NC Post Licensing 302 Elite Prep Guide:
Detailed Answer Key, Scenario-Based
Practice Questions & Exam Review Toolkit
Topic 3: Due Diligence, Inspections, and
Contingencies.
Q1. What best describes a buyer performing due diligence?
A) The buyer meets with a lender to get pre-qualified, arranges a home inspection and
appraisal, asks questions, and investigates any other areas of the property the buyer feels may
need it.
B) The buyer signs the purchase agreement without any investigation.
C) The buyer relies solely on the seller's representations.
D) The buyer waives all inspection rights.
✔ Correct Answer: A
Due diligence is the buyer's reasonable investigation of the property's condition, title, zoning,
and other material factors before closing.
Q2. Under the NC Standard Offer to Purchase and Contract (Form 2-T), what is the due diligence
period?
A) The time for the seller to find a new home.
B) The negotiated time during which the buyer may inspect the property and terminate for any
reason.
C) The time for the lender to approve the loan.
D) The time for the attorney to prepare closing documents.
✔ Correct Answer: B
The due diligence period is a specific number of days negotiated by the parties during which the
buyer may conduct inspections and terminate for any reason (or no reason).
Q3. What is the due diligence fee?
A) A non-refundable fee paid directly to the seller for the right to conduct due diligence.
B) An additional earnest money deposit held in escrow.
,C) A fee paid to the buyer's agent.
D) A refundable deposit for the home inspection.
✔ Correct Answer: A
The due diligence fee is paid directly to the seller (not held in escrow) and is non-refundable
unless the seller breaches the contract.
Q4. If a buyer terminates the contract during the due diligence period for any reason, what
happens to the due diligence fee?
A) It is returned to the buyer in full.
B) It is split 50/50 between buyer and seller.
C) It is retained by the seller.
D) It is paid to the buyer's agent.
✔ Correct Answer: C
The due diligence fee is non-refundable to the buyer if the buyer terminates for any reason
allowed under the contract (including no reason).
Q5. What happens to the earnest money if a buyer terminates during the due diligence period?
A) Earnest money is forfeited to the seller.
B) Earnest money is returned to the buyer.
C) Earnest money is split 50/50.
D) Earnest money is paid to the listing broker.
✔ Correct Answer: B
Earnest money is refundable to the buyer if the buyer terminates during the due diligence
period. The seller keeps only the due diligence fee.
Q6. A buyer pays a $2,000 due diligence fee and $5,000 earnest money. The buyer terminates
during the due diligence period. How much does the buyer lose?
A) $7,000
B) $5,000
C) $2,000
D) $0
✔ Correct Answer: C
The buyer loses only the $2,000 due diligence fee. The $5,000 earnest money is returned.
, Q7. A buyer pays a $3,000 due diligence fee and $10,000 earnest money. The seller breaches
the contract before closing. What happens?
A) Buyer gets only earnest money back.
B) Buyer gets only due diligence fee back.
C) Buyer gets both earnest money and due diligence fee back, plus may sue for damages.
D) Buyer gets nothing.
✔ Correct Answer: C
If the seller breaches, the buyer is entitled to return of both the earnest money and the due
diligence fee, plus potential damages.
Q8. What is the due diligence period primarily intended to allow?
A) The seller to find a replacement property.
B) The buyer to conduct inspections, tests, and investigations.
C) The lender to process the loan.
D) The attorney to record the deed.
✔ Correct Answer: B
The due diligence period gives the buyer time to investigate the property's condition, title,
environmental issues, zoning, and other concerns.
Q9. Which of the following is NOT something a buyer can typically investigate during the due
diligence period?
A) Home inspection
B) Pest inspection
C) The seller's personal finances to ensure the seller can go through with the transaction
D) Zoning and land use
✔ Correct Answer: C
A buyer may not review the seller's personal finances. The buyer's investigation is limited to the
property, not the seller's financial status.
Q10. Under Form 2-T, if no due diligence period is specified, what happens?
A) The contract is void.
B) There is no due diligence period, and the buyer accepts the property "as is."
