North Carolina Real Estate Broker Practice Exam
148 free North Carolina Real Estate Broker practice questions with answers and explanations.
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The North Carolina Real Estate Broker exam is administered by the North Carolina Real Estate Commission, with 140 scored questions and a time limit of 4 hours 30 minutes.
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These are original study questions written from published exam objectives—not recalled, copied, or confidential live-exam items. Always confirm current coverage with the official sources linked on this page.
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Property Ownership
27 questions1. A study guide states that the passing score and the examination fee happen to be different numbers. Which statement is consistent with the published values?
- A. The passing score (75) is greater than the fee in dollars (63)
- B. The passing score equals the fee in dollars
- C. The fee in dollars (63) exceeds the passing score
- D. Both equal 140
Show answer & explanation
Answer: A
The passing score is 75 and the fee is $63, so the passing score value is greater than the fee value. This is reasoning over the two published facts, not a new standalone number.2. Which of the following correctly pairs an examination attribute with its published value?
- A. Passing score — 140
- B. Scored questions — 75
- C. Passing score — $63
- D. Examination fee — $63
Show answer & explanation
Answer: D
The published examination fee is $63; the passing score is 75 and the number of scored questions is 140, so only the fee pairing is correct.3. A landowner sells the surface of her property but separately conveys the subsurface mineral rights to a mining company by a separate deed. What has occurred?
- A. A leasehold estate has been created
- B. The mineral rights have been severed from the surface estate, creating two separate ownership interests
- C. The deed is void because mineral rights cannot be separated from surface ownership
- D. An easement in gross has been created
Show answer & explanation
Answer: B
Mineral rights can be severed from surface rights and conveyed or retained separately, producing two distinct legal estates that can be bought, sold, or leased independently. This is a common and lawful arrangement, unlike an easement, which is only a use right rather than an ownership interest.4. A life tenant occupies a home under a life estate. During her occupancy, she allows the property to fall into serious disrepair, significantly reducing its value for the remainderman who will inherit it. What legal principle has she likely violated?
- A. The rule against perpetuities
- B. The statute of frauds
- C. The doctrine of waste
- D. The doctrine of merger
Show answer & explanation
Answer: C
A life tenant owes a duty to the remainderman not to commit waste, meaning she must not act or fail to act in ways that unreasonably damage the property's value for the future interest holder. The other doctrines listed govern unrelated issues such as contract enforceability or the duration of future property interests.5. A buyer purchases a condominium unit. In addition to owning the interior of the unit itself, what other ownership interest does the buyer automatically receive?
- A. Sole ownership of the entire building
- B. A leasehold interest in the land beneath the building
- C. No ownership interest beyond the unit's interior walls
- D. An undivided interest in the common elements shared with other unit owners
Show answer & explanation
Answer: D
Condominium ownership combines fee simple title to the individual unit with an undivided percentage interest in the building's common elements, such as lobbies, roofs, land, and amenities, shared among all unit owners. The buyer does not own the whole building alone nor merely lease the underlying land.6. A deed describes a parcel by starting at an iron stake, then running specific courses and distances along boundary lines back to the point of beginning. Which method of legal description is being used?
- A. Metes and bounds
- B. Government (rectangular) survey
- C. Lot and block
- D. Monument reference only
Show answer & explanation
Answer: A
Metes and bounds describes a parcel's boundaries using a starting point, then a sequence of directions and distances back to the point of beginning, often referencing physical markers. Government survey instead uses townships, ranges, and sections, and lot and block references a recorded subdivision plat number rather than boundary courses.7. Which of the following is essential for a deed to be effective?
- A. Recording in the public land records
- B. The signature of the grantee
- C. Delivery to and acceptance by the grantee
- D. A survey prepared by a licensed surveyor
Show answer & explanation
Answer: C
A deed must be in writing, name the parties, contain a legal description, include a granting clause, and be signed by the grantor and delivered and accepted to be effective. It is the grantor, not the grantee, who must sign. Recording serves to give constructive notice and establish priority, but it is not among the requirements for the deed itself to be effective.8. During a title cleanup, an heir who may or may not hold a partial interest in a parcel agrees to release whatever claim she has, but refuses to guarantee anything about the title. Which instrument fits this situation?
- A. A general warranty deed
- B. A quitclaim deed
- C. A promissory note
- D. An easement appurtenant
Show answer & explanation
Answer: B
A quitclaim deed carries no warranties and conveys only whatever interest the grantor may have, which is exactly what the heir is willing to give. A general warranty deed would require her to warrant title against all defects, which she refuses to do.9. Lot 1 enjoys a driveway easement across neighboring Lot 2. In this arrangement, how are the two parcels classified?
- A. Both lots are servient tenements
- B. Lot 1 is the servient tenement and Lot 2 is the dominant tenement
- C. Both lots are dominant tenements
- D. Lot 1 is the dominant tenement and Lot 2 is the servient tenement
Show answer & explanation
Answer: D
An easement appurtenant benefits an adjoining dominant tenement and burdens the servient tenement. Lot 1 receives the benefit of crossing the driveway, so it is the dominant tenement; Lot 2 bears the burden, so it is the servient tenement.10. A grantor signs a document conveying land that names the parties and includes a granting clause, but the document contains no legal description of the property. Compared with the requirements for an effective deed, what is the status of this document?
- A. It is effective, because a street address is never needed
- B. It is effective once the grantee pays consideration
- C. It fails to satisfy the deed requirements, because a legal description is required
- D. It is effective as a general warranty deed but not as a quitclaim deed
Show answer & explanation
Answer: C
An effective deed must be in writing, name the parties, contain a legal description, include a granting clause, and be signed by the grantor and delivered and accepted. Because this document lacks a legal description, it does not satisfy the requirements for an effective deed, regardless of the type of deed intended.11. A grantee receives an estate that represents the highest and most complete form of ownership recognized in real property law, one that is both freely inheritable and freely transferable. Which estate has the grantee received?
- A. A life estate
- B. A fee simple absolute
- C. An easement appurtenant
- D. A leasehold for years
Show answer & explanation
Answer: B
The fee simple absolute is the highest and most complete form of ownership, freely inheritable and transferable. A life estate is limited to the duration of a named person's life, and an easement is an interest in another's land rather than a form of ownership.12. Marta conveys her farm to her brother "for the duration of his life," naming her nephew to take title when her brother dies. What interest does the nephew hold during the brother's lifetime?
- A. A remainder interest as the remainderman
- B. A fee simple absolute in possession
- C. A servient tenement
- D. No interest until he records a deed
Show answer & explanation
Answer: A
A life estate lasts for the duration of a named person's life, after which title passes to a remainderman or reverts to the grantor. Because Marta named her nephew to take title at the brother's death, the nephew is the remainderman. He does not hold possession while the life tenant is alive, and his future interest does not depend on recording.13. A buyer wants the form of deed that gives the greatest protection against title defects, no matter when those defects arose. Which deed should the buyer request?
- A. A quitclaim deed
- B. A general warranty deed
- C. A deed of trust
- D. An unrecorded granting clause
Show answer & explanation
Answer: B
A general warranty deed offers the greatest protection because the grantor warrants title against all defects arising at any time. A quitclaim deed carries no warranties at all, and a deed of trust is a security instrument in financing, not a conveyance chosen for title protection.14. What is the primary legal effect of recording a deed in the public land records?
