North Carolina Real Estate Exam Flashcards

Q: How is the North Carolina real estate broker exam structured?

The exam has 120 scored questions split into two sections: an 80-question national section developed by PSI and a 40-question North Carolina state section developed by the NC Real Estate Commission. You must pass each section separately, with a total testing time of about 4 hours. Since 2024, the exam is delivered at Pearson VUE test centers on behalf of NCREC.

Q: What passing scores does the NC broker exam require?

You need 71% (about 57 of 80) on the national section and 72.5% (29 of 40) on the North Carolina state section. The two sections are scored independently, so if you pass one and fail the other, you only retake the failed section. Passing both is required to apply for a license.

Q: Why does North Carolina call new licensees 'provisional brokers' instead of 'salespersons'?

North Carolina is a 'broker only' state and does not issue a salesperson license. Every newly licensed person is a provisional broker who must work under a Broker-in-Charge (BIC). Provisional status is removed after the broker completes 90 hours of postlicensing education, after which they hold a full broker license.

Q: What education is required to take the NC real estate exam?

Applicants must be at least 18 years old and complete a 75-hour NCREC-approved Broker Prelicensing Course before sitting for the exam. After licensure, provisional brokers must complete three 30-hour postlicensing courses (90 hours total) to remove provisional status, plus 8 hours of continuing education each license year.

Q: What is North Carolina's due diligence fee, and how is it different from earnest money?

Under the NC Offer to Purchase and Contract (Form 2-T), the buyer can pay a non-refundable due diligence fee directly to the seller for the right to investigate the property during the due diligence period. Earnest money is separate and is generally refundable if the buyer terminates during that period. This fee/period structure replaces traditional financing and inspection contingencies.

Q: How quickly must an NC broker deposit trust money?

A North Carolina broker must deposit trust money, such as earnest money, into a designated trust or escrow account within three banking days of receipt unless the contract directs otherwise. Trust funds must be kept separate from the broker's personal or operating funds, and commingling is a license law violation.

Question 1

Provisional Broker (North Carolina)

Accepted Answer

The entry-level NC license. North Carolina has no 'salesperson' license; new licensees are provisional brokers who must work under a Broker-in-Charge and cannot operate independently. Status is removed after 90 hours of postlicensing education.

Question 2

NCREC (North Carolina Real Estate Commission)

Accepted Answer

The state agency that licenses, regulates, and disciplines NC brokers under Chapter 93A of the General Statutes and rules in 21 NCAC 58. It approves education, investigates complaints, and administers the Recovery Fund.

Question 3

Broker-in-Charge (BIC)

Accepted Answer

The broker responsible for supervising affiliated brokers and trust accounts at an office. Requires full (non-provisional) broker status, 2 years of full-time experience in the prior 5, and a BIC course. Every NC office handling brokerage must have a designated BIC.

Question 4

75-Hour Prelicensing Requirement

Accepted Answer

NC applicants must complete a 75-hour NCREC-approved Broker Prelicensing Course and be at least 18 before sitting for the exam. Exam eligibility from the application is time-limited (about 180 days).

Question 5

90-Hour Postlicensing Education

Accepted Answer

To remove provisional status, a broker completes three 30-hour postlicensing courses (90 hours total). Failure to finish within the allowed window places the license on inactive status, stopping practice until completed.

Question 6

NC Continuing Education Requirement

Accepted Answer

Active NC brokers must complete 8 CE hours each license year: a mandatory 4-hour Update course (General Update, or BIC Update for brokers-in-charge) plus 4 hours of elective CE. Licenses run on an annual cycle ending June 30.

Question 7

NC Exam Structure (National + State)

Accepted Answer

120 scored questions: an 80-question national section developed by PSI and a 40-question NC state section developed by NCREC. Each section is passed separately; pass the national (71%) and state (72.5%) to qualify for licensure.

Question 8

Real Estate Education and Recovery Fund (NC)

Accepted Answer

An NCREC-administered fund that may reimburse consumers who win a court judgment against a licensee for fraud or misrepresentation but cannot collect. It protects the public, not the broker; NCREC may seek reimbursement from the licensee.

Question 9

License Exemption for Attorneys (NC)

Accepted Answer

A licensed NC attorney performing real estate work as part of their law practice is exempt from the broker license requirement. Most others who broker real estate for compensation must hold an active broker license.

Question 10

Removing Provisional Status

Accepted Answer

A provisional broker becomes a full broker by completing all 90 postlicensing hours within the required period. Only full brokers may operate independently or qualify to become a Broker-in-Charge.

Question 11

Working With Real Estate Agents (WWREA) Brochure

Accepted Answer

The official NCREC disclosure that explains agency relationship options (seller's agent, buyer's agent, dual agent) and how brokers are paid. Brokers must use the official version and provide it at first substantial contact.

