NC REAL ESTATE UNIT 7 EXAM QUESTIONS
AND ANSWERS
A seller confided to his listing broker that he was eager to sell his property as soon as
possible due to financial hardship. During the term of the listing agreement, the broker's
sister moved to the town where the listed property was located. Knowing that the seller
was becoming desperate and that the listed property had many features that his sister
desired in a house, the broker encouraged his sister to make a low offer on the
property. His sister agreed and the broker helped her prepare a written offer without
entering into any kind of express agency agreement with his sister. When the broker
presented the offer, he did not disclose to the seller his relationship to the prospective
buyer. The seller thought the offer was very low, but the broker encouraged him to
make a counteroffer and eventually the parties went under contract. Given these facts,
each of the following statements is true EXCEPT: - Answer- The broker should
DEFINITELY have disclosed this relationship and should DEFINITELY have never
given advice to a buyer (any buyer) to make a low offer on a property where the broker
represented the seller. It is also very likely that a court would find that this broker is
acting as a buyer's agent even though they don't have a buyer agency agreement. This
is the definition of implied agency...acting as if a broker has authority even though the
client never actually hired them.
The North Carolina General Assembly has declared the following item to be a material
fact about listed property in North Carolina - Answer- Items B, C, D are all stigmatized
properties which are not material facts. Polybutylene piping is a material fact in NC
Which of the following statements is true regarding a dual agency transaction in North
Carolina? - Answer- In statement I, the broker shows the property as a "subagent of the
seller". This means the broker is affiliated with the listing firm....they work for the firm
who represents the seller and therefore they personally also represent the seller. If they
later (subsequently) execute a buyer agency agreement with the same buyer on that
same property, the firm would then be representing both the seller and the buyer in the
transaction....this creates dual agency. Statement II is correct of all true dual agency
transactions (but not designated dual agency). Because the firm represents both seller
and buyer, it is impossible in dual agency to seek the best possible outcome for one
without harming the other.
Sub-agent - Answer- A subagent is a real estate agent or broker who brings in the buyer
to purchase a property, but he is not the property's listing agent. The subagent usually
earns a portion of the commission. Subagents are rare today because of the popularity
of buyer's agents and due to liability concerns.
,Dual agency - Answer- is when a real estate agent works with the buyer and the seller
on the same transaction simultaneously. Here's a common scenario on when dual
agency may occur:
A real estate agent is hired to sell the home of a client named Mary. That real estate
agent has a second client, named Rob, who is in the market to buy a home. Rob tours
Mary's home and decides he wants to purchase the home. Because both Rob and Mary
are clients of the same real estate agent, the transaction is considered an example of
dual agency. Another example of dual agency is if Rob and Mary are represented by
different real estate agents, but both real estate agents work for the same brokerage
company.
A third example is if a real estate agent is hosting an open house and meets a buyer
who is interested in buying the home. If the buyer is not represented by a real estate
agent, the buyer may request that the seller's agent represent them in the transaction. If
both the buyer and seller are in agreement that the same real estate agent can
represent both parties, the realtor becomes a dual agent in the transaction.
First substantial contact occurs when a - Answer- First substantial contact is not first
contact. It is the first time a buyer or seller gives personal information about themselves
that could be used against them in the transaction.
Which of the following is required to have an active real estate broker license in order to
receive compensation for selling or leasing real estate in North Carolina? - Answer- A(A
person leasing personally-owned rental properties) does not require a license as it is not
done for someone else. B(An attorney-at-law when selling properties of an estate
he/she is administering for the family) and C(An officer or an employee of a corporation
selling or leasing corporate-owned properties) are both exceptions to the license law
rule and thus do not require a license. correct is D(The son of an elderly couple who is
hired by his parents to lease units in the apartment building the couple owns)
Sea Coast Real Estate has executed a written agency agreement with Billy the buyer.
Which of the following would end that agency agreement? - Answer- Destruction of the
property only terminates seller (listing) agency agreements. Since the buyer hires their
firm to help purchase ANY property, the agreement would continue until the buyer found
another acceptable property or the agreement expired. Once the buyer purchases ANY
property, the buyer agency agreement comes to an end.
A North Carolina real estate broker properly explained real estate agency options to a
prospective buyer who then chose to enter into a written buyer agency agreement with
the broker without authorizing dual agency. The broker showed the prospective buyer
fifteen houses listed by other companies before the client asked to see a property listed
by the brokerÂ's firm. Given these circumstances, what kind of authority to act as a dual
agent must the broker obtain in order to proceed with the transaction? - Answer-
Because the buyer has a WRITTEN buyer agency agreement, the firm is required to
have WRITTEN permission from BOTH parties prior to any dual agency showings. If the
buyer were working with the firm under an oral buyer agency agreement, the firm could
obtain oral approval from both the buyer and the seller for the showing.