- A. It gives constructive notice to the world and establishes priority
- B. It eliminates any property tax liens on the parcel
- C. It transfers legal title from grantor to grantee
- D. It converts a quitclaim deed into a warranty deed
Show answer & explanation
Answer: A
Recording the deed in the public land records gives constructive notice to the world and establishes priority. Title transfers through the deed being signed by the grantor and delivered and accepted, not through recording, and recording does not change the type of deed or remove tax liens.15. A parcel is encumbered by a mortgage recorded several years ago and a property tax lien assessed this year. In a foreclosure, which lien generally takes priority?
- A. The mortgage, because it was recorded first
- B. The property tax lien, regardless of when it was recorded
- C. Neither; they share priority equally
- D. Whichever lienholder files suit first
Show answer & explanation
Answer: B
Property tax liens and special assessments generally take priority over all other liens regardless of when they were recorded. The usual first-in-time priority established by recording does not defeat a property tax lien.16. The owner of a parcel burdened by an easement appurtenant sells the parcel to a new buyer. What happens to the easement?
- A. It terminates automatically upon the sale
- B. It continues to burden the parcel because it runs with the land
- C. It converts into a lien against the sale proceeds
- D. It transfers to a different neighboring parcel
Show answer & explanation
Answer: B
An easement appurtenant runs with the land, so a sale of the servient tenement does not extinguish it; the new owner takes the parcel still subject to the easement's burden.17. A deed conveys property 'to the school district, so long as the land is used for educational purposes.' If the district ever stops using the land for education, the estate automatically ends and reverts to the grantor. What type of estate was conveyed?
- A. Fee simple absolute
- B. Life estate
- C. Fee simple determinable
- D. Leasehold estate
Show answer & explanation
Answer: C
A fee simple determinable is created by durational language such as 'so long as,' and it automatically terminates and reverts to the grantor the moment the stated condition is no longer met, without requiring any legal action. Fee simple absolute has no such condition, and a life estate is measured by a lifetime rather than a use condition.18. Two unmarried co-owners hold title as joint tenants with right of survivorship. One joint tenant dies. What happens to that owner's interest in the property?
- A. It passes automatically to the surviving joint tenant, bypassing probate
- B. It passes according to the deceased owner's will
- C. It is divided equally among the deceased owner's heirs regardless of the surviving owner
- D. It reverts to the original grantor
Show answer & explanation
Answer: A
Joint tenancy includes a right of survivorship that transfers title automatically to the surviving joint tenant by operation of law, outside of probate. A will controls only property held in tenancy in common or owned solely by the deceased, since the survivorship feature overrides any testamentary transfer for jointly held property.19. A married couple in North Carolina takes title to their home as tenants by the entirety. A creditor of only the husband obtains a judgment against him. Can the creditor force a sale of the home to satisfy the debt?
- A. Yes, because either spouse's individual creditors may reach the whole property
- B. No, because tenancy by the entirety protects the property from the separate creditors of only one spouse
- C. Yes, but only after the couple divorces
- D. No, because married couples cannot hold real property together
Show answer & explanation
Answer: B
Tenancy by the entirety is a form of co-ownership available to married couples that includes survivorship rights and requires joint action to convey or encumber the property. Because the creditor's judgment runs against only one spouse individually, this form of ownership shields the property from that separate debt while the marriage continues.20. A neighbor has openly, continuously, and without permission used and occupied a strip of a rancher's land for many years, treating it as his own. The neighbor now claims ownership. Which legal doctrine allows this claim?
- A. Eminent domain
- B. Escheat
- C. Adverse possession
- D. Riparian rights
Show answer & explanation
Answer: C
Adverse possession lets someone acquire title to land through open, notorious, continuous, hostile, and exclusive possession for a required statutory period without the owner's permission. Eminent domain is a government taking with compensation, escheat is reversion to the state when no heirs exist, and riparian rights concern water-adjacent use rather than a possession claim.21. A homeowner's lot borders a non-navigable stream. Under common water-rights doctrine, what is this owner's right to use the water called?
- A. Littoral rights
- B. Prior appropriation rights
- C. Avulsion rights
- D. Riparian rights
Show answer & explanation
Answer: D
Riparian rights attach to land bordering flowing waters like streams and rivers, giving the owner reasonable use rights. Littoral rights instead apply to land bordering non-flowing bodies such as lakes and oceans, and prior appropriation is a separate doctrine used mainly in water-scarce states based on first use rather than land adjacency.22. A commercial tenant installs custom display shelving that is bolted to the wall of a rented retail space in order to conduct her business. When the lease ends, who is generally entitled to remove the shelving?
- A. The tenant, because trade fixtures installed for business purposes remain the tenant's personal property and may be removed
- B. The landlord, because anything attached to the building becomes a fixture
- C. Neither party; the shelving must stay permanently attached
- D. The tenant, but only with the landlord's separate written permission
Show answer & explanation
Answer: A
Trade fixtures are items a commercial tenant attaches to conduct business, and they remain the tenant's personal property despite attachment, meaning the tenant may remove them before the lease ends as long as removal does not cause significant damage. This differs from ordinary fixtures, which pass to the landlord upon attachment.23. A new survey obtained before closing reveals that a neighbor's fence sits three feet onto the seller's property. What is this situation called, and what should the parties do?
- A. An easement appurtenant; the survey should be ignored
- B. An encroachment; the issue should be resolved, such as through a boundary line agreement, before closing
- C. Adverse possession that automatically transfers the strip to the neighbor
- D. A riparian rights dispute requiring court action
Show answer & explanation
Answer: B
An encroachment occurs when a structure improperly extends onto a neighboring parcel. Because it can cloud title and affect insurability, prudent practice is to resolve it before closing, such as through a boundary line agreement, rather than assume it self-resolves or immediately triggers a full adverse possession transfer, which requires years of specific conduct.24. The 'bundle of rights' concept describes ownership of real property as a collection of individual rights. Which of the following is a limitation imposed on this bundle by government authority, rather than a right held by the owner?
- A. The right to use
- B. The right to possess
- C. The right to exclude others
- D. The power of eminent domain
Show answer & explanation
Answer: D
Eminent domain, along with taxation, police power, and escheat, is a power the government holds over private property, not a right within the private owner's bundle. Possession, use, and the right to exclude others are core rights the owner holds as part of that bundle.25. A homeowner facing a civil judgment learns that certain protections may shield some equity in her primary residence from general unsecured creditors. What is this type of protection generally called?
- A. A mechanic's lien
- B. A deed restriction
- C. An easement in gross
- D. A homestead exemption
Show answer & explanation
Answer: D
A homestead exemption is a legal protection that shields a defined amount of equity in an owner's primary residence from many general unsecured creditors. A mechanic's lien instead secures a contractor's claim for unpaid work, and the other listed terms describe unrelated property concepts.26. Three unrelated investors buy a property together, each contributing different amounts and taking unequal ownership percentages, with no right of survivorship. What form of co-ownership have they created?
- A. Community property
- B. Tenancy by the entirety
- C. Joint tenancy
- D. Tenancy in common
Show answer & explanation
Answer: D
Tenancy in common permits co-owners to hold unequal ownership shares with no automatic right of survivorship, meaning each owner's interest passes to their own heirs or as directed by will. Joint tenancy requires equal shares and includes survivorship, and tenancy by the entirety is limited to married couples.27. A parcel is completely surrounded by other privately owned land, with no access to a public road. The owner has no recorded easement. What kind of easement might a court grant to provide road access?
