law, when must a broker first review the Working With Real Estate Agents Disclosure with a consumer?

• a.Only at the closing table
• b.Only after a written offer is prepared
• c.Whenever the broker feels it is appropriate
• d.At first substantial contact with the consumer✓

North Carolina requires brokers to review the Working With Real Estate Agents Disclosure with a buyer or seller at first substantial contact, meaning before the consumer shares confidential information. Waiting until closing or until an offer is written would defeat the disclosure's purpose of explaining agency options early. The timing is set by Commission rule, not left to the broker's discretion.

In North Carolina, dual agency is permitted only when:

• a.Both the buyer and seller give informed written consent✓
• b.The broker discloses it verbally at closing
• c.The transaction involves commercial property only
• d.It is never permitted under any circumstances

North Carolina allows dual agency, where a firm represents both buyer and seller in the same transaction, only with the informed written consent of both parties. Verbal disclosure at closing is insufficient because consent must be informed and in writing before the conflict arises. Dual agency is not restricted to commercial deals and is not categorically prohibited in North Carolina.

A North Carolina broker receives an earnest money deposit. Where must those funds be held?

• a.In the broker's personal checking account
• b.In a trust or escrow account separate from the broker's own funds✓
• c.In the broker-in-charge's investment account
• d.In cash in the office safe until closing

North Carolina License Law requires client and customer money such as earnest money to be deposited in a trust or escrow account kept separate from the broker's personal or business funds. Commingling those funds with the broker's own money is prohibited and can lead to discipline. Holding deposits in cash or a personal account fails the safeguarding and record-keeping requirements the Commission enforces.

In North Carolina, what is the primary role of the broker-in-charge (BIC) at a real estate office?

• a.To personally close every transaction handled by the office
• b.To guarantee commissions to all affiliated brokers
• c.To supervise the brokers and the trust accounting at that office location✓
• d.To act as the sole agent for all clients of the firm

The broker-in-charge is responsible for supervising the brokers affiliated with an office and overseeing the office's trust account and advertising. The BIC does not have to personally close every deal or serve as agent for every client. The BIC also does not guarantee other brokers' commissions; the role is one of oversight and compliance, not payment guarantees.

North Carolina's Residential Property and Owners' Association Disclosure Statement generally requires a seller of residential real property to:

• a.Guarantee that the property has no defects
• b.Repair all defects before listing
• c.Provide a professional home inspection to the buyer
• d.Disclose known material characteristics and defects or note 'No Representation'✓

North Carolina's disclosure statement asks sellers to reveal known conditions of the property or to answer 'No Representation,' placing the duty on disclosure rather than warranty. The seller need not guarantee the property is defect-free, repair items before listing, or supply an inspection. The form gives buyers information about known conditions while allowing the seller to decline to represent certain items.

North Carolina imposes an excise tax (transfer tax) on deeds at a rate of:

• a.$1 per $500 of value or fraction thereof✓
• b.$5 per $1,000 of value
• c.$2 per $100 of value
• d.A flat $500 per transaction

North Carolina's real estate excise tax is $1 for every $500 of consideration or value, or fraction thereof, and is customarily paid by the seller. The other rates listed overstate the tax; for example, a $200,000 sale produces $400 in excise tax under the $1-per-$500 rule. It is calculated on the sale price, not charged as a flat per-transaction fee.

The standard North Carolina Offer to Purchase and Contract typically uses which mechanism to give the buyer a negotiated period to investigate the property and terminate for any reason?

• a.A statutory three-day rescission period
• b.A due diligence fee and due diligence period✓
• c.An automatic 30-day inspection contingency
• d.A mandatory appraisal contingency

North Carolina's standard form uses a negotiated due diligence period, often paired with a due diligence fee paid to the seller, during which the buyer may investigate and terminate for any reason or no reason. There is no general statutory three-day rescission right for a home purchase, and the inspection period is negotiated rather than a fixed automatic 30 days. Appraisal protections are handled within due diligence, not as a separate mandatory contingency.

In North Carolina, residential real estate closings are conducted under a model in which:

• a.Only real estate brokers may conduct the closing
• b.No attorney involvement is permitted
• c.A licensed attorney supervises the closing and handles the title work✓
• d.Closings are always handled by out-of-state escrow companies

North Carolina follows an attorney-supervised closing model in which a licensed North Carolina attorney handles the title examination and the disbursement of funds. Brokers may facilitate the transaction but do not perform the legal closing work themselves. Out-of-state escrow-only companies do not replace the attorney's role in North Carolina residential closings.

In North Carolina, from whom may an affiliated broker lawfully accept a commission for a real estate transaction?

• a.Only from their own broker-in-charge or firm✓
• b.Directly from the buyer with no firm involvement
• c.From any party who offers to pay them
• d.From the opposing brokerage firm directly

A provisional broker or affiliated broker in North Carolina may accept compensation for brokerage activity only through their own firm or broker-in-charge, not directly from clients or other firms. This keeps compensation flowing through the supervising firm, which is responsible for the broker's conduct. Accepting money directly from a client or the other firm would violate License Law.

A buyer is purchasing a home in a federally designated Special Flood Hazard Area with a federally backed mortgage. What is typically required?

• a.Nothing, because flood insurance is always optional
• b.Flood insurance as a condition of the loan✓
• c.A waiver of all hazard insurance
• d.Private mortgage insurance instead of flood coverage

When a property in a Special Flood Hazard Area is financed with a federally backed or federally regulated loan, the lender must require flood insurance. Standard homeowners hazard policies do not cover flood damage, so a separate flood policy is needed. Private mortgage insurance protects the lender against default and is unrelated to flood risk, so it cannot substitute for flood coverage.

A newly licensed North Carolina broker holds a provisional broker license. To remove the provisional status, the broker must:

• a.Simply renew the license for two years
• b.Pass a second state examination
• c.Open their own brokerage firm
• d.Complete the required post-licensing education within the allowed time✓

A North Carolina provisional broker must complete the mandatory post-licensing education courses within the allowed period to remove the provisional status and become a full broker. Merely renewing, opening a firm, or retaking the exam does not satisfy this requirement. Failing to complete post-licensing education on time results in the license becoming inactive.

Under North Carolina's Tenant Security Deposit Act, a landlord who collects a residential security deposit must:

• a.Keep the deposit as additional rent
• b.Return the deposit only if the tenant stays two years
• c.Hold the deposit in a trust account or post a bond and account for it after move-out✓
• d.Deposit it into the landlord's personal spending account

North Carolina's Tenant Security Deposit Act requires residential landlords to hold deposits in a trust account with a licensed North Carolina bank or post a bond, and to provide an accounting of any deductions after the tenancy ends. The deposit is the tenant's money held in trust, not additional rent or personal funds. Return is tied to the lawful accounting process, not an arbitrary length of stay.