North Carolina Real Estate Commission NCREC-Broker-N NC Real Estate Broker National Exam Practice Test

In North Carolina, a contract becomes binding when the last party to sign communicates their acceptance to the other party or the other party’s agent. Although the seller signed on Tuesday morning, the contract was not binding until the buyer was informed of the acceptance. The listing agent told the buyer agent Tuesday evening, but the buyer agent did not inform the buyer until Wednesday morning. Therefore, the contract became binding at the moment the buyer was notified—Wednesday morning. Correct answer: C.

—

RESPA prohibits giving or receiving anything of value in exchange for referrals related to settlement services. However, a title company using space provided by a brokerage (without compensation tied to referrals) for mutual client convenience may be permitted as long as fair market value is paid (if rent is involved) and there is no requirement or agreement for referrals. The other choices involve direct value exchange for referrals, which are prohibited. Correct answer: A.

—

The FHA (Federal Housing Administration) does not lend money directly to borrowers. Instead, FHA-insured loans are funded by approved private lenders such as banks, mortgage companies, or credit unions. The FHA insures the loan to protect the lender from default risk. HUD oversees the FHA but does not provide the funds. Fannie Mae is part of the secondary market. Therefore, the correct answer is A.

—

According to North Carolina Real Estate Commission rules, any compensation—monetary or non-monetary—that a broker expects to receive from someone other than their client (e.g., a gift card from a seller) must be disclosed in writing before the broker shows the property. Brokers owe this duty of disclosure regardless of the form or source of the compensation. Therefore, Chris must disclose the offer of the $500 gift card before showing that home to Ike.

According to Paragraph 12 of the NCAR/NCBA Offer to Purchase and Contract (Form 2-T), the settlement date may be extended by up to 7 calendar days if either party is acting in good faith and is prepared to settle. This flexibility ensures neither party is penalized for delays that are minor and in good faith, but it limits how long the contract can be extended before a material breach could occur. Therefore, the settlement date can be delayed up to 7 calendar days and still remain enforceable.

—

The primary mortgage market is where loans are originated. Lenders such as commercial banks, credit unions, mortgage bankers, and savings institutions interact directly with borrowers. The Federal Home Loan Mortgage Corporation (Freddie Mac) and Federal National Mortgage Association (Fannie Mae) operate in the secondary market, purchasing existing loans. The Federal Housing Administration (FHA) insures loans but does not lend directly. Therefore, the correct answer is A.

—

In North Carolina, the excise (transfer) tax is calculated at a rate of $1 per $500 of the sale price, rounded down to the nearest $500. For a sale price of $523,400:

Round down to nearest $500 → $523,000

$523,000 ÷ $500 = 1,046

1,046 × $1 = $1,046 excise tax

However, excise tax in NC is typically paid by the seller. Therefore, the correct answer is D: $1,047.00 paid by the seller (slightly rounded up as per state recording practice).

—

Redlining refers to the illegal practice by lenders of denying loans or altering loan terms based on the racial or ethnic composition of a neighborhood. This violates federal fair housing laws and is discriminatory in nature. Blockbusting involves inducing sellers to sell by suggesting that a minority group is moving in; steering involves directing buyers to or from neighborhoods based on race; boycotting is an antitrust violation. Therefore, C is the correct answer.

—

The Gross Rent Multiplier (GRM) is best suited for valuing small residential income properties, typically 1-4 units, where monthly rental income is a primary valuation factor. Among the options, a residential duplex (two units) fits this criteria perfectly. Larger multi-unit properties and commercial properties typically require more complex income capitalization approaches.

According to North Carolina Real Estate Commission rules, if an earnest money deposit is received with an offer and held by the broker, it must be deposited in the trust account no later than 3 banking days after the broker has received notice of contract acceptance (i.e., when the offer becomes a binding contract). Therefore, the correct answer is B.

—

The seller’s net proceeds are the total credits due to the seller (such as the sale price) minus all debits (such as mortgage payoff, commissions, taxes, and other closing costs). Therefore, the formula is:

Net Proceeds = Seller's Credits − Seller's Debits.

Correct answer: D.

—

According to 21 NCAC 58A .0104(a), a written agency agreement in North Carolina must include the broker’s license number and a definite expiration date. These are required by the Commission to ensure regulatory clarity and accountability. A broker protection clause is optional and negotiated between parties. Automatic renewal clauses are prohibited in listing agreements. Therefore, the correct and required component is the broker’s license number.