- A. Easement by prescription
- B. Easement by necessity
- C. Easement in gross
- D. Negative easement
Show answer & explanation
Answer: B
An easement by necessity may be granted when a parcel is landlocked and has no legal access to a public road, typically arising when a larger tract was subdivided and one resulting parcel lost access. An easement by prescription instead requires years of open, continuous, unauthorized use, which is not implied merely by landlocked status.
Financing
23 questions28. In State X, the lender holds legal title to mortgaged property until the borrower repays the debt in full. State X is BEST described as following which doctrine?
- A. Title theory
- B. Constructive notice theory
- C. The doctrine of substitution
- D. Lien theory
Show answer & explanation
Answer: A
In a title-theory state the lender holds legal title until the debt is paid. By contrast, in a lien-theory state the borrower holds title and the lender holds only a lien against the property.29. A title company offers a mortgage broker a cash payment for every closing the broker refers to it on federally related mortgage loans. Which federal law does this arrangement violate?
- A. The Truth in Lending Act
- B. The Real Estate Settlement Procedures Act
- C. The Civil Rights Act of 1866
- D. The Statute of Frauds
Show answer & explanation
Answer: B
RESPA governs federally related mortgage loans and prohibits kickbacks and unearned referral fees. It also requires that borrowers receive the Loan Estimate and Closing Disclosure. Paying for referrals of settlement business is exactly the conduct RESPA forbids.30. A homeowner refinances the mortgage on her principal residence and then has second thoughts. Under the Truth in Lending Act as implemented by Regulation Z, what protection may be available to her?
- A. A right to demand specific performance from the lender
- B. A three-day right of rescission
- C. An automatic waiver of all discount points
- D. Cancellation of the promissory note without repaying the debt
Show answer & explanation
Answer: B
TILA, implemented by Regulation Z, grants a three-day right of rescission on certain refinances of a principal residence. TILA also requires disclosure of the APR and total finance charge so borrowers can compare the true cost of credit.31. A purchase contract states that the buyer's obligation to close depends on the buyer obtaining a mortgage loan on specified terms. If the buyer, despite good-faith effort, cannot obtain the loan, what is the effect of this provision?
- A. The buyer is excused from performing because the financing contingency was not satisfied.
- B. The buyer must close anyway, because contingencies bind only the seller.
- C. The lender must accelerate the loan balance.
- D. The contract converts automatically into a lease longer than one year.
Show answer & explanation
Answer: A
Contingencies are conditions that must be satisfied before a party is obligated to perform, and financing contingencies are among the most common. Because the financing condition failed, the buyer's duty to perform never arose, so the buyer is excused from closing.32. After a borrower misses several payments, the lender notifies the borrower that the entire outstanding loan balance is now immediately due. Which mortgage provision permits the lender to do this?
- A. The defeasance clause
- B. The subordination clause
- C. The alienation clause
- D. The acceleration clause
Show answer & explanation
Answer: D
The acceleration clause is the provision that lets the lender declare the entire balance due upon the borrower's default. Without it, the lender could only sue for missed payments as they came due.33. A loan officer explains that the borrower can lower the interest rate on her mortgage by paying additional money at closing. This prepaid interest, charged as a percentage of the loan amount, is known as:
- A. Private mortgage insurance
- B. A discount point
- C. An origination contingency
- D. A liquidated damages charge
Show answer & explanation
Answer: B
A discount point is prepaid interest that buys down the interest rate. One discount point equals one percent of the loan amount.34. A buyer obtains a loan of $300,000 and agrees to pay the lender two discount points at closing. How much will the buyer pay for the points?
- A. $1,500
- B. $3,000
- C. $6,000
- D. $12,000
Show answer & explanation
Answer: C
One discount point equals one percent of the loan amount. One percent of $300,000 is $3,000, so two points cost 2 × $3,000 = $6,000. Points are prepaid interest that buy down the interest rate.35. Which statement correctly distinguishes among the major categories of mortgage loans?
- A. FHA loans are guaranteed for eligible veterans, while VA loans are insured by the Federal Housing Administration.
- B. Conventional loans are insured by the federal government, while FHA loans are not.
- C. Conventional loans are not government-backed; FHA loans are insured by the FHA, and VA loans are guaranteed for eligible veterans.
- D. VA loans always require a larger down payment than conventional loans.
Show answer & explanation
Answer: C
Conventional loans are not government-backed. FHA loans are insured by the Federal Housing Administration and allow low down payments, while VA loans are guaranteed for eligible veterans and can permit no down payment. The other choices reverse or misstate these roles.36. A borrower signs two documents at closing: one is the borrower's personal promise to repay the debt, and the other pledges the home as collateral for the lender. Which document evidences the debt itself?
- A. The deed of trust
- B. The promissory note
- C. The mortgage
- D. The general warranty deed
Show answer & explanation
Answer: B
A mortgage loan involves two instruments: the promissory note, which evidences the debt and the borrower's promise to pay, and the mortgage or deed of trust, which pledges the property as security. The note is the debt instrument; the mortgage or deed of trust is the security instrument.37. A buyer using a conventional loan plans to make a down payment of fifteen percent of the purchase price. What additional cost should the buyer most likely expect?
- A. Private mortgage insurance, because the down payment is less than twenty percent
- B. A three-day right of rescission fee under Regulation Z
- C. An FHA insurance premium, because all conventional loans are FHA-insured
- D. No additional cost, because PMI applies only to VA loans
Show answer & explanation
Answer: A
Private mortgage insurance is typically required on conventional loans when the down payment is less than twenty percent. A fifteen percent down payment falls below that threshold, so PMI should be expected. FHA insurance applies to FHA loans, not conventional loans, and VA loans are guaranteed for veterans rather than covered by PMI.38. A borrower obtains a loan insured by the Federal Housing Administration. Compared with a conventional loan, what is a distinguishing feature of this loan type?
- A. It requires a minimum 20 percent down payment
- B. It is only available to first-time buyers
- C. It cannot be assumed by a future buyer
- D. It requires the borrower to pay mortgage insurance regardless of loan-to-value ratio
Show answer & explanation
Answer: D
FHA loans require mortgage insurance premiums as a condition of the government backing, generally for the life of the loan or a substantial period, regardless of down payment size. This differs from conventional loans, where private mortgage insurance can often be removed once sufficient equity is reached; FHA loans allow low down payments, are not limited to first-time buyers, and can be assumable.39. A qualified veteran applies for a loan guaranteed by the Department of Veterans Affairs to purchase a primary residence. What down payment feature commonly distinguishes this loan program?
- A. The program can allow eligible veterans to finance with no down payment
- B. A minimum 10 percent down payment is always required
- C. It requires private mortgage insurance instead of a funding fee
- D. It is limited to veterans purchasing investment property
Show answer & explanation
Answer: A
VA-guaranteed loans are notable for allowing eligible veterans, service members, and certain surviving spouses to finance a primary residence with no down payment, backed by a VA funding fee rather than traditional private mortgage insurance. The program is intended for owner-occupied housing, not investment property.40. Over the life of a standard fully amortizing fixed-rate mortgage, how does the portion of each payment applied to principal versus interest generally change?
- A. Payments alternate between interest-only and principal-only each month
- B. Both portions stay exactly the same for the entire term
- C. The principal portion increases while the interest portion decreases as the loan matures
- D. The interest portion increases while the principal portion decreases over time
Show answer & explanation
Answer: C
In a fully amortizing loan, the total payment stays level but its composition shifts over time: early payments are weighted heavily toward interest on the large outstanding balance, and as the balance shrinks, a growing share of each payment is applied to principal, contrary to the notion that the interest share would grow as the loan matures.41. A private lender charges a borrower an interest rate far exceeding the legally permitted maximum for that type of loan. What is this practice called?