, What is the difference between willful omission and willful misrepresentation? - Answer-
Willful omission - is purposely not disclosing something known about the property that is
a material fact. The agent has not made a statement orally or in writing. Example: The
owner knows that the road is about to be widened causing a significant increase in
traffic and the loss of a substantial portion of the front yard, but does not inform potential
buyers.
Willful misprepresentation - is lying. The broker knows that the statement that they have
made is a lie. Example: The agent knows that the basement floods during spring rains,
but tells the buyer that there are no issues with regard to flooding.
What is caveat emptor? - Answer- Caveat emptor means "let the buyer beware". There
are very few items for which the seller must disclose and the duty of disclosure falls to
the licensed real estate agents. The seller cannot conceal problems (making it
impossible to discover), but they can choose to make "no representation". NC is a
caveat emptor state.
What is First Substantial Contact? What does it trigger? - Answer- FSC - Point in time
that the coversation shifts from facts about the property to information that is personal /
confidential and may weaken a party's bargaining position. It requires the broker to
discuss the Working With Real Estate Agent's Brochure - where agency is explained
and then the customer/client decides how to proceed.
For a buyer it can occur at any time up to a broker showing a home, where the broker is
opening the door for the buyer.
For a seller it can occur at any time up to the listing presentation, where the broker is
actively seeking the listing.
What is the Working with Real Estate Agents Brochure? - Answer- A consumer
protection form - it is the real estate version of the miranda warning - anything you say
can and will be used against you unless you are my client. It is triggered by first
substantial contact, where the conversation shifts from facts about a property to
personal/confidential information.
It is NOT A CONTRACT and only explains agency. The broker must discuss agency
options - exclusive, dual, designated dual and subagency. The customer/client signs to
confirm the receipt of the brochure and discussion. A customer/client can refuse to sign
- and the broker would need to document it on the signature page of the form. The
broker may continue to work for the client or with the customer.
What is exclusive representation? - Answer- Where the firm only represents one party -
buyer or seller in the sales transaction / tenant or landlord in a lease transaction.
What is the difference between working "with" a buyer and working "for" a buyer? -
Answer- Working With = no agency representation (the agent is agent or subagent of
the seller)
AND ANSWERS
A seller confided to his listing broker that he was eager to sell his property as soon as
possible due to financial hardship. During the term of the listing agreement, the broker's
sister moved to the town where the listed property was located. Knowing that the seller
was becoming desperate and that the listed property had many features that his sister
desired in a house, the broker encouraged his sister to make a low offer on the
property. His sister agreed and the broker helped her prepare a written offer without
entering into any kind of express agency agreement with his sister. When the broker
presented the offer, he did not disclose to the seller his relationship to the prospective
buyer. The seller thought the offer was very low, but the broker encouraged him to
make a counteroffer and eventually the parties went under contract. Given these facts,
each of the following statements is true EXCEPT: - Answer- The broker should
DEFINITELY have disclosed this relationship and should DEFINITELY have never
given advice to a buyer (any buyer) to make a low offer on a property where the broker
represented the seller. It is also very likely that a court would find that this broker is
acting as a buyer's agent even though they don't have a buyer agency agreement. This
is the definition of implied agency...acting as if a broker has authority even though the
client never actually hired them.
The North Carolina General Assembly has declared the following item to be a material
fact about listed property in North Carolina - Answer- Items B, C, D are all stigmatized
properties which are not material facts. Polybutylene piping is a material fact in NC
Which of the following statements is true regarding a dual agency transaction in North
Carolina? - Answer- In statement I, the broker shows the property as a "subagent of the
seller". This means the broker is affiliated with the listing firm....they work for the firm
who represents the seller and therefore they personally also represent the seller. If they
later (subsequently) execute a buyer agency agreement with the same buyer on that
same property, the firm would then be representing both the seller and the buyer in the
transaction....this creates dual agency. Statement II is correct of all true dual agency
transactions (but not designated dual agency). Because the firm represents both seller
and buyer, it is impossible in dual agency to seek the best possible outcome for one
without harming the other.
Sub-agent - Answer- A subagent is a real estate agent or broker who brings in the buyer
to purchase a property, but he is not the property's listing agent. The subagent usually
earns a portion of the commission. Subagents are rare today because of the popularity
of buyer's agents and due to liability concerns.