Question 12

First Substantial Contact (NC)

Accepted Answer

The point at which a broker begins exchanging specific personal, financial, or motivational information with a consumer (beyond general facts like price or square footage). It triggers the duty to deliver the WWREA brochure and disclose agency status.

Question 13

Designated Agency (NC)

Accepted Answer

When one firm represents both buyer and seller, the BIC may designate one broker for each party so each client keeps full fiduciary representation and confidentiality. The BIC cannot serve as a designated agent.

Question 14

Dual Agency Consent (NC)

Accepted Answer

A broker may act as dual agent only with informed written consent from both buyer and seller. The dual agent becomes a neutral facilitator and may not advocate for either side or reveal one party's price or motivation to the other.

Question 15

Duties Owed to ALL Parties (NC)

Accepted Answer

Regardless of whom the broker represents, NC brokers owe every party honesty, fairness, and disclosure of material facts about the property. Loyalty, obedience, and confidentiality are owed only to the broker's own client.

Question 16

Material Fact Disclosure Overrides Client Instruction

Accepted Answer

An NC broker must disclose known material defects (e.g., structural damage, flood-zone status) to all parties even if the seller-client instructs otherwise. The duty to disclose material facts outranks the duty of obedience.

Question 17

Written Agency Agreement Requirement (NC)

Accepted Answer

Client-level (full fiduciary) agency in NC generally requires a written agreement covering type of agency, duration, compensation, and duties. Oral arrangements are hard to enforce and the NCREC strongly recommends writing.

Question 18

Trust Money / Trust Account (NC)

Accepted Answer

Money belonging to others held by a broker (earnest money, due diligence fees handled by the broker, tenant deposits). It must be held in a designated trust or escrow account, kept separate from the broker's own funds, and accurately recorded.

Question 19

Three-Banking-Day Deposit Rule

Accepted Answer

NC brokers must deposit trust money into the trust account within three banking days of receipt unless the contract directs otherwise. Weekends and holidays are not banking days, so a Friday receipt can be due by the following Wednesday.

Question 20

Commingling (Prohibited in NC)

Accepted Answer

Mixing trust money with the broker's personal or business funds. NC prohibits commingling; trust funds must stay in a separate trust account. Using clients' funds for the broker's own purposes is conversion, a serious violation.

Question 21

Trust Account Record Retention (NC)

Accepted Answer

The BIC must maintain complete trust account records — journals, ledgers, and reconciliations — and generally keep transaction records for at least three years so NCREC can audit proper handling of others' money.

Question 22

Disputed Earnest Money (NC)

Accepted Answer

If buyer and seller dispute who gets the earnest money, the broker holds it in trust and does not release it to either party without written agreement or a court/clerk-of-court order. NC procedures let a broker deposit disputed funds with the clerk of court.

Question 23

NC Offer to Purchase and Contract (Form 2-T)

Accepted Answer

The standard residential sales contract in NC, built around the due diligence fee and period instead of traditional inspection/financing contingencies. It defines buyer and seller obligations, deposits, and the settlement date.

Question 24

Due Diligence Period (NC)

Accepted Answer

A negotiated window in which the NC buyer may investigate the property and financing and terminate for any reason. To terminate during this period, the buyer typically forfeits the due diligence fee but recovers the earnest money.

Question 25

Due Diligence Fee vs. Earnest Money (NC)

Accepted Answer

The due diligence fee is paid to the seller for the right to investigate and is generally non-refundable. Earnest money shows good faith and is usually refundable if the buyer terminates during the due diligence period. They are separate sums.

Question 26

Residential Property and Owners' Association Disclosure Statement (NC)

Accepted Answer

Sellers of residential property (1-4 units) must give buyers this NC disclosure form, even FSBO sellers. Sellers may answer 'no representation' to items but must still deliver the form to the buyer.

Question 27

Mineral and Oil & Gas Rights Disclosure (NC)

Accepted Answer

NC requires sellers of residential real property to disclose, on the prescribed statement, whether mineral, oil, and gas rights have been severed from the property — a fact that can affect ownership and future use.

Question 28

Attorney-Conducted Closings (NC)

Accepted Answer

North Carolina practice requires a licensed attorney to handle the closing of a real estate transaction. The closing attorney examines title, prepares the deed, and oversees recording and disbursement of funds.

Question 29

NC Excise Tax (Revenue Stamps)

Accepted Answer

NC charges a transfer 'excise tax' on deeds of $1 per $500 of the sale price (or fraction thereof), i.e., $2 per $1,000. It is customarily paid by the seller. Example: a $300,000 sale = $600 excise tax.

Question 30

Fee Simple Absolute

Accepted Answer

The highest, most complete form of ownership: indefinite duration, fully transferable, and inheritable, subject only to government powers and any private restrictions. Most residential property is held in fee simple.

Question 31

Joint Tenancy vs. Tenancy in Common

Accepted Answer

Joint tenants hold equal shares with right of survivorship — a deceased owner's share passes automatically to survivors. Tenants in common may hold unequal shares with NO survivorship; a share passes to the owner's heirs.