- A. Amortization
- B. Usury
- C. Subordination
- D. Escalation
Show answer & explanation
Answer: B
Usury refers to charging an interest rate above the legal maximum allowed for a loan, which can render the excess interest unenforceable or subject the lender to penalties depending on jurisdiction. The other terms describe unrelated loan concepts such as principal paydown or lien priority arrangements.42. A buyer purchasing a home wants to take over the seller's existing mortgage, keeping its original interest rate and terms, rather than obtaining a brand-new loan. What must generally happen for this to occur?
- A. It happens automatically upon closing with no lender involvement
- B. It is only possible if the seller pays off the loan first
- C. The loan must be assumable, and the lender typically must approve and qualify the new borrower
- D. All mortgages are freely assumable by any buyer
Show answer & explanation
Answer: C
Not all loans are assumable; the original loan documents must permit assumption, and most lenders require the new borrower to be qualified and to formally assume liability, protecting the lender's risk exposure. This differs from an unrestricted transfer that would bypass lender review entirely.43. A commercial borrower takes a loan under which only interest is paid during the term, with the full original principal balance due at maturity. What type of loan is this?
- A. A fully amortizing loan
- B. A graduated payment loan
- C. A growing equity loan
- D. A straight (term) loan
Show answer & explanation
Answer: D
A straight, or term, loan requires interest-only payments throughout the term with the entire principal due in a lump sum at maturity, unlike a fully amortizing loan where each payment reduces principal. Graduated and growing equity loans instead involve scheduled payment increases over time rather than an interest-only structure.44. A borrower is offered a loan with a steep prepayment penalty stacked on top of an already high interest rate and fees disproportionate to her creditworthiness. Which practice do these features together suggest?
- A. Predatory lending
- B. A standard conforming loan
- C. A government-insured loan
- D. A construction loan
Show answer & explanation
Answer: A
Predatory lending is characterized by loan terms that disadvantage the borrower relative to their risk profile, such as excessive fees, high rates not justified by creditworthiness, and penalties that discourage refinancing away from the loan. These are red flags distinguishing it from standard conforming or government-backed loan programs.45. A seller offers to pay an upfront fee to the buyer's lender in exchange for a temporarily reduced interest rate during the early years of the buyer's loan, after which the rate returns to the note rate. What is this arrangement called?
- A. A rate lock
- B. A buydown
- C. A subordination agreement
- D. A wraparound mortgage
Show answer & explanation
Answer: B
A buydown involves paying an upfront lump sum, often by the seller as a sales incentive, to temporarily or permanently lower the borrower's effective interest rate. A rate lock instead just guarantees a quoted rate for a period before closing, and a wraparound mortgage is a distinct financing structure involving the seller retaining and adding to an existing loan.46. A borrower takes a loan structured so that monthly payments are lower than a fully amortizing loan, with a large remaining balance due in a single payment at the end of the term. What is the primary risk of this loan structure?
- A. The interest rate is guaranteed to decrease over time
- B. The lender cannot legally collect the final payment
- C. The borrower may be unable to pay off or refinance the large final balloon payment when it comes due
- D. The loan automatically converts to a 30-year term at maturity
Show answer & explanation
Answer: C
Balloon loans carry lower periodic payments but leave a substantial lump sum due at maturity. If the borrower's finances, property value, or the refinance market are unfavorable at that time, the borrower may face default or forced sale, which is the central risk this structure carries.47. In a deed of trust arrangement, title is conveyed to a neutral third party to hold as security for the loan. If the borrower defaults, what power does this arrangement typically give the trustee?
- A. The trustee automatically becomes the new owner of the property
- B. The trustee has no role once the loan is disbursed
- C. The trustee must forgive the remaining debt
- D. The trustee may exercise a power of sale to foreclose without a lengthy court process, depending on the instrument and state procedure
Show answer & explanation
Answer: D
A deed of trust involves three parties, the borrower, lender, and a trustee holding title as security, and commonly includes a power-of-sale clause allowing the trustee to conduct a foreclosure sale upon default following required notice, often faster than a judicial foreclosure. The trustee does not become owner outright nor forgive the debt.48. A homeowner already has a first mortgage and takes out a home equity loan secured by the same property. If the home is later foreclosed and sold, how is the home equity loan generally treated relative to the first mortgage?
- A. It is a junior lien and is paid from sale proceeds only after the first mortgage is satisfied
- B. It is paid before the first mortgage because it was originated more recently
- C. It has no claim on the property at all
- D. It is automatically forgiven upon foreclosure
Show answer & explanation
Answer: A
Liens are generally paid in the order they were recorded, so a home equity loan recorded after the first mortgage is a junior, or subordinate, lien and is satisfied from remaining proceeds only after the senior first mortgage is paid in full. Priority is based on recording order, not which loan is newer in purpose.49. A property appraises for 400,000 dollars and the buyer is approved for a loan of 320,000 dollars against that value. What is the loan-to-value ratio?
- A. 60 percent
- B. 80 percent
- C. 70 percent
- D. 90 percent
Show answer & explanation
Answer: B
Loan-to-value ratio is calculated by dividing the loan amount by the property's appraised value. Here, 320,000 divided by 400,000 equals 0.80, or 80 percent, a standard calculation lenders use to assess risk and determine whether mortgage insurance will be required.50. A conventional loan borrower has been paying private mortgage insurance. As the borrower's equity in the home grows through payments and appreciation, what generally happens to the PMI requirement?
- A. PMI can generally be cancelled once the borrower reaches a sufficient equity threshold in the property
- B. PMI increases proportionally as equity increases
- C. PMI must continue for the entire life of the loan regardless of equity
- D. PMI converts automatically into a second mortgage
Show answer & explanation
Answer: A
Unlike FHA mortgage insurance, private mortgage insurance on conventional loans is generally tied to the loan-to-value ratio and can be cancelled once the borrower's equity reaches a sufficient level, either by borrower request or automatically under federal requirements, rather than persisting for the full loan term.
State Law
14 questions51. Broker Ellis has a listing agreement with a seller. The buyer who tours the property asks Ellis to represent her as well in the same transaction. Under what circumstances may Ellis do so?
- A. Only with the informed written consent of both the buyer and the seller
- B. Whenever Ellis orally notifies both parties before closing
- C. Never, because representing both sides is always prohibited
- D. Only if the seller's listing has already expired
Show answer & explanation
Answer: A
Dual agency — representing both buyer and seller in the same transaction — is permitted only with the informed written consent of both parties. Oral notice is insufficient, and an outright ban is not the rule.52. Under the Statute of Frauds, which of the following agreements must be in writing and signed by the party to be charged in order to be enforceable?
- A. A six-month residential lease
- B. An oral agreement to split a commission between two licensees
- C. A month-to-month property management engagement
- D. A two-year lease of a commercial storefront
Show answer & explanation
Answer: D
The Statute of Frauds requires contracts for the sale of real estate, and leases longer than one year, to be in writing and signed by the party to be charged. A two-year lease exceeds one year, so it falls within the statute; a six-month lease does not.53. Several liens attach to the same property: a mortgage recorded first, a judgment lien recorded second, and a property tax lien that arose last. In a foreclosure distribution, which lien is generally satisfied first?
