STUDENT ADVENTURE GUIDE

NOTEBOOK

Welcome to Superior School’s

Post 302 – Graduate Program

14815 Ballantyne Village Way #270

Charlotte, NC 28277
877-944-4260
Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 Postlicensing 302: Contracts & Closing
Table of Contents

MODULE 1 – CONTRACTS & CONTRACT PREPARATION

Section 1 – Basics of Contracts & Contract Preparation

Basic Contract Principles in the Real World
Basic Contract Terms
Essential Elements of a Contract
Distinguishing Between Void & Voidable
Statute of Frauds
Section 1 – Notebook Guide

Section 2 – Formation of a Contract

Fundamental Offer & Acceptance Rules
Creation of Counteroffers
Formation of a Contract
Impediments to Mutual Consent & Contract Breaches
Fraud & Misrepresentation
Assignments
Remedies for Breach
Section 2 – Notebook Guide

Section 3 – Review of the NC Offer to Purchase & Contract

Prohibition Against Drafting Contracts
Sources of Forms
Role of NCREC in Regard to Contracts
Practical Applications Questions
Detailed Review of Standard Form 2T
Section 3 – Notebook Guide

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 3
 Table of Contents (CONTINUED)

MODULE 2 – CLOSING PREPARTIONS & PROCEDURES

Section 4 – Closing Preparations & Procedures

Preclosing Procedures
The Role of the Attorney
The Buyer & Due Diligence
Title Insurance Issues
Conducting the Closing
Good Funds Act & Transfers of Funds
Real Estate Settlement & Procedures Act
Loan Estimates
The Closing Disclosure Statements & TRID
Requirements to Provide and Review Closing Disclosures
Section 4 – Notebook Guide

Section 5 – The Closing Disclosures

Guide to Success with Closing Disclosures
Costs and Fees the Seller Pays
Costs and Fees the Buyer Pays
Paid Outside of Closing Items
Mortgage Interest Paid in Arrears
Items Deposited as Reserves
Transferring Rental Properties
Section 5 – Notebook Guide
Practice Closing Disclosure #1
Practice Closing Disclosure #2
Practice Closing Disclosure #3
Practice Closing Disclosure #4

4 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 Table of Contents (CONTINUED)

MODULE 3 – ADVANCED CONTRACT ISSUES & ADDENDA

Section 6 – Advanced Contract Issues & Addenda

A Matter of Signatures
Marital Interests
Federal and State Laws Dealing with Electronic Signatures
The Modification & Amendment of Contracts
General Guidelines for Addenda Completion
Section 6 – Notebook Guide
2A1-T – Backup Contract Addendum
2A2-T – Contingent Sale Addendum
2A3-T – New Construction Addendum
2A4-T – FHA/VA Financing Addendum
2A7-T – Buyer Possession Before Closing Addendum
2A8-T – Seller Possession Before Closing Addendum
2A9-T – Lead Based Paint & Hazard Addendum
2A11-T – Additional Provisions Addendum
2A12-T – Owners’ Association Addendum
4-T – Agreement to Amend Contract Addendum
310-T – Due Diligence Request and Agreement

Section 7 – Dealing with Funds in the Contract

Provisional Broker Handling of Money
Deposits of Earnest Money
Handling 3rd Party Funds for Delivery
Acting as a Courier
Rules Regarding Trust Accounts
Section 7 – Notebook Guide

Section 8 – Dealing with Multiple Offers

Requirement to Submit All Offers
Existence of Multiple Offers
Consent Required for Disclosure of Offer Terms
Roundtable Discussion Regarding Multiple Offers
Real World Negotiating Case Studies & Scenarios
Section 8 – Notebook Guide

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 5
 Table of Contents (CONTINUED)

MODULE 4 – OTHER TYPES OF CONTRACTS

Section 9 – Other Types of Contracts

Vacant Lots & Land
Transferring Unsubdivided Land
The Regulations of Subdivisions
Interstate Land Sales Full Disclosure Act
12-T – Offer to Purchase and Contract Vacant Land
Dealing with New Construction
New Construction Exemptions from Licensure
NC Licensing Board for General Contractors
2A3-T – New Construction Addendum
800-T – Offer to Purchase and Contract New Construction
Approaches to Seller Financing
Loan Assumptions
2A6-T – Loan Assumption Addendum
Seller Carrybacks
1A5-T – Seller Financing Addendum
Land Contracts & Contracts for Deed
Dealing with Options
Section 9 – Notebook Guide

6 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 North Carolina Postlicensing Course Syllabus
Post 302: Contracts & Closing (Student Version)

August 2021 Edition

North Carolina Real Estate Commission

P.O. Box 17100
Raleigh, NC 27619
(919) 875-3700
Email: [email protected] v

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 7
 INTRODUCTION

Course Description: The Post 302 – Contracts & Closing course is one of the three 30- instructional hour
courses in the North Carolina mandatory Postlicensing (PL) education program. The primary objective of the
courses is to provide instruction at a level beyond that provided in Prelicensing courses on topics deemed to
be of special importance in the active practice of real estate brokerage. Topics addressed in this course
include:
• selected basic contract law concepts,
• real estate sales contract preparation,
• sales contract procedures,
• buyer’s due diligence,
• closing procedures,
• Real Estate Settlement Procedures Act,
• closing disclosure preparation,
• contracts for deed, options, and
• selected real estate license status and education issues.

Requirements for Offering the Course: This course may only be offered by Commission- certified
Education Providers (EPs) that have received course approval for each specific course delivery method. EPs
may only use instructors approved by the North Carolina Real Estate Commission to teach Prelicensing and
Postlicensing courses. Rules governing the conduct of the course, including scheduling, course delivery,
course completion standards, course completion reporting and other related matters may be obtained on the
Commission website (www.ncrec.gov). The Post 302 – Contracts & Closing course must be taught as
prescribed by this syllabus.

Course Hours and Delivery Method: Each Postlicensing course must consist of a minimum of 30
instructional hours. The course may be offered via in-person, synchronous distance, self- paced distance, or
blended delivery. Pre-approval is required for each type of delivery.

Prerequisite: Per Commission Rule 58A .1902(b), a provisional broker as described in NCGS 93A-4(a1)
shall complete all Postlicensing courses pursuant to Paragraph (a) of this Rule within 18 months following
the date of initial licensure.

An EP should require an individual enrolling in a Postlicensing course for Postlicensing educational credit
to verify their identity and to provide their NC real estate license number to assure compliance with the above
rule.

Course Materials: Per Commission Rule 58H .0205(c), the EP shall verify that each enrolled student
possesses course materials by the first class session. Mandatory materials for this courseinclude the current
editions of:
• North Carolina Real Estate Manual (hereinafter called Manual),
• North Carolina Real Estate License Law and Commission Rules (hereinafter called LLCR), and
• the Commission’s Residential Square Footage Guidelines booklet.
These publications in print or digital format can be ordered through the Commission’s website orthe EP.

Text references throughout the syllabus are for the July 2020 edition of the LLCR and the 2020 edition of
the Manual. For your benefit, all Manual chapters referenced in this course syllabus areconsolidated within
Chapter 25. POST 302, Contracts and Closing in the digital version of the

8 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
Manual. Italicized [Digital REM search words] after a subheading will help you narrow your digitalsearch
for a Manual reference.

Instructor Note: Copies of current standard NC REALTORS® forms required for teaching this course
may be downloaded (by instructors & education directors) in your ShareFile account
(https://ncrec.sharefile.com) with SAMPLE watermarked across each page.

Course Scheduling: Refer to Commission Rule 58H .0404 for course scheduling parameters.

Commission Rule 21 NCAC 58H .0304: Instructor Conduct and Performance

(a) All instructors shall ensure that class sessions are conducted at the scheduled time and for thefull amount
of time that is scheduled or required. Instructors shall conduct courses in accordance with the Commission's
rules, and any applicable course syllabi, instructor guide, or course plan. Instructors shall conduct classes
demonstrating the ability to:
(1) state student learning objectives at the beginning of the course and present accura te and relevant
information;
(2) communicate correct grammar and vocabulary;
(3) utilize a variety of instructional techniques that require students to analyze and apply coursecontent,
including teacher-centered approaches, such as lecture and demonstration, and student-centered
approaches, such as lecture discussion, reading, group problem solving, case studies, and scenarios;
(4) utilize instructional aids, such as:
(A) whiteboards;
(B) sample forms and contracts;
(C) pictures;
(D) charts; and
(E) videos;
(5) utilize assessment tools, such as:
(A) in-class or homework assignments, and
(B) quizzes and midterm examinations for Prelicensing and Postlicensing courses;
(6) avoid criticism of any other person, agency, or organization;
(7) identify key concepts and correct student misconceptions; and
(8) maintain control of the class.
(b) Instructors shall not obtain, use, or attempt to obtain or use, in any manner or form, North Carolina
real estate license examination questions.

Instructor Notes: EPs and instructors are REQUIRED to comply with the assigned Instructor Notes and
conduct “Required Activities” when teaching this course. Any “Suggested Activities” are not required to
be implemented.

End-of-Course Examinations and Completion Standards: For successful completion of thecourse,

students must
1. satisfactorily complete any required activities and homework exercises,
2. meet attendance requirements, and
3. pass the end-of-course examination.
Instructional time should only be used for the introduction, and review upon completion, of thehomework
assignment(s).

EPs are required to utilize end-of-course examinations in accordance with Commission Rule 58H
.0207. End-of-course exams must be closed-book and proctored. The minimum passing grade is75%. The
Commission recommends that certified EPs and approved instructors use end-of-

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 9
 course examinations that are comprehensive in scope. EPs and instructors shall safeguard theintegrity and
confidentiality of examinations at all times.

Syllabus Copies:
• The course syllabus is posted on the Commission’s website, under Education.
• EPs and instructors may reproduce all or part of the syllabus for student use at their ownexpense,
and may charge students for the cost of reproduction.

Order of Subject Area Presentation: The order in which subject areas are presented in the Syllabus is the
recommended order, but instructors may make adjustments in the order of presentation.

Instructional Levels: The Commission utilizes Instructional Levels to prescribe the scope and depth of
coverage of topics and subtopics throughout the course. There are three levels, with Level 1 being the lowest
and Level 3 being the highest level of instruction. Instructional Levels are based on Bloom’s Taxonomy.

Below are the definitions of the three Instructional Levels, including the prescribed competency and
instruction for each. Competency means what students will be able to do by the end of topic/subtopic
coverage. Instruction means the prescribed depth of coverage and instructional methods.

Level 1 – Recall

NOTE: Level 1 is based on Bloom’s Taxonomy Level 1-Understand and Level 2-Remember.

Competency: Students should be able to recall facts and basic concepts and to explain ideas or
concepts. Learning objectives may include terms such as define, duplicate, classify,
explain, and describe.

Instruction: Instructor should review and discuss basic definitions, facts, concepts, procedures,
etc. In-depth instruction is not required.

Level 2 – Application

NOTE: Level 2 is based on Bloom’s Taxonomy Level 3-Apply and Level 4-Analyze.

Competency: Students should be able to use information in new situations and to draw
connections among ideas. Learning objectives may include terms such as
implement, solve, demonstrate, interpret, differentiate, relate, compare, and
contrast.

Instruction: Instructor should review and discuss the topic in moderate depth sufficient to
illustrate and enhance understanding of facts, principles, procedures, etc. and their
relevance to brokerage practice.

10 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 Level 3 –Analysis

NOTE: Level 3 is based on Bloom’s Taxonomy Level 5-Evaluate and Level 6-Create.

Competency: Students should be able to justify a stand or decision and to produce new or
original work based on the information. Learning objectives may include terms
such as defend, judge, critique, weigh, design, assemble, develop, or formulate.

Instruction: Instructor should review and discuss the topic in substantial depth, using examples
to reinforce understanding of ideas, principles and practices, andrequiring students
to complete practical work assignments to demonstrateboth their understanding of
the topic and their ability to apply their knowledge to common fact situations that
will be encountered in real estate practice.

Each major topic (i.e., preceded by a capital letter) in this syllabus has been assigned an Instructional Level.
In some instances where a subtopic should be afforded significantly greater or lesser emphasis than the
major topic under which it is listed, that subtopic has been assigned a different Instructional Level that
applies to that subtopic only.

Education Providers and instructors are REQUIRED to comply with the assigned Instructional
Levels when teaching this course. The majority of Postlicensing topics should be taught at a Level 3;
therefore, assume the Instructional Level is 3 if no level is noted in the syllabus.

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 11
 POST 302
CONTRACTS and CLOSING
POSTLICENSING COURSE

Instructional Hours per Section

Section # Section Title Hours

1 Basic Selected Contract Law Concepts…………………………... 1.5

2 Real Estate Sales Contract Preparation………………………….. 12

3 Sales Contract Procedures………………………………………… 2

4 Closing Preparations and Procedures…………………………….. 2

TILA-RESPA Integrated Disclosure Rule (TRID)

5 and Real Estate Settlement Procedures Act (RESPA) ………… 2

6 The Settlement Statement………………………………………….. 6.75

Other Topics (Alternate Conveyance Contracts;

7 0.75
License Status and Education Issues)…………………………….

Subtotal 27

End-of-Course Examination
(including a complete settlement problem) 3

Total 30

12 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 Post 302
Contracts and Closing
Postlicensing Course Syllabus

Instructor Note: Some sections have Required Activities while others give SuggestedActivities for a
topic or section. In addition to the Required Activities, instructors are strongly encouraged to use other
activities to maximize student engagement and retention of information.
Suggested Course-long Activity: The transactional timeline used as the basis for the Post 302course lends
itself to a course activity with steps that are continued throughout the course. Students can perform tasks
at appropriate places in the syllabus that follow an imaginary buyer or seller client from the creation and
delivery of an offer, through negotiation with a multiple offerscenario, to contract formation, and through
settlement and closing. Instructor will need to provide guidance (maybe in the form of an informational
handout or template that assures the inclusion of many course concepts) so students have all necessary
information to complete all the various steps of the process. Some of the mentioned steps are Required
Activities for the course.

Section 1: Basic Selected Contract Law Concepts (1½ hours)

(Manual, Chapter 10, Contract Law, pp. 293-322)

I. Basic Contract Terms [Digital REM search for: basic contract law]
Instructor Note: This section should be a very brief review of terminology.
Suggested Activity: Consider using a quiz or matching exercise to quickly refresh the
information. A timed completion quiz like Kahoot! would work well.

A. Definition of Contract: A deliberate agreement between two or more competent parties

supported by legal consideration to perform or abstain from performing some act

B. Express and Implied Contracts: words vs. conduct

C. Unilateral and Bilateral Contracts: promises by one party vs. both parties

D. Executed and Executory Contracts: fully performed vs. in the process of performing

E. Valid Contracts: satisfy all legal requirements; fully enforceable in court

F. Voidable Contracts: one party can avoid performance based on a legal principle

G. Void Contracts: does not satisfy all legal requirements; unenforceable in court

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 13
 H. Addenda: add something to the original contract; becomes part of the contract

I. Amendments: change some term(s) of the original contract through later mutualwritten
agreement

II. Essential Elements of a Contract (Manual, Chapter 10, Contract Law, pp. 295-303)

Instructor Note: This section should be a brief review of fundamental common law contract
principles that continue to govern modern contract law. Real world examples should include commercial
and residential brokerage transactions.

A. Mutual Assent / Offer and Acceptance / Meeting of the Minds (Manual, Chapter11,
Sales Contract Procedures, pp. 357-365)

Required Activity: Thoroughly review the offer and acceptance concept by using varied fact
situations, including situations that involve electronic communication of offerand acceptance and
communication to agents vs. principals.
Instructor Note: Active student involvement is critically important to assure understanding of
these crucial basic concepts. Revisit the offeror/offeree terms. Additional resources available on
the Commission’s website under Publications include: NCREC brochure titled Q&A on Offer
and Acceptance; Contracts section of the 2020-2021 Update; and Contract Formation and
Negotiation section of the 2013- 2014 Update.

1. Communication of offer & acceptance

a. Oral communication

b. Personal delivery

c. Mail (traditional or special mail, such as USPS, FedEx, UPS, etc.)

d. Electronic methods of communication

2. Offer
Note: Pay careful attention to terminology. There is a huge difference between an offer
and a contract.

a. Definition: a promise (that is definite in terms) by an offeror asking for a promise

or an action by an offeree

b. Typically, the buyer is the initial offeror and the seller is the initial offeree; but
sellers can initiate offers

c. Brokers must present all offers to offeree (or their agent) immediately but in no case
later than 3 days from receipt by broker [NCGS 93A-6(a)(13); Rule58A .0106(a)]

14 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 i. Even if property is under contract
ii. Broker cannot “hold” offer while negotiating compensation agreement
iii. Use of Back-up Contract Addendum (NC REALTORS® Standard Form
2A1-T will be covered in Section 2 with other standard addenda)

3. Acceptance

a. Mailbox rule [Digital REM search for: mailbox]

i. Acceptable notification as long as offer does not prohibit it

ii. Must be properly addressed to the offeror
iii. Offer considered accepted at date and time of mailing
▪ Once in control of mail service & out of offeree’s control
▪ Time of actual receipt by offeror is irrelevant
iv. Neither party can withdraw offer or acceptance once mailed
v. Only applies to communicating acceptance of an offer; not termination of an
offer or contract

b. Communication to agent same as to principal

4. Termination of offers

a. Counteroffer (a new offer with partial or conditional acceptance of originaloffer

terms)

b. Rejection by offeree by notification or lapse of time specified in offer

c. Revocation by offeror any time prior to communication of acceptance from

offeree

d. Destruction of the property

e. Death or insanity of the offeror immediately terminates without notice to the

offeree

f. Response to Buyer’s Offer (NC REALTORS® Standard Form 340-T) [DigitalREM

search for: 340-T]

Required Activity: Provide a detailed review of NC REALTORS® Standard Form 340-

T. Discuss the pros and cons of the seller using this form, especially ina multiple offer
scenario.

i. Is not a counteroffer; the seller is not bound, so free to negotiate and even
go under contract while waiting for original buyer’s response to the form
ii. Can be used with one or multiple offers
iii. Three (3) possible responses to the buyer

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 15
 ▪ Rejects offer and encourages new offer based on list of the seller’s
preferences for offer terms
▪ Will hold offer until established offer deadline & consider it with any
other offers
▪ Rejects offer

B. Consideration: Anything that is bargained for and given in exchange for a promise;usually
the sales price or rent in real estate
Note: The sales price is the consideration in a sales contract, not the earnest money deposit
or the due diligence fee. Rent is the consideration in a lease, not the tenant security deposit.

C. Legal Capacity of the Parties [Digital REM search for: legal capacity]

1. Obtain legal advice if unsure of legal capacity of a party prior to executing an offer
or acceptance

2. No legal capacity to contract

a. Minors (persons under the age of 18 in NC) - voidable

b. Persons declared mentally incompetent by court of law - void

c. Persons mentally incompetent in fact - voidable

d. Persons intoxicated or under drug influence who do not understand whatthey are
doing when signing a contract - voidable

D. Lawful Objective

III. Impediments to Mutual Consent [Digital REM search for: mutual consent]

Instructor Note: Provide real world examples of each of the following ways that real estatecontracts
may be declared void or voidable.
Suggested Activity: Provide various scenarios that include some of the impediments belowand have
students identify situations that may produce an unenforceable contract. Also explore ways to resolve
the issues.

A. Mistake

1. Mistake of fact

a. Definition: an erroneous impression on the part of one or both parties

regarding some material aspect of the contract

b. Contract may be voidable if the mistake of fact

16 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 i. Involves a material term or aspect;
ii. Is mutual; and
iii. Is not the result of fraud or negligence

c. Unilateral mistakes of fact do not release parties from their obligations

2. Mistake of law does not excuse obligation of a party

a. Definition: mistaken understanding of legal effect of the contract

b. Does not excuse obligation of a party

B. Fraud and Misrepresentation

1. Fraud

a. Elements of fraud

i. False misrepresentation or omission of a past or existing material fact

ii. Made with knowledge of falsity or in reckless disregard of its truth
iii. With the intent that it will be acted upon by the other party
iv. That is acted on by that party to their injury

b. Voidable by the deceived party; not automatic

2. Innocent misrepresentation

a. Definition: an untrue representation by a party believing it to be true

b. May be basis for contract rescission

Note: Brokers should not make statements about matters about which they are
ignorant

C. Unfair or Deceptive Trade Practices Act [NCGS 75-1.1] [Digital REM search for:
deceptive]

1. Includes

a. Providing a misleading opinion or false inducement

b. Failing to disclose a material fact

c. Misleading advertising

d. Misrepresenting the nature or extent of a guarantee or warranty

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 17
 Suggested Activity: Have students brainstorm examples of statements or advertisements that
might violate the Act.
Instructor Note: Help students differentiate between legal “puffing” and deceptiveads.

2. Injured party is entitled to treble damages [NCGS 75-16]

3. Application

a. Applies to

i. Real estate brokers

ii. Owners who regularly sell real estate

b. Does not apply to For Sale By Owner that does not generally engage in real
estate trade

D. Duress

1. Overcoming the will of a person by violence or threat of violence

2. Voidable by injured party through legal action within a reasonable time after duress is
removed

E. Undue Influence

1. One person takes unfair advantage of another person due to a close, confidential, or
fiduciary relationship (e.g., parent - child, broker - client, attorney - client)

2. Voidable if contract was induced by undue weight being given to the counsel of the
fiduciary party

IV. Other Contract Law Issues

A. Statute of Frauds [NCGS 22-2] [Digital REM search for: statute]

1. Certain contracts must be in writing to be enforceable

a. All contracts to convey interest in real property

b. A lease that exceeds 3 years from the “making”/signing of the leaseagreement

c. Contract modifications

18 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 d. Agency agreements are considered employment contracts, not real estatecontracts,
and are excluded from Statute of Frauds; Commission rules require these to be in
writing

2. Verbal negotiations and agreements are not enforceable (See Parol EvidenceRule
below)

3. Necessary elements for compliance with Act

a. Individual names of the parties to the contract

Instructor Note: This is why Mr. & Mrs. is not acceptable on the sales contract.

b. Subject matter of the contract

c. Material terms and conditions

d. Signature of any party to be charged with the contract (or an authorizedagent)

B. Electronic Transactions
Instructor Note: Refer to Electronic Signatures and Documents section of the 2014- 2015
Update for more detail about the laws, disclosure requirements, recommended practices, and
examples of application to brokerage transactions.

1. Uniform Electronic Transactions Act (UETA) [Digital REM search for: UETA]

a. Applies to interstate transactions involving at least one natural person whois

i. Purchasing or selling an owner-occupied dwelling, or

ii. Leasing a vacation rental property for personal use, or
iii. Leasing a pre-1978 dwelling to use as their residence

b. If parties consent to use electronic means, they cannot later deny the validity of
those transactions

c. Electronic signature: a sound, symbol or process attached to, or logically associated

with, a record, executed or adopted by a person with the intent to sign the record

d. North Carolina version (NCUETA) [NCGS Article 40, Chapter 66]

i. Regulates intrastate commerce

ii. Required notice in NC consumer transactions [NCGS 66-327]

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 19
 2. Electronic Signatures in Global & National Commerce Act (ESIGN) [Digital REM
search for: electronic signatures] regulates interstate and foreign commerce (i.e.,
commerce across state lines)
Note: Brokers must be diligent about using up-to-date cybersecurity measures. Refer
to Cybersecurity section of the 2020-2021 Update and WireFraud section of the 2019-
2020 Update for examples of application to brokerage transactions.

C. Discharge of Contracts [Digital REM search for: discharge of contracts]

Instructor Note: Provide real world examples of each of the following ways that real estatecontracts
are terminated. Be sure to highlight that termination of a contract is different fromtermination of an
offer.

1. Full and complete performance of all contract terms by all parties

2. Agreement of the parties

a. Release: a contract to destroy an earlier contract

b. Novation: a new contract substituted for a previous contract

c. Subsequent Modifying Agreement: a new contract changing the terms of the

original contract

d. Accord and Satisfaction: mutually agreed upon compromise

e. Cancellation

3. Material breach

a. Failure of one party to perform a major contract obligation may release non-
breaching party from obligation to perform

b. Not all failures to perform are material

c. Most contracts do not use “time of the essence” so a reasonable time to perform
must be allowed

4. Impossibility of performance

a. Consequences of contingent contract conditions should be addressed in thecontract

terms; non-performance of such conditions seldom allow for contract termination
without specific contract language

b. Generally refers to impossibility of the thing to be done, not the inability of the
promisor to do it

20 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 c. If a party dies after contract formation, but prior to closing, the contract is
binding upon heirs and/or estate of contract parties

5. Operation of law may override contract (e.g., bankruptcy of a party; statutes of

limitation; government action)

D. Assignment

1. Transfer of all contract rights and obligations of the assignor to the assignee

2. Unless released by the other party to the contract, the assignor will remain
secondarily liable for performance of contract terms

E. Rules for Interpretation of Contracts

Instructor Note: This is a good opportunity to remind brokers that they are prohibited from
drafting legal documents for others, interpreted as the unlawful practice of law per NCGS 93A-
6(a)(11).