Detailed Answer Key, Scenario-Based
Practice Questions & Exam Review Toolkit
Topic 3: Due Diligence, Inspections, and
Contingencies.
Q1. What best describes a buyer performing due diligence?
A) The buyer meets with a lender to get pre-qualified, arranges a home inspection and
appraisal, asks questions, and investigates any other areas of the property the buyer feels may
need it.
B) The buyer signs the purchase agreement without any investigation.
C) The buyer relies solely on the seller's representations.
D) The buyer waives all inspection rights.
✔ Correct Answer: A
Due diligence is the buyer's reasonable investigation of the property's condition, title, zoning,
and other material factors before closing.
Q2. Under the NC Standard Offer to Purchase and Contract (Form 2-T), what is the due diligence
period?
A) The time for the seller to find a new home.
B) The negotiated time during which the buyer may inspect the property and terminate for any
reason.
C) The time for the lender to approve the loan.
D) The time for the attorney to prepare closing documents.
✔ Correct Answer: B
The due diligence period is a specific number of days negotiated by the parties during which the
buyer may conduct inspections and terminate for any reason (or no reason).
Q3. What is the due diligence fee?
A) A non-refundable fee paid directly to the seller for the right to conduct due diligence.
B) An additional earnest money deposit held in escrow.
,C) A fee paid to the buyer's agent.
D) A refundable deposit for the home inspection.
✔ Correct Answer: A
The due diligence fee is paid directly to the seller (not held in escrow) and is non-refundable
unless the seller breaches the contract.
Q4. If a buyer terminates the contract during the due diligence period for any reason, what
happens to the due diligence fee?
A) It is returned to the buyer in full.
B) It is split 50/50 between buyer and seller.
C) It is retained by the seller.
D) It is paid to the buyer's agent.
✔ Correct Answer: C
The due diligence fee is non-refundable to the buyer if the buyer terminates for any reason
allowed under the contract (including no reason).
Q5. What happens to the earnest money if a buyer terminates during the due diligence period?
A) Earnest money is forfeited to the seller.
B) Earnest money is returned to the buyer.
C) Earnest money is split 50/50.
D) Earnest money is paid to the listing broker.
✔ Correct Answer: B
Earnest money is refundable to the buyer if the buyer terminates during the due diligence
period. The seller keeps only the due diligence fee.
Q6. A buyer pays a $2,000 due diligence fee and $5,000 earnest money. The buyer terminates
during the due diligence period. How much does the buyer lose?
A) $7,000
B) $5,000
C) $2,000
D) $0
✔ Correct Answer: C
The buyer loses only the $2,000 due diligence fee. The $5,000 earnest money is returned.
, Q7. A buyer pays a $3,000 due diligence fee and $10,000 earnest money. The seller breaches
the contract before closing. What happens?
A) Buyer gets only earnest money back.
B) Buyer gets only due diligence fee back.
C) Buyer gets both earnest money and due diligence fee back, plus may sue for damages.
D) Buyer gets nothing.
✔ Correct Answer: C
If the seller breaches, the buyer is entitled to return of both the earnest money and the due
diligence fee, plus potential damages.
Q8. What is the due diligence period primarily intended to allow?
A) The seller to find a replacement property.
B) The buyer to conduct inspections, tests, and investigations.
C) The lender to process the loan.
D) The attorney to record the deed.
✔ Correct Answer: B
The due diligence period gives the buyer time to investigate the property's condition, title,
environmental issues, zoning, and other concerns.
Q9. Which of the following is NOT something a buyer can typically investigate during the due
diligence period?
A) Home inspection
B) Pest inspection
C) The seller's personal finances to ensure the seller can go through with the transaction
D) Zoning and land use
✔ Correct Answer: C
A buyer may not review the seller's personal finances. The buyer's investigation is limited to the
property, not the seller's financial status.
Q10. Under Form 2-T, if no due diligence period is specified, what happens?
A) The contract is void.
B) There is no due diligence period, and the buyer accepts the property "as is."