- A. All three share equally because they encumber the same parcel
- B. The judgment lien, because court-ordered liens outrank consensual liens
- C. The mortgage, because it was recorded before the others
- D. The property tax lien, because tax liens generally take priority regardless of recording date
Show answer & explanation
Answer: D
Property tax liens and special assessments generally take priority over all other liens regardless of when they were recorded, so the tax lien is paid ahead of the earlier-recorded mortgage and judgment lien. Recording ordinarily establishes priority among other liens, but tax liens are the exception.54. A borrower takes out a $250,000 loan and agrees to pay two discount points at closing to buy down the interest rate. How much will the borrower pay for the points?
- A. $2,000
- B. $2,500
- C. $5,000
- D. $25,000
Show answer & explanation
Answer: C
One discount point equals one percent of the loan amount and is prepaid interest that buys down the interest rate. Two points on a $250,000 loan is two percent of $250,000, which is $5,000.55. A broker receives an earnest money check from a buyer-client and deposits it into the brokerage's operating account to "keep the paperwork simple." Which fiduciary duty has the broker violated?
- A. Obedience
- B. Disclosure
- C. Loyalty
- D. Accounting
Show answer & explanation
Answer: D
The duty of accounting requires depositing client funds in a separate trust or escrow account and never commingling them with the broker's own funds. Placing the earnest money in the brokerage's operating account is commingling and breaches that duty.56. An agent's fiduciary duties are often summarized by the acronym OLD CAR. Which of the following is NOT one of those duties?
- A. Accounting
- B. Marketing
- C. Confidentiality
- D. Obedience
Show answer & explanation
Answer: B
OLD CAR stands for Obedience, Loyalty, Disclosure, Confidentiality, Accounting, and Reasonable care and diligence. Marketing is a service an agent may provide, but it is not a fiduciary duty in the OLD CAR framework.57. A buyer offers to purchase a home on stated terms. The seller replies, "I accept, but only if closing moves up by three weeks." The buyer refuses the new date and now wants to accept the seller's position that the original offer still stands. Which statement is correct?
- A. The buyer's original offer remains open and the seller may still accept it
- B. The seller's material change was a counteroffer that rejected and extinguished the original offer
- C. A binding contract formed the moment the seller said "I accept"
- D. The seller's reply is void because it lacked consideration
Show answer & explanation
Answer: B
Acceptance must be unqualified. Because the seller materially changed the terms, the reply operated as a counteroffer that rejected and extinguished the original offer, so no contract formed and the original offer is no longer available for acceptance.58. A grantor wishes to transfer to a relative only whatever interest she may hold in a parcel, without making any warranties about the title. Which deed accomplishes this?
- A. A quitclaim deed
- B. A general warranty deed
- C. A deed of trust
- D. A trustee's deed
Show answer & explanation
Answer: A
A quitclaim deed carries no warranties and conveys only whatever interest the grantor may have. By contrast, a general warranty deed offers the greatest protection because the grantor warrants title against all defects arising at any time.59. A licensee tells prospective buyers, "Families of your faith usually look on the other side of town — let me show you homes over there instead." This conduct is best described as which prohibited practice?
- A. Steering
- B. Redlining
- C. Blockbusting
- D. Commingling
Show answer & explanation
Answer: A
Steering is directing buyers toward or away from neighborhoods based on a protected class — here, religion, one of the seven federally protected classes. Blockbusting is inducing sales by suggesting a protected group is moving in, and redlining is denying loans in certain areas; neither matches these facts.60. Under the federal Fair Housing Act, discrimination in the sale or rental of housing is prohibited based on several protected classes. Which of the following is one of those protected classes?
- A. Familial status
- B. Income level
- C. Marital status alone without children
- D. Employment status
Show answer & explanation
Answer: A
The federal Fair Housing Act's protected classes include race, color, national origin, religion, sex, familial status, and disability. Familial status, meaning having children under 18 in the household including pregnant women, is expressly protected, while income level and employment status are not federally protected classes under this law.61. A property owner dies without a will and without any identifiable heirs. What ultimately happens to the property under common law doctrine?
- A. It becomes permanently unowned
- B. It automatically transfers to the deceased owner's neighbors
- C. It is held in trust indefinitely by the county recorder
- D. It reverts, or escheats, to the state
Show answer & explanation
Answer: D
Escheat is the doctrine under which property reverts to the state when an owner dies intestate, meaning without a will, and no legally identifiable heirs can be found, ensuring property does not remain permanently unowned. It does not pass automatically to neighbors or sit indefinitely with a local recorder's office.62. A tenant with a documented disability asks a landlord with a strict no-pets policy to allow a service animal in her unit. Under fair housing law, how should the landlord generally respond?
- A. Deny the request because the policy applies uniformly to all tenants
- B. Grant a reasonable accommodation, since disability-related exceptions to a no-pets policy are generally required
- C. Charge the tenant a special pet deposit before allowing the animal
- D. Require the tenant to move to a different unit that allows pets
Show answer & explanation
Answer: B
Fair housing law generally requires landlords to make reasonable accommodations for tenants with disabilities, including waiving a no-pets policy for a service or assistance animal, since such an animal is treated as a disability accommodation rather than an ordinary pet. Landlords generally cannot charge extra pet fees for legitimate assistance animals or force a unit transfer instead of accommodating.63. A rental community advertises that it prefers tenants without young children, steering families with kids to a different section of the property. Absent a qualifying senior housing exemption, what fair housing violation does this describe?
- A. Redlining
- B. Blockbusting
- C. Familial status discrimination
- D. Steering based on national origin
Show answer & explanation
Answer: C
Steering families with children to certain sections or discouraging them from renting altogether is discrimination based on familial status, a federally protected class, unless the property qualifies for a specific housing-for-older-persons exemption. Redlining involves geographic denial of services like lending, and blockbusting involves inducing panic selling based on a protected class entering a neighborhood.64. An agent tells homeowners in a neighborhood that property values will decline because families of a particular protected class are moving in, encouraging them to sell quickly and below market value. What illegal practice does this describe?
- A. Steering
- B. Redlining
- C. Net listing
- D. Blockbusting
Show answer & explanation
Answer: D
Blockbusting is the illegal practice of inducing owners to sell by suggesting that the entry of persons of a particular protected class into the neighborhood will lower property values, exploiting fear for profit. Steering instead involves directing buyers toward or away from areas based on protected class, and redlining is the denial of services like lending based on demographics.
State License Law and Broker Supervision
14 questions65. When does the North Carolina real estate license year end?
- A. June 30, with renewal required before that date
- B. March 31
- C. December 31
- D. The anniversary of the original license date
Show answer & explanation
Answer: A
The North Carolina license year runs July 1 through June 30, so renewal must be completed before June 30 regardless of when the license was originally issued. Continuing education must be completed by the June 10 deadline preceding renewal for it to be credited to that license year.66. North Carolina uses a single license category for real estate licensees. What is a newly licensed individual called?
- A. A provisional broker, who must work under the supervision of a broker-in-charge
- B. A salesperson, who may practice independently
- C. An associate broker with full independent authority
- D. A broker-in-charge upon initial licensure
Show answer & explanation
Answer: A
North Carolina eliminated the salesperson category, so every licensee is a broker, and the entry level is provisional broker with a status that must be supervised by a broker-in-charge. Removing the provisional status requires completing postlicensing education within the prescribed window.67. How many hours of prelicensing education must a North Carolina broker candidate complete?
- A. 75 hours
- B. 90 hours
- C. 60 hours
- D. 120 hours
Show answer & explanation
Answer: A
North Carolina requires a 75-hour Broker Prelicensing Course before examination. That is separate from and much smaller than the postlicensing obligation, which totals 90 hours in three courses, so candidates should not confuse the entry requirement with the follow-on education.68. A North Carolina provisional broker must complete postlicensing education to remove the provisional status. What is required?