1. Parol Evidence Rule [Digital REM search for: parol evidence]

a. All previous negotiations and informal agreements are superseded by written

contract terms

b. Preliminary negotiations inconsistent with terms of written contract are not

admissible to alter the terms of the contract
Suggested Activity: Have students discuss what preliminary negotiations might cause a
problem if not reflected in the final terms of the written contract. Possibilities include
whether appliances or other personal property convey; what landscaping items remain; if
Seller will leave furniture or lawn mower, etc.

2. A contract is to be interpreted as a whole

3. Ordinary words will be interpreted in their ordinary, popular sense unless

circumstances show that the parties clearly intended a different use

4. Written provisions will override pre-printed contract language, if there is a

conflict

5. Writer of ambiguous language will be held liable for confusion; court generally rules
in favor of party that did not draft the confusing language

F. Contract Remedies for Breach [Digital REM search for: contract remedies]

1. Money Damages

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 21
 a. Compensatory damages: intended to make injured party whole, not to penalize the
breaching party

b. Consequential damages: also known as special damages, a money award made by a

court to compensate the injured party for damages that resulted from a foreseeable
result of wrongdoing that a reasonable person could have foreseen); very unusual
in real estate transactions

(Example: “Assume that a seller of an airplane falsely reports themechanical

repair and flight history of the airplane in its logbook, which the buyer relies on
when purchasing the airplane. Months after the purchase,the airplane’s engine
malfunctions during flight. If the seller knew at the timeof contract that the buyer
would be using the airplane for commercialpurposes, then it is foreseeable at
the time of contracting that the buyerwould incur lost profits in the form of lost
airline ticket sales and loss of use costs while the airplane is in repair. Additionally,
the buyer may be impacted by a loss of goodwill due to disgruntled customers.”
Read more athttps://www.metzlewis.com/incidental-damages-vs-consequential-
damages-distinction-consequence/)

c. Liquidated damages: an amount pre-determined in the contract as the total

compensation that either party will receive in the event of a breach (e.g., earnest
money deposit or tenant security deposit)
Suggested Activity: Have students review the “liquidated damages” language of the
Earnest Money Deposit contract provision in the Offer or Purchase and Contract
NCBA/NCAR Standard Form #2-T.

2. Specific Performance [Digital REM search for: specific performance]

a. One party sues the other party to make them perform according to the
contract

b. Frequently granted to buyers due to the unique nature of each parcel

c. Rarely granted to sellers

3. Rescission [Digital REM search for: rescission]

a. Declares the contract invalid and returns the parties to the position they were in
prior to entering the contract

b. May be granted for

i. Mutual mistake of fact

ii. Fraud or misrepresentation cases
iii. Undue influence or duress situations

22 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 G. Real Estate Auction Sales Level 1

1. With reserve vs. without reserve

2. Regulation of auctions & auctioneers

a. Real estate license not required for person acting solely as auction’s cryer of sales

b. Real estate license is required for person performing any activity other than “cryer”,
such as advertising and conducting the auction, making representations about the
property, or soliciting people to attend the auction

Section 2: Real Estate Sales Contract Preparation (12 hours)

(Manual, Chapter 11, Sales Contracts and Practices, pp. 323-397)

I. Introductory Concepts

A. Expectation of Broker Competence [NCGS 93A-6(a)(8)]

1. Competent and accurate completion of pre-printed standard sales contractforms

2. Understanding of all provisions in standard pre-printed forms

3. Ensuring that all points of agreement are included in the final written contract;no
ambiguous terms

4. Incompetence is a violation of fiduciary duties under the common law of agency and
License Law

B. Prohibition against Drafting Contract Language for Others [Digital REM search for:
drafting]

1. Drafting constitutes unauthorized practice of law [NCGS 93A-6(a)(11)]

2. Brokers are legally permitted to fill in the blanks of preprinted forms

3. Have an attorney draft any unique contract language

C. Sources of Standardized Sales Contract Forms

1. REALTORS® may obtain and use the contract forms created by NC

REALTORS® as part of their membership benefits

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 23
 2. Non-REALTOR® brokers may not initiate use of forms bearing the REALTOR® logo

3. Non-REALTOR® brokers may obtain and use the sales contract forms and standard
addenda that are jointly approved by North Carolina REALTORS® and the North
Carolina Bar Association (NCBA), that bear only the NCBA logo/approval, through an
attorney or forms vendor
Note: NCREC does not create the standardized sales contract forms used by the
majority of NC licensees. The only standardized forms authored by the Commission
are:
▪ Working With Real Estate Agents Disclosure;
▪ Residential Property & Owners’ Association Disclosure Statement
(RPOADS); and
▪ Mineral and Oil and Gas Mandatory Disclosure Statement (MOG)
D. Requirements for Broker-Provided Preprinted Sales Contract Forms [Rule 58A
.0112] [Digital REM search for: preprinted contract]

Instructor Note: Remind brokers that this Rule does not apply to contract forms that aredrafted or
supplied by the parties/principals or their attorneys.

1. Must include 19 items/issues

Required Activity: Have students locate the 19 required items in Standard Form #2-
T. This activity can be done now or during detailed review of that form later in thecourse.

2. The NC Bar Association/NC Association of REALTORS®, Inc. (NCBA/NCAR)

jointly approved contract forms are Rule-compliant

3. Prohibited provisions [Rule 58A .0112(b)]

a. Brokerage compensation

b. Liability disclaimer for broker

Note: These 2 items cannot be added even at instruction of the parties or theirattorneys

4. Parties to the contract

a. May alter, amend, or delete any provision in a standardized contract

b. May draft their own offer or contract

c. May have an attorney draft an offer or contract on their behalf

24 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
II. Detailed Review and Completion of the Standard Sales Contract Forms Jointly Approved by
NC REALTORS® and the North Carolina Bar Association (NCBA)

Instructor Note: Provide students with the current version of all referenced forms from
https://ncrec.sharefile.com.
Use NC REALTORS® Guidelines for instructions on how to complete the forms. Train students to
continually look for and use these resources.
Required Activity: Conduct a detailed review of each paragraph in each of the standard forms listed
below. Be sure to discuss the intended use of each form, the meaning and purpose of each paragraph,
and common issues in filling various blanks. Improper completionof sales contract forms by brokers
continues to be one of the greatest problems in real estatebrokerage practice. Every broker completing
this course should be able to accurately complete the appropriate offer to purchase and contract form
(plus any needed addenda or related contract forms) for a wide variety of situations they will commonly
encounter.

A. Standard Contract Forms and Addenda to be Reviewed

Instructor Note: Stress the importance of brokers knowing what offer to purchase and contract
form is appropriate for various types of transactions. Explain that standardized forms give uniformity
to transactions and reduce brokers’ temptation to draft.
Suggested Activity: Have students determine which form is the best to use for various sales
situations.

1. Specialized standard NCBA/NCAR sales contracts (e.g., residential, vacant

lot/land, commercial)

a. Offer to Purchase & Contract, Standard Form 2-T (with Form 2-G
Guidelines for Completing the Offer to Purchase and Contract)

i. Primarily intended for sale of existing single-family residences

ii. Use standard addenda to tailor to needs of the parties
iii. Do not use for lease-option agreement, lease-purchase agreement, or
installment land contract

b. Offer to Purchase & Contract -- Vacant Lot/Land, Standard Form 12-T (with Form
12-G Guidelines)

i. Intended for sale of unimproved land or lot being bought for personaluse
ii. not intended for sale of a large tract of land, such as purchase of land for
subdivision development and resale

c. Offer to Purchase & Contract (New Construction), Standard Form 800-T(with

Form 800G Guidelines)

i. Intended for sale of new residential construction to be built prior to

closing

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 25
 ii. If sale involves completion of new construction that is well under way at time
of contract formation, use Standard Form 2-T with 2A3-T, New Construction
Addendum

Suggested Activity: Have brokers discuss when to use 800-T versus 2-T withthe New
Construction Addendum.

d. Agreement for Purchase & Sale of Improved Real Property, Standard Form580-T;
commercial sales transactions

Instructor Note: Form name changed in 2020 to include “Improved” to help distinguish
it from the new 580L-T for land sales. Brokers are encouraged to use Land Information
Worksheet, Standard Form 502.

e. Agreement for Purchase & Sale of Land, Standard Form 580L-T

Instructor Note: Form created in 2020 because many brokers were improperly using 12-
T, intended for a single residential lot purchase, for the purchase of large acreage.
Brokers are again encouraged to use Land Information Worksheet, Standard Form 502.

i. Very similar to 580-T that was previously used with attorney-drafted addendum
for land purchases
ii. Includes provisions that deal with unique land issues (e.g., possibility ofa price
per acre purchase price; rollback taxes; leases that may need to be terminated
prior to closing; etc.)

2. Thirteen (13) NC REALTORS® /NCBA jointly approved standard addenda (Forms

2A1-T through 2A14-T and 3-T with Guidelines) for use in conjunction with the various
standard residential Offer to Purchase and Contract forms
Instructor Note: Just mention the existence of standard addenda and guidelineshere;
coverage will be handled later in this section.

3. Guidelines are provided for many standard NC REALTORS® forms

B. Common Mistakes in Contract Completion

Instructor Note: The following are common mistakes that the Commission legal staffhas
noted while investigating complaints.
Required Activity: Discuss why the following issues are serious enough to generate
complaints and possible disciplinary action by the Commission.

1. Use of the phrase “owner of record”

2. Failure to clearly list fixtures that will not convey

3. Failure to clearly specify Seller’s personal property that will convey

26 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 4. Failure to clearly define all critical dates

5. Failure to timely present offers and executed contracts

6. Confusion about negotiating repair issues vs. completion of repair work

C. General Guidelines for Contract Completion [Digital REM search for: 2G]

Instructor Note: The following instructions are paraphrased from “General Instructions”area of
NC REALTORS® 2G Guidelines. More detail is included there.

1. Type or print legibly

2. Fill in ALL the blanks; enter “N/A” or “none” as appropriate

3. Be precise; avoid abbreviations, acronyms, or unclear terminology

4. Both Buyer & Seller should initial and date every change, addition, or deletion

5. Rewrite offer if there are numerous changes; retain copies of all offers and
contracts

6. Review ALL contract provisions with the parties and recommend they obtain legal
advice to answer legal questions

III. Major Paragraphs of Standard Form 2-T (Manual, pp. 329-354) [Digital REM search for: 2-
T]

Instructor Note: The review of Standard Form 2-T should be a line-by-line review guided by the
discussion in Section III. Consider covering the 13 standard addenda as they are referenced in the 2-T
so that students can see the relevance of the addenda to the contract terms. Any remaining addenda
can be covered later.
Use of the Guidelines for Completing the Offer to Purchase and Contract is strongly recommended.
Paragraph numbers and letters noted below coincide with the current structure/format of Standard
Form 2-T. The subtopics in the Manual may not strictly follow the sequence of the current Standard
Form 2-T.

Note: Be sure to highlight all the Notes and Warnings in the form.Paragraph #1:

Terms and Definitions

Note: Whenever a term that would not normally be capitalized appears in the body
of a contract and begins with a capital letter, it indicates that the word or phrase isa defined
term that can be found somewhere earlier in that contract. Most of the defined terms in
Form 2-T are defined in Paragraph #1. Words that appear in parenthesis, such as
(Additional) Earnest Money Deposit in 1(d), are optional words to be used or ignored as
appropriate.

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 27
 1-a & b. Names of Seller and Buyer
o Must use individual full legal names (e.g., no Mr. & Mrs.) for all parties
▪ Include at least initial of middle name or NMN if there is no middle name
▪ Include any suffix (e.g., Sr., Jr., III, etc.) even if not used all the time
▪ Marital relationship can be identified but is not mandatory (e.g., John S.Doe and
spouse, Mary R Doe or Pablo T. Martinez, an unmarried person)

o Never use owner of record

o Use full legal name of any entity party; not the dba or trade name 1-c.

Property Description

o Must include a legal description that clearly identifies the contract property

o Do not use the mailing address

o Reference to only a tax map or number is seldom adequate

o Pay close attention to the Notes in this provision

o Attach Additional Provisions Addendum (Standard Form 2A11-T) if a

manufactured home is part of the Property
Instructor Note: Consider reviewing this Addendum at this time. Or you may
reference it now and cover in detail later during the Addenda section.
Suggested Activity: Briefly discuss where to find the information needed to
complete the Legal Description section.

1-d. Purchase Price

o Entry for “Balance” line should be equal to Purchase Price on 1st line minus all
entries in the 2nd through 7th line (funds that will be applied to the Purchase Price
on Buyer’s behalf)
Note: If a counteroffer changes any of the entries in (d), adjustment must also to be
made to the Balance line

o Due Diligence Fee (DDF) Amount

▪ No DDF is required to create a binding contract
▪ Made payable and delivered to Seller by Effective Date
▪ Details of DDF and Due Diligence Period (DDP) covered later in Subpara. 1-
h, i, j

28 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 o Earnest Money Deposit (EMD) Amount(s)
▪ No EMD is required to create a binding contract
▪ Initial EMD, if any, should be
- Paid to named Escrow Agent
- Delivered by Effective Date or within five business days of EffectiveDate,
if checked
▪ (Additional) EMD, if any
- Cannot be paid by personal check
- Time being of the essence in regard to payment
Note: There is no conflict between the option to deliver initial EMD within 5 days
of contract formation and Rule 58A .0116(b) which requires deposit of trust monies
into a trust account no later than 3 days from receipt by broker;it is impossible to
deposit what has not been received

o Referenced financing addenda

▪ Loan balance to be assumed in Loan Assumption Addendum (2A6-T)
▪ Loan amount in Seller Financing Addendum (2A5-T)
▪ Building Deposit in New Construction Addendum (2A3-T)

Instructor Note: Consider reviewing these Addenda at this time. Or you may
reference them now and cover in detail later during the Addenda section.

o Time Being of The Essence: a “drop-dead” date and time for performance of a
contract term that if not observed will be considered a default on the part of the
obligated party and allows the non-defaulting party to exercise stated options

o Late or non-payment of Buyer’s funds (e.g., EMD, DDF) grants Seller the right to
demand good funds within 1 banking day of notice
Suggested Activity: Have students discuss the merits of this Seller right andwhen, or
if, Seller should be encouraged to exercise it.

1-e. Earnest Money Deposit [Rule 58A .0116] [Digital REM search for: earnest money]

Instructor Note: Refer to the Contract section of the 2020-2021 Update, and the Contract Issues
section of the 2018-2019 Update for examples and discussions about handling EMDs and DDFs.
Required Activity: Use various scenarios to explore how both types of EMD should be handled
and when it should be delivered to the Escrow Agent at various points during thetransaction. Pay
particular attention to application of Rule 58A .0116(b)(3-4) regarding following Buyer’s
instructions for delivery to and the timing of deposit by the Escrow Agent.

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 29
 o Addresses how EMD will be held and handled if:
▪ Offer is not accepted
▪ Buyer terminates during Due Diligence Period (DDP)
▪ Contract condition is not met after DDP
▪ Seller breaches contract1-

f. Escrow Agent

o Should be the name of a brokerage company or closing attorney; not an

individual agent unless the agent is a sole proprietor

o EMD checks should be made payable to named Escrow Agent

o Do not sign acknowledging receipt of monies unless actually received

o Permission given for an interest-bearing trust account

o Disputed EMD [NCGS 93A-12; Rule 58A .0116(d)]

Instructor Note: Escrow Agent is not required to transfer disputed EMD moniesto clerk
of court per this law; it is an option.
Suggested Activity: Since this discussion of the disputed funds rule is also included in
the Post 303 course, ask students to share what they remember aboutthe rule. Be sure to
acknowledge correct information and to gently restructure information that is not accurate.

▪ Both brokers and attorneys serving as escrow agents may use thedisputed
funds rule
▪ 90-day written notification to all parties claiming ownership of the moniesof
Escrow Agent’s intent to deposit monies with clerk of court
▪ Deposited with clerk of court in county where contract property is located
▪ Parties have 1 year to file special proceedings with clerk of court or fundswill
escheat to the state
▪ Does not apply to residential tenant security deposits 1-g.

Effective Date

o When last party has signed or initialed the current offer and has communicated this
fact to the other party; there is no contract until acceptance is communicated to the
last offeror or their agent

o Initials of the parties at the bottom of each contract page, or lack thereof, donot affect
contract formation

o Oral agreements are meaningless per Statute of Frauds

30 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 1- h, i, j. Due Diligence [Digital REM search for: due diligence fee]

o Buyer’s opportunity to fully investigate the Property to determine whether to

proceed with or terminate contract

o Due Diligence Fee (DDF)

▪ Negotiated amount paid by Buyer for right to terminate for any or no
reason during Due Diligence Period
▪ Paid directly to Seller
▪ Non-refundable unless Seller breaches or Property is materially damaged or
destroyed
▪ Becomes Buyer’s credit if transaction closes
Note: Seller should cash the DDF check immediately

Suggested Activity: Discuss the reasons it is important for Seller to immediatelycash the
DDF checks, such as Buyer cannot receive credit at Settlement for the funds or Buyer
terminates the contract and stops payment on the check. Some students may have
scenarios to share.

o Due Diligence Period (DDP) [Digital REM search for: due diligence period]
▪ Begins at contract formation; ends at 5 p.m. on date in blank
▪ Time Being of the Essence as to expiration
▪ Buyer’s right to terminate addressed in Para. 4(g)
▪ Termination must be made in writing and delivered to Seller or Seller’sagent
before DDP expiration
▪ EMD is not at risk until after DDP
Instructor Note: Stress the unforgiving nature of the DDF deadline and why it is
especially important for the buyer agent to clearly set expectations with Buyer about
communicating termination in a timely manner.

1-k & l. Settlement [Digital REM search for: settlement]

o All executed documents and funds necessary to complete the transaction

delivered to settlement agent

o Settlement Date
▪ Time and place selected by Buyer
▪ Delay of Settlement is addressed in Para. 12

Note: Brokers are strongly cautioned against suggesting inclusion of a timebeing of

the essence provision regarding the settlement date unless it is imperative to one of
the parties that the transaction close by a specific date. This inclusion could be
considered unlawful practice of law by a broker.

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 31
 Suggested Activity: Discuss how inserting time being of the essence in regardto the
settlement and closing dates might not be in the client’s best interest.

1-m. Closing
Instructor Note: Pay particular attention to the discussion of this paragraph in the Guidelines.
Stress that only a lawyer can legally represent or provide legal services at or during the settlement
process.

o Completion of the legal process to transfer title

o Recordation of the deed and deed of trust required prior to disbursement offunds
held by settlement agent
Note: The settlement meeting and closing may not happen on the sameday,
especially if settlement is late in the day.

Required Activity: Break into groups and discuss why having the settlement meeting and
closing dates on different days might be a problem. Explore ways tominimize the problem.
Instructor Note: Be prepared to address insurance plus keys and possession of the
property being held until recordation of the deed, especially for a Friday settlement. Refer
students to the contract provisions that address possession andinsurance.

1-n. Special Assessments

o Buyer responsibilities addressed in Para. 6(a)

o Seller responsibilities addressed in Para. 8(k)

Paragraph #2: Fixtures and Exclusions [Digital REM search for: fixtures]

o Specified items in Subpara. (b) shall convey with related equipment and remotes
free of liens unless excluded in Subpara. (d) or (e); it is not necessary to mark out
listed items that are not on the property

o Items leased or not owned by the Seller should be listed in (d)

o Items that will not convey should be clearly identified in (e) to avoid later dispute

o Seller must repair any damage caused by removal of excluded items

Paragraph #3: Personal Property

o Any personal property owned by Seller that will convey with the property must be
clearly specified here

32 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 o Verbal agreement and/or personal items listed in MLS are not enforceable

o Item description should be accurate and precise to avoid later dispute

Example: “refrigerator” vs “GE Profile side-by-side refrigerator Model #DH-3594”
Note: Buyers should be advised to consult with their lender in regard to thepossible
effect of any personal property listed in the sales contract

Instructor Note: Discuss possible loan complications arising from inclusion of personal
property in the sales contract. Explore options for proper handling of thesale personal
property item and of fully furnished properties.

Paragraph #4: Buyer’s Due Diligence Process (Manual, Chapter 14, Closing Real Estate
Transactions, Buyer's Due Diligence Process, pp. 461-467) [Digital REM search for: due
diligence process]
Note: Buyers should be strongly advised to perform due diligence activities as quickly as
possible to allow time for negotiation about any discovered issues to beresolved prior to the
end of the DDP. The Buyer is not limited to the investigative items listed in this Paragraph.
Seller is not obligated to extend the DDP. If the Buyer does not terminate the contract prior
to the end of the DDP, the Buyer may continue to investigate the Property after the DDP
but has waived their right to terminate without penalty unless there is a Seller breach

Required Activity: Discuss possible issues arising during the DDP (e.g., loan issues, broken
appliances, house systems that need repair, insurability issues, mechanic’s liens, use restrictions,
etc.). Discussion of how to handle negotiations from both Seller and Buyer viewpoints using
standard forms can be addressed here or under Para 4-d.

4-a. Loan
Note: There are no financing or appraisal contingencies in this contract. Buyer should be
strongly encouraged to meet with a mortgage lender prior to starting a property search.
DDP should be long enough for Buyer to receive the appraisal and to feel confident in their
ability to obtain loan approval.

4-b. Property Investigation

o Inspections
▪ Physical Inspection by Buyer and/or by qualified professionals
▪ Property condition
▪ Moisture & drainage
▪ Environmental (e.g., asbestos, radon, lead, etc.)
▪ Wood-destroying insects
▪ Well & sewage disposal systems

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 33
 o Review of Documents
▪ Residential Property & Owners’ Association Disclosure Statement
▪ Mineral and Gas and Oil Rights Mandatory Disclosure Statement
▪ Lead-Based Paint or Lead-Based Paint Hazard Disclosure Addendum,if
applicable
▪ Protective covenants
▪ Owner association documents

o Insurance
Note: The availability and cost of homeowners insurance and/or flood
insurance can be problematic on some properties

o Appraisal

o Survey
▪ Reveals boundaries and setback lines
▪ Identifies encroachments & easements
▪ Locates mandatory septic repair field, if applicable
▪ Required for title insurance policy coverage for homeowner, but notlender

o Zoning & Government Regulations

▪ May affect Buyer’s intended use of property
▪ Can help identify
- Adjacent land use
- Possible road construction
- School attendance zones

o Flood Hazard (and any flood insurance requirement)

o Utilities & Access

o Street/Roads
▪ Public or private status
▪ Discover if public streets/roads were accepted for maintenance
▪ If not publicly maintained, determine who is responsible for maintenance
▪ Discover private street/road maintenance agreement, if any, and provideto
buyer
▪ Lender may require road maintenance agreement if road is private

o Special Assessments

34 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 o Fuel tank
Note: Determine the location, type and ownership of any fuel tanks on the property;
continued use of leased tanks, especially underground ones, should be verified.

4-c. Sale/Lease of Existing Property [Digital REM search for: contingent sale]

o Material fact that speaks to Buyer’s ability to perform

o Not a contingent sale condition of the contract 4-d.

Repair/Improvement Negotiations/Agreement

o Property being sold in its current condition (as is) unless other agreementsare
specified in the contract

o Repair Negotiation Agreements, if any, should be resolved in writing as partof the

contract before the end of the DDP; agreed upon repairs must be complete prior to
Settlement [see Para. 8(m)]

▪ Due Diligence Request & Agreement (Standard Form 310-T) with Guidelines
▪ Agreement to Amend Contract (Standard Form 4-T)
Required Activity: Discuss possible repair scenarios and how best to handle
negotiations from both the Seller and Buyer viewpoints with use of above forms.

4-e. Buyer’s Obligation to Repair Damage caused by inspections (even if contract fails)

4-f. Indemnification of Seller by Buyer for damage cause by Buyer or Buyer’s agentsand
contractors

4-g. Buyer’s Right to Terminate

o For any reason or no reason

o Written notification by 5 p.m. of stated date, TIME BEING OF THEESSENCE

o EMD (initial and/or additional EMD) shall be refunded to the Buyer, only if
written contract termination is delivered to the seller or seller’s agent by 5pm

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 35
 4-h. Closing shall constitute Acceptance unless other provisions made in writing
Instructor Note: Stress the importance of a final walk-through inspection of Property bythe Buyer
as close to Settlement as possible. Discuss why such an inspection by only the agent is not
recommended. Remind students that only written agreements survive Closing.
Required Activity: Determine best way(s) to handle contract terms, such as incompleterepairs or
missing fixtures, which are unmet at time of Settlement.

Paragraph #5: Buyer Representations

Note: Buyer is liable for the accuracy of all representations made and Seller is entitled to
rely on the information. The representations are informational only and do not rise to the
level of a contract condition or contingency absent relevant attached addenda.