,Dual agency - Answer- is when a real estate agent works with the buyer and the seller
on the same transaction simultaneously. Here's a common scenario on when dual
agency may occur:
A real estate agent is hired to sell the home of a client named Mary. That real estate
agent has a second client, named Rob, who is in the market to buy a home. Rob tours
Mary's home and decides he wants to purchase the home. Because both Rob and Mary
are clients of the same real estate agent, the transaction is considered an example of
dual agency. Another example of dual agency is if Rob and Mary are represented by
different real estate agents, but both real estate agents work for the same brokerage
company.
A third example is if a real estate agent is hosting an open house and meets a buyer
who is interested in buying the home. If the buyer is not represented by a real estate
agent, the buyer may request that the seller's agent represent them in the transaction. If
both the buyer and seller are in agreement that the same real estate agent can
represent both parties, the realtor becomes a dual agent in the transaction.
First substantial contact occurs when a - Answer- First substantial contact is not first
contact. It is the first time a buyer or seller gives personal information about themselves
that could be used against them in the transaction.
Which of the following is required to have an active real estate broker license in order to
receive compensation for selling or leasing real estate in North Carolina? - Answer- A(A
person leasing personally-owned rental properties) does not require a license as it is not
done for someone else. B(An attorney-at-law when selling properties of an estate
he/she is administering for the family) and C(An officer or an employee of a corporation
selling or leasing corporate-owned properties) are both exceptions to the license law
rule and thus do not require a license. correct is D(The son of an elderly couple who is
hired by his parents to lease units in the apartment building the couple owns)
Sea Coast Real Estate has executed a written agency agreement with Billy the buyer.
Which of the following would end that agency agreement? - Answer- Destruction of the
property only terminates seller (listing) agency agreements. Since the buyer hires their
firm to help purchase ANY property, the agreement would continue until the buyer found
another acceptable property or the agreement expired. Once the buyer purchases ANY
property, the buyer agency agreement comes to an end.
A North Carolina real estate broker properly explained real estate agency options to a
prospective buyer who then chose to enter into a written buyer agency agreement with
the broker without authorizing dual agency. The broker showed the prospective buyer
fifteen houses listed by other companies before the client asked to see a property listed
by the brokerÂ's firm. Given these circumstances, what kind of authority to act as a dual
agent must the broker obtain in order to proceed with the transaction? - Answer-
Because the buyer has a WRITTEN buyer agency agreement, the firm is required to
have WRITTEN permission from BOTH parties prior to any dual agency showings. If the
buyer were working with the firm under an oral buyer agency agreement, the firm could
obtain oral approval from both the buyer and the seller for the showing.
, What is the difference between willful omission and willful misrepresentation? - Answer-
Willful omission - is purposely not disclosing something known about the property that is
a material fact. The agent has not made a statement orally or in writing. Example: The
owner knows that the road is about to be widened causing a significant increase in
traffic and the loss of a substantial portion of the front yard, but does not inform potential
buyers.
Willful misprepresentation - is lying. The broker knows that the statement that they have
made is a lie. Example: The agent knows that the basement floods during spring rains,
but tells the buyer that there are no issues with regard to flooding.
What is caveat emptor? - Answer- Caveat emptor means "let the buyer beware". There
are very few items for which the seller must disclose and the duty of disclosure falls to
the licensed real estate agents. The seller cannot conceal problems (making it
impossible to discover), but they can choose to make "no representation". NC is a
caveat emptor state.
What is First Substantial Contact? What does it trigger? - Answer- FSC - Point in time
that the coversation shifts from facts about the property to information that is personal /
confidential and may weaken a party's bargaining position. It requires the broker to
discuss the Working With Real Estate Agent's Brochure - where agency is explained
and then the customer/client decides how to proceed.
For a buyer it can occur at any time up to a broker showing a home, where the broker is
opening the door for the buyer.
For a seller it can occur at any time up to the listing presentation, where the broker is
actively seeking the listing.
What is the Working with Real Estate Agents Brochure? - Answer- A consumer
protection form - it is the real estate version of the miranda warning - anything you say
can and will be used against you unless you are my client. It is triggered by first
substantial contact, where the conversation shifts from facts about a property to
personal/confidential information.
It is NOT A CONTRACT and only explains agency. The broker must discuss agency
options - exclusive, dual, designated dual and subagency. The customer/client signs to
confirm the receipt of the brochure and discussion. A customer/client can refuse to sign
- and the broker would need to document it on the signature page of the form. The
broker may continue to work for the client or with the customer.
What is exclusive representation? - Answer- Where the firm only represents one party -
buyer or seller in the sales transaction / tenant or landlord in a lease transaction.
What is the difference between working "with" a buyer and working "for" a buyer? -
Answer- Working With = no agency representation (the agent is agent or subagent of
the seller)