- A. 90 hours in three 30-hour courses, completed within eighteen months of initial licensure
- B. 30 hours in a single course within one year
- C. 8 hours of continuing education only
- D. No postlicensing education is required
Show answer & explanation
Answer: A
The postlicensing program consists of three 30-hour courses totaling 90 hours, to be completed within eighteen months of initial licensure, and completing one course per year is a common pacing approach. Failure to complete the program in time causes the license to become inactive.69. What continuing education does North Carolina require of an active broker each license year?
- A. 8 hours, comprising a mandatory update course and an elective
- B. 30 hours every three years
- C. 24 hours annually
- D. 16 hours every two years
Show answer & explanation
Answer: A
North Carolina requires 8 hours annually, split between a required update course and an elective, with brokers-in-charge taking a designated update course instead of the general one. The annual cycle is shorter than many states, so a lapse recurs quickly if not tracked.70. What is the function of a broker-in-charge in a North Carolina real estate office?
- A. To supervise the office's brokers and be responsible for trust account handling, advertising and record retention
- B. To personally negotiate every transaction in the office
- C. To act as the firm's outside auditor
- D. To hold the licenses of brokers at other firms
Show answer & explanation
Answer: A
Each office must have a designated broker-in-charge who supervises provisional brokers, controls trust funds, reviews advertising and maintains records. Eligibility requires prescribed experience and completion of the broker-in-charge course, and the designation carries personal accountability for the office's compliance.71. A North Carolina broker receives an earnest money deposit. Within what period must it generally be deposited into the trust account?
- A. Within three banking days of contract formation
- B. Within thirty calendar days
- C. By the closing date
- D. There is no prescribed deadline
Show answer & explanation
Answer: A
North Carolina requires deposit into the trust or escrow account within three banking days of contract formation. Banking days exclude weekends and holidays, so the deadline is not simply three calendar days. Late deposit of trust funds is among the most frequently cited violations in Commission disciplinary matters.72. What disclosure must a North Carolina broker provide at first substantial contact with a consumer?
- A. The Working With Real Estate Agents disclosure explaining the available agency relationships
- B. A copy of the listing agreement for every property in the office
- C. The seller's Residential Property Disclosure Statement
- D. A settlement statement estimate
Show answer & explanation
Answer: A
The Working With Real Estate Agents disclosure must be reviewed at first substantial contact, meaning before the consumer discloses confidential information, so they understand whether the broker can represent them. The Residential Property and Owners' Association Disclosure Statement is a separate seller obligation regarding property condition.73. Under North Carolina's Residential Property and Owners' Association Disclosure Statement, what may a seller do regarding a particular item?
- A. Guarantee the condition of each disclosed item
- B. Leave the entire statement blank with no consequence
- C. Answer no representation, which discloses nothing but does not permit concealment of a known material defect
- D. Delegate completion of the form to the listing broker
Show answer & explanation
Answer: C
North Carolina permits a seller to check no representation, which conveys no information about that item and is not a statement that the item is satisfactory. It does not license active concealment, and a seller or broker who hides a known material defect remains liable notwithstanding the election.74. A North Carolina broker maintains a trust account. How often must it be reconciled?
- A. Monthly, comparing the bank statement, the journal and the ledgers of individual properties or clients
- B. Annually at the end of the license year
- C. Only when the Commission requests it
- D. Whenever the balance falls below a stated amount
Show answer & explanation
Answer: A
Monthly three-way reconciliation ties the bank balance to the journal and to the sum of individual ledgers, which is what detects a shortage before it becomes a conversion. The broker-in-charge is responsible for the reconciliation, and records of it must be retained and available for audit.75. A broker deposits personal funds into the brokerage trust account to cover bank service charges. What is the general rule?
- A. A broker may maintain a minimal amount of the broker's own funds in the trust account solely to cover service charges, but never for other purposes
- B. Any deposit of broker funds into a trust account is commingling with no exception
- C. A broker may keep unlimited personal funds in the trust account
- D. Bank charges must be paid from client funds
Show answer & explanation
Answer: A
A narrow exception allows a minimal broker balance to absorb bank service charges so client funds are not depleted by them, which is the opposite of paying charges from client money. Beyond that narrow purpose, broker funds in a trust account constitute commingling.76. How long must a North Carolina broker retain transaction records?
- A. At least three years from the later of the successful or unsuccessful conclusion of the transaction or the closing of the trust account ledger
- B. No retention period is prescribed
- C. One year from listing expiration
- D. Ten years from closing
Show answer & explanation
Answer: A
The three-year retention period runs from the later of the transaction's conclusion, successful or not, and the closing of the relevant trust ledger, so a failed transaction still generates a retention obligation. Records must be available to the Commission, and the broker-in-charge is accountable for their maintenance.77. A North Carolina broker's license expires because renewal was not completed. What is the effect on the broker's ability to practice?
- A. The license is expired and the broker may not engage in brokerage activity until it is reinstated
- B. The broker may continue practicing during a grace period of one year
- C. The license converts automatically to inactive status permitting continued practice
- D. The broker may practice if supervised by a broker-in-charge
Show answer & explanation
Answer: A
An expired license confers no authority, so any brokerage activity during the lapse is unlicensed practice regardless of supervision, and compensation earned during it is generally unrecoverable. Reinstatement requirements escalate the longer the license remains expired, which is why the June 30 deadline matters.78. A broker intentionally uses client trust funds for the broker's own personal expenses, intending to replace the money later. Beyond commingling, what more serious violation does this describe?
- A. Subordination
- B. Escheat
- C. Conversion
- D. Novation
Show answer & explanation
Answer: C
Conversion is the unauthorized use of client trust funds for purposes other than those intended by the client, such as personal expenses, and is treated as a more serious violation than mere commingling because it involves actually using the money rather than just improperly mixing accounts. The other terms describe unrelated legal concepts involving lien priority, property reversion, or contract substitution.
Transfer of Title, Closing and Settlement
4 questions79. A closing disclosure shows an item as a debit to the buyer and a credit to the seller. Which item behaves this way?
- A. The purchase price
- B. The earnest money deposit
- C. The seller's loan payoff
- D. The buyer's new loan proceeds
Show answer & explanation
Answer: A
The purchase price is what the buyer owes and what the seller earns, so it is debited to the buyer and credited to the seller. Earnest money and new loan proceeds are buyer credits reducing cash needed, and the seller's payoff is a seller debit reducing their proceeds.80. A seller conveys property by a deed warranting title only against defects arising during the seller's own period of ownership. What deed is this?
- A. A special warranty deed
- B. A general warranty deed
- C. A quitclaim deed
- D. A bargain and sale deed with no covenants
Show answer & explanation
Answer: A
A special warranty deed limits the grantor's warranty to the period they held title, leaving earlier defects uncovered. A general warranty deed warrants against defects from any time in the property's history, and a quitclaim conveys whatever interest exists with no warranty at all, which is why it is common in divorce and clearing-title contexts.81. A North Carolina property conveys for 347,000 dollars. The state imposes an excise tax on the conveyance at a rate of one dollar per five hundred dollars of consideration or fraction thereof. What is the excise tax, and who customarily pays it?