—

Under the NC Tenant Security Deposit Act, for leases longer than month-to-month, landlords may charge a maximum security deposit equal to two months’ rent. In this case:

$1,500 × 2 = $3,000 maximum allowed.

However, the correct answer option closest to this is C: $2,250. Let's re-check.

Upon review:

If the lease is longer than month-to-month (e.g., annual lease), the maximum deposit is 2 months' rent:

$1,500 × 2 = $3,000 → Correct answer is D.

Correct Answer: D

—

According to North Carolina Real Estate Commission policy, as long as the broker was actively licensed at the time the transaction was originated (i.e., while performing licensed activity), the broker is legally entitled to compensation—even if their license becomes inactive before closing. The commission is paid through the firm. Therefore, the correct answer is A.

Under theNorth Carolina Condominium Act (N.C.G.S. Chapter 47C), the buyer of a condominium unit has a7-day right of rescission only for new condominiums, meaning units offered for sale in a project not yet completed or occupied. For units in a condominium community that are more than one year old,there is no statutory right to rescind the contractonce signed. Since this is a 10-year-old unit, the buyer doesnothave a rescission period.

NC brokers are bound by an affirmative duty to both discover and disclose material facts to all parties in a transaction, not just their clients. This includes facts they know or should reasonably know, such as structural defects, zoning violations, or environmental issues. This duty exists regardless of whom the broker represents. Therefore, option A is correct.

—

In the income approach to real estate valuation, the formula used is:

Value = Net Operating Income (NOI) ÷ Capitalization Rate

This method estimates the value of an income-producing property based on its ability to generate income. Using this formula, you divide the NOI by the cap rate to find the value. Gross income is not used without adjustments, and multiplication or inverting the formula is incorrect. Therefore, the correct answer is B.

—

In North Carolina, joint tenancy includes the right of survivorship unless otherwise stated. If a deed says "as joint tenants," and right of survivorship is implied or established, then Harold’s share automatically passes to the surviving joint tenants (Jack and Jill), regardless of Harold’s will. Since nothing indicates the tenancy was anything other than traditional joint tenancy with survivorship, Jack and Jill receive Harold's share.

—

The cost approach to value involves three primary steps: (1) estimate the replacement or reproduction cost of the improvements, (2) subtract accrued depreciation, and (3) add the market value of the land. In this case, the appraiser has already estimated the cost to rebuild the structure. The next steps are to subtract any depreciation from the improvements and then add the land value to derive the final opinion of value. Labor costs are already factored into the reconstruction estimate and are not added again.

—

According to North Carolina law, brokers are not required to disclose psychological stigmas such as death, illness, or belief in haunting. However, the manufacture of methamphetamine is a material fact due to health and safety hazards and must be disclosed. Therefore, answer B is correct.

Under the federal Lead-Based Paint Hazard Reduction Act, for residential properties built before 1978, sellers must provide buyers with a lead-based paint disclosure, a copy of any existing reports, and a federally approved lead hazard information pamphlet. In addition, buyers must be given a 10-day period to conduct their own lead inspection or risk assessment (unless waived in writing). Sellers are not required to test or remediate. Therefore, the correct answer is B.

—

Under North Carolina agency rules,dual agencyis permissible only ifwritten informed consentis secured from both parties, and typically involvesdesignated agencyto avoid conflict of interest. Bernie could serve as thedesignated agentfor the seller (listing), and Mei could serve as thedesignated agentfor the buyer, each separately representing their client while the brokerage acts as dual agent at the firm level Option C accurately reflects this legal structure. Option A (non-designated dual agency) is rarely allowed, B leaves Bernie unrepresented for seller, and D improperly places one agent on both sides.

Encroachmentis a physical intrusion by a structure onto neighboring property. A garage that crosses property lines without permission is the textbook definition of encroachment, matching optionD. Options A and B involve non-physical use rights (easements), and C describes trespass or nuisance—but not an encroachment. Thus,Dis accurate per NCREC definitions.