5-a. Loan

o Information for Seller to use in response to offer

o Material fact if Buyer must obtain financing to close this transaction

o Specified financing terms agreeable to Buyer

o Seller is advised to obtain documentation of Buyer’s ability to close if no

financing is needed (e.g., proof of funds)
Instructor Note: Even though the standard offer to purchase is not contingent on the buyer
obtaining the noted financing, brokers need to pay attention to the loan informationand help their
seller evaluate its potential impact on likelihood of closing.
Suggested Activity: Have students discuss one or both of these questions:
1) How might a seller use loan information to select one offer over another in a multipleoffer
situation?
2) What is the potential impact if the buyer significantly changes the amount or type ofloan
needed to close?

5-b. Other Property

o Information for Seller to use in response to offer

o Material fact if Buyer must sell or lease other property to close thistransaction

o Seller is strongly advised to review contract for sale of Buyer’s current

property prior to accepting offer

o Contract is not conditioned on sale of Buyer’s other property

36 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
5-c. Performance of Buyer’s Financial Obligations 5-d.

& e. Property Disclosures [NCGS 42E-2]

o Residential Property and Owners’ Association Disclosure Statement

▪ Status of Buyer’s receipt of required Statement
▪ If exempt, indicate under what scenario

o Mineral and Gas and Oil Rights Mandatory Disclosure Statement

▪ Status of Buyer’s receipt of required Statement
▪ If exempt, indicate under what scenario

Paragraph #6: Buyer Obligations

6-a. Responsibility for Special Assessments: Buyer takes title subject to

6-b. Responsibility for certain costs

o Loan costs
o Owner association fees
o Determining covenant compliance
o Appraisal
o Title search
o Title insurance
o Closing attorney fees
o Recording of deed & loan documents6-c.

Authorization to disclose information Paragraph #7:

Seller Representations

Note: Seller is liable for the accuracy of all representations made and Buyer is
entitled to rely on the information. The representations are informational only and do not
rise to the level of a contract condition or contingency absent relevant attached addenda.

7-a. Length of property ownership

7-b. Lead-Based Paint, if applicable [Digital REM search for: lead-based paint
disclosure]

o Applicable for residential property built prior to 1978

o Use Lead-Based Paint or Lead-Based Paint Hazard Addendum (2A9-T)

Suggested Activity: Review how to complete the Lead-Based Paint or Lead-Based
Paint Hazard Disclosure Addendum 2A9-T at this time.

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 37
 7-c. Assessments

7-d. Owners’ Association(s) & Dues

Paragraph #8: Seller Obligations

Note: If Seller fails to comply with the numerous obligations imposed by the Contract,
Buyer may terminate the Contract & receive a refund of any Earnest Money Deposit and
Due Diligence Fee paid. In a Seller breach, Buyer may also obtain reimbursement from
Seller for reasonable costs incurred conducting the Due Diligence without affecting any
other remedies available to Buyer. Brokers are reminded that an attorney should be
consulted to determine if a breach has occurred.

8-a. Evidence of Title, Payoff Statement(s) and Non-Foreign Status8-b.

Authority to Disclose Information

8-c. Access to Property

o Reasonable access through time of Closing or Buyer Possession

o Including working, existing utilities at Seller’s expense

Instructor Note: Discuss the importance of Seller leaving the utilities “on.” It is a Seller
breach if they disconnect utilities too early. This is a particular problem if the listing is
vacant or right after the Seller moves out of the Property.

8-d. Removal of Seller’s Property

o All Seller’s personal property that is not part of the sale

o Including garbage & debris anywhere on the Property

8-e. Affidavit & Indemnification Agreement (against Mechanics Liens) [NCGS 44A-8] 8-f.

Designation of Lien Agent, Payment & Satisfaction of Liens [if required by NCGS
44A-11.1]

8-g. Good Title, Legal Access

o Seller to provide General Warranty Deed

o Fee simple marketable title free of all liens, encumbrances or defects exceptfor:
▪ Ad valorem taxes for current year
▪ Utility easements
▪ Unviolated covenants
▪ Other encumbrances assumed or approved by Buyer

38 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 o Legal access to public right of way

o Consider using Short Sale Addendum (2A14-T) if possibility of short sale 8-h.

Deed, Taxes & Fees

o Seller pays for deed preparation, excise tax and any conveyance fees

o Identify exact legal names of Buyer(s) for new deed

o Optional indication of Buyer’s relationship status can be helpful to Settlement

Agent (e.g., spouses, siblings, unmarried person, etc.)

8-i. Agreement to Pay Buyer Expenses

o A stated dollar amount credited towards Buyer expenses, if applicable

o Include any FHA/VA lender and inspection costs (seller mandated fees) thatcannot
be paid by Buyer

o Subject to approval of Buyer’s lender 8-

j. Owners’ Association Fees/Charges

o Confirming Seller’s account info for payment or proration

o Imposed by HOA for transaction other than those to be paid by Buyer underPara.
6(b)

o Completion of RPOADS or other resale certifications8-k.

Payment of Special Assessments, if any

8-l. Late Listing Penalties, if any

8-m. Negotiated Repairs/Improvements

o Completed in good & workmanlike manner

Note: Good & workmanlike manner is a term of art that is not as vague as it first
appears. It means the work has been completed to the standard of the industry.
o Buyer has right to verify prior to Settlement

8-n. Seller’s Breach of Contract (Refer to Paragraph #23)

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 39
 Paragraph #9: Prorations and Adjustments (Based on 365 days/year) [Digital REMsearch
for: prorations]

o Taxes on Real Property (prorated based on 365 days/calendar year)

o Taxes on Personal Property (prorated based on 365 days/calendar year if

conveying with Property )

o Rents, if any

o Owners’ Association Dues

Paragraph #10: Home Warranty

Paragraph #11: Risk of Loss/Condition of Property at Closing

Instructor Note: Remind licensees that Paragraph 11 survives expiration of the DueDiligence
Period.

o Buyer rights if Property not in same or better condition at Closing as on dateof offer
▪ May terminate contract by written notice to Seller & receive refund of any
Earnest Money Deposit and Due Diligence Fee paid
▪ May close on Property & receive Seller’s property insurance proceedson
Property claim
▪ Seller should maintain existing hazard insurance until they confirmrecordation
of deed and receive net proceeds
▪ Buyer should obtain policy effective for entire day of Settlement
▪ Possession other than at Closing can be problematic for insurance
coverage; see Para. 13

Paragraph #12: Delay in Settlement/Closing

o Delaying Party acting in good faith should give as much notice as possible

o Automatic 7-day grace period to close after Settlement Date in contract

o If not closed by end of 7-day grace period, Non-Delaying Party may

unilaterally terminate contract

o Written extension of Settlement Date can be negotiated; new date will also have 7-
day grace period

Paragraph #13: Possession

o Shall be at Closing (after deed recordation), not Settlement

40 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 o No means of access (e.g., keys, garage door openers, etc.) to be granted to Buyer
between Settlement and Closing
Note: If possession date is critical to Buyer, Settlement should be scheduled so that
there is sufficient time for Closing to occur before that date

o Use appropriate addendum if possession at a time other than Closingand/or

an existing lease is involved

Instructor Note: Consider a detailed review of both the Buyer Possession BeforeClosing
Agreement (2A7-T) and the Seller Possession After Closing Agreement (2A8-T) at this
time. Also discuss Provision #3 in Additional Provisions Addendum(2A11-T) and Vacation
Rental Addendum (2A13-T) if the Property is subject to alease.
Required Activity: Discuss the advantages and disadvantages of allowingpossession at a
time other than Closing. Be sure to address insurance issues and what happens if the
transaction does not close. Remind brokers to encourage their clients to consult an
attorney about risks/implications of possession before/after closing.

Paragraph #14: Addenda [Digital REM search for: addenda]

Note: A NC real estate broker is not permitted to suggest or draft any addenda forothers
(unless they are an actively licensed NC attorney)

o Check appropriate boxes and attach all standard addenda that are to bepart of
the contract

o All attorney or party drafted addenda must be properly identified andattached to

become part of the contract

Paragraphs #15-23: Miscellaneous Paragraphs

Instructor Note: Coverage of these boilerplate provisions should be quick and basic. Address
any student clarification questions.
Suggested Activity: Provide a matching game that requires students to identify thepurpose of
these provisions.

o #15. Assignments must have written consent of all parties

o #16. Tax-Deferred Exchange cooperation agreement

o #17. Parties clarified

o #18. Survival of some contract provisions past Closing

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 41
 o #19. Entire Agreement contained in contract with listed addenda andagreement
that all changes will be made in writing and signed by all parties

o #20. Conduct of Transaction

▪ Electronic communication and actions are endorsed
▪ All written notices and communications may be sent to any address authorized
in Notice Information section
▪ Notice Information and Acknowledgement of Receipt of Monies sectionsare not
material parts of the contract; can be altered without creating a rejection or
counteroffer

o #21. Execution

o #22. Computation of Days/Time of Day

▪ Days means consecutive calendar days including weekends and all
holidays
▪ Day count begins the day after the act or notice required by contract
▪ Date & time of day are for North Carolina

o #23. Remedies
▪ Breach by Buyer
- Established as sole remedy for Seller for a breach by Buyer
- Seller cannot sue for specific performance or damages (other than
damages to property by Buyer)
▪ Breach by Seller
- Buyer may terminate the Contract and
• Receive refund of any EMD and Due Diligence Fee previously paid by
Buyer
• Can obtain reimbursement from Seller for reasonable costsincurred
conducting the Due Diligence Process
- Other remedies may be available to Buyer
▪ Attorneys’ Fees

Page 13: Signature and Dates

o Must be signed by all Buyers and Sellers; use Additional Signatures

Addendum (3-T) if there are more than two Buyers or two Sellers

o To transfer clear title, Seller spouse should sign contract, even if not named on the
deed, to assure spouse’s participation at Settlement

o Verify correct signators for entities or trusts

o Date all signatures to clearly establish Effective Date; although contract isvalid
without dates

o Wire Fraud Warning

42 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 Page 14: Notice Information

o At least one notice address must be entered for each party or agent approved to
receive notices contemplated by the contract

o Insert N/A for all blanks

Note: Entry of any Buyer or Seller contact information in the Notice Information
section authorizes communication directly to a Party rather than the standard practice
of communicating through the agents

o Enter names of individual listing and selling brokers, their license numbers,firm
names and license numbers, and check appropriate agency representation boxes
[Rule 58A .0104(f)]

Page 15: Acknowledgment of Receipt of Monies

o Listing Agent Acknowledgment of Receipt of DDF

o Seller Acknowledgment of Receipt of DDF

o Escrow Agent Acknowledgment of Receipt of Initial EMD

o Escrow Agent Acknowledgment of Receipt of (Additional) EMD

IV. All Standard NC REALTORS® Residential Addenda

Instructor Note: Provide and review all current standard NC REALTORS® addenda for 2-T and
any available Guidelines in detail. Any addenda that have not already been reviewed during the review
of Form 2-T should be covered in this section.

Note: In an event of a conflict between information in an addendum and the contract, the
addendum will control, unless the conflict involves the description of the Property or the
identity of Buyer or Seller in which case the contract will control

A. 2A1-T: Back-up Contract Addendum (Manual, Chapter 11, Back-Up Contract

Addendum, pp. 356-357)

Required Activity: Detailed review of this Addendum and how to complete and use it.
Instructor Note: Discuss how the Due Diligence Period might affect a buyer’s decision to write
an offer on a property that is already under contract. Discuss the pros and cons of a Back-up
Contract from Seller’s viewpoint. Be sure to stress that in order for a buyer to hold a secondary
contract position after the primary contract, the secondary buyer must have a fully executed
contract with Seller, including the Offer to Purchase & Contract with the Back-up Contract
Addendum (and any other needed addenda). An OTPand Back-up Contract Addendum signed only
by Buyer is not sufficient.
Suggested Activity: Have students share any experience with this Addendum especially in
situations with multiple offers.

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 43
 1. Seller is not required to take Property off the market once under contract

2. Addendum ties dates for DDP and Settlement Date to Seller’s delivery of noticethat the
contract has primary status; contract blanks for these dates should reference the
Addendum

3. Back-up Contract remains in secondary position until primary contract isperformed or

terminated

4. Back-up Buyer may terminate with automatic termination date or any time prior to
notification that their contract has primary status

5. There can be multiple Back-up Contracts on the same property; proper completion of
the forms is critical for clarity

Instructor Note: Discussion of the next 7 addenda (2A3-T through 2A9-T) should be verybasic. Be
sure to address any questions the students have about form use or completion. Be aware that NC
REALTORS® do not currently have a contingent sale addendum; a realestate attorney should be
consulted before adding such a contingency to an offer.
Suggested Activity: Assign an addendum to each group and have them give a quick overview of
the form and any points that caught their attention.
Required Activity: Have students prepare a complete offer for a residential property that will
require use of at least three standard addenda. This may be performed as a class, group, or individual
exercise. If assigned as homework, allow instructional time to review the exercise. For smaller
classes, consider dividing the class into two or more groups andassigning one specific property to
each group (all students in the same group will write anoffer on the same property but keep the terms
to themselves). For this exercise, instructorswill need to provide the tax card information.
Suggested Course-long Activity Step: These offers will be used for a multiple offer exercise later
in this course.

B. 2A3-T: New Construction Addendum

C. 2A4-T: FHA/VA Financing Addendum

D. 2A5-T: Seller Financing Addendum

E. 2A6-T: Loan Assumption Addendum

F. 2A7-T: Buyer Possession Before Closing Addendum

G. 2A8-T: Seller Possession After Closing Addendum

H. 2A9-T: Lead-Based Paint or Lead-Based Paint Hazard Addendum

44 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
I. 2A11-T: Additional Provisions Addendum
Instructor Note: Briefly review the 6 issues that are addressed by this addendum.
Suggested Activity: Have students discuss when and how they would use thisaddendum.

1. Expiration of offer with Time Being of the Essence

2. Septic System Installation/Modification

3. Rental/Income/Investment Property

4. Agreed-Upon Repairs and/or Improvements (for items identified before

contract formation)

5. Manufactured (Mobile) Home

6. Pool/Spa Inspection/Preparation

Instructor Note: Discussion of the next 3 addenda (2A12 -T through 2A14-T) should bevery
basic, unless you are in an area where vacation rental management is prevalent. Inthat case, spend
more time on 2A13-T.
Suggested Activity: Survey the class to see who has encountered a transaction that could use any
of these addenda; invite discussion on whether the appropriate addendumwas actually used and
how it helped.

J. 2A12-T: Owners’ Association Disclosure and Condominium Resale Statement

Addendum

K. 2A13-T: Vacation Rental Addendum

L. 2A14-T: Short Sale Addendum

1. Definition of Short Sale and associated risks

2. Contingent on written approval of all Seller’s lienholders

3. Rights to Terminate

4. Dates established for DDP and Settlement

5. Other Offers

6. Issues with Foreclosure/Bankruptcy/Tax Consequences

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 45
 V. Review of Other Specialized Sales Contracts
Suggested Activity: After the thorough whole-class review of 2-T, the review of the remainingcontracts
could be conducted in small groups that report back to the entire class. Encourage a compare and
contrast to the 2-T; what are the differences and why are the differences necessary.

A. Offer to Purchase and Contract – Vacant Lot/Land (Form 12-T) and Guidelines for
Completing (Form 12-G)

B. Offer to Purchase & Contract (New Construction), (Form 800-T) and Guidelines
for Completing (Form 800-G)

C. Agreement for Purchase & Sale of Improved Real Property (Form 580-T)

D. Agreement for Purchase & Sale of Land, (Form 580L-T)

Section 3: Sales Contract Procedures (2 hours)

(Manual, Chapter 11, Submitting Offers to Sellers, pp. 363-367)
Instructor Note: Active student involvement is critically important to ensure understanding ofthese
basic procedures. Additional resources available on the Commission’s website under Publications
include: Contract section of the 2020-2021 Update; Contract Issues section of the 2018-2019 Update;
and Contract Formation and Negotiation section of the 2013-2014 Update.

I. Submitting Offers to Sellers [NCGS 93A-6(a)(13); Rule 58A .0106] [Digital REM
search for: submitting offers]

A. Delivery to Parties of Offers, Contracts, and other Transactional Documents

1. No later than 3 days from receipt by broker of executed document

2. Applies to all brokers in the transaction regardless of who they represent or how they
will be compensated

3. Oral presentation of the offer terms to the offeree does not negate the requirement for
the broker to deliver the offer within 3 days

4. Listing broker has no authority to accept or reject an offer on behalf of Seller; the broker
should point out advantages and disadvantages of the offer and provide any information
that might affect the Seller’s decision, such as notice that another offer is forthcoming

5. Only 1 contract signed by all parties required to be binding; copies to all contractparties
required by Rule 58A .0106

46 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 Suggested Activity: There are several examples regarding contracts and procedures in Chapter
11 of the Manual. Assign examples to student groups or review in class and encourage student
discussion of possible outcomes.

B. Multiple Offers [Digital REM search for: multiple offers]

1. All Offers must be presented immediately (but no later than 3 days) even if
Property already under contract

2. Concurrent Offers must be presented at the same time; no particular order of

presentation is required

3. Disclosure of Offer and/or Terms

i. Existence of other offers not a material fact

ii. Broker prohibited from sharing material terms of an offer without express
permission of offeror [Rule 58A .0115]
iii. Broker needs Seller’s authority to share existence of other offers and/orterms
that might be acceptable to the Seller
Suggested Activity: Discuss pros and cons of notifying offeror(s) of existence ofother
offers. Best practices would require equal communication for all offerors.

II. Offer Modification and Counteroffers

A. Assume any change to an offer rejects the original offer

B. A counteroffer is created if offeree makes changes, initials those changes, and signs the
offer before returning it to the original offeror

C. Possible use of NC REALTORS® Standard Form #340-T Response to Buyer’sOffer

Instructor Note: Remind students of earlier discussion of this form in Section I.

D. Numerous term changes should prompt use of a new offer form completed with current
terms under consideration by the parties

E. Retain all offers, even if rejected or replaced [Rule 58A .0108]

Suggested Activity: For smaller classes, using a whiteboard (actual or electronic) or other means,
write or type the key terms from each offer within one group (purchase price, deposits, dates,
personal property, loan details and other terms that might influencea seller’s decision). Then have
a second group act as the “Seller” by selecting the best offer. Repeat with the next group and have
the “Seller” select an offer and either make a counter offer or draft a Response to Buyer’s Offer
(Form 340-T). Repeat with remaininggroups.
Suggested Course-long Activity Step: The offers that students created in Section 2,
IV. should be used for this multiple offer and contract formation exercise.

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 47
 Section 4: Closing Preparations and Procedures (2 hours)
(Manual, Chapter 14, Pre-Closing Procedures, pp. 460-469)

Note: Real estate brokers should possess a thorough understanding of closing practices and
procedures, as well as the competence to properly assist buyers, sellers, and settlement agents
with the closing process

I. General Pre-Closing Procedures [Digital REM search for: pre-closing]

A. Respective Responsibilities of the Parties

Suggested Activity: Responsibilities for each party (Buyer, Seller, each agent) are established by
contract and customary practice. A quick review might be accomplished with a Kahoot! quiz about
who pays for what.

B. Select the Settlement Agent [Digital REM search for: settlement agent]

1. Buyer should identify the Settlement Agent of their choice immediately after
contract formation, if not before

2. In North Carolina, most real estate closings are handled by a real estate closingattorney

3. Settlement Agent usually represents Buyer, Buyer’s lender, and may provide some
services to Seller

4. Buyer agent may make recommendations for Settlement Agent as long asthere is
no reward for referring (e.g., kickback)

C. Provide Information to Settlement Agent

1. All available information that will assist in preparing for closing, including butnot
limited to

a. Copies of the contract

b. Seller’s deed

c. Seller’s title insurance policy

d. Information on Seller’s loan payoff or lender

e. Contact information for any owners’ association that charges dues, fees, or
assessments

f. Any invoices or services that are to be paid at Settlement

g. Any contract amendments as soon as executed

48 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 2. Both parties should provide information to Settlement Agent as soon asavailable to
expedite Closing

D. Settlement Date and Delays

Note: Settlement date delays are commonplace due to many variables frequently beyond
the control of either party. Buyer and Seller should be well advised about their individual
obligations, the need for timeliness, and the repercussions for non-performance. Review the
paragraphs in Standard Form 2-T regarding this matter

II. Buyer’s Due Diligence Process [Digital REM search for: due diligence process]

A. General Responsibility of Broker Working with a Buyer

B. Inspections and Investigations

1. Including, but not limited to, those recommended under Paragraph 4 of Standard
Form 2-T

2. Possible Discoveries during Physical Inspection by Buyer

a. Tenants

b. Easements & encroachments

c. Recent construction or renovations

Note: Broker working with a buyer should recognize “red flags” of possible issues
such as those listed above.

C. Resolution of Inspection/Repair Issues

1. Buyer strongly encouraged to resolve any issues prior to the end of DDP

2. Seller is under no obligation to make repairs or improvements to the Property,unless

they are terms of the contract

3. Standard forms to use in negotiation of repair issues

Instructor Note: If not done previously in this course, provide current versions of theforms
listed below and lead a detailed review of how to complete and use them during repair
negotiations. Be sure to advocate for Buyer requesting, as part of original offer, repairs or
improvements that the Buyer knows about before contract formation; this is done through the
use of Additional Provisions Addendum. This does not affect Buyer’s right to investigate and
request further concessions during the DDP.
Required Activity: Explore correct form completion for various scenarios, including
(1) Repairs to be negotiated as part of the initial offer,
(2) Items to be repaired based on home inspection report, and
(3) Adjustment in sales price in lieu of repairs.

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 49
 Suggested Course-long Activity Step: The offers that students created in Section2, IV.
should be used for this repair negotiation exercise.

a. Additional Provisions Addendum (Form 2A11-T)

b. Due Diligence Request & Agreement (Form 310-T)

c. Agreement to Amend Contract (Form 4-T)

III. Other Pre-Closing Matters

A. Title Search [Digital REM search for: title search]

B. Clearing of any Title Defects by Seller [Digital REM search for: title defect]

1. Seller’s existing mortgage loan

2. Any home equity loans

3. Mechanic’s liens

C. Prepare Assignment of any Outstanding Leases and Related Security Deposits from
Seller to Buyer

D. Final Pre-Closing Procedures [Digital REM search for: final pre-closing]

1. Transfer EMD from Escrow Agent to the Settlement Agent no earlier than 10 days
prior to scheduled Settlement [Rule 58A .0116(e)]

2. Review draft of Closing Disclosure by listing and selling broker for accuracy assoon
as available

a. TRID requires lender to provide Borrower’s Closing Disclosure (BCD) to

borrower at least 3 business days prior to Settlement

i. Definition of delivery and receipt

ii. Buyer agents should alert buyers to look for and acknowledge receipt ofBCD
in a timely manner

b. Any of the following three (3) changes will prompt the need for a new BCD
and a new 3 business day waiting period

i. An increase in APR
ii. A change in loan product
iii. Addition of a prepayment penalty

c. No delivery deadline prior to Settlement for Seller’s Closing Disclosure

50 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 3. Notify Buyer of certified funds needed to close
Instructor Note: Discuss the need to verify with the Settlement Agent what constitutes
acceptable certified funds for the transaction. Be sure to address cash, money orders, out-of-
state certified checks, etc. Reach out to a local real estate attorney for local insight into this
topic, if possible.

4. Attorney orders title insurance policy for lender and owner

Note: Buyer should be strongly advised to obtain a title insurance policy even if no
lender is involved or lender does not require

IV. Closing Methods [Digital REM search for: closing method]

A. Escrow Closing Method

1. Escrow agreement instructions accomplished virtually by Escrow Agent;parties do

not attend a meeting

2. Escrow Agent is generally a title company or lender’s escrow division

3. Relation Back Doctrine: deed is considered delivered once Seller has delivered it to
Escrow Agent

4. Extremely rare in NC

B. Settlement Meeting Method

1. Most common closing method in NC

2. Residential closings in NC are generally coordinated by 1 attorney; separate

attorneys may be used in complex or commercial transactions

3. Role of Non-lawyers at Settlement

a. Present & identify documents necessary to complete NC closing

b. Direct parties where to sign documents

c. Ensure parties have properly executed the documents

d. Receive & disburse closing funds

e. Avoid performing unlawful practice of law activities

Note: A broker is strongly discouraged from attempting to act as a settlementagent

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 51
 5. Settlement Meeting Procedures

a. Location and parties attending

i. Buyer generally attends

ii. Seller may not attend if all documents have been signed
iii. Listing broker and selling broker should attend, unless broker’s license isno
longer on active status on settlement date

b. Review of documents

c. Post-settlement meeting tasks: title update, recording, disbursingfunds,

tax reporting requirements, etc.