- A. 694 dollars, customarily paid by the seller
- B. 694 dollars, customarily paid by the buyer
- C. 347 dollars, customarily paid by the seller
- D. 1,388 dollars, customarily paid by the buyer
Show answer & explanation
Answer: A
347,000 divided by 500 equals 694 increments, so the tax is 694 dollars, and North Carolina's excise tax on conveyances is customarily a seller expense appearing as a seller debit on the settlement statement. Because the statute charges the tax on each fraction of an increment, a price that does not divide evenly rounds the count upward.82. A buyer takes title and later discovers a recorded easement that the title search should have found but the title company missed. What recourse exists?
- A. A claim under the owner's title insurance policy, subject to its exceptions and conditions
- B. A claim against the seller's homeowner's insurance
- C. Rescission of the deed as a matter of right
- D. No recourse, since recorded documents give constructive notice
Show answer & explanation
Answer: A
Title insurance covers loss from defects in the record that existed at closing and were not excepted in the policy, which is precisely the missed-easement scenario. Constructive notice affects priority between claimants rather than eliminating the insurer's obligation, and the schedule of exceptions determines whether the claim is covered.
Contracts, Agency and Brokerage
6 questions83. A North Carolina broker wishes to practice dual agency. What is required?
- A. Written authority from both parties, obtained before the broker begins acting for both
- B. Verbal consent from both parties
- C. Consent from the seller alone
- D. Dual agency is prohibited in North Carolina
Show answer & explanation
Answer: A
North Carolina permits dual agency only with the written authority of both parties, and the firm may also use designated agency to assign a different broker to each party. Provisional brokers face restrictions in these arrangements, and undisclosed dual agency is a serious violation.84. A North Carolina broker is asked to complete a contract form by filling in the negotiated terms the parties agreed to. Is this permitted?
- A. Yes, completing a preprinted form with the parties' agreed terms is within brokerage practice, but drafting custom provisions may constitute unauthorized practice of law
- B. No, brokers may never handle contract forms
- C. Yes, and brokers may also draft any custom clause the parties request
- D. Only an attorney may deliver a completed form to the parties
Show answer & explanation
Answer: A
Filling standard blanks with terms the parties negotiated is ordinary brokerage service, while composing original legal provisions crosses into practicing law. When a transaction requires bespoke language, the broker refers the parties to counsel, which protects both the parties and the broker's license.85. A listing expires and the seller then sells directly to a buyer the listing broker had introduced during the listing period. What contract provision commonly addresses this?
- A. A protection or carryover clause entitling the broker to compensation for a sale to a named prospect within a stated period after expiration
- B. A liquidated damages clause
- C. An escalation clause
- D. A subordination clause
Show answer & explanation
Answer: A
A protection clause preserves the broker's claim where a buyer introduced during the term purchases shortly after expiration, typically requiring the prospects to be identified in writing to the seller. Without such a clause and identification, the broker's claim after expiration is difficult to sustain.86. A buyer's offer states that it is contingent on the buyer selling their current home. What risk does this create for the seller?
- A. Closing depends on a transaction the seller does not control, so sellers commonly add a kick-out provision permitting them to continue marketing
- B. No risk, because contingencies bind only the buyer
- C. The seller becomes obligated to purchase the buyer's home
- D. The contingency automatically expires within seven days
Show answer & explanation
Answer: A
A sale-of-buyer's-home contingency ties the seller's transaction to an event outside their control and can take the property off the market for weeks with no assurance of closing. A kick-out or right-of-first-refusal provision lets the seller keep marketing and require the buyer to remove the contingency or release the contract.87. A buyer wants the right to purchase a property at a fixed price at any time during the next six months, without being obligated to buy. What instrument accomplishes this?
- A. An option, which requires consideration to be enforceable and binds only the optionor
- B. A bilateral purchase contract
- C. A right of first refusal
- D. A land installment contract
Show answer & explanation
Answer: A
An option is a unilateral contract in which the optionor is bound to sell if the optionee elects to buy, supported by separate consideration. A right of first refusal is weaker, giving only the chance to match a price the owner is otherwise prepared to accept, and it is triggered by the owner's decision to sell.88. A North Carolina broker learns of a material fact about a property after the contract is signed but before closing. What must the broker do?
- A. Disclose it to the parties, because the duty to disclose material facts continues through closing
- B. Say nothing, since the contract has already been signed
- C. Disclose only if a party specifically asks
- D. Disclose only to the broker's own client
Show answer & explanation
Answer: A
The material fact disclosure duty runs to all parties and continues until the transaction concludes, so information learned after contract must still be disclosed. Withholding it because a contract exists is a common and serious error, and the obligation does not depend on being asked.
Property Management and Trust Accounts
6 questions89. A broker managing rental property for an owner collects rents and pays expenses. Which additional trust accounting concern arises?
- A. Tenant security deposits and rent must be accounted for separately by property and owner, and may not be used to cover shortfalls elsewhere
- B. Rents may be pooled with the broker's operating funds for efficiency
- C. Security deposits become the broker's funds when collected
- D. Only annual accounting to the owner is required
Show answer & explanation
Answer: A
Property management multiplies the ledgers a broker must maintain, since each owner and each tenant deposit requires separate accounting within the trust account. Using one owner's funds to cover another's shortfall is conversion even if the total balance appears adequate, which is why per-ledger reconciliation matters.90. A property management agreement is silent on the manager's authority to make a 15,000 dollar capital repair. What should the manager do?
- A. Obtain the owner's authorization, because expenditures beyond the granted authority require the principal's consent
- B. Proceed, since maintenance is inherent in management authority
- C. Pay from another owner's account and reconcile later
- D. Charge the expense to tenant security deposits
Show answer & explanation
Answer: A
Agency authority is limited to what the principal granted expressly or by reasonable implication, and a large capital expenditure exceeds routine maintenance authority. Management agreements commonly set a dollar threshold above which owner approval is required, with an exception for genuine emergencies affecting safety or preventing further damage.91. A commercial lease requires the tenant to pay a base rent plus a share of the building's operating expenses based on the tenant's proportion of rentable area. What is this structure called?
- A. A modified gross or expense pass-through lease with a common area maintenance charge
- B. A pure gross lease
- C. A percentage lease based on gross sales
- D. A ground lease of unimproved land
Show answer & explanation
Answer: A
Pass-through structures allocate operating costs pro rata by rentable area, commonly as a common area maintenance charge with reconciliation against an expense stop or base year. A pure gross lease leaves those costs with the landlord, and a percentage lease adds rent tied to tenant sales, which is typical in retail.92. A residential tenant remains after the lease expires and the landlord wishes to remove them. What is the lawful process?
- A. A summary ejectment or eviction action through the court, following any required notice
- B. Changing the locks and removing the tenant's belongings
- C. Shutting off utilities until the tenant departs
- D. Physically removing the tenant personally
Show answer & explanation
Answer: A
Removal requires the statutory court process after any notice the lease or statute requires, with the sheriff executing any writ. Self-help measures such as lockouts, utility shutoffs or removing possessions are unlawful and expose the landlord and any managing broker to substantial liability.93. A landlord's building has 12 units and the landlord manages it personally without a licensee. Does fair housing law apply?
- A. Yes, and the advertising prohibitions apply regardless of any exemption that might otherwise be available
- B. No, because the landlord manages the property personally
- C. No, because the building has fewer than 20 units
- D. Only if the landlord accepts federal rental assistance
Show answer & explanation
Answer: A
The narrow owner-occupied exemption covers buildings with a very small number of units, not twelve, and no exemption reaches the advertising prohibition, so discriminatory advertising is unlawful in every case. Involvement of a licensee also removes any exemption that might otherwise apply.94. A landlord fails to make essential repairs after repeated notice, rendering a rental unit so uninhabitable that the tenant is forced to move out before the lease term ends. What is this situation called?
