Free North Carolina Real Estate Practice Exam

Q1.A seller deliberately fails to disclose a known roof defect on the SPDS. After closing, the buyer discovers it and sues. What is the most likely legal theory?

• A.Strict liability — sellers are automatically liable for all undisclosed defects
• B.Fraudulent misrepresentation or concealment — the seller had knowledge and failed to disclose
• C.Breach of warranty — the SPDS operates as a warranty of property condition
• D.Negligence per se — any SPDS omission is automatically a statutory violation

Q2.A broker represents the seller in a transaction involving a federally related mortgage loan. At closing, the buyer's lender provides a Closing Disclosure that shows a $450 origination fee that was not listed on the Loan Estimate. The broker notices this discrepancy but the buyer seems unaware. Under RESPA, what is the broker's most appropriate course of action?

• A.Advise the buyer to review the discrepancy with their lender before signing, as RESPA requires that the Closing Disclosure reflect charges consistent with the Loan Estimate within applicable tolerance limits.
• B.Proceed with closing because RESPA tolerances allow unlimited increases in origination fees between the Loan Estimate and Closing Disclosure.
• C.Instruct the title company to remove the fee from the closing statement since the broker has authority to modify lender-imposed charges.
• D.Ignore the discrepancy because the broker's fiduciary duty runs only to the seller, and the buyer's loan terms are not the broker's concern.

Q3.North Carolina law requires sellers of residential real property to disclose information about mineral and oil/gas rights on the property using which form?

• A.The Offer to Purchase and Contract (Form 2-T)
• B.The Residential Property and Owners' Association Disclosure Statement
• C.A separate Mineral and Oil and Gas Rights Mandatory Disclosure Statement
• D.The Working with Real Estate Agents Disclosure

Q4.A landlord instructs a property manager to only show available units to applicants of a specific race. The property manager should:

• A.Follow the landlord's instructions since the landlord is the client
• B.Comply only if the building is a small owner-occupied property
• C.Refuse the instruction because complying would violate the federal Fair Housing Act
• D.Ask the landlord to put the instruction in writing before complying

Q5.A seller in North Carolina sells a residential property for $320,000. How is the North Carolina Excise Tax (also called the deed stamp tax or transfer tax) calculated, and approximately how much will the seller owe?

• A.$1.00 per $500 of the sales price, totaling $640
• B.$2.00 per $1,000 of the sales price, totaling $640
• C.$1.00 per $1,000 of the sales price, totaling $320
• D.$2.00 per $500 of the sales price, totaling $1,280

Q6.RESPA prohibits which of the following practices in connection with a federally related mortgage loan?

• A.Charging a loan origination fee
• B.Requiring title insurance as a loan condition
• C.Paying a kickback or referral fee to a settlement service provider
• D.Collecting escrow funds for property taxes

Q7.A borrower takes out an adjustable-rate mortgage (ARM). Under the Truth in Lending Act and Regulation Z, which disclosure is the lender required to provide specifically related to the ARM's rate adjustment features?

• A.A fixed payment schedule for the life of the loan
• B.A Consumer Handbook on Adjustable Rate Mortgages and loan-specific ARM disclosure
• C.A written guarantee that the interest rate will not exceed the initial rate by more than 2%
• D.A comparison of the ARM to all currently available fixed-rate products

Q8.Wire fraud in real estate transactions most commonly occurs when:

• A.A seller fails to pay off an existing mortgage at closing
• B.A buyer's lender miscalculates closing costs
• C.A title company fails to record the deed within 24 hours
• D.A cybercriminal intercepts email communications and sends fraudulent wiring instructions

Q9.A broker managing a real estate firm discovers that one of her affiliated salespersons has been telling prospective buyers that the brokerage represents only the buyer's interests, without disclosing that the brokerage also holds a listing on the property being shown. Under general agency law principles, which statement most accurately describes the broker's liability and duty in this situation?

• A.The broker bears supervisory liability for the salesperson's misrepresentation and must immediately correct the disclosure deficiency with the affected buyers.
• B.The broker has no liability because the salesperson acted outside the scope of employment by making an unauthorized representation.
• C.The broker is insulated from liability provided she had a written independent contractor agreement in place with the salesperson.
• D.The broker's liability is limited to returning any commission earned on the transaction to the aggrieved buyers.

Q10.A newly licensed salesperson affiliated with a broker accepts a listing and signs the listing agreement using only her own name, without any reference to the employing broker. As the supervising broker, what is your primary legal exposure in this situation?

• A.No exposure exists because the salesperson holds a valid license and is authorized to enter listing agreements independently.
• B.The broker faces potential disciplinary action for failure to supervise, and the listing agreement may be unenforceable because a salesperson cannot contract in her own name — only the employing broker may be a party to a listing agreement.
• C.The broker's only obligation is to ratify the agreement within 10 business days to cure the defect, after which full enforceability is restored.
• D.The broker faces liability solely to the seller for breach of the duty of disclosure, but the listing agreement remains fully enforceable.

Q11.A property is held in joint tenancy with right of survivorship. One owner dies. How does title pass?

• A.Through the probate court based on the deceased owner's will
• B.Automatically to the surviving joint tenant(s) without probate
• C.To the deceased owner's heirs equally regardless of survivorship language
• D.By court order after creditor claims are resolved

Q12.What is IC3?

• A.An insurer hotline.
• B.The FBI's online Internet Crime Complaint Center.
• C.An ADRE licensing portal.
• D.A title-company guarantee fund.

Q13.A grantor in North Carolina executes a deed conveying 'Blackacre to my daughter and her heirs, but if she ever uses the property for commercial purposes, then to my son and his heirs.' What type of future interest does the son hold?

• A.A reversion in fee simple
• B.A right of re-entry (power of termination)
• C.An executory interest (shifting executory interest)
• D.A remainder interest contingent upon a condition subsequent

Q14.A seller intentionally conceals a known plumbing defect by making cosmetic repairs before listing. After closing, the buyer discovers the underlying problem. Which claim provides the buyer's strongest legal theory?

• A.Breach of contract — the purchase contract is a warranty of property condition
• B.Strict liability — Arizona sellers are absolutely liable for all defects
• C.Negligence — the seller should have known the repair was inadequate
• D.Fraudulent concealment — the seller actively hid a known defect

Q15.Two friends purchase an investment property as joint tenants. One friend dies. What happens to her ownership interest?

• A.Her interest passes to her heirs through her estate
• B.Her interest is split equally among all surviving relatives
• C.Her interest is sold by the estate and proceeds distributed
• D.Her interest automatically transfers to the surviving joint tenant through the right of survivorship, bypassing probate