Instructor Note: Brokers should be reminded that no funds will/should be disbursed at the
settlement meeting so their clients will be well-informed. Per the NC Good Funds Settlement
Act, the Settlement Agent must update the title search, record the new deed and deed of trust,
and only then will funds be disbursed as appropriate to Seller, brokers and others.
Disbursement of funds can occur several days after Settlement depending on when deed
recordation can happen.
Suggested Activity: Survey students to see whose clients have received funds or keys to the
property at Settlement. Revisit why this might not be in the best interestsof all parties.

Section 5: Real Estate Settlement Procedures Act (RESPA) and TILA-

RESPA Integrated Disclosure Rule (TRID) (2 hours) (Manual,
Chapter 14, Real Estate Settlement Procedures Act, pp. 474- 486)

Instructor Note: Refer to the TRID section of the 2015-2016 Update course and theBulletin
article, TRID vs. HUD-1 to supplement the Manual content.

I. Applicability of RESPA [Digital REM search for: respa]

A. Federally related residential mortgage loan made by institutional lenders to purchase 1-4
family dwelling that is or will be constructed or placed on the property within 2 years of
purchase

B. Regulation X administered by Consumer Financial Protection Bureau (CFPB) under the

Dodd-Frank Act

C. Applies to all settlement services providers (brokers, lenders, closing attorneys, title
companies, appraisers, surveyors, etc.)

D. Does not apply to loans for commercial, business or agricultural purposes, even if residential
property is included

52 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
II. RESPA Requirements/Consumer Protections

A. Purpose is to protect consumers against abusive lending practices and ensure accurate
and timely disclosure of settlement costs

B. Disclosure & Borrower Credit for Yield Spread Premiums

C. Loan Servicing Disclosure Requirements

1. Whether loan servicing can be sold, transferred or assigned

2. Borrower notification required prior to transfer of servicing

D. Escrow Account Restrictions

1. Maximum amount collected monthly by the lender is 1/12 of annual tax &
insurance disbursement

2. Lender may escrow a cushion amount not to exceed 1/6 of annual tax &
insurance disbursement

E. Prohibited Kickbacks or Referral Fees

1. Applies to all service providers including real estate brokers for payment orreceipt
of payment for referral of business to or from another service provider

2. Referral fees between real estate brokers for brokerage activities are expressly
permitted

3. Any thing of value includes money, prizes, coupons, gift certificates, etc.

4. Disclosure of Affiliated Business Arrangements

a. Disclosure of relationship and a written estimate of charges for services

b. Person is not required to use a particular service provider

c. Only “thing of value” received for referral is return on ownership interest

F. Special Information Booklet for Homebuyer/Borrowers

1. Lender or mortgage broker must provide booklet to consumer within 3 businessdays

following loan application

2. Educational booklet about the buying and borrowing process [available at

consumerfinance.gov/owning-a-home/explore/home-loan-toolkit/]

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 53
 G. Written Estimate of Settlement Charges (the Loan Estimate) within 3 businessdays of
loan application [Digital REM search for: loan estimate]

1. Definition of Loan Application

2. Intended to encourage borrowers to shop for loans

H. HUD-1 Settlement Statement generally replaced by Closing Disclosures

I. Penalties for Violating RESPA

1. Criminal fines up to $10,000 per violation

2. Imprisonment for up to 1 year

3. Injunctions against illegal activity and orders to compensate victims for illegalprofits

4. Civil lawsuits for treble damages

5. Violation of License Law 93A-6(a)(10) for brokers

III. TILA-RESPA Integrated Disclosure (TRID) Rule [Digital REM search for: TRID]

A. The Loan Estimate (LE)

1. Permissible Variations/Tolerance Limits

2. Brokers’ Responsibility for LE

B. The Closing Disclosures [Digital REM search for: closing disclosure]

1. Delivery of Borrowers’ Closing Disclosure no less than 3 business days prior to

Settlement (excludes only Sundays & 10 federal holidays in day count)

2. Corrected/Revised Closing Disclosure requiring a 3 day waiting period to Close(See

Section 4, III.D.2.b.)

3. Brokers’ Responsibilities [93A-6(a)(14)]

a. Confirm accuracy of entries about which they have direct knowledge

i. Amounts noted in contract

ii. Broker may assume amounts paid by third parties are correct unlessthere is
cause for a reasonable broker to suspect an amount is incorrect
iii. All expenses related to the transaction should be reflected, not just
amounts paid by Settlement Agent or paid by third parties

54 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 iv. As to all debits and credits related to the transaction, whether paid before or at
closing, the broker must
▪ Review and confirm that all charges and credits have been property debited
or credited to the seller or buyer and are entered in the correct column
▪ Review and confirm accuracy of the calculations for all prorated items,
escrow reserves, interim interest, excise tax and “bottom line figures”

b. Notify all parties to the transaction of any errors or omissions

c. May rely on attorney or lawful settlement agent for delivery of statement to parties

Instructor Note: Emphasize what a broker is and is not expected to verify

regarding the information on a closing disclosure.

Section 6: The Settlement Statement (6 hours, 45 minutes)

(Manual, Chapter 14, The Settlement Statement, pp. 486-501) [Digital REM search for:
settlement statement]

I. Allocation of Settlement Expenses [Digital REM search for: closing expenses]

A. Credits and Debits for Buyers and Sellers

Suggested Activity: Have students (collectively or in groups) identify the buyer credits, buyer
debits, seller credits, and seller debits in a typical transaction.

1. Definitions

a. Credit: an amount payable to a party usually for an amount already paid (e.g., EMD
or DDF for buyer) or being reimbursed (e.g., prepayment of buyer’s prorated tax
portion for seller) or being paid by a third party on one’sbehalf (e.g., loan amount for
buyer)

b. Debit: an amount owed by a party that is to be paid at settlement

2. Typical NC Buyer Expenses

a. Closing attorney’s fee

b. Appraisal

c. Inspection fees

d. Loan fees, if applicable

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 55
 e. Interim interest on loan

f. Escrow pre-paid deposits, if required by lender

i. Property taxes
ii. Mortgage insurance
iii. Homeowners insurance
iv. Owner association dues, if paid by lender on behalf of owner
v. Aggregate adjustment

g. Survey

h. Recording fees for deed and loan documents

3. Typical NC Seller Expenses

a. Broker’s commission

b. Excise tax

c. Deed preparation

d. Quick claim deed preparation, if needed to clear title

e. Seller concessions per contract terms

B. Prorated Entries [Digital REM search for: prorated]

1. Definition of Proration: the division or distribution of property expenses at settlement

between the buyer and the seller proportionate to the ownership period of each

2. Common Prorated Items

a. Real Estate Taxes (various situations)

Required Activity: Have students calculate tax prorations in various situations(e.g.,

prepaid by Seller; unpaid before Sept. 1st; unpaid after Sept. 1st ).

b. Rents

c. Homeowner’s Dues

56 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
II. Buyer’s Closing Disclosure
Required Activity: After reviewing the basics, students must complete at least one closingdisclosure
problem. This may be completed during class either individually or in groups or as homework. Allow
instructional time to review the problem line-by-line with the entire class. Including a complete closing
scenario problem on the end-of-course examination is required.
Suggested Activities: Consider providing students with a completed closing disclosure containing
several errors and ask students to find the errors. Provide students with one or more practice closing
problems.
Suggested Course-long Activity Step: The contracts that students created in Section 3,
II. should be used generate the entries for a settlement statement exercise.

Section 7: Other Topics (45 minutes) Level 2

I. Alternate Conveyance Contracts (Manual, Chapter 11, Installment Land Contract, pp.368-
377)

A. Installment Land Contract (also called Contract for Deed, Land Contract) [Digital REM
search for: installment land]

1. Definition: Agreement whereby real property is sold on the installment paymentmethod

with the seller (vendor) retaining legal title until all the purchase price is paid or until
some other agreed upon time; the buyer (vendee) receives equitable title and possession

2. No standard contract form; consult an attorney; do not use REALTOR®Standard

Form 2-T

3. Seller must record Contract for Deed or a Memorandum within 5 business daysof
execution

4. Buyer must be allowed up to 30 days to cure a default

5. Advantages and Disadvantages

B. Option to Purchase [Digital REM search for: option to purchase]

1. Definition of Option: Unilateral contract that binds the property owner (optionor)to hold
an offer to sell open for a set period of time and gives the other party (optionee) a legal
right, in exchange for an option fee, to accept or not accept that offer to sell during the
time period of the option

2. No standard option form; consult an attorney; do not use NC REALTORS®

Standard Form 2-T

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 57
 3. Rights of parties

a. Optionor

i. Gives up right to sell property to anyone other than optionee duringoption

period
ii. Negotiations during the option period do not affect original terms of the
option

b. Optionee

i. Has exclusive right to buy property during the option period only on
specified terms of the option
ii. Has no obligation to exercise the option
iii. Can negotiate different terms during the option period without giving up right
to exercise the option

4. Two types of consideration

a. Option fee, generally non-refundable

b. Purchase price

5. Must be in writing and recorded

6. Time Being of the Essence in regard to date to exercise the option

7. Residential leases may include an option to purchase

Note: No standard form exists for a residential lease with option to purchase, and a
broker must not suggest that landlords/tenants attempt to cobble together the lease and
offer to purchase forms. A broker should direct the parties to enlist an attorney to draft
this special type of agreement

8. Advantages and Disadvantages

Suggested Activity: Have students discuss situations in which a buyer or sellermight
want to use an installment land contract or an option to purchase contract.

C. Preemptive Rights Level 1 [Digital REM search for: preemptive]

1. Right of First Refusal: owner legally promises another party that, if the owner decides
to sell in the future, the other party can buy the property by matchinga bona fide offer
from a third party

2. Right of First Opportunity to Purchase: owner legally promises another party that, if
the owner decides to sell in the future, the owner will give the other party the first
opportunity to buy the property at a price to be determined at that time

58 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
II. License Status and Education Issues [NCGS 93A-4; Rules 58A .0503, A .0504, A .0505, and A
.0506]

Instructor Note: Refer to the Licensing & Education Review section of the current Updatecourse.

A. License Status: Meaning of provisional broker, active, inactive, expired,

suspended, and revoked status.

B. Postlicensing Education Requirement (and consequences of failure to satisfy)[Rule

58A .1902]

C. Continuing Education Requirement (and consequences of failure to satisfy) [Rules58A

.0504(b); 58A .1702]

D. Requirements and procedures to activate an Inactive license [Rules 58A .0504(c)& (d);
58A .1703]

E. Requirements and procedures to reinstate an Expired license

1. License expired for not more than 6 months [Rules 58A .0505(c) & (h)]

2. License expired between 6 months and 2 years [Rules 58A .0505(d) & (h)]

3. License expired for more than 2 years [Rules 58A .0505(e) (f) & (h)]

--End of Course Syllabus--

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 59
Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
Basics of Contracts & Contract Preparation
 Critical Reading Information

• Chapter 10 – Contract Law

• Chapter 11 – Sales Contracts & Practices

• NC Statute of Frauds
• Rule 58A.0106 – Delivery of Instruments
• Rule 58A.0108 – Retention of Records
• Rule 58A.0112 – Requirements for Contracts
• NAR Code of Ethics Standard of Practice 1–7
• Unfair & Deceptive Trade Practices Act
• Parol Evidence Rule

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 61
 For each of the following scenarios, determine whether
or not a contract exists and if not, provide the reason
and the best practice that would have avoided the
contract issue.

1. Kalil, a seller’s agent, received an offer from a buyer that the seller signed, initialed, and
accepted. The seller’s acceptance was communicated to the buyer’s representative. One
week later when Kalil insisted that the buyer deliver the $500 due diligence fee to the
seller, Kalil was informed that the buyer had changed their mind. The buyer and buyer’s
representative claimed that since no due diligence fee or earnest money had been tendered,
there was no consideration and that a contract had not been formed between the parties.

2. Cassandra and Shelly, two buyers, had entered into a contract to purchase a home owned
by Devon. During the due diligence period, numerous discussions occurred between the
parties. Devon agreed to make several repairs, but the parties did not put the repair
agreements in writing. On the day before closing, Cassandra and Shelly noticed during
their walk-through that the agreed-upon repairs had not been made and are refusing to
close due to the seller’s non-performance. What advice and guidance should be given to
the parties?

62 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 Contract Case Studies (CONTINUED)
3. Kelly and Sam are interested in buying a home in a residential neighborhood where Cassie
lives. Cassie is a licensed real estate professional. Cassie knows that one of her neighbors is
interested in selling and has a lengthy conversation with her neighbor about what they owe
on their home and the sales price they are seeking. She relays this information to Kelly and
Sam and helps them put an offer together. Cassie doesn’t have a listin g agreement with her
neighbor and has no signed buyer’s broker agreement with the buyers because she did not
intend to charge either of them anything. Is Cassie in an agency relationship with the
parties?

4. Jessica receives a phone call from her friend Pat, whose mother has died. Pat explains to
Jessica that Pat will be acting as the executor of her mother’s estate and wants to get
the home listed. Jessica has Pat sign a listing agreement, and the home is placed on the
market. After Pat has entered into an Offer to Purchase and Contract with a buyer, the
closing attorney informs all parties that Pat does not have the legal authority to sell the
home. Does a contract exist with the buyer, and what are the ramifications for Jessica?

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 63
 Kalil and the Indecisive Buyer

In order to form a contract in North Carolina, an

offer is accepted by signing and initialing the contract
and communicating that fact to the other party and/or
their agent. Although a contract requires consideration, the consideration offered by the buyer
was the purchase price. Neither earnest money, nor the due diligence fee, is required to form a
contract. The buyer has a right to cancel, but the seller is entitled to the due diligence fee.
The listing agent should inform the buyer there is a contract and demand payment of the
$500 due diligence fee and a cancellation notice from the buyer. If the $500 is not paid within
one day, the seller may terminate the contract and be advised to seek the advice of an attorney
in collecting the $500 from the buyer.

Devon & The Unfinished Repairs

The statute of frauds requires contracts to be in writing in order to be enforceable. This

includes later changes and addendums to the agreement. Because the repair agreement was
not put in writing, Cassandra and Shelly must attend settlement or risk being in breach.
Because licensees are not permitted to make misrepresentations, if either of the licensees
made statements to the buyers indicating that the repairs would be made, the licensees may
face disciplin ary action for a misrepresen tation. The licensees may also face disciplinary
action for breaching the standard of care in not getting the repair agreement in writing.
In any event, there is no contract for the repairs and Cassandra and Shelly will have no
claim against the seller.

64 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 Discussion of Contract Scenarios (CONTINUED)
Working with the Neighbor Next Door

This is a good example of licensees creating implied agency. It is possible to create an implied
agency in North Carolina, it is just almost always a bad idea. Cassie has violated a number of
North Carolina rules and statutes. She would have had to have used the WWREA disclosure
before she reached first substantial contact with her neighbor or the buyers. She is assisting
the buyers without a written brokerage agreement, and she may be in the situation of being
labeled an undisclosed dual agent who acted on behalf of both parties without agreement
and consent.

Pat’s Alleged Authority

The case study indicates that Pat is not the authorized executor of the estate. This is not a
mistake of fact, this is a failure to recognize the operation of law. There is a valid contract here,
but Pat is going to be in breach because the property cannot be legally conveyed. When
working with estates, guardianships, and the like, the agents should insist on legal
documentation that the party on whose behalf they are acting has legal authority. Questions
about such documents and legal authority should always be deferred to an attorney.

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 65
 Student Notes

66 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 The definition of a contract is:
1.

There are four essential elements to every contract.

They are:
2.

Consideration is a mutual exchange of anything of 3. .

The consideration offered by a buyer in a real estate transaction is
4.
NOT the 5. or the 6. .

When an agreement is entered into by a person who lacks competence the contract is
7. by the person who 8. .

Void means: 9.
Voidable means 10.

People who have been declared incompetent in a court of law make the contract
11. . There was never a contract formed.

If a real estate professional has any doubts about a person’s legal capacity, they should
12.

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 67
 Basics of Contracts &
Contract Preparation (CONTINUED)
Define each of the following as terms relating to contracts:
Express: 13.

Implied: 14.

Bilateral: 15.

Unilateral: 16.

Executory: 17.

Executed: 18.

Oral contracts exist in many instances. Only certain types of contracts need to be in
19. in order to be enforceable. This
requirement is established by the Statute of Frauds.

NC requires all of the following to be in writing in order to be enforceable:

20.

68 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
1. A deliberate agreement between two or more competent parties supported by legal
consideration to perform or abstain from performing some act
2. Consideration
Legal act
Agree mutually
Parties competent
3. Anything of value
4. Purchase price the buyer is offering
5. Earnest money deposit
6. Due diligence fee
7. Voidable
8. By the party that lacked competency
9. A contract that lacks an essential element and never existed
10. One of the parties has the ability to make the contract void
11. Void
12. Consult an attorney
13. A contract where the intentions are expressed either orally or in writing
14. A contract that gets inferred from conduct or actions
15. A contract where both parties are obligated and bound
16. A contract where only one party is obligated or bound
17. A contract where tasks remain to be performed
18. A contract where all tasks have been completed
19. Writing
20. Deeds, Restrictive Covenants, Easements, Assignments, Mortgages Options,
Installment Land Contracts, Leases Longer than 3 Years, Sales Contracts

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 69
 Student Notes

70 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 71
 Basics of Offer & Acceptance

All offers must be communicated IMMEDIATELY,

but never later than 1. days.

A copy of every transaction document (including

offers) must be provided to the firm or the sole
proprietorship within 2. days
of the 3. .
Both of these are 4. days.

An offer can be withdrawn anytime prior to 5. even if

the buyer stated they would hold it open for a longer period of time. The withdraw must be
communicated to 6. .

72 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 Basics of Offer & Acceptance (CONTINUED)

An offer is terminated by any of the following events or actions:

7.

Effective January 1, 2019, the NAR has amended Standard of Practice 1-7 in the
REALTOR® Code of Ethics regarding the handling of presentation and rejection of offers.

A listing broker or agent is required to respond 8. that

an offer was submitted to the seller if the cooperating broker who submitted the offer so
requests. The listing broker or agent must respond in the affirmative unless the seller has
provided written notification waiving the obligation to have the offer presented.

Any change, no matter how small, creates a counteroffer that must be

9. by the seller and communicated
back to the 10. before a binding contract is created.

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 73
74 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 In North Carolina a contract is formed when the last
offer or counteroffer is:
11.
12.
that fact is communicated back to the
13. in any manner.

When a dual agent has been informed that a seller has accepted an offer that information is
communicated back to the buyer 14. .

All of the following are valid methods of communicating the acceptance:

15.

The Mailbox Rule

In North Carolina, we measure delivery at the time the communication was
16. , not when it was
17. .

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 75
 Analysis of Manecke vs. Kurtz
Court of Appeals of North Carolina.

Christopher B. MANECKE, Plaintiff, v. Jerrold M. KURTZ and Deborah A. Kurtz,

Defendants.

No. COA11–1447.

Decided: August 21, 2012

John F. Hanzel, P.A., by John F. Hanzel, for plaintiff-appellant. Womble Carlyle Sandridge &
Rice, LLP, by Mark P. Henriques and Brandie N. Smith, for defendant-appellees.

Appeal by plaintiff from order entered 11 August 2011 by Judge F. Lane Williamson in
Mecklenburg County Superior Court. Heard in the Court of Appeals 3 April 2012.

Where the record fails to disclose the existence of genuine issues of material fact as to whether
defendants entered into a contract to purchase plaintiff 's real property, the trial court did not
err by granting defendants’ motion for summary judgment.

In 2010, Christopher B. Manecke (“plaintiff ”), a resident of Mecklenburg County, North

Carolina sought to sell his residence located at 21104 Blakely Shores Drive, Cornelius, North
Carolina. Plaintiff engaged the services of real estate broker Linda Schafer (“Schafer”) to list
the property for sale. Jerrold M. Kurtz and Deborah A. Kurtz (“defendants”), residents of the
state of New Jersey, sought to purchase real property in North Carolina. Defendants engaged
the services of Real Estate Broker Thomas Wells (“Wells”) and entered into a standard buyer
agency agreement as issued by the North Carolina Realtors Association to negotiate a contract
for the purchase of real property.

On 22 August 2010, Wells sent an email to Schafer that he had an offer to purchase plaintiff ’s
property. Attached to the email was a standard “Offer to Purchase and Contract” form signed
by defendants offering to purchase plaintiff ’s property for $785,000. In response, Schafer
emailed Wells a counteroffer to sell plaintiff ’s residence for $845,000 with an $8,000 repair
contingency. In reply, Wells emailed Schafer the following message: “[defendants] are really
excited about their new home and agree to > [sic] the counter offer [sic][.]”1 On 23 August
2010, Wells emailed Schafer a copy of an earnest money deposit check in the amount of
$20,000. In the email, Wells informed Schafer that defendant Jerrold Kurtz would be
overnighting the earnest money deposit check and that “[Wells] should also have the initialed
changes to the contract tomorrow.”

76 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 Analysis of Manecke vs. Kurtz (CONTINUED)
On 25 August 2010, in response to an email from Schafer inquiring as to the deposit, Wells
emailed Schafer informing her that he had received defendants’ deposit and that he would
deliver it to Schafer’s office on the morning of 26 August 2010. Wells also stated that he
would have the initialed changes to the contract at that time, that he would ask defendants to
select an attorney for the closing and arrange for the home inspection. At the request of
defendants, Wells asked that the closing date be postponed from 30 September 2010 to 15
October 2010. On 26 August 2010, defendants informed Wells that they were not going to
sign the counteroffer, and instructed Wells to tear up their earnest money deposit check.
Wells informed Schafer via telephone that defendants were no longer interested in purchasing
plaintiff ’s property.

On 17 November 2010, plaintiff filed suit against defendants in Mecklenburg County

Superior Court seeking specific performance and, in the alternative, recovery for breach of
contract. On 15 June 2011, defendants filed a motion for summary judgment. The trial court
heard defendants’ motion for summary judgment on 11 August 2011 and that same day,
entered an order granting defendants’ motion for summary judgment. Plaintiff appeals.

On appeal, plaintiff argues that the trial court erred in granting defendants’ motion for
summary judgment finding that there were no genuine issues of material fact. After setting
out (A) the standard of review, plaintiff argues that there are genuine issues of material fact as
to whether (B) Wells acted with actual or apparent authority, (C) there is a valid contract, and
(D) the writings are sufficient to satisfy the statute of frauds.

“Summary judgment is proper when ‘the pleadings, depositions, answers to interrogatories,

and admissions on file, together with the affidavits, if any, show that there is no genuine issue
as to any material fact and that any party is entitled to a judgment as a matter of law.’” Crocker
v. Roethling, 363 N.C. 140, 142, 675 S.E.2d 625, 628 (2009) (quoting N.C. Gen.Stat. § 1A–
1, Rule 56(c) (2007)). When considering a motion for summary judgment, “[t]he trial court
must consider the evidence in the light most favorable to the non-moving party.” Id.
(citations omitted). “[A]n issue is genuine if it is supported by substantial evidence, and [a]n
issue is material if the facts alleged ․ would affect the result of the action[.]” DeWitt v.
Eveready Battery Co., 355 N.C. 672, 681, 565 S.E.2d 140, 146 (2002) (internal citations and
quotation marks omitted). “Substantial evidence is such relevant evidence as a reasonable mind
might accept as adequate to support a conclusion and means more than a scintilla or a permis-
sible inference[.]” Id. (internal citations and quotation marks omitted).

Where a summary judgment motion has been granted the two critical questions of law on appeal
are whether, on the basis of the materials presented to the trial court, (1) there is a genuine issue of
material fact and, (2) whether the movant is entitled to judgment as a matter of law.

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 77
 Analysis of Manecke vs. Kurtz (CONTINUED)
North River Ins. Co. v. Young, 117 N.C.App . 663, 667, 453 S.E.2d 205, 208 (1995). “Review of
summary judgment on appeal is necessarily limited to whether the trial court’s conclusion s as
to these questions of law were correct ones.” Id. (citing Ellis v. Williams, 319 N.C. 413, 355
S.E.2d 479 (1987)). “On appeal, this Court reviews an order granting summary judgment de
novo.” Esposito v. Talbert & Bright, Inc., 181 N.C.Ap p. 742, 745, 641 S.E.2d 695, 697 (2007)
(citing McCutchen v. McCutchen, 360 N.C. 280, 285, 624 S.E.2d 620, 625 (2006)).

Plaintiff argues that there exists a genuine issue of material fact as to whether defendants’ real
estate broker Wells acted with actual or apparent authority to bind defendants by contract to
purchase plaintiff ’s property. We disagree.

A principal is liable upon a contract made by its agent with a third party in three instances:
when the agent acts within the scope of his or her actual authority; when a contract, although
unauthorized, has been ratified; or when the agent acts within the scope of his or her apparent
authority.