Question 32

Easement

Accepted Answer

A non-possessory right to use another's land for a specific purpose, such as a driveway or utility line. An easement appurtenant benefits an adjoining parcel and transfers with the land; an easement in gross benefits a person or company.

Question 33

Encroachment

Accepted Answer

An unauthorized intrusion of one owner's improvement (fence, building, driveway) onto a neighbor's land. It is a title defect typically revealed by a survey and can cloud marketable title.

Question 34

General Warranty Deed

Accepted Answer

The deed offering the strongest buyer protection: the grantor warrants clear title against all defects, even those arising before the grantor owned the property. Contrast with a quitclaim deed, which conveys only whatever interest the grantor has.

Question 35

Listing Agreement

Accepted Answer

A written contract between seller and brokerage authorizing the firm to market the property. An exclusive right-to-sell listing pays the firm a commission no matter who finds the buyer; an exclusive agency listing lets the seller sell on their own commission-free.

Question 36

Statute of Frauds (Real Estate)

Accepted Answer

Requires contracts for the sale of real estate (and most leases over one year) to be in writing and signed to be enforceable. A verbal promise to sell land generally cannot be enforced in court.

Question 37

Fiduciary Duties (Agency)

Accepted Answer

The duties an agent owes a client, often recalled with OLD CAR: Obedience, Loyalty, Disclosure, Confidentiality, Accounting, and Reasonable care. These elevated duties are owed only to the client, not to customers.

Question 38

Client vs. Customer

Accepted Answer

A client has an agency relationship and receives full fiduciary duties. A customer is an unrepresented party who receives only honesty, fairness, and material-fact disclosure. A seller's agent may help an unrepresented buyer with paperwork without creating buyer agency.

Question 39

Loan-to-Value Ratio (LTV)

Accepted Answer

Loan amount divided by the lesser of sale price or appraised value, expressed as a percent. A higher LTV means more borrowed and higher lender risk; conventional loans above about 80% LTV usually require private mortgage insurance (PMI).

Question 40

Deed of Trust (NC security instrument)

Accepted Answer

North Carolina secures mortgage loans primarily with a deed of trust, which adds a neutral trustee who can conduct a non-judicial foreclosure (power of sale) if the borrower defaults, rather than a traditional mortgage requiring judicial foreclosure.

Question 41

Amortization

Accepted Answer

The gradual payoff of a loan through regular payments of principal and interest. Early payments are mostly interest; over time more goes to principal. A fully amortized loan reaches a zero balance at the end of the term.

Question 42

Discount Points

Accepted Answer

Prepaid interest a borrower pays at closing to lower the loan's interest rate. One point equals 1% of the loan amount. Example: 2 points on a $200,000 loan costs $4,000.

Question 43

FHA vs. Conventional Loan

Accepted Answer

FHA loans are government-insured, allow low down payments (as low as 3.5%) and lower credit scores, but require mortgage insurance premiums. Conventional loans are not government-backed and can avoid mortgage insurance at 20% or more down.

Question 44

Comparative Market Analysis (CMA) vs. Appraisal

Accepted Answer

A CMA is a broker's pricing opinion using recent comparable sales to help set a list or offer price. An appraisal is a formal value opinion by a licensed appraiser, usually required by the lender. A CMA is not an appraisal.

Question 45

Sales Comparison Approach

Accepted Answer

An appraisal method that estimates value by comparing the subject to recently sold similar properties and adjusting for differences (size, condition, location). It is the primary approach for valuing single-family homes.

Question 46

Cost vs. Income Approach (Appraisal)

Accepted Answer

The cost approach values land plus the depreciated cost to rebuild improvements — useful for new or special-purpose property. The income approach values investment property by capitalizing its net operating income (NOI ÷ cap rate).

Question 47

Federal Fair Housing Act — Protected Classes

Accepted Answer

The federal Fair Housing Act prohibits housing discrimination based on race, color, religion, national origin, sex, familial status, and disability. Familial status and disability were added by the 1988 amendments.

Question 48

Steering, Blockbusting, and Redlining

Accepted Answer

Three prohibited fair housing practices: steering (channeling buyers toward or away from areas by protected class), blockbusting (inducing panic selling), and redlining (denying loans or insurance based on a neighborhood's composition).

Question 49

Reasonable Accommodation vs. Modification (Disability)

Accepted Answer

A reasonable accommodation is a change in rules or services (e.g., allowing a service animal despite a no-pets policy). A reasonable modification is a physical change to the unit (e.g., a ramp). Fair housing law requires landlords to permit both for persons with disabilities.

Question 50

Proration at Closing

Accepted Answer

Dividing recurring costs (property taxes, HOA dues, prepaid rent) fairly between buyer and seller based on the closing date. The party responsible for the period before closing is debited; the other is credited for amounts already paid or owed.

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