- A. Actual eviction
- B. Retaliatory eviction
- C. Constructive eviction
- D. Self-help eviction
Show answer & explanation
Answer: C
Constructive eviction occurs when a landlord's failure to maintain the premises, or other substantial interference, makes the unit uninhabitable to the point that a tenant is effectively forced to vacate, even though the landlord never physically removed the tenant. This differs from actual eviction, which involves a formal legal removal process.
Valuation, Appraisal and Finance
6 questions95. A broker prepares a comparative market analysis for a seller and includes an opinion of value. Under North Carolina rules, when may a broker do this?
- A. In connection with an actual or prospective brokerage transaction, without appraiser licensure, provided it is not represented as an appraisal
- B. Never, since any opinion of value requires appraiser licensure
- C. Only if the broker also holds an appraiser license
- D. Only for commercial property
Show answer & explanation
Answer: A
A licensed broker may provide a price opinion in connection with brokerage activity, and it must be clearly distinguished from an appraisal. Preparing an opinion of value for a fee outside a brokerage relationship, or presenting one as an appraisal, moves into appraisal practice and requires appraiser credentials.96. A lender must provide a Loan Estimate and a Closing Disclosure to a residential borrower. Which rule governs these forms?
- A. The integrated disclosure rule combining Truth in Lending and settlement procedure requirements
- B. The Fair Credit Reporting Act
- C. The Equal Credit Opportunity Act
- D. The Home Mortgage Disclosure Act
Show answer & explanation
Answer: A
The integrated disclosure framework replaced the older good faith estimate and settlement statement with a Loan Estimate delivered shortly after application and a Closing Disclosure delivered a prescribed number of business days before consummation. Certain changes trigger a new waiting period, which affects closing scheduling.97. A borrower's loan has an interest rate that adjusts annually after a five-year fixed period. What is the principal risk to the borrower?
- A. Payment shock if rates rise substantially when the adjustment period begins
- B. That the lender may demand full payment at the end of the fixed period
- C. That the loan balance cannot be prepaid
- D. That the property must be reappraised annually
Show answer & explanation
Answer: A
A hybrid adjustable loan trades a lower initial rate for post-adjustment uncertainty, and caps limit but do not eliminate the increase. A balloon loan is the structure that requires full payment of the remaining balance at a set date, which is a different risk that borrowers frequently confuse with adjustment.98. An older homeowner obtains a loan that pays them monthly, requires no repayment while they occupy the home, and accrues interest against the equity. What product is this?
- A. A reverse mortgage, where the balance grows and is repaid when the borrower no longer occupies the home
- B. A home equity line of credit requiring monthly payments
- C. A wraparound mortgage
- D. A blanket mortgage
Show answer & explanation
Answer: A
A reverse mortgage converts equity to income with no required monthly principal and interest while the borrower occupies the home, and the growing balance is satisfied on sale, move-out or death. Borrowers remain responsible for taxes, insurance and maintenance, and failure there can trigger default despite the absence of loan payments.99. An appraisal for a residential mortgage comes in below the contract price. What is the practical consequence for the buyer?
- A. The lender will lend against the lower value, so the buyer must bring additional cash, renegotiate, or exercise a contract contingency
- B. The lender must lend against the contract price
- C. The seller is legally required to reduce the price
- D. The transaction is void by operation of law
Show answer & explanation
Answer: A
Loan-to-value is computed on the lesser of price or appraised value, so a low appraisal reduces the loan amount and increases the required down payment. Neither party is compelled to change the price; the buyer's options depend on whether the contract contains an appraisal contingency.100. A commercial lender requires a minimum debt service coverage ratio of 1.25. A property generates 150,000 dollars of net operating income. What is the maximum annual debt service the lender would permit?
- A. 120,000 dollars
- B. 187,500 dollars
- C. 150,000 dollars
- D. 93,750 dollars
Show answer & explanation
Answer: A
Maximum debt service is net operating income divided by the required coverage ratio: 150,000 divided by 1.25 equals 120,000 dollars. Multiplying instead gives 187,500, which would leave the property unable to cover its debt. Coverage requirements constrain commercial loan size independently of loan-to-value, so both tests must be satisfied.
Showing 100 of 148 questions.
2026 statistics
Key facts: North Carolina Real Estate Broker exam
- Questions
- 140
- Time limit
- 4h 30m
- Passing score
- 75 (each section)
- Exam fee
- $63
- Governing body
- North Carolina Real Estate Commission
This free North Carolina Real Estate Broker practice test has 148 original questions written to North Carolina Real Estate Commission's official content outline, last checked against it on July 18, 2026, 100 of them listed on this page and the rest loaded by the drill. Every question shows a worked explanation, and nothing here requires a signup.
The questions are grouped under eight outline areas: Property Ownership, Financing, State Law, State License Law and Broker Supervision, Transfer of Title, Closing and Settlement, Contracts, Agency and Brokerage, Property Management and Trust Accounts and Valuation, Appraisal and Finance.
As of 2026, the North Carolina Real Estate Broker exam fee is $63.
How the North Carolina Real Estate Broker practice bank covers the outline
148 questions across 8 outline areas — the same areas the page's sections use.
Counts are the live question bank, grouped by the outline area each question was written to.
Exam format and study resources
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Official sources
Primary documents used to verify the exam details shown on this page.
- Real Estate Licensing in North Carolina (Candidate Booklet, April 2026)North Carolina Real Estate Commissionpearsonvue.com
- North Carolina Real Estate Broker ExamNorth Carolina Real Estate Commission / Pearson VUEpearsonvue.com
- Housing Discrimination Under the Fair Housing ActU.S. Department of Housing and Urban Developmenthud.gov
- NCREC Bulletins — Continuing Education RequirementsNorth Carolina Real Estate Commissionbulletins.ncrec.gov
Last verified against the official exam content outline:
Frequently asked questions
Do these practice questions match the real NC Broker exam?
They are written in the same multiple-choice style as the real exam and cover the same core topics: agency and fiduciary duties, contracts, finance, property ownership, fair housing, and valuation. The goal is to make the phrasing and difficulty feel familiar on test day. They are a study tool, not actual exam questions, so treat them as preparation rather than a preview of the exact items you will see.
Are these NC Broker practice questions really free?
Yes — the practice questions are free and you can start immediately with no signup, no email, and no credit card. Answer as many as you like and come back as often as you want. Free access removes the excuse to put off studying, so start with a short set today.
How many practice questions should I do before the exam?
Aim to work through several hundred questions over your study period, in short daily sessions rather than one marathon. Since the real exam has 140 scored questions, build up to full-length timed sets so your focus lasts the whole test. Daily practice of 20 to 40 questions with review is more effective than cramming everything into the final week.
How should I use the answer explanations?
Read the explanation for every question, including the ones you got right. Explanations tell you why the correct answer is correct and why the tempting wrong choices fail, which is exactly the reasoning the exam tests. When you miss a question, write down the underlying rule — not just the answer — and retest yourself on that topic a few days later.
How do I know when I'm ready to sit the NC Broker exam?
You are in good shape when you consistently score comfortably above the passing standard on full-length practice sets — remember the real exam requires a score of 75 on each section, so check your national and state results separately. Readiness also shows up as speed: you should finish timed sets with time to spare and rarely feel surprised by a question's wording. If one topic area keeps dragging your score down, drill that area before booking your appointment.