Bell Atl. Tricon Leasing Corp. v. DRR, Inc., 114 N.C.App . 771, 774, 443 S.E.2d 374, 376
(1994).

“‘Actual authority is that authority which the agent reasonably thinks he possesses, conferred
either intentionally or by want of ordinary care by the principal.’ ‘Actual authority may be
implied from the words and conduct of the parties and the facts and circumstances attending
the transaction in question.’” Leiber v. Arboretum Joint Venture, LLC, –––N.C.App . ––––, ––––,
702 S.E.2d 805, 812 (2010) (quoting Harris v. Ray Johnson Constr. Co., 139 N.C.App. 827,
830, 534 S.E.2d 653, 655 (2000)).

Plaintiff argues there was a valid binding contract created by the actions of the parties as
well as their “agents,” including Wells. However, plaintiff fails to offer facts to establish that
defendants granted Wells the authority necessary to bind them to a real estate contract. A real
estate agent in North Carolina, absent special authority, does not have the power to bind his
principal in a contract to convey real property. Forbis v. Honeycutt, 301 N.C. 699, 703, 273
S.E.2d 240, 242 (1981).

In an affidavit filed with the trial court, defendant Jerrold Kurtz states that he and his wife
entered into a Buyer Agent Agreement with Wells “for the purpose of acquiring property in
North Carolina.” Defendant further avers that Wells was authorized to negotiate a contract for
the purchase of real property but defendant denies vesting Wells with “any special authority ․
to enter into a binding contract․”

78 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 Analysis of Manecke vs. Kurtz (CONTINUED)
In his deposition, Wells testified as follows:

Q. And, at that point in time, do I understand correctly that [defendants] wanted to put in an
offer. And then you explained to them, as part of that putting in an offer process, they needed
to sign an agreement with you?

A. Correct.

Q. Did they sign the agreement with you before signing the offer?

A. Correct.

Q. Was the agreement that they signed with you the standard—

A. Buyer agency—I’m sorry.

Q. —buyer agency agreement—

A. Correct.

Q. —that’s issued by the North Carolina Realtors Association?

A. Correct.

Q. Any changes to it?

A. No.

Q. [Defendants] never provided you with a power of attorney form to let—that would let you
execute documents on their behalf?

A. Correct.

Q. You understand that, as a licensed real estate broker, your responsibility is to negotiate—
assist your clients in negotiating the terms of a contract but that you don’t have authority to
enter into any binding contract on their behalf; is that right?

[Plaintiff ’s attorney]: Objection

A. Correct.

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 79
 Analysis of Manecke vs. Kurtz (CONTINUED)
Q. So was it you understanding that there would only be a binding contract once the
counteroffer submitted by ․ [plaintiff ] was, in fact, initialed by [defendants]?

A. Correct.

Q. And without initials, there was not any enforceable contract pursuant to the offer that was
submitted; current?

[Plaintiff ’s attorney]: Objection

A. Correct.

The evidence of record here is that Wells acknowledged that he did not possess actual author-
ity to bind defendants by contract to purchase plaintiff ’s property. Therefore, plaintiff has
failed to establish a genuine issue of material fact as to whether Wells acted with actual
authority.

Apparent authority “is that authority which the principal has held the agent out as possessing
or which he has permitted the agent to represent that he possesses.” Branch v. High Rock
Realty, Inc. ., 151 N.C.App. 244, 250, 565 S.E.2d 248, 252 (2002) (citations and quotations
marks omitted). “Pursuant to the doctrine of apparent authority, the principal’s liability is to be
determined by what authority a person in the exercise of reasonable care was justified in
believing the principal conferred upon his agent.” Branch, 151 N.C.App. at 250, 565 S.E.2d at
253 (citations omitted).

Plaintiff contends that Wells’ email to Schafer, plaintiff ’s real estate broker, stating that
defendants “agree to > [sic] [plaintiff ’s] counteroffer” to purchase plaintiff ’s property, as well
as, Wells’ faxed copy of the earnest money deposit check sent to Schafer and Wells’ email
that he expected to receive the initialed copy of the contract indicated that Wells acted with
apparent authority if not actual authority to bind defendants to the contract to purchase
plaintiff ’s property.

But plaintiff ’s contentions do not support the theory that Wells acted with apparent authority.
Plaintiff ’s contentions cite no more than notifications from Wells that defendants agreed to
the terms of plaintiff ’s counteroffer, that Wells had received a facsimile of a $20,000.00 check
intended to serve as an earnest money deposit, and that Wells expected to receive the initialed
copy of plaintiff ’s counteroffer. The record provides no evidence that defendants held Wells
out as possessing authority to bind them in contract or permitted Wells to represent himself as
having such authority. See High Rock Realty, Inc., 151 N.C.App. at 250, 565 S.E.2d at 252.
In fact, Wells acknowledged that his responsibility as defendants’ real estate broker was to
assist defendants in negotiating the terms of a contract, not to enter into a contract that would
bind them. Therefore, plaintiff has failed to establish a genuine issue of material fact as to
whether Wells acted with apparent authority. Accordingly , we overrule plaintiff ’s arguments.

80 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 Analysis of Manecke vs. Kurtz (CONTINUED)
Plaintiff next argues that there exists a genuine issue of material fact as to whether a valid
contract exists between plaintiff and defendants. Plaintiff provides two arguments to support
the existence of a contract between the parties. First, plaintiff contends that defendants
ratified Wells’ actions by sending the faxed copy of the $20,000.00 check. Second, plaintiff
argues that the terms of the “Offer to Purchase and Contract,” setting out the modes of
communication by which the offer would become binding, in conjunction with the written
email notifications provided to plaintiff, support the existence of a valid contract. We disagree.

“[W]hen one, with no authority whatever, or in excess of the limited authority given him,
makes a contract as agent for another, or purporting to do so as such agent, the supposed
principal, upon discovery of the facts, may ratify the contract․” Patterson v. Merrill Lynch,
Pierce, Fenner & Smith, Inc., 266 N.C. 489, 492, 146 S.E.2d 390, 393 (1966) (emphasis added)
(citations omitted).

The act of a principal will establish ratification of an unauthorized transaction of an agent

where “(1) ․ at the time of the act relied upon, the principal had full knowledge of all material
facts relative to the unauthorized transaction, and (2) ․ the principal had signified his assent or
his intent to ratify by word or by conduct which was inconsistent with an intent not to
ratify.” Carolina Equip. & Parts Co. v. Anders, 265 N.C. 393, 400–01, 144 S.E.2d 252, 258
(1965).

Barbee v. Johnson, 190 N.C.App. 349, 356, 665 S.E.2d 92, 98 (2008).

Plaintiff contends that by agreeing to the terms of plaintiff ’s counteroffer, Wells acted to
bind defendants to the contract to purchase plaintiff ’s property, and defendants ratified that
contract by sending the facsimile of the $20,000.00 check intended to notify plaintiff that
defendants were sending an earnest money deposit. As discussed in part B, supra, and as we
further discuss herein, Wells’ communications to plaintiff did not bind defendants in contract.
Thus, plaintiff cannot maintain the argument that defendants ratified the contract to which
Wells allegedly bound them.

Second, plaintiff also argues the terms of the Offer to Purchase and Contract support the
contention that the contract was entered into and, thus, binding. The contract states:
This offer shall become a binding contract on the date that: (i) the last one of the Buyer and
Seller has signed or initialed this offer or the final counteroffer, if any, and (ii) such signing or
initialing is communicated to the party making the offer or counteroffer, as the case may be.

Following in paragraph 27, the contract reads:

Any notice or communication to a party herein may be given to the party or to each party ’s
agent. Any written notice or communication in connection with the transaction contemplated
by this contract may be given to a party or a party ’s agent by sending or transmitting it to any
mailing address, e-mail address or fax number set forth in the “Notice Address” section below.
Plaintiff contends defendants accepted the offer made by plaintiff in Wells’ email sent to

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 81
 Analysis of Manecke vs. Kurtz (CONTINUED)
Schafer stating that “[defendants] are really excited about their new home and agree to > [sic]
the counter offer [sic][.]” Plaintiff also references Wells’ email to plaintiffs’ agent, Schafer,
stating “[Defendant Jerrold Kurtz] is overnighting the [earnest money deposit] check
tomorrow. We will get it on Wednesday․ I should also have the initialed changes to the
contract tomorrow.” Plaintiff asserts that these communications constitute defendants’
acceptance in a manner recognized under the terms of the contract and bind defendants
accordingly. We disagree.

All contracts to sell or convey any lands ․ or any interest in or concerning them ․ shall be
void unless said contract, or some memorandum or note thereof, be put in writing and
signed by the party to be charged therewith, or by some other person by him thereto
lawfully authorized.

N.C. Gen.Stat. § 22–2 (2011).

Here, the contract states that it shall become binding when it has been signed or initialed by
both parties. Wells’ email that defendants “agree to > [sic] the counter offer [sic]” does not
indicate that the contract reflecting the counteroffer had been signed. Moreover, Wells’ email
that he “should also have the initialed changes to the contract tomorrow” is not an indication
that the contract had been initialed or signed. To the contrary, it indicates only when Wells
expected to receive the signed or initialed contract.

Plaintiff has failed to establish a genuine issue of material fact as to whether defendants
ratified a contract entered into by Wells or were bound by the terms of the counteroffer
based on the email communications updating plaintiff about the status of the documents
expected to be delivered. Accordingly , plaintiff ’s argument is overruled.

Lastly, plaintiff argues that there is a genuine issue of material fact as to whether the writings
exchanged between the parties are sufficient to satisfy the statute of frauds. Plaintiff contends
that there are numerous writings when read together establish a contract sufficient to satisfy
the statute of frauds. We need not reach this issue.

As plaintiff has failed to establish that defendants have entered into a contract binding them
to the purchase of plaintiff ’s real property, we need not consider whether the writin gs provided
were sufficient to satisfy the statute of frauds, a defense to the formation of a contract.
For the foregoing reasons, the trial court’s decision is affirmed.

Affirmed.
BRYANT, Judge.

Chief Judge MARTIN and Judge McCULLOUGH concur.

See more at http://caselaw.findlaw.com/nc-court-of-appeals/

1609816.html#sthash.zThaibSM.dpuf
82 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 The Timing Game

in the following scenario?

Jerry, a buyer’s representative, wrote an offer on behalf of his buyer Jack on October 1. The
offer was submitted to the listing agent who represented Jill, the seller, on October 2. Jill
immediately told her agent that she liked and agreed to the terms of the offer. On October 3,
the listing agent called Jerry and indicated that the seller had signed and initialed the offer.
On October 4, Jerry communicated the seller’s acceptance to Jack. On October 5, the signed
contract was delivered to Jerry by the listing agent and the final signed agreement was
delivered to Jack on October 6.

1. When was a valid and binding contract formed between the parties? Why?

2. What if after the communication of the seller’s acceptance, Jerry discovered an email from
Jack that the buyer wanted to withdraw the offer and the email was dated prior to the
acceptance by the seller?

3. If Jerry never communicated the acceptance of the offer to Jack, does a valid and binding
contract still exist?

4. What would be the results of formation of the contract if either the seller or the buyer
died during the process of offer and acceptance?

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 83
 Mutual mistakes regarding a
18. may
allow a buyer to rescind the contract and be refunded
19. .
Such results do not apply to
20. .

The North Carolina Case Study of Willis vs. Willis

Janice Willis transferred to her son Eddie a fee simple
estate and reserved for herself a life estate in the real
property. Shortly thereafter, her son Eddie died. When
Janice Willis learned that her property at the time of
her death (the end of her life estate) would pass to her
daughter-in-law, she attempted to rescind the
transaction based on a mistake of material fact. The
court held that although a mistake of material fact could result in rescission of a contract,
Janice Willis encountered an unintentional result due to her misunderstanding of applicable
law and that she was bound by the transfer.

When fraud occurs either through a willful 21. or

22. of a material fact, the contract is voidable by
23. .

Contracts also become voidable when the contract is entered into due to:
24. .

84 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 The federal and state Unfair & Deceptive Trade
Practices Act applies when someone provides:
25. or
26. or
27. or
28.

The law applies to 29. and does

not apply to 30. .
In a lawsuit under the Unfair & Deceptive Trade Practices Act, the damages are:
31. .

The Assignment of Contracts

Contracts may be 32. so long as the contract does not
contain language that prohibits or limits the assignment.

In an assignment, the assignee becomes 33. and the

assignor is 34. .

The NC Offer to Purchase and contract requires 35.

in order to assign rights under the contract.

Generally when a contract is breached, parties can be entitled to any of the following
remedies:
36.
37.
38.
39.
40.

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 85
 What are the seller’s remedies if the buyer breaches?

What are the buyer’s remedies if the seller breaches?

86 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
1. 3 days
2. 3 days
3. Broker’s receipt
4. Calendar
5. Acceptance
6. Other party and/or their agent
7. Counteroffer
Rejection by offeree
Revocation by offeror
Destruction of the property
Death or insanity of the offeror prior to acceptance
8. Writing
9. Counteroffer
10. Communicated to the other party
11. Signed
12. Initialed
13. Communicated to the other party and/or their agent
14. Immediate
15. Oral communication
Personal delivery
Mail
Electronic methods
16. Sent
17. Received
18. Material fact
19. All monies
20. Mistakes of law
21. Misrepresentation
22. Omission

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 87
 Section 2: Formation of a Contract
Notebook Guide (CONTINUED)
23. Voidable by the person deceived
24. Duress & undue influence
25. Misleading opinion or false inducement
26. Fails to disclose a material fact
27. Creates misleading advertising
28. Misrepresents the nature of any guarantee or warranty
29. Real estate brokers and owners who regularly sell
30. Owners who do not regularly engage in the business
31. Treble damages
32. Generally assignable
33. Primarily liable
34. Secondarily liable
35. Consent prior to assignment
36. Compensatory
37. Consequential
38. Liquidated
39. Specific performance
40. Rescission

88 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 Section 3: Review of the NC
Offer to Purchase & Contract
Standard Form 2T

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 89
 The Basic Rules
Real estate professionals are prohibited from 1.
as it is considered the 2. .
The role of a licensee is to 3. .

The prohibition is against 4. for 5.

It does not prohibit changes made by a 6. .

However, if a client wants to change the language in the forms, they should be advised by a
licensee to 7. .

Forms in North Carolina come from a 8. created

between 9.
and 10. .

The North Carolina Real Estate Commission

does NOT:
11.
12.
13.

The Commission does have 14. about what the

contracts may and may not contain. There are 19 separate provisions required.

90 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 List the 19 required items, locate each one in
the Standard Form 2-T & list the paragraph
number where the required item is located in
the Form #2-T
1. _________________________________________________
2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

13.

14.

15.

16.

17.

18.

19.

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 91
 The Basic Rules for the
Interpretation of Contracts
The 15. provides that all previous negotiations
and informal agreements are superseded by the final written contract and cannot be used to
alter the written contract terms.

A contract is interpreted 16. not parts interpreted out

of context.

Words are interpreted in their 17. sense unless the parties

clearly indicated a different use.

18. provisions outweigh and take priority over

preprinted form language

When the language is unclear or ambiguous, 19.

is liable for the confusion.

92 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 For each of the following questions, find the specific
reference to these items in Form 2-T, the Offer to

on the contract’s language.

1. When is the buyer required to pay and deliver the due diligence fee to the seller?

2. How long does the buyer have to pay and deliver to the escrow agent the earnest money
deposit?

3. As a listin g agent, what should I recommend that my seller do if they don’t receive the due
diligence fee as required by the contract?

4. What happens to the interest that may be earned on the escrow account?

5. What if the lender cannot get the lending documents to the closing attorney by the
settlement date?

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 93
 A Dozen Common Questions Answered
by the NC Offer to Purchase & Contract (CONTINUED)
6. Does the buyer still have the right to continue to investigate and inspect the property after
the due diligence date?

7. With whom should a buyer consult regarding the length of the due diligence period?

8. What if the buyer has not received the RPOADS or MOG disclosures at the time of
making an offer?

9. What should the parties do if disclosures indicate that the mineral, oil, or gas rights to the
property have been severed?

10. Does the seller have to use licensed contractors in order to make agreed-upon repairs?

11. What happens to the contract if the property is damaged by a storm or fire prior to
closing?

12. On what date will the buyer be given possession and allowed to move into the property?

94 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 95
96 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
1. Drafting of contracts
2. Unauthorized practice of law
3. Fill in or complete printed forms
4. Drafting contracts
5. For others
6. Buyer or seller
7. Consult an attorney
8. Joint Task Force
9. NC Association of REALTORS
10. North Carolina Bar Association
11. Create contracts
12. Provide the forms
13. Approve contracts
14. Rules
15. Parol Evidence Rule
16. As a whole
17. Ordinary
18. Handwritten
19. Drafter of the document

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 97
 this section of the material?

1.

2.

3.

4.

5.

6.

7.

8.

98 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
Closing Preparations and Procedures
 Critical Reading Information

• Chapter 14 – Closing Real Estate Transactions

• Rule 58A.0116 – Handling of Trust Money

• Real Estate Settlement & Procedures Act

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 99
 North Carolina is an attorney state and closings are
conducted by attorneys.

The attorney has the following roles in regard to the

real estate closing:

1.
2.
3.
4.

The attorney is typically chosen and selected by 5. .

All of the following need to be provided to the closing attorney in order for them to prepare
for closing:
6.
7.
8.
9.
10.

Either party to the contract can delay the day of settlement of up to 11. days.

100 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 the buyer.

1.

2.

3.

4.

5.

6.

7.

8.

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 101
 Title Insurance
In North Carolina, the closing attorney, based on their research of the property and the people
involved in the transaction, issues an 12. .

Most transaction s involve two policies of title insurance that are issued at closing. They are:
13. and the 14. .

Both are typically paid by the 15. as a

16. paid 17. .

It is illegal to transfer or disburse any settlement

monies in North Carolina prior to
18. .

A closing attorney must verify all funds in excess of 19. .

A brokerage holding a buyer’s earnest money deposit cannot transfer the deposit to the escrow
or closing attorney until 20. .

102 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 Preparing Clients for Closing
What advice and preparation checklist should an agent
provide to the seller and the buyer prior to attending a
closing?

Advice & Information to Share with Sellers

1.

2.

3.

4.

Advice & Information to Share with Buyers

1.

2.

3.

4.

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 103
 The Real Estate Settlement & Procedures Act
(RESPA) was enacted with two primary purposes
in mind:

21.
22.

RESPA applies to the following:

23.
24.

RESPA does not apply to:

25.

26.

27.

28.

104 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 The Real Estate Settlement
Procedures Act (RESPA) (CONTINUED)
In a RESPA transaction, a borrower gets an upfront disclosure of closing costs.

The Loan Estimate

The buyer must receive a loan estimate within 29.
of 30. .

The loan estimate is provided with two additional items:

31. and
32. .

33. are responsible for issuing the loan estimate

and brokers should have a general understanding of the loan estimate.

Prior to the issuance of a loan estimate, the 34. charge that a lender
may make to a borrower is for obtainment of the 35. .

The loan estimate is required to be similar to the eventual closing disclosure that RESPA
also requires. There are only certain permissib le variations that are allowed as shown in the
following table.

Permissible Variations Between Loan Estimate & Closing Disclosure

No Variatio n at all 10% Variation Unlimited Variatio n

Lender Fees Settlement Agent Fees Prepaid Interest
Services Chosen by the Lender Recording Fees Property Insurance
Escrows & Impounds
3rd Party Services

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 105
 What are the key elements of a loan estimate that a

might appear in the loan estimate?

106 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 Save this Loan Estimate to compare with your Closing Disclosure.

Loan Estimate LOAN TERM

PURPOSE
DATE ISSUED PRODUCT
APPLICANTS LOAN TYPE Conventional FHA VA
LOAN ID #
RATE LOCK NO YES, u n til
PROPERTY Before closing, your interest rate, points, and lender credits can
EST. PROP. VALUE change unless you lock the interest rate. All other estimated
closing costs expire on

Loan Terms Can this amoun t increas e after closing ?

Loan Amount

Interes t Rate

Month ly Principa l & Inter es t

See Projected Payments below for your
Estimated Total Monthly Payment

Does the loan have these featur es ?

Prepa y m en t Penalty

Balloon Paymen t

Projected Payments
Paymen t Calcula ti on

Prin cipal & In te re st

Mo rtgage In su ran ce
Estimate d Escro w
Amount can increase over time

Estima ted Total

Monthly Payment

This estima te includes In escrow ?

Pro pe rty Taxe s
Estima ted Taxes, Insurance
& Assess men ts Ho me o wn e r’s In su ran ce
Amount can increase over time Other:
See Section G on page 2 for escrowed property costs. You must pay for other
property costs separately.

Costs at Closing
Estima ted Closing Costs Includes in Lo an Co sts + in Oth e r Co sts –
in Le n de r Cre dits. See page 2 for details.

Estima ted Cash to Close In clu de s Clo sin g Co sts. See Calculati ng Cash to Close on page 2 for details.

Visit www.c on su m erfi na nc e.g ov / m or tg ag e -es tim a te fo r ge n e ral in fo rma tio n an d to o ls.
LOAN ESTIMATE PAGE 1 OF 3 • LOAN ID #

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 107
 Save this Loan Estimate to compare with your Closing Disclosure.

Loan Estimate LOAN TERM

PURPOSE
DATE ISSUED PRODUCT
APPLICANTS LOAN TYPE Conventional FHA VA
LOAN ID #
RATE LOCK NO YES, u n til
PROPERTY Before closing, your interest rate, points, and lender credits can
EST. PROP. VALUE change unless you lock the interest rate. All other estimated
closing costs expire on

Loan Terms Can this amoun t increas e after closing ?

Loan Amount

Interes t Rate

Month ly Principa l & Inter es t

See Projected Payments below for your
Estimated Total Monthly Payment

Does the loan have these featur es ?

Prepa y m en t Penalty

Balloon Paymen t

Projected Payments
Paymen t Calcula ti on

Prin cipal & In te re st

Mo rtgage In su ran ce
Estimate d Escro w
Amount can increase over time

Estima ted Total

Monthly Payment

This estima te includes In escrow ?

Pro pe rty Taxe s
Estima ted Taxes, Insurance
& Assess men ts Ho me o wn e r’s In su ran ce
Amount can increase over time Other:
See Section G on page 2 for escrowed property costs. You must pay for other
property costs separately.

Costs at Closing
Estima ted Closing Costs Includes in Lo an Co sts + in Oth e r Co sts –
in Le n de r Cre dits. See page 2 for details.

Estima ted Cash to Close In clu de s Clo sin g Co sts. See Calculati ng Cash to Close on page 2 for details.

Visit www.c on su m erfi na nc e.g ov / m or tg ag e -es tim a te fo r ge n e ral in fo rma tio n an d to o ls.
LOAN ESTIMATE PAGE 1 OF 3 • LOAN ID #

108 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
Additional Information About This Loan

LENDER MORTGAGE BROKER

NMLS/ LICENSE ID NMLS/ LICENSE ID
LOAN OFFICER LOAN OFFICER
NMLS/ LICENSE ID NMLS/ LICENSE ID
EMAIL EMAIL
PHONE PHONE

Comparisons
Use these measur es to compar e this loan with other loans.

Total you will have paid in principal, interest, mortgage insurance, and loan costs.
In 5 Years
Principal you will have paid off.

Annual Percenta g e Rate (APR) Your costs over the loan term expressed as a rate. This is not your interest rate.

Total Interest Percentag e (TIP) The total amount of interest that you will pay over the loan term as a
percentage of your loan amount.

Other Considerations

Appraisal We may order an appraisal to determine the property’s value and charge you for this
appraisal. We will promptly give you a copy of any appraisal, even if your loan does not close.
You can pay for an additional appraisal for your own use at your own cost.

Assumption If you sell or transfer this property to another person, we

will allow, under certain conditions, this person to assume this loan on the original terms.
will not allow assumption of this loan on the original terms.

Homeown er ’s This loan requires homeowner’s insurance on the property, which you may obtain from a
Insurance company of your choice that we find acceptable.

Late Paymen t If your payment is more than days late, we will charge a late fee of

Refinance Refinancing this loan will depend on your future financial situation, the property value, and
market conditions. You may not be able to refinance this loan.

Servicing We intend
to service your loan. If so, you will make your payments to us.
to transfer servicing of your loan.

Confirm Receipt

By signing, you are only confirming that you have received this form. You do not have to accept this loan because you have signed or
received this form.

Applicant Signature Date Co-Applicant Signature Date

LOAN ESTIMATE PAGE 3 OF 3 • LOAN ID #

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 109
 RESPA prohibits the payment of
36.
to 37.
incidental to the referral of business.

RESPA does not prohibit or affect in any way the following items:
38.
39.
40.

RESPA allows for the co-ownership of settlemen t service providers. These are called
41. and they require:
42.
43.
44.

RESPA prohibits anyone in a real estate transaction from forcing the parties to use a particular
45. .

The government agency which enforces RESPA is

46. .