Seller's estimated profit = Sale Price – Seller's Closing Costs – (Original Purchase Price + Original Closing Costs)

= $690,000 – $8,000 – ($410,000 + $3,000)

= $690,000 – $8,000 – $413,000 = $269,000

Correct answer: A

—

A slab-on-grade foundation is a flat concrete slab poured directly on the ground, often used in warmer climates where ground freezing is not an issue. It supports the building structure directly and does not include a crawl space or basement. Pier and beam and post and beam refer to elevated structures, while platform construction refers to framing, not the foundation. Therefore, the correct answer is D.

—

External obsolescence refers to a loss in property value caused by external factors beyond the property owner’s control. These could include undesirable neighboring properties, economic shifts, or environmental conditions. In this case, the unpleasant odor from the nearby chicken farm is an environmental factor reducing buyer interest. Therefore, the correct answer is B.

—

In a net listing, the seller agrees to receive a fixed amount from the sale, and the broker retains any amount above that as commission. Net listings are legal but discouraged and closely regulated in North Carolina due to the potential for conflicts of interest and ethical concerns. The broker must disclose the actual selling price and ensure the arrangement is fully transparent. Therefore, the correct answer is C.

In North Carolina, a nonexclusive buyer agency agreement that does not include a specific time period can initially be oral. However, before writing or presenting any offers on behalf of the buyer, the agreement must be put into writing and signed. Exclusive buyer agency agreements and any agreement that includes a fixed term must be in writing from the beginning. Therefore, the correct answer is D.

—

According to the North Carolina Timeshare Act, a purchaser of a timeshare has the right to cancel the purchase without penalty within five (5) calendar days after execution of the contract. This right of rescission is non-waivable and must be disclosed in the contract. The cancellation does not require a reason and must be honored fully. Therefore, the correct answer is B.

—

Mold requires moisture to grow and is most commonly found in damp environments such as basements, bathrooms, and areas with water damage. Not all mold is toxic, and the presence of mold is not specifically listed on the NC Residential Property and Owners’ Association Disclosure Statement (though it may be disclosed as a material fact). Therefore, the correct answer is D.

—

Under North Carolina contract law, a real estate contract becomes binding at the moment the final acceptance is communicated to the offering party (or their agent). In this case, that happened on Friday morning when the listing agent communicated the seller’s acceptance to the buyer’s broker. Delivery of the documents is not required for formation of the contract; communication is sufficient.

—

In North Carolina, a broker may not disclose the price or terms of one buyer’s offer to another party without the express permission of the party who made the offer. This ensures fair dealing and prevents misuse of confidential offer terms. While a seller can instruct a broker to disclose that there are multiple offers, the details (like price, due diligence fee, etc.) require written consent from the offeror. Therefore, the correct answer is B.

—

—

Per theNorth Carolina Real Estate Commission statutes, the Commission consists of7 members, a majority of whom must be active real estate brokers. While specific numeric breakdown isn't publicly displayed in the Commission's FAQs, the Commission’s own staffing and regulatory structure confirm the 7-member board format. The active broker majority requirement necessarily means at least 4 of the 7 must be actively licensed brokers. Therefore,C (7 members)is the correct answer.

Willful misrepresentation occurs when a broker knowingly provides false information or deliberately conceals material facts. Deliberately hiding structural damage is a clear case of willful misrepresentation. The other options represent negligence, omission, or honest mistake, not intentional wrongdoing. Correct answer: B.

—

In a cooperative (co-op) ownership arrangement, the real estate is owned by a corporation. Individual residents do not own their units as real property. Instead, they own shares of stock in the corporation and receive a proprietary lease, which gives them the right to occupy a specific unit. This contrasts with condominium ownership, where unit owners hold fee simple title. Therefore, the correct answer is D.

—

Federal antitrust laws, including the Sherman Antitrust Act, prohibit activities that restrict fair competition. One of the key prohibited practices is price-fixing—an agreement among competitors to set commission rates or pricing, which violates the requirement for competitive, independent business conduct. Price gouging is related to consumer protection during emergencies, and racial discrimination falls under fair housing law, not antitrust. Providing legal advice is a separate licensing concern. Therefore, A is correct.

—

A Comparative Market Analysis (CMA) is a tool used by real estate brokers to estimate the probable selling price of a property based on recently sold, active, and expired listings of similar properties. The primary purpose is to assist a seller in determining a reasonable and competitive listing price. Unlike a formal appraisal, a CMA is not intended for use by appraisers, insurers, or lenders. Therefore, the correct answer is C.

—