110 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 In 2010, two federal laws were combined for
enforcement and form compliance under the
Consumer Financial Protection Bureau.
Those two federal laws resulted in the
47. , which is an acronym for
the Closing Disclosures. 48.

Pursuant to these laws, the 49. is required to provide to the

50. to the 51.
at least 52. days prior to settlement.

In order to count the days properly, you will need to know all of the following:
• The days counted on banking 53.
They include Monday-Saturday and exclude Sundays and federal holidays
• You do not count the day of delivery to the borrower, you start counting the next day.
• The borrower may close on the 54. day.

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 111
 Real Estate Closing Disclosures (CONTINUED)
Examples of Counting Days
If the Disclosure is delivered on a Monday before midnight, the first day that the borrower
can close is 55. .
If the Disclosure is delivered on a Thursday before midnight, the first day that the borrower
can close is 56. .

The timeline and requirements for disclosure are 57. and

cannot be 58. .

Additional Closing Disclosure Issues to Keep in Mind

The buyer’s and seller’s closing disclosures are 59. and
should be kept 60. .

Brokers have an obligation to review the Closing Disclosure for its

61. and 62. .

The Seller Closing Disclosure does not have to provided prior to settlement.

If any of the following change, a new Closing Disclosure will be required:

63.
64.
65.

112 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 This form is a statement of final loan terms and closing costs. Compare this
Closing Disclosure document with your Loan Estimate.

Closing Information Transaction Information Loan Information

Date Issued Borrower Loan Term
Closing Date Purpose
Disbursement Date Product
Settlement Agent Seller
File # Loan Type Conventional FHA
Property VA _____________
Lender Loan ID #
Sale Price MIC #

Loan Terms Can this amount increase after closing?

Loan Amount

Interest Rate

Monthly Principal & Interest

See Projected Payments below for your
Estimated Total Monthly Payment

Does the loan have these features?

Prepayment Penalty

Balloon Payment

Projected Payments
Payment Calculation

Principal & Interest

Mortgage Insurance
Estimated Escrow
Amount can increase over time

Estimated Total
Monthly Payment

This estimate includes In escrow?

Estimated Taxes, Insurance Property Taxes
& Assessments Homeowner’s Insurance
Amount can increase over time Other:
See page 4 for details See Escrow Account on page 4 for details. You must pay for other property
costs separately.

Costs at Closing
Closing Costs Includes $5,877.00 in Loan Costs + $7,642.43 in Other Costs – $0
in Lender Credits. See page 2 for details.

Cash to Close Includes Closing Costs. See Calculating Cash to Close on page 3 for details.

CLOSING DISCLOSURE PAGE 1 OF 5 • LOAN ID # 0000000000

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 113
 This form is a statement of final loan terms and closing costs. Compare this
Closing Disclosure document with your Loan Estimate.

Closing Information Transaction Information Loan Information

Date Issued Borrower Loan Term
Closing Date Purpose
Disbursement Date Product
Settlement Agent Seller
File # Loan Type Conventional FHA
Property VA _____________
Lender Loan ID #
Appraised Prop. Value MIC #

Loan Terms Can this amount increase after closing?

Loan Amount

Interest Rate

Monthly Principal & Interest

See Projected Payments below for your
Estimated Total Monthly Payment

Does the loan have these features?

Prepayment Penalty

Balloon Payment

Projected Payments
Payment Calculation

Principal & Interest

Mortgage Insurance
Estimated Escrow
Amount can increase over time

Estimated Total
Monthly Payment

This estimate includes In escrow?

Estimated Taxes, Insurance Property Taxes
& Assessments Homeowner’s Insurance
Amount can increase over time Other:
See page 4 for details See Escrow Account on page 4 for details. You must pay for other property
costs separately.

Costs at Closing
Closing Costs Includes $5,877.00 in Loan Costs + $7,642.43 in Other Costs – $0
in Lender Credits. See page 2 for details.

Cash to Close Includes Closing Costs. See Calculating Cash to Close on page 3 for details.

CLOSING DISCLOSURE PAGE 1 OF 5 • LOAN ID # 0000000000

114 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 This form is a statement of final loan terms and closing costs. Compare this
Closing Disclosure document with your Loan Estimate.

Closing Information Transaction Information Loan Information

Date Issued Borrower Loan Term
Closing Date Purpose
Disbursement Date Product
Settlement Agent Seller
File # Loan Type Conventional FHA
Property VA _____________
Lender Loan ID #
Estimated Prop. Value MIC #

Loan Terms Can this amount increase after closing?

Loan Amount

Interest Rate

Monthly Principal & Interest

See Projected Payments below for your
Estimated Total Monthly Payment

Does the loan have these features?

Prepayment Penalty

Balloon Payment

Projected Payments
Payment Calculation

Principal & Interest

Mortgage Insurance
Estimated Escrow
Amount can increase over time

Estimated Total
Monthly Payment

This estimate includes In escrow?

Estimated Taxes, Insurance Property Taxes
& Assessments Homeowner’s Insurance
Amount can increase over time Other:
See page 4 for details See Escrow Account on page 4 for details. You must pay for other property
costs separately.

Costs at Closing
Closing Costs Includes $5,877.00 in Loan Costs + $7,642.43 in Other Costs – $0
in Lender Credits. See page 2 for details.

Cash to Close Includes Closing Costs. See Calculating Cash to Close on page 3 for details.

CLOSING DISCLOSURE PAGE 1 OF 5 • LOAN ID # 0000000000

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 115
 Closing Cost Details
Borrower-Paid Seller-Paid Paid by
Others
Loan Costs At Closing Before Closing At Closing Before Closing
A. Origination Charges
01 % of Loan Amount (Points)
02
03
04
05
06
07
08
B. Services Borrower Did Not Shop For
01
02
03
04
05
06
07
08
09
10
C. Services Borrower Did Shop For
01
02
03
04
05
06
07
08
D. TOTAL LOAN COSTS (Borro wer -P ai d )
Loan Costs Subtotals (A + B + C)

Other Costs
E. Taxes and Other Governm e nt Fees
01 Recording Fees Deed: Mortgage:
02
F. Prepaids
01 Homeowner’s Insurance Premium ( mo.)
02 Mortgage Insurance Premium ( mo.)
03 Prepaid Interest ( per day from to )
04 Property Taxes ( mo.)
05
G. Initial Escrow Payment at Closing
01 Homeowner’s Insurance per month for mo.
02 Mortgage Insurance per month for mo.
03 Property Taxes per month for mo.
04
05
06
07
08 Aggregate Adjustment
H. Other
01
02
03
04
05
06
07
08
I. TOTAL OTHER COSTS (Borro we r -Pa i d )
Other Costs Subtotals (E + F + G + H)

J. TOTAL CLOSING COSTS (Borro we r -Pai d )

Closing Costs Subtotals (D + I)
Lender Credits

CLOSING DISCLOSURE PAGE 2 OF 5 • LOAN ID #

116 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
Calculating Cash to Close Use this table to see what has changed from your Loan Estimate.
Loan Estimate Final Did this change?
Total Closing Costs (J)
Closing Costs Paid Before Closing
Closing Costs Financed
(Paid from your Loan Amount)
Down Payment/Funds from Borrower
Deposit
Funds for Borrower
Seller Credits
Adjustments and Other Credits
Cash to Close

Summaries of Transactions Use this table to see a summary of your transaction.

BORROWER’S TRANSACTION SELLER’S TRANSACTION
K. Due from Borrower at Closing M. Due to Seller at Closing
01 Sale Price of Property 01 Sale Price of Property
02 Sale Price of Any Personal Property Included in Sale 02 Sale Price of Any Personal Property Included in Sale
03 Closing Costs Paid at Closing (J) 03
04 04
Adjustments 05
05 06
06 07
07 08
Adjustments for Items Paid by Seller in Advance Adjustments for Items Paid by Seller in Advance
08 City/Town Taxes to 09 City/Town Taxes to
09 County Taxes to 10 County Taxes to
10 Assessments to 11 Assessments to
11 12
12 13
13 14
14 15
15 16
L. Paid Already by or on Behalf of Borrower at Closing N. Due from Seller at Closing
01 Deposit 01 Excess Deposit
02 Loan Amount 02 Closing Costs Paid at Closing (J)
03 Existing Loan(s) Assumed or Taken Subject to 03 Existing Loan(s) Assumed or Taken Subject to
04 04 Payoff of First Mortgage Loan
05 Seller Credit 05 Payoff of Second Mortgage Loan
Other Credits 06
06 07
07 08 Seller Credit
Adjustments 09
08 10
09 11
10 12
11 13
Adjustments for Items Unpaid by Seller Adjustments for Items Unpaid by Seller
12 City/Town Taxes to 14 City/Town Taxes to
13 County Taxes to 15 County Taxes to
14 Assessments to 16 Assessments to
15 17
16 18
17 19
CALCULATION CALCULATION
Total Due from Borrower at Closing (K) Total Due to Seller at Closing (M)
Total Paid Already by or on Behalf of Borrower at Closing (L) Total Due from Seller at Closing (N)
Cash to Close From To Borrower Cash From To Seller

CLOSING DISCLOSURE PAGE 3 OF 5 • LOAN ID # 0000000000

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 117
 Additional Information About This Loan

Loan Disclosu r es
Assumption Escrow Account
If you sell or transfer this property to another person, your lender For now, your loan
will allow, under certain conditions, this person to assume this will have an escrow account (also called an “impound” or “trust”
loan on the original terms. account) to pay the property costs listed below. Without an escrow
will not allow assumption of this loan on the original terms. account, you would pay them directly, possibly in one or two large
payments a year. Your lender may be liable for penalties and interest
Demand Feature for failing to make a payment.
Your loan
has a demand feature, which permits your lender to require early Escrow
repayment of the loan. You should review your note for details. Escrowed Estimated total amount over year 1 for
does not have a demand feature. Property Costs your escrowed property costs:
over Year 1
Late Paymen t
If your payment is more than days late, your lender will charge a Non-Escrowed Estimated total amount over year 1 for
Property Costs your non-escrowed property costs:
late fee of over Year 1

Negative Amortization (Increase in Loan Amount) You may have other property costs.
Under your loan terms, you
Initial Escrow A cushion for the escrow account you
are scheduled to make monthly payments that do not pay all of Payment pay at closing. See Section G on page 2.
the interest due that month. As a result, your loan amount will
increase (negatively amortize), and your loan amount will likely
become larger than your original loan amount. Increases in your Monthly Escrow The amount included in your total
loan amount lower the equity you have in this property. Payment monthly payment.
may have monthly payments that do not pay all of the interest
due that month. If you do, your loan amount will increase will not have an escrow account because you declined it your
(negatively amortize), and, as a result, your loan amount may lender does not offer one. You must directly pay your property
become larger than your original loan amount. Increases in your costs, such as taxes and homeowner’s insurance. Contact your
loan amount lower the equity you have in this property. lender to ask if your loan can have an escrow account.
do not have a negative amortization feature.
No Escrow
Partial Paymen ts Estimated Estimated total amount over year 1. You
Your lender Property Costs must pay these costs directly, possibly
over Year 1 in one or two large payments a year.
may accept payments that are less than the full amount due
(partial payments) and apply them to your loan. Escrow Waiver Fee
may hold them in a separate account until you pay the rest of the
payment, and then apply the full payment to your loan. In the future,
Your property costs may change and, as a result, your escrow pay-
does not accept any partial payments. ment may change. You may be able to cancel your escrow account,
If this loan is sold, your new lender may have a different policy. but if you do, you must pay your property costs directly. If you fail
to pay your property taxes, your state or local government may (1)
Security Interest impose fines and penalties or (2) place a tax lien on this property. If
You are granting a security interest in you fail to pay any of your property costs, your lender may (1) add
the amounts to your loan balance, (2) add an escrow account to your
loan, or (3) require you to pay for property insurance that the lender
buys on your behalf, which likely would cost more and provide fewer
You may lose this property if you do not make your payments or benefits than what you could buy on your own.
satisfy other obligations for this loan.

CLOSING DISCLOSURE PAGE 4 OF 5 • LOAN ID #

118 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
Additional Information About This Loan

Loan Disclosures
Assumption Escrow Account
If you sell or transfer this property to another person, your lender For now, your loan
will allow, under certain conditions, this person to assume this will have an escrow account (also called an “impound” or “trust”
loan on the original terms. account) to pay the property costs listed below. Without an escrow
will not allow assumption of this loan on the original terms. account, you would pay them directly, possibly in one or two large
payments a year. Your lender may be liable for penalties and interest
Demand Feature for failing to make a payment.
Your loan
has a demand feature, which permits your lender to require early Escrow
repayment of the loan. You should review your note for details. Escrowed Estimated total amount over year 1 for
does not have a demand feature. Property Costs your escrowed property costs:
over Year 1
Late Payment
If your payment is more than ___ days late, your lender will charge a Non-Escrowed Estimated total amount over year 1 for
Property Costs your non-escrowed property costs:
late fee of ________________________________________________ over Year 1

Negative Amortization (Increase in Loan Amount) You may have other property costs.
Under your loan terms, you
Initial Escrow A cushion for the escrow account you
are scheduled to make monthly payments that do not pay all of Payment pay at closing. See Section G on page 2.
the interest due that month. As a result, your loan amount will
increase (negatively amortize), and your loan amount will likely
become larger than your original loan amount. Increases in your Monthly Escrow The amount included in your total
loan amount lower the equity you have in this property. Payment monthly payment.
may have monthly payments that do not pay all of the interest
due that month. If you do, your loan amount will increase will not have an escrow account because you declined it your
(negatively amortize), and, as a result, your loan amount may lender does not offer one. You must directly pay your property
become larger than your original loan amount. Increases in your costs, such as taxes and homeowner’s insurance. Contact your
loan amount lower the equity you have in this property. lender to ask if your loan can have an escrow account.
do not have a negative amortization feature.
No Escrow
Partial Payments Estimated Estimated total amount over year 1. You
Your lender Property Costs must pay these costs directly, possibly
over Year 1 in one or two large payments a year.
may accept payments that are less than the full amount due
(partial payments) and apply them to your loan. Escrow Waiver Fee
may hold them in a separate account until you pay the rest of the
In the future,
payment, and then apply the full payment to your loan.
Your property costs may change and, as a result, your escrow pay-
does not accept any partial payments. ment may change. You may be able to cancel your escrow account,
If this loan is sold, your new lender may have a different policy. but if you do, you must pay your property costs directly. If you fail
to pay your property taxes, your state or local government may (1)
Security Interest impose fines and penalties or (2) place a tax lien on this property. If
You are granting a security interest in you fail to pay any of your property costs, your lender may (1) add
the amounts to your loan balance, (2) add an escrow account to your
loan, or (3) require you to pay for property insurance that the lender
buys on your behalf, which likely would cost more and provide fewer
You may lose this property if you do not make your payments or benefits than what you could buy on your own.
satisfy other obligations for this loan.

Adjustable Payment (AP) Table Adjustable Interest Rate (AIR) Table

Interest Only Payments? Index + Margin
Initial Interest Rate
Optional Payments?
Minimum/Maximum Interest Rate
Step Payments?
Change Frequency
Seasonal Payments? First Change
Monthly Principal and Interest Payments Subsequent Changes
First Change/Amount Limits on Interest Rate Changes
Subsequent Changes First Change
Maximum Payment Subsequent Changes

CLOSING DISCLOSURE PAGE 4 OF 5 • LOAN ID # 0000000000

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 119
 Additional Information About This Loan

Loan Disclosures
Assumption Escrow Account
If you sell or transfer this property to another person, your lender For now, your loan
will allow, under certain conditions, this person to assume this will have an escrow account (also called an “impound” or “trust”
loan on the original terms. account) to pay the property costs listed below. Without an escrow
will not allow assumption of this loan on the original terms. account, you would pay them directly, possibly in one or two large
payments a year. Your lender may be liable for penalties and interest
Demand Feature for failing to make a payment.
Your loan
has a demand feature, which permits your lender to require early Escrow
repayment of the loan. You should review your note for details. Escrowed Estimated total amount over year 1 for
does not have a demand feature. Property Costs your escrowed property costs:
over Year 1
Late Payment
If your payment is more than ___ days late, your lender will charge a Non-Escrowed Estimated total amount over year 1 for
Property Costs your non-escrowed property costs:
late fee of ________________________________________________ over Year 1

Negative Amortization (Increase in Loan Amount) You may have other property costs.
Under your loan terms, you
Initial Escrow A cushion for the escrow account you
are scheduled to make monthly payments that do not pay all of Payment pay at closing. See Section G on page 2.
the interest due that month. As a result, your loan amount will
increase (negatively amortize), and your loan amount will likely
become larger than your original loan amount. Increases in your Monthly Escrow The amount included in your total
loan amount lower the equity you have in this property. Payment monthly payment.
may have monthly payments that do not pay all of the interest
due that month. If you do, your loan amount will increase will not have an escrow account because you declined it your
(negatively amortize), and, as a result, your loan amount may lender does not offer one. You must directly pay your property
become larger than your original loan amount. Increases in your costs, such as taxes and homeowner’s insurance. Contact your
loan amount lower the equity you have in this property. lender to ask if your loan can have an escrow account.
do not have a negative amortization feature.
No Escrow
Partial Payments Estimated Estimated total amount over year 1. You
Your lender Property Costs must pay these costs directly, possibly
over Year 1 in one or two large payments a year.
may accept payments that are less than the full amount due
(partial payments) and apply them to your loan. Escrow Waiver Fee
may hold them in a separate account until you pay the rest of the
In the future,
payment, and then apply the full payment to your loan.
Your property costs may change and, as a result, your escrow pay-
does not accept any partial payments. ment may change. You may be able to cancel your escrow account,
If this loan is sold, your new lender may have a different policy. but if you do, you must pay your property costs directly. If you fail
to pay your property taxes, your state or local government may (1)
Security Interest impose fines and penalties or (2) place a tax lien on this property. If
You are granting a security interest in you fail to pay any of your property costs, your lender may (1) add
the amounts to your loan balance, (2) add an escrow account to your
loan, or (3) require you to pay for property insurance that the lender
buys on your behalf, which likely would cost more and provide fewer
You may lose this property if you do not make your payments or benefits than what you could buy on your own.
satisfy other obligations for this loan.

Adjustable Payment (AP) Table

Interest Only Payments?
Optional Payments?
Step Payments?
Seasonal Payments?
Monthly Principal and Interest Payments
First Change/Amount
Subsequent Changes
Maximum Payment

CLOSING DISCLOSURE PAGE 4 OF 5 • LOAN ID # 0000000000

120 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
Additional Information About This Loan

Loan Disclosures
Assumption Escrow Account
If you sell or transfer this property to another person, your lender For now, your loan
will allow, under certain conditions, this person to assume this will have an escrow account (also called an “impound” or “trust”
loan on the original terms. account) to pay the property costs listed below. Without an escrow
will not allow assumption of this loan on the original terms. account, you would pay them directly, possibly in one or two large
payments a year. Your lender may be liable for penalties and interest
Demand Feature for failing to make a payment.
Your loan
has a demand feature, which permits your lender to require early Escrow
repayment of the loan. You should review your note for details. Escrowed Estimated total amount over year 1 for
does not have a demand feature. Property Costs your escrowed property costs:
over Year 1
Late Payment
If your payment is more than ___ days late, your lender will charge a Non-Escrowed Estimated total amount over year 1 for
Property Costs your non-escrowed property costs:
late fee of ________________________________________________ over Year 1

Negative Amortization (Increase in Loan Amount) You may have other property costs.
Under your loan terms, you
Initial Escrow A cushion for the escrow account you
are scheduled to make monthly payments that do not pay all of Payment pay at closing. See Section G on page 2.
the interest due that month. As a result, your loan amount will
increase (negatively amortize), and your loan amount will likely
become larger than your original loan amount. Increases in your Monthly Escrow The amount included in your total
loan amount lower the equity you have in this property. Payment monthly payment.
may have monthly payments that do not pay all of the interest
due that month. If you do, your loan amount will increase will not have an escrow account because you declined it your
(negatively amortize), and, as a result, your loan amount may lender does not offer one. You must directly pay your property
become larger than your original loan amount. Increases in your costs, such as taxes and homeowner’s insurance. Contact your
loan amount lower the equity you have in this property. lender to ask if your loan can have an escrow account.
do not have a negative amortization feature.
No Escrow
Partial Payments Estimated Estimated total amount over year 1. You
Your lender Property Costs must pay these costs directly, possibly
over Year 1 in one or two large payments a year.
may accept payments that are less than the full amount due
(partial payments) and apply them to your loan. Escrow Waiver Fee
may hold them in a separate account until you pay the rest of the
In the future,
payment, and then apply the full payment to your loan.
Your property costs may change and, as a result, your escrow pay-
does not accept any partial payments. ment may change. You may be able to cancel your escrow account,
If this loan is sold, your new lender may have a different policy. but if you do, you must pay your property costs directly. If you fail
to pay your property taxes, your state or local government may (1)
Security Interest impose fines and penalties or (2) place a tax lien on this property. If
You are granting a security interest in you fail to pay any of your property costs, your lender may (1) add
the amounts to your loan balance, (2) add an escrow account to your
loan, or (3) require you to pay for property insurance that the lender
buys on your behalf, which likely would cost more and provide fewer
You may lose this property if you do not make your payments or benefits than what you could buy on your own.
satisfy other obligations for this loan.

Adjustable Interest Rate (AIR) Table

Index + Margin
Initial Interest Rate
Minimum/Maximum Interest Rate
Change Frequency
First Change
Subsequent Changes
Limits on Interest Rate Changes
First Change
Subsequent Changes

CLOSING DISCLOSURE PAGE 4 OF 5 • LOAN ID # 0000000000

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 121
 Loan Calculations Other Disclosures

Total of Payments. Total you will have paid after Appraisal

you make all payments of principal, interest, If the property was appraised for your loan, your lender is required to
mortgage insurance, and loan costs, as scheduled. give you a copy at no additional cost at least 3 days before closing.
If you have not yet received it, please contact your lender at the
information listed below.
Finance Charge. The dollar amount the loan will
cost you.
Contract Details
See your note and security instrument for information about
Amount Financed. The loan amount available after • what happens if you fail to make your payments,
paying your upfront finance charge. • what is a default on the loan,
• situations in which your lender can require early repayment of the
Annual Percentage Rate (APR). Your costs over loan, and
the loan term expressed as a rate. This is not your • the rules for making payments before they are due.
interest rate.
Liability after Foreclosure
Total Interest Percentage (TIP). The total amount If your lender forecloses on this property and the foreclosure does not
of interest that you will pay over the loan term as a cover the amount of unpaid balance on this loan,
percentage of your loan amount. state law may protect you from liability for the unpaid balance. If you
refinance or take on any additional debt on this property, you may
lose this protection and have to pay any debt remaining even after
foreclosure. You may want to consult a lawyer for more information.
state law does not protect you from liability for the unpaid balance.

??
Questions? If you have questions about the Refinance
loan terms or costs on this form, use the contact Refinancing this loan will depend on your future financial situation,
information below. To get more information the property value, and market conditions. You may not be able to
or make a complaint, contact the Consumer refinance this loan.
Financial Protection Bureau at
www.consumerfinance.gov/mortgage-closing Tax Deductions
If you borrow more than this property is worth, the interest on the
loan amount above this property’s fair market value is not deductible
from your federal income taxes. You should consult a tax advisor for
more information.

Contact Information
Lender Mortgage Broker Real Estate Broker (B) Real Estate Broker (S) Settlement Agent
Name Ficus Bank FRIENDLY MORTGAGE RELIABLE REALTY CO. REALTY PROS ABC Settlement
BROKER INC.
Address 4321 Raven Blvd. 1234 Terrapin Dr. 1776 Chesapeake St. 3456 Oriole Ave. 5432 Free State Blvd.
Somecity, MD 54321 Somecity, MD 54321 Ste 405 Anytown, MD 12345 Ste 405
Anytown, MD 12345 Somecity, MD 54321
NMLS ID 111111 222222
License ID
Contact Joe Smith JIM TAYLOR KELLY GREEN STEVE WALSH NANCY WILSON
Contact NMLS ID 487493 394784
Contact
License ID
Email JSMITH@ JTAYLOR@ KGREEN@ SWALSH@ NWILSON@
FICUSBANK.COM FRNDLYMTGBRKR.CO RREALTY.COM REALTYPROS.COM ABCSETTLEMENT.COM
Phone 111-222-3333 333-444-5555 444-555-6666 555-666-7777 666-777-8888

Confirm Receipt
By signing, you are only confirming that you have received this form. You do not have to accept this loan because you have signed or received
this form.

Applicant Signature Date Co-Applicant Signature Date

CLOSING DISCLOSURE PAGE 5 OF 5 • LOAN ID # 0000000000

122 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 Loan Calculations Other Disclosures

Total of Payments. Total you will have paid after Appraisal

you make all payments of principal, interest, If the property was appraised for your loan, your lender is required to
mortgage insurance, and loan costs, as scheduled. give you a copy at no additional cost at least 3 days before closing.
If you have not yet received it, please contact your lender at the
information listed below.
Finance Charge. The dollar amount the loan will
cost you.
Contract Details
See your note and security instrument for information about
Amount Financed. The loan amount available after • what happens if you fail to make your payments,
paying your upfront finance charge. • what is a default on the loan,
• situations in which your lender can require early repayment of the
Annual Percentage Rate (APR). Your costs over loan, and
the loan term expressed as a rate. This is not your • the rules for making payments before they are due.
interest rate.
Liability after Foreclosure
Total Interest Percentage (TIP). The total amount If your lender forecloses on this property and the foreclosure does not
of interest that you will pay over the loan term as a cover the amount of unpaid balance on this loan,
percentage of your loan amount. state law may protect you from liability for the unpaid balance. If you
refinance or take on any additional debt on this property, you may
lose this protection and have to pay any debt remaining even after
foreclosure. You may want to consult a lawyer for more information.
state law does not protect you from liability for the unpaid balance.

??
Questions? If you have questions about the Loan Acceptance
loan terms or costs on this form, use the contact You do not have to accept this loan because you have received this
information below. To get more information form or signed a loan application.
or make a complaint, contact the Consumer
Financial Protection Bureau at Refinance
www.consumerfinance.gov/mortgage-closing Refinancing this loan will depend on your future financial situation,
the property value, and market conditions. You may not be able to
refinance this loan.

Tax Deductions
If you borrow more than this property is worth, the interest on the
loan amount above this property’s fair market value is not deductible
from your federal income taxes. You should consult a tax advisor for
more information.

Contact Information
Lender Mortgage Broker Real Estate Broker (B) Real Estate Broker (S) Settlement Agent
Name Ficus Bank FRIENDLY MORTGAGE RELIABLE REALTY CO. REALTY PROS ABC Settlement
BROKER INC.
Address 4321 Raven Blvd. 1234 Terrapin Dr. 1776 Chesapeake St. 3456 Oriole Ave. 5432 Free State Blvd.
Somecity, MD 54321 Somecity, MD 54321 Ste 405 Anytown, MD 12345 Ste 405
Anytown, MD 12345 Somecity, MD 54321
NMLS ID 111111 222222
License ID
Contact Joe Smith JIM TAYLOR KELLY GREEN STEVE WALSH NANCY WILSON
Contact NMLS ID 487493 394784
Contact
License ID
Email JSMITH@ JTAYLOR@ KGREEN@ SWALSH@ NWILSON@
FICUSBANK.COM FRNDLYMTGBRKR.CO RREALTY.COM REALTYPROS.COM ABCSETTLEMENT.COM
Phone 111-222-3333 333-444-5555 444-555-6666 555-666-7777 666-777-8888

CLOSING DISCLOSURE PAGE 5 OF 5 • LOAN ID # 0000000000

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 123
 Loan Calculations Other Disclosures

Total of Payments. Total you will have paid after Contract Details
you make all payments of principal, interest, See your note and security instrument for information about
mortgage insurance, and loan costs, as scheduled. • what happens if you fail to make your payments,
• what is a default on the loan,
• situations in which your lender can require early repayment of the
Finance Charge. The dollar amount the loan will
cost you. loan, and
• the rules for making payments before they are due.

Amount Financed. The loan amount available after Liability after Foreclosure
paying your upfront finance charge. If your lender forecloses on this property and the foreclosure does not
cover the amount of unpaid balance on this loan,
Annual Percentage Rate (APR). Your costs over state law may protect you from liability for the unpaid balance. If you
the loan term expressed as a rate. This is not your refinance or take on any additional debt on this property, you may
interest rate. lose this protection and have to pay any debt remaining even after
foreclosure. You may want to consult a lawyer for more information.
Total Interest Percentage (TIP). The total amount state law does not protect you from liability for the unpaid balance.
of interest that you will pay over the loan term as a
percentage of your loan amount. Refinance
Refinancing this loan will depend on your future financial situation,
the property value, and market conditions. You may not be able to
refinance this loan.

??
Tax Deductions
Questions? If you have questions about the If you borrow more than this property is worth, the interest on the
loan terms or costs on this form, use the contact loan amount above this property’s fair market value is not deductible
information below. To get more information from your federal income taxes. You should consult a tax advisor for
or make a complaint, contact the Consumer more information.
Financial Protection Bureau at
www.consumerfinance.gov/mortgage-closing

Contact Information
Lender Mortgage Broker Real Estate Broker (B) Real Estate Broker (S) Settlement Agent
Name Ficus Bank FRIENDLY MORTGAGE RELIABLE REALTY CO. REALTY PROS ABC Settlement
BROKER INC.
Address 4321 Raven Blvd. 1234 Terrapin Dr. 1776 Chesapeake St. 3456 Oriole Ave. 5432 Free State Blvd.
Somecity, MD 54321 Somecity, MD 54321 Ste 405 Anytown, MD 12345 Ste 405
Anytown, MD 12345 Somecity, MD 54321
NMLS ID 111111 222222
License ID
Contact Joe Smith JIM TAYLOR KELLY GREEN STEVE WALSH NANCY WILSON
Contact NMLS ID 487493 394784
Contact
License ID
Email JSMITH@ JTAYLOR@ KGREEN@ SWALSH@ NWILSON@
FICUSBANK.COM FRNDLYMTGBRKR.CO RREALTY.COM REALTYPROS.COM ABCSETTLEMENT.COM
Phone 111-222-3333 333-444-5555 444-555-6666 555-666-7777 666-777-8888

Confirm Receipt
By signing, you are only confirming that you have received this form. You do not have to accept this loan because you have signed or received
this form.

Applicant Signature Date Co-Applicant Signature Date

CLOSING DISCLOSURE PAGE 5 OF 5 • LOAN ID # 0000000000

124 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 Loan Calculations Other Disclosures

Total of Payments. Total you will have paid after Contract Details
you make all payments of principal, interest, See your note and security instrument for information about
mortgage insurance, and loan costs, as scheduled. • what happens if you fail to make your payments,
• what is a default on the loan,
• situations in which your lender can require early repayment of the
Finance Charge. The dollar amount the loan will
cost you. loan, and
• the rules for making payments before they are due.

Amount Financed. The loan amount available after Liability after Foreclosure
paying your upfront finance charge. If your lender forecloses on this property and the foreclosure does not
cover the amount of unpaid balance on this loan,
Annual Percentage Rate (APR). Your costs over state law may protect you from liability for the unpaid balance. If you
the loan term expressed as a rate. This is not your refinance or take on any additional debt on this property, you may
interest rate. lose this protection and have to pay any debt remaining even after
foreclosure. You may want to consult a lawyer for more information.
Total Interest Percentage (TIP). The total amount state law does not protect you from liability for the unpaid balance.
of interest that you will pay over the loan term as a
percentage of your loan amount. Loan Acceptance
You do not have to accept this loan because you have received this
form or signed a loan application.

Refinance

??
Refinancing this loan will depend on your future financial situation,
Questions? If you have questions about the the property value, and market conditions. You may not be able to
loan terms or costs on this form, use the contact refinance this loan.
information below. To get more information
or make a complaint, contact the Consumer Tax Deductions
Financial Protection Bureau at If you borrow more than this property is worth, the interest on the
www.consumerfinance.gov/mortgage-closing loan amount above this property’s fair market value is not deductible
from your federal income taxes. You should consult a tax advisor for
more information.

Contact Information
Lender Mortgage Broker Real Estate Broker (B) Real Estate Broker (S) Settlement Agent
Name Ficus Bank FRIENDLY MORTGAGE RELIABLE REALTY CO. REALTY PROS ABC Settlement
BROKER INC.
Address 4321 Raven Blvd. 1234 Terrapin Dr. 1776 Chesapeake St. 3456 Oriole Ave. 5432 Free State Blvd.
Somecity, MD 54321 Somecity, MD 54321 Ste 405 Anytown, MD 12345 Ste 405
Anytown, MD 12345 Somecity, MD 54321
NMLS ID 111111 222222
License ID
Contact Joe Smith JIM TAYLOR KELLY GREEN STEVE WALSH NANCY WILSON
Contact NMLS ID 487493 394784
Contact
License ID
Email JSMITH@ JTAYLOR@ KGREEN@ SWALSH@ NWILSON@
FICUSBANK.COM FRNDLYMTGBRKR.CO RREALTY.COM REALTYPROS.COM ABCSETTLEMENT.COM
Phone 111-222-3333 333-444-5555 444-555-6666 555-666-7777 666-777-8888

CLOSING DISCLOSURE PAGE 5 OF 5 • LOAN ID # 0000000000

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 125
 Closing Disclosure
Closing Information Transaction Information
Date Issued Borrower
Closing Date
Disbursement Date
Settlement Agent Seller
File #
Property

Sale Price

Summaries of Transactions Contact Information

SELLER’S TRANSACTION REAL ESTATE BROKER (B)
Due to Seller at Closing Name
01 Sale Price of Property Address
02 Sale Price of Any Personal Property Included in Sale
03
04 __ License ID
05 Contact
06
07 Contact __ License ID
08 Email
Adjustments for Items Paid by Seller in Advance Phone
09 City/Town Taxes to
10 County Taxes to REAL ESTATE BROKER (S)
11 Assessments to Name
12 Address
13
14
15 __ License ID
16
Contact
Due from Seller at Closing
Contact __ License ID
01 Excess Deposit
02 Closing Costs Paid at Closing (J) Email
03 Existing Loan(s) Assumed or Taken Subject to Phone
04 Payoff of First Mortgage Loan
SETTLEMENT AGENT
05 Payoff of Second Mortgage Loan
06 Name
07 Address
08 Seller Credit
09
10 __ License ID
11 Contact
12
Contact __ License ID
13
Adjustments for Items Unpaid by Seller Email
14 City/Town Taxes to Phone
15 County Taxes to
16 Assessments to
17
Questions? If you have questions about the

?
18
19 loan terms or costs on this form, use the contact
CALCULATION information above. To get more information
or make a complaint, contact the Consumer
Total Due to Seller at Closing
Financial Protection Bureau at
Total Due from Seller at Closing www.consumerfinance.gov/mortgage-closing
Cash From To Seller

CLOSING DISCLOSURE PAGE 1 OF 2

126 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
Closing Cost Details
Seller-Paid
Loan Costs At Closing Before Closing
A. rigination Charges
01 % of Loan Amount (Points)
02
03
04
05
06
07
08
B. ervices Borrower Did Not Shop For
01
02
03
04
05
06
07
08
C. ervices Borrower Did Shop For
01
02
03
04
05
06
07
08

Other Costs
E. Taxes and Other Government Fees
01 Recording Fees Deed: $120.00 Mortgage: $32.00
02
F. Prepaids
01 Homeowner’s Insurance Premium ( 12 mo.)
02 Mortgage Insurance Premium ( mo.)
03 Prepaid Interest ( $26.31 per day from 3/23/12 to 3/31/12))
04 Property Taxes ( mo.)
05
G. Initial Escrow Payment at Closing
01 Homeowner’s Insurance per month for mo.
02 Mortgage Insurance per month for mo.
03 Property Taxes per month for mo.
04
05
06
07
08 Aggregate Adjustment
H. Other
01
02
03
04
05
06
07
08
09
10
11
12
13

J. TOTAL CLOSING COSTS

CLOSING DISCLOSURE PAGE 2 OF 2

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 127
 Section 4: Closing Preparations &
Procedures Notebook Guide

1. Co-ordinates the process

2. Issues validity of title opinions
3. Prepares closing documents
4. Conducts the closing
5. Buyer
6. A copy of the seller’s deed
7. Accurate HOA information
8. Info on the seller’s title insurance
9. Current and accurate copy of contract
10. Bills and invoices to be paid at closing
11. 7 days
12. Attorney ’s opinion letter
13. ALTA policy for the lender
14. Owner’s policy for the buyer
15. Buyer
16. One-time charge
17. When policy is issued at closing
18. Recording
19. All funds over $5,000
20. No sooner than 10 days prior to settlement
21. Disclosure
22. Eliminate kickbacks
23. Federally related loan (any loan government can regulate)
24. 1–4 family residential
25. Cash transactions
26. Vacant land
27. Commercial transactions
28. Seller carrybacks

128 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 Section 4: Closing Preparations &
Procedures Notebook Guide (CONTINUED)

29. 3 days
30. Loan application
31. Required APR per TILA
32. Consumer Settlement Costs booklet
33. Lender
34. ONLY
35. Credit report
36. Anything of value
37. Settlement service providers
38. Referral fees between licensees
39. Crediting commissions to clients for costs
40. Receipt of bonuses by a licensee from someone other than settlement service provider
41. Affiliated business arrangements
42. Disclosure of relationship
43. Cannot require use
44. Must disclose all fees to be charged
45. Settlement service providers
46. Consumer Financial Protection Bureau (CFPB)
47. TRID
48. TILA/RESPA Integrated Disclosures
49. Lender
50. Closing disclosure
51. Borrower
52. 3 days
53. Lender business days
54. 3rd day
55. Thursday
56. Monday

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 129
 Section 4: Closing Preparations &
Procedures Notebook Guide (CONTINUED)

57. Not negotiable

58. Waived
59. Confidential
60. Separate
61. Accuracy
62. Completeness
63. APR increases
64. Prepayment penalty added
65. Basic loan product changes

130 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 Section 5:
The Closing Disclosures
Preparation & Review
Guide to Success

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 131
 The Closing Disclosures
Costs and fees that are paid by the seller include
all of the following:

1.
2.
3.
4.
5.
6.

Costs and fees that are paid by the buyer include all of the following:

7. 13.
8. 14.
9. 15.
10. 16.
11. 17.
12.

When fees are indicated to be 18. , POC means that those fees
have been 19. and they are not collected at closing.
These POC items may show on the paid Before Closing column of the Borrower’s Paid costs.

132 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 The Closing Disclosures (CONTINUED)

Mortgage Interest is
Paid in Arrears

st a ment
oan nterest
ollected t ue
losing /
CL S se o one

/ / /

Borrowers Pay Items

in Advance to
Lenders to Set Up
Reserve/Escrow
Accounts for Taxes,
Insurance, and
Mortgage Insurance

Handling Seller Paid Loan Costs

When the seller is paying portions of the buyer’s costs:
• Charge the costs to the 20. on the 1st page.
• Debit the seller and credit the buyer on the 2nd page.

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 133
 The Closing Disclosures (CONTINUED)
Brokerage Retention of Earnest Money
When the brokerage is retaining the earnest money deposit ( EMD) and not delivering it to
the attorney, you may see it reflected on the Closing Disclosure in this manner:
• Reduce the 21. on the 1st page.
• Deduct the amount of the earnest money from the 22. on page 2.

When a Transfer Involves a Rental Property

The new owner must 23.
all rental agreements. On Vacation Rentals only those
leases for 180 days.
• Security deposits appear as 24. for the 25. .
• They appear as a 26. for the 27. .

Rents May Have to Be Prorated per the Following Example

Example: A buyer is purchasing a rental property from the seller. The total rent collected each
month is $1,850. Closing is on September 14. The tenant has already paid the rent for the
month of September. What will be the Closing Disclosure entry?

Answer: $1,850 ÷ 30 (#of days in September) = $61.6667 per day in rent

Seller owned the property for 14 days and is entitled to rent of $61.667 × 14 = $863.33
Tenant paid $1,850 – $863.33 = Amount due to buyer $986.67
Debit the seller and credit the buyer $968.67

134 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
1. Commission
2. Deed preparation
3. Mortgage payoff
4. Lien release recording
5. Excise tax
6. Unpaid or double debit taxes
7. Loan origination fees
8. Discount points
9. Interest on loan
10. Mortgage insurance
11. Homeowner’s insurance
12. Reserves deposited with lender
13. Closing attorney fees
14. Title insurance premium
15. Recording of mortgage lien
16. Surveys/inspections
17. Courier fees
18. POC
19. Paid outside of closing
20. Buyer
21. Commission
22. Seller
23. Honor
24. Debit
25. Seller
26. Credit
27. Buyer

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 135
 Closing Cost Details Closing Disclosure Core (Page 1 of 2)
Borrower-Paid Seller-Paid Paid by
Loan Costs Others
At Closing Before Closing At Closing Before Closing
A. Origination Charges
01 % of Loan Amount (Points)
02 Loan Origination Fee
03
04
05
06
07
08
B. Services Borrower Did Not Shop For
01 Appraisal Fee
02 Credit Report Fee
03
04
05
06
07
08
09
10
C. Services Borrower Did Shop For
01 Attorney's Closing Fee
02 Deed Preparation
03 Title Ins Premium (Lender's and/or Owner's policy)
04 Pest Inspection Report
05 Survey
06
07
08
D. TOTAL LOAN COSTS (Borrower-Paid)
Loan Costs Subtotals (A + B + C)

Other Costs
E. Taxes and Other Government Fees
01 Recording Fees Deed: Mortgage:
02 Excise Tax
F. Prepaids
01 Homeowner’s Insurance Premium ( mo.)
02 Mortgage Insurance Premium ( mo.)
03 Prepaid Interest
est ( y from
om o )
04 Property Taxes ( mo.)
05
G. Initial Escrow Payment at Closing
01 Homeowner’s Insurance per month for mo.
02 Mortgage Insurance per month for mo.
03 Property Taxes per month for mo.
04
05
06
07
08 Aggregate Adjustment
H. Other
01 Brokerage Commission
02 Home Inspection
03 Home Warranty
04 Courier Fee for Seller's Loan Payoff
05 Courier Fee for docs to Buyer's Lender
06
07
08
I. TOTAL OTHER COSTS (Borrower-Paid)
Other Costs Subtotals (E + F + G + H)

J. TOTAL CLOSING COSTS (Borrower-Paid) /Seller-Paid

Closing Costs Subtotals (D + I)
Lender Credits

CLOSING DISCLOSURE LOAN ID # 0000000000

NCREC, October 2015

136 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 Closing Disclosure Core (Page 2 of 2)
Calculating Cash to Close Use this table to see what has changed from your Loan Estimate.
Loan Estimate Final Did this change?
Total Closing Costs (J)
Closing Costs Paid Before Closing
Closing Costs Financed
(Paid from your Loan Amount)
Down Payment/Funds from Borrower
Deposit
Funds for Borrower
Seller Credits
Adjustments and Other Credits
Cash to Close

Summaries of Transactions Use this table to see a summary of your transaction.

BORROWER’S TRANSACTION SELLER’S TRANSACTION
K. Due from Borrower at Closing M. Due to Seller at Closing
01 Sale Price of Property 01 Sale Price of Property
02 Sale Price of Any Personal Property Included in Sale 02 Sale Price of Any Personal Property Included in Sale
03 Closing Costs Paid at Closing (J) 03
04 04
Adjustments 05
05 06
06 07
07 08
Adjustments for Items Paid by Seller in Advance Adjustments for Items Paid by Seller in Advance
08 City/Town Taxes to 09 City/Town Taxes to
09 County Taxes to 10 County Taxes to
10 Assessments to 11 Assessments to
11 12
12 13
13 14
14 15
15 16
L. Paid Already by or on Behalf of Borrower at Closing N. Due from Seller at Closing
01 Deposit 01 Excess Deposit
02 Loan Amount 02 Closing Costs Paid at Closing (J)
03 Existing Loan(s) Assumed or Taken Subject to 03 Existing Loan(s) Assumed or Taken Subject to
04 04 Payoff of First Mortgage Loan
05 Seller Credit 05 Payoff of Second Mortgage Loan
Other Credits 06
06 Due Diligence Fee 07 Due Diligence Fee
07 08 Seller Credit
Adjustments 09
08 10
09 11
10 12
11 13
Adjustments for Items Unpaid by Seller Adjustments for Items Unpaid by Seller
12 City/Town Taxes to 14 City/Town Taxes to
13 County Taxes to 15 County Taxes to
14 Assessments to 16 Assessments to
15 17
16 18
17 19
CALCULATION CALCULATION
Total Due from Borrower at Closing (K) Total Due to Seller at Closing (M)
Total Paid Already by or on Behalf of Borrower at Closing (L) Total Due from Seller at Closing (N)
Cash to Close From To Borrower Cash From To Seller

CLOSING DISCLOSURE LOAN ID # 0000000000

NCREC, October 2015

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 137
 Closing Disclosure Practice #1

Based on the fact situation presented below, complete

pages 1 and 2 of the Closing Disclosure Statement
form provided to you for this exercise and answer
questions 1 through 4. Your two pages of the Closing
Disclosure Statement form will not be scored but must
be completed. Indicate your answers to the questions
rounding to the nearest whole dollar. For prorated entries,
use the 365-day year method, and for prorated entries involving the seller, consider the seller
responsible for the day of closing.

Facts: Seller’s home was listed and sold by a real estate company. The standard NCAR/NCBA
Offer to Purchase and Contract form was used. Pertinent facts about the transaction include
the following:

• Settlement date: April 18

• Contract sales price: $285,400
• Earnest money: $3,800
• Due diligence fee: $500
• Financing: Conventional 30-year loan of $256,860 at a fixed rate of 4.75%,
with a 1% loan origination fee. Buyer has agreed to pay two discount points
• Items paid outside of closing by buyer:
o Appraisal fee: $450
o Credit report: $35
• Interim interest on buyer’s new mortgage loan through April 30
• Private mortgage insurance: $840 for first year’s premium due at closing
• Buyer’s homeowner’s insurance premium: $650 due at closing
• Reserves deposited with lender:
o 2 months’ homeowner’s insurance premiums based on cost of first year’s premium
o 2 months’ private mortgage insurance premiums based on a monthly renewal
cost of $65
o 2 months of real property taxes based on estimated taxes for the current year
• Seller’s brokerage commission : 7% of sales price
• Seller’s mortgage loan payoff: $212,300
• Real property taxes: Based on the previous year’s tax bill, real property taxes for the
current year are estimated to be $2,860 and will be paid later in the year by the buyer

138 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 Closing Disclosure Practice #1 (CONTINUED)

• Miscellaneous expenses: The expenses listed below should be charged to the seller
or buyer according to standard practice when using the NCAR/NCBA standard
contract form:
o Settlement or closing fee: $480
o Lender’s title insurance: $468
o Owner’s title insurance: $78
o Deed preparation: $125
o Government recording and transfer charges:
• Deed: $20
• Buyer’s mortgage (deed of trust): $47
• Excise tax based on statutory rate
o Additional settlement charges
• Survey: $450
• Wood-destroying insect report: $230
• Homeowner’s warranty provided by the seller: $480
• Courier fee to pay off seller’s mortgage: $20

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 139
 Closing Cost Details Closing Disclosure Core (Page 1 of 2)
Borrower-Paid Seller-Paid Paid by
Loan Costs Others
At Closing Before Closing At Closing Before Closing
A. Origination Charges
01 % of Loan Amount (Points)
02 Loan Origination Fee
03
04
05
06
07
08
B. Services Borrower Did Not Shop For
01 Appraisal Fee
02 Credit Report Fee
03
04
05
06
07
08
09
10
C. Services Borrower Did Shop For
01 Attorney's Closing Fee
02 Deed Preparation
03 Title Ins Premium (Lender's and/or Owner's policy)
04 Pest Inspection Report
05 Survey
06
07
08
D. TOTAL LOAN COSTS (Borrower-Paid)
Loan Costs Subtotals (A + B + C)

Other Costs
E. Taxes and Other Government Fees
01 Recording Fees Deed: Mortgage:
02 Excise Tax
F. Prepaids
01 Homeowner’s Insurance Premium ( mo.)
02 Mortgage Insurance Premium ( mo.)
03 Prepaid Interest
est ( y from
om o )
04 Property Taxes ( mo.)
05
G. Initial Escrow Payment at Closing
01 Homeowner’s Insurance per month for mo.
02 Mortgage Insurance per month for mo.
03 Property Taxes per month for mo.
04
05
06
07
08 Aggregate Adjustment
H. Other
01 Brokerage Commission
02 Home Inspection
03 Home Warranty
04 Courier Fee for Seller's Loan Payoff
05 Courier Fee for docs to Buyer's Lender
06
07
08
I. TOTAL OTHER COSTS (Borrower-Paid)
Other Costs Subtotals (E + F + G + H)

J. TOTAL CLOSING COSTS (Borrower-Paid) /Seller-Paid

Closing Costs Subtotals (D + I)
Lender Credits

CLOSING DISCLOSURE LOAN ID # 0000000000

NCREC, October 2015

140 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 Closing Disclosure Core (Page 2 of 2)
Calculating Cash to Close Use this table to see what has changed from your Loan Estimate.
Loan Estimate Final Did this change?
Total Closing Costs (J)
Closing Costs Paid Before Closing
Closing Costs Financed
(Paid from your Loan Amount)
Down Payment/Funds from Borrower
Deposit
Funds for Borrower
Seller Credits
Adjustments and Other Credits
Cash to Close

Summaries of Transactions Use this table to see a summary of your transaction.

BORROWER’S TRANSACTION SELLER’S TRANSACTION
K. Due from Borrower at Closing M. Due to Seller at Closing
01 Sale Price of Property 01 Sale Price of Property
02 Sale Price of Any Personal Property Included in Sale 02 Sale Price of Any Personal Property Included in Sale
03 Closing Costs Paid at Closing (J) 03
04 04
Adjustments 05
05 06
06 07
07 08
Adjustments for Items Paid by Seller in Advance Adjustments for Items Paid by Seller in Advance
08 City/Town Taxes to 09 City/Town Taxes to
09 County Taxes to 10 County Taxes to
10 Assessments to 11 Assessments to
11 12
12 13
13 14
14 15
15 16
L. Paid Already by or on Behalf of Borrower at Closing N. Due from Seller at Closing
01 Deposit 01 Excess Deposit
02 Loan Amount 02 Closing Costs Paid at Closing (J)
03 Existing Loan(s) Assumed or Taken Subject to 03 Existing Loan(s) Assumed or Taken Subject to
04 04 Payoff of First Mortgage Loan
05 Seller Credit 05 Payoff of Second Mortgage Loan
Other Credits 06
06 Due Diligence Fee 07 Due Diligence Fee
07 08 Seller Credit
Adjustments 09
08 10
09 11
10 12
11 13
Adjustments for Items Unpaid by Seller Adjustments for Items Unpaid by Seller
12 City/Town Taxes to 14 City/Town Taxes to
13 County Taxes to 15 County Taxes to
14 Assessments to 16 Assessments to
15 17
16 18
17 19
CALCULATION CALCULATION
Total Due from Borrower at Closing (K) Total Due to Seller at Closing (M)
Total Paid Already by or on Behalf of Borrower at Closing (L) Total Due from Seller at Closing (N)
Cash to Close From To Borrower Cash From To Seller

CLOSING DISCLOSURE LOAN ID # 0000000000

NCREC, October 2015

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 141
 Questions for Closing Disclosure Practice #1

1. On page 1 of 2 of the Closing Disclosure on line J, what are the total borrower paid
closing costs rounded to the nearest whole dollar?

(A) $12,118
(B) $6,981
(C) $11,400
(D) $7,300

2. On page 1 of 2 of the Closing Disclosure on line J, what are the total seller paid closing
costs rounded to the nearest whole dollar?

(A) $26,311
(B) $21,174
(C) $20,603
(D) $18,300

3. At the bottom of page 2 of the Closing Disclosure what is the cash to close from borrower
rounded to the nearest whole dollar?

(A) $35,512
(B) $25,238
(C) $23,450
(D) $21,860

4. At the bottom of page 2 of the Closing Disclosure what is the cash to seller at closing
rounded to the nearest whole dollar?

(A) $24,600
(B) $22,500
(C) $50,580
(D) $15,680

142 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 143
 Closing Disclosure Practice #1

144 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 Closing Disclosure Practice #2

Based on the fact situation presented below, complete

pages 1 and 2 of the Closing Disclosure Statement
form provided to you for this exercise and answer
questions 1 through 4. Your two pages of the Closing
Disclosure Statement form will not be scored but must
be completed. Indicate your answers to the questions
rounding to the nearest whole dollar. For prorated
entries, use the 365-day year method, and for prorated entries involving the seller, consider the
seller responsible for the day of closing.

Facts: Seller’s home was listed and sold by a real estate company. The standard NCAR/NCBA
Offer to Purchase and Contract form was used. Pertinent facts about the transaction include
the following:

• Settlement date: March 13

• Contract sales price: $164,250
• Earnest money: $4,200
• Due diligence fee: $1,000
• Financing: Conventional 30-year loan of $150,500 at a fixed rate of 5.25%,
with a 1% loan origination fee. Buyer has agreed to pay 1 discount point.
• Items paid outside of closing by buyer:
o Appraisal fee: $375
o Credit report: $40
• Interim interest on buyer’s new mortgage loan through March 31
• Private mortgage insurance: $760 for first year’s premium due at closing
• Buyer’s homeowner’s insurance premium: $580 due at closing
• Reserves deposited with lender:
o 2 months’ homeowner’s insurance premiums based on cost of first year’s premium
o 2 months’ private mortgage insurance premiums based on a monthly renewal
cost of $45
o 2 months of real property taxes based on estimated taxes for the current year
• Seller’s brokerage commission : 6.5% of sales price
• Seller’s mortgage loan payoff: $128,500
• Real property taxes: Based on the previous year’s tax bill, real property taxes for the
current year are estimated to be $2,250 and have already been paid in full by the seller.

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 145
 Closing Disclosure Practice #2 (CONTINUED)

• Miscellaneous expenses: The expenses listed below should be charged to the seller
or buyer according to standard practice when using the NCAR/NCBA standard
contract form:
o Settlement or closing fee: $520
o Lender’s title insurance: $425
o Owner’s title insurance: $65
o Deed preparation: $75
o Government recording and transfer charges:
• Deed: $30
• Buyer’s mortgage (deed of trust): $35
• Excise tax based on statutory rate
o Additional settlement charges
• Survey: $400
• Wood-destroying insect report: $215
• Homeowner’s warranty provided by the seller: $450
• Courier fee to pay off seller’s mortgage: $20

146 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
Closing Cost Details Closing Disclosure Core (Page 1 of 2)
Borrower-Paid Seller-Paid Paid by
Loan Costs Others
At Closing Before Closing At Closing Before Closing
A. Origination Charges
01 % of Loan Amount (Points)
02 Loan Origination Fee
03
04
05
06
07
08
B. Services Borrower Did Not Shop For
01 Appraisal Fee
02 Credit Report Fee
03
04
05
06
07
08
09
10
C. Services Borrower Did Shop For
01 Attorney's Closing Fee
02 Deed Preparation
03 Title Ins Premium (Lender's and/or Owner's policy)
04 Pest Inspection Report
05 Survey
06
07
08
D. TOTAL LOAN COSTS (Borrower-Paid)
Loan Costs Subtotals (A + B + C)

Other Costs
E. Taxes and Other Government Fees
01 Recording Fees Deed: Mortgage:
02 Excise Tax
F. Prepaids
01 Homeowner’s Insurance Premium ( mo.)
02 Mortgage Insurance Premium ( mo.)
03 Prepaid Interest
est ( y from
om o )
04 Property Taxes ( mo.)
05
G. Initial Escrow Payment at Closing
01 Homeowner’s Insurance per month for mo.
02 Mortgage Insurance per month for mo.
03 Property Taxes per month for mo.
04
05
06
07
08 Aggregate Adjustment
H. Other
01 Brokerage Commission
02 Home Inspection
03 Home Warranty
04 Courier Fee for Seller's Loan Payoff
05 Courier Fee for docs to Buyer's Lender
06
07
08
I. TOTAL OTHER COSTS (Borrower-Paid)
Other Costs Subtotals (E + F + G + H)

J. TOTAL CLOSING COSTS (Borrower-Paid) /Seller-Paid

Closing Costs Subtotals (D + I)
Lender Credits

CLOSING DISCLOSURE LOAN ID # 0000000000

NCREC, October 2015

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 147
 Closing Disclosure Core (Page 2 of 2)
Calculating Cash to Close Use this table to see what has changed from your Loan Estimate.
Loan Estimate Final Did this change?
Total Closing Costs (J)
Closing Costs Paid Before Closing
Closing Costs Financed
(Paid from your Loan Amount)
Down Payment/Funds from Borrower
Deposit
Funds for Borrower
Seller Credits
Adjustments and Other Credits
Cash to Close

Summaries of Transactions Use this table to see a summary of your transaction.

BORROWER’S TRANSACTION SELLER’S TRANSACTION
K. Due from Borrower at Closing M. Due to Seller at Closing
01 Sale Price of Property 01 Sale Price of Property
02 Sale Price of Any Personal Property Included in Sale 02 Sale Price of Any Personal Property Included in Sale
03 Closing Costs Paid at Closing (J) 03
04 04
Adjustments 05
05 06
06 07
07 08
Adjustments for Items Paid by Seller in Advance Adjustments for Items Paid by Seller in Advance
08 City/Town Taxes to 09 City/Town Taxes to
09 County Taxes to 10 County Taxes to
10 Assessments to 11 Assessments to
11 12
12 13
13 14
14 15
15 16
L. Paid Already by or on Behalf of Borrower at Closing N. Due from Seller at Closing
01 Deposit 01 Excess Deposit
02 Loan Amount 02 Closing Costs Paid at Closing (J)
03 Existing Loan(s) Assumed or Taken Subject to 03 Existing Loan(s) Assumed or Taken Subject to
04 04 Payoff of First Mortgage Loan
05 Seller Credit 05 Payoff of Second Mortgage Loan
Other Credits 06
06 Due Diligence Fee 07 Due Diligence Fee
07 08 Seller Credit
Adjustments 09
08 10
09 11
10 12
11 13
Adjustments for Items Unpaid by Seller Adjustments for Items Unpaid by Seller
12 City/Town Taxes to 14 City/Town Taxes to
13 County Taxes to 15 County Taxes to
14 Assessments to 16 Assessments to
15 17
16 18
17 19
CALCULATION CALCULATION
Total Due from Borrower at Closing (K) Total Due to Seller at Closing (M)
Total Paid Already by or on Behalf of Borrower at Closing (L) Total Due from Seller at Closing (N)
Cash to Close From To Borrower Cash From To Seller

CLOSING DISCLOSURE LOAN ID # 0000000000

NCREC, October 2015

148 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 Questions for Closing Disclosure Practice #2

1. On page 1 of 2 of the Closing Disclosure on line J, what are the total borrower paid clos-ing
costs rounded to the nearest whole dollar?

(A) $5,800
(B) $6,284
(C) $7,013
(D) $8,240

2. On page 1 of 2 of the Closing Disclosure on line J, what are the total seller paid closing
costs rounded to the nearest whole dollar?

(A) $10,900
(B) $11,550
(C) $11,800
(D) $12,325

3. At the bottom of page 2 of the Closing Disclosure what is the cash to close from borrower
rounded to the nearest whole dollar?

(A) $15,594
(B) $16,480
(C) $17,369
(D) $17,900

4. At the bottom of page 2 of the Closing Disclosure what is the cash to seller at closing
rounded to the nearest whole dollar?

(A) $19,560
(B) $20,435
(C) $22,680
(D) $25,006

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 149
150 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 Closing Disclosure Practice #2

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 151
 Closing
Closing Disclosure Practice #3 Disclosure
Practive #3
Based on the fact situation presented below, complete
pages 1 and 2 of the Closing Disclosure Statement
form provided to you for this exercise and answer
questions 1 through 4. Your two pages of the Closing
Disclosure Statement form will not be scored but must
be completed. Indicate your answers to the questions
rounding to the nearest whole dollar. For prorated entries,
use the 365-day year method, and for prorated entries involving the seller, consider the seller
responsible for the day of closing.

Facts: Seller’s home was listed and sold by a real estate company. The standard NCAR/NCBA
Offer to Purchase and Contract form was used. Pertinent facts about the transaction include
the following:

• Settlement date: September 9

• Contract sales price: $232,500
• Earnest money: $3,500
• Due diligence fee: $500
• Financing: Conventional 30-year loan of $210,500 at a fixed rate of 4.25%,
with a 1% loan origination fee and 2 discount points to be paid by the buyer
• Items paid outside of closing by buyer:
o Appraisal fee: $400
o Credit report: $40
• Interim interest on buyer’s new mortgage loan through September 30
• Private mortgage insurance: $820 for first year’s premium due at closing
• Buyer’s homeowner’s insurance premium: $680 due at closing
• Reserves deposited with lender:
o 2 months’ homeowner’s insurance premiums based on cost of first year’s premium
o 2 months’ private mortgage insurance premiums based on a monthly renewal
cost of $45
o 2 months of real property taxes based on estimated taxes for the current year
• Seller’s brokerage commission : 6% of sales price

• Seller’s mortgage loan payoff: $178,300

152 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 Closing Disclosure Practice #3 (CONTINUED)

• Real property taxes: The tax bill of $2,460 for the current year is outstanding and will
be prorated between the parties at closing. For purposes of this exercise, treat the real
property taxes to be paid at closing as additional charges. On page 1 of 2 in Section H
(Other) Line 6, write in “Double Debit Taxes” and determine the amount to be paid
by the seller at closing and the amount to be paid by the buyer at closing.
• Miscellaneous expenses: The expenses listed below should be charged to the seller
or buyer according to standard practice when using the NCAR/NCBA standard
contract form:
o Settlement or closing fee: $680
o Lender’s title insurance: $525
o Owner’s title insurance: $65
o Deed preparation: $120
o Government recording and transfer charges:
• Deed: $20
• Buyer’s mortgage (deed of trust): $30
• Excise tax based on statutory rate
o Additional settlement charges
• Survey: $475
• Wood-destroying insect report: $185
• Homeowner’s warranty provided by the seller: $650
• Courier fee to pay off seller’s mortgage: $25

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 153
 Closing Cost Details Closing Disclosure Core (Page 1 of 2)
Borrower-Paid Seller-Paid Paid by
Loan Costs Others
At Closing Before Closing At Closing Before Closing
A. Origination Charges
01 % of Loan Amount (Points)
02 Loan Origination Fee
03
04
05
06
07
08
B. Services Borrower Did Not Shop For
01 Appraisal Fee
02 Credit Report Fee
03
04
05
06
07
08
09
10
C. Services Borrower Did Shop For
01 Attorney's Closing Fee
02 Deed Preparation
03 Title Ins Premium (Lender's and/or Owner's policy)
04 Pest Inspection Report
05 Survey
06
07
08
D. TOTAL LOAN COSTS (Borrower-Paid)
Loan Costs Subtotals (A + B + C)

Other Costs
E. Taxes and Other Government Fees
01 Recording Fees Deed: Mortgage:
02 Excise Tax
F. Prepaids
01 Homeowner’s Insurance Premium ( mo.)
02 Mortgage Insurance Premium ( mo.)
03 Prepaid Interest
est ( y from
om o )
04 Property Taxes ( mo.)
05
G. Initial Escrow Payment at Closing
01 Homeowner’s Insurance per month for mo.
02 Mortgage Insurance per month for mo.
03 Property Taxes per month for mo.
04
05
06
07
08 Aggregate Adjustment
H. Other
01 Brokerage Commission
02 Home Inspection
03 Home Warranty
04 Courier Fee for Seller's Loan Payoff
05 Courier Fee for docs to Buyer's Lender
06
07
08
I. TOTAL OTHER COSTS (Borrower-Paid)
Other Costs Subtotals (E + F + G + H)

J. TOTAL CLOSING COSTS (Borrower-Paid) /Seller-Paid

Closing Costs Subtotals (D + I)
Lender Credits

CLOSING DISCLOSURE LOAN ID # 0000000000

NCREC, October 2015

154 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 Closing Disclosure Core (Page 2 of 2)
Calculating Cash to Close Use this table to see what has changed from your Loan Estimate.
Loan Estimate Final Did this change?
Total Closing Costs (J)
Closing Costs Paid Before Closing
Closing Costs Financed
(Paid from your Loan Amount)
Down Payment/Funds from Borrower
Deposit
Funds for Borrower
Seller Credits
Adjustments and Other Credits
Cash to Close

Summaries of Transactions Use this table to see a summary of your transaction.

BORROWER’S TRANSACTION SELLER’S TRANSACTION
K. Due from Borrower at Closing M. Due to Seller at Closing
01 Sale Price of Property 01 Sale Price of Property
02 Sale Price of Any Personal Property Included in Sale 02 Sale Price of Any Personal Property Included in Sale
03 Closing Costs Paid at Closing (J) 03
04 04
Adjustments 05
05 06
06 07
07 08
Adjustments for Items Paid by Seller in Advance Adjustments for Items Paid by Seller in Advance
08 City/Town Taxes to 09 City/Town Taxes to
09 County Taxes to 10 County Taxes to
10 Assessments to 11 Assessments to
11 12
12 13
13 14
14 15
15 16
L. Paid Already by or on Behalf of Borrower at Closing N. Due from Seller at Closing
01 Deposit 01 Excess Deposit
02 Loan Amount 02 Closing Costs Paid at Closing (J)
03 Existing Loan(s) Assumed or Taken Subject to 03 Existing Loan(s) Assumed or Taken Subject to
04 04 Payoff of First Mortgage Loan
05 Seller Credit 05 Payoff of Second Mortgage Loan
Other Credits 06
06 Due Diligence Fee 07 Due Diligence Fee
07 08 Seller Credit
Adjustments 09
08 10
09 11
10 12
11 13
Adjustments for Items Unpaid by Seller Adjustments for Items Unpaid by Seller
12 City/Town Taxes to 14 City/Town Taxes to
13 County Taxes to 15 County Taxes to
14 Assessments to 16 Assessments to
15 17
16 18
17 19
CALCULATION CALCULATION
Total Due from Borrower at Closing (K) Total Due to Seller at Closing (M)
Total Paid Already by or on Behalf of Borrower at Closing (L) Total Due from Seller at Closing (N)
Cash to Close From To Borrower Cash From To Seller

CLOSING DISCLOSURE LOAN ID # 0000000000

NCREC, October 2015

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 155
 Questions for Closing Disclosure Practice #3

1. On page 1 of 2 of the Closing Disclosure on line J, what are the total borrower paid clos-ing
costs rounded to the nearest whole dollar?

(A) $10,499
(B) $11,709
(C) $12,183
(D) $15,600

2. On page 1 of 2 of the Closing Disclosure on line J, what are the total seller paid closing
costs rounded to the nearest whole dollar?

(A) $16,908
(B) $14,620
(C) $14,930
(D) $15,200

3. At the bottom of page 2 of the Closing Disclosure what is the cash to close from borrower
rounded to the nearest whole dollar?

(A) $26,300
(B) $29,709
(C) $31,800
(D) $32,700

4. At the bottom of page 2 of the Closing Disclosure what is the cash to seller at closing
rounded to the nearest whole dollar?

(A) $36,792
(B) $38,421
(C) $38,892
(D) $39,430

156 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 Closing Disclosure Practice #3

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 157
 Closing Disclosure Practice #3

158 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
Advanced Contract Issues and Addenda
 Critical Reading Information

• Chapter 10 – Contract Law

• Chapter 11 – Sales Contract & Practices

• Rule 58A.0016 – Trust Accounts

• Rule 58A.0017 – Trust Accounts
• Rule 58A.0106 – Submission of Offers
• Rule 58A.0115 – Multiple Offers

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 159
 A Matter of Signatures
All purchase contracts should be signed by 1. .

When identifying people in the contract, use their 2. .

The signature line should indicate whether or not people are “married” or “husband and wife.”

The one to buy, two to sell rule in North Carolina means the following:
3.

Spouses buying properties in their own name in North Carolina usually are required to:
4. and
5. .

Electronic signatures are permitted and authorized by both a federal law dealing with
interstate commerce and a state law dealing with intrastate commerce. These two laws are:
6.

Electronic systems such as Docusign or Dotloop contain a mandated disclosure for the
consumers that informs them of the extent of use and purpose of their electronic signature.

160 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 As an attorney state, North Carolina prohibits
licensees from 7. a contract for
8. .

This does not prohibit any of the following:

9.
10.
11.
12.

When a contract is changed it is called an 13. .

Changing or editing existing terms of a contract is considered an

13. .

Adding additional terms or conditions to a contact is properly done with an

14. .

There are a total of 13 NCAR/NCBA jointly approved standard addenda for use with
residential contracts.

Most of the forms have accompanying Guidelines. All of the following should be adhered to:
15.
16.
17.
18.
19.
20.

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 161
 each of them.

Backup Contract Addendum

1. What is the purpose and use of this form?

2. How does the primary contract get terminated?

3. How does the buyer with the backup contract know that they are now in primary position?

4. Does the buyer on the backup contract get to see the primary contract?

5. How is the backup buyer to handle due diligence fees and earnest money deposits?

6. How and when may the buyer terminate their backup contract?

162 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 New Construction Addendum

1. When should a broker use this Addendum as opposed to

form 800-T – The New Construction Offer to Purchase and Contract?

2. When must the seller provide a Certificate of Occupancy?

3. Can improvements or additions to the property be made using this Addendum?

4. Who pays for the construction of additional improvements?

5. What happens if construction is delayed?

6. Does the buyer have the right to inspect the improvements?

7. Under what circumstances does the buyer have the right to cancel the Contract?

8. What is a building deposit and how is it handled?

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 163
 Working With Addenda (CONTINUED)
FHA/VA Financing Addendum

1. What is the purpose and use of this form?

2. What is an amendatory clause and what is its effect?

3. If additional inspections and certifications are performed, whose responsibility are those?

4. What funds constitute “any penalty by forfeiture”?

5. Why are agents required to sign this form when the Offer to Purchase and Contract is

between the seller and the buyer?

164 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 Buyer Possession Before Closing Agreement

1. What is the purpose and use of this form?

2. Who are the two professionals that a buyer and seller may want to consult with
before using this form?

3. What is the earliest time under which a buyer can take possession using this form?

4. Does the buyer using this form agree to pay additional money to the seller?

5. What additional obligations does a buyer assume when they utilize this form?

6. What obligations does the seller retain regarding the property even though it is
occupied by the buyer?

7. What happens if the buyer can’t or doesn’t close?

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 165
 Working With Addenda (CONTINUED)
Seller Possession After Closing Agreement

1. What is the purpose and use of this form?

2. Why is there a big warning to sellers about talking with an insurance professional?

3. How long after closing can a seller occupy the home using this Addendum?

4. How can the seller be required to maintain condition when they are no longer
occupying the property?

5. Who bears the risk of loss if the property is destroyed or damaged after closing?

6. What must the buyer do to obtain occupancy if the seller remains beyond the
time in the Addendum?

166 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 Lead Based Paint & Hazard Addendum

1. What is the purpose and use of this form?

2. Where would the seller check for any records or reports to comply with paragraph (b)
of the Seller’s Disclosure?

3. Who is responsible for making certain that the buyer gets the pamphlet
Protect Your Family From Lead in Your Home?

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 167
 Working With Addenda (CONTINUED)
Additional Provisions Addendum

1. In which situations should a broker use

this Addendum?

2. Why should a broker not use this form for a vacation rental property?

3. What makes something a vacation rental?

4. What is the best way to complete the agreed-upon repairs and/or improvement sections?

5. Does a seller have to use a licensed contractor for repairs and/or improvements?

6. What does “workmanlike manner” mean?

7. What other document should be obtained if the transaction involves a manufactured

home?

168 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
1. What is the use and purpose of this form?

2. Who completes this form?

3. What if the Owner’s Association charges fees and costs for the completion of this
Disclosure or the providing of any of the information? Who pays for that?

4. How is this form different from the information that is provided in the RPOADS
disclosure?

5. Who pays all of the fees referenced in paragraph 5?

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 169
 Agreement to Amend the Contract

1. Why was this form created? Can the parties just

initial and change the original document?

2. What specific items does this form allow to be altered in the original contract?

170 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 Due Diligence Request & Agreement

1. What is the purpose of this form?

2. When should this form be completed?

3. How specific should the requests be in paragraph 1? Pick specific examples and write

with the proper language.

4. Who can make the repairs? Can the seller make them?

5. When does the seller have to complete the repairs?

6. What are the consequences of the buyer releasing the inspection reports?

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 171
 1. All owners of the property
2. Individual legal names
3. Both spousal signatures to sell, one spouse may buy on their own
4. Acknowledge deed of trust
5. Sign a free trader agreement
6. E-Sign Act
UETA – Uniform Electronic Transaction Act
7. Drafting contracts
8. Others
9. A person altering an agreement to which they are a party
10. Licensees own employment agreement with the firm
11. A listing agreement on behalf of the firm
12. A buyer broker agreement on behalf of the firm
13. Amendment
14. Addendum
15. Type or print legibly
16. Fill in all blanks
17. Be precise – avoid abbreviations and acronyms
18. Parties should initial and date every change, addition, or deletion
19. Rewrite offer if numerous changes
20. Review all contract provisions with parties and recommend legal advice

172 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 Student Notes

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 173
174 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 175
 Integrating the Contractual
Handling of Money with Commission
Rules
There is no law requiring a residential brokerage to maintain a trust account.

A trust account is only required when a brokerage is holding money

1. .

In residential sales the earnest money may be held either in a:

2. or 3. .

All monies that are received by a 4. must be

delivered to a 5. 6. .

BICs must deposit all client monies to the trust

account within 7. .

The counting of the three days can be delayed until

the date of 8. .

The only monies which a North Carolina licensee is authorized to accept for delivery are:
9.
10.

Licensees are not permitted to courier or deliver funds relating to any of the following:
11.
12.
13.
14.

When a licensee accepts due diligence fees or earnest money for delivery they must
15. until delivery.

176 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 Integrating the Contractual
Handling of Money with Commission
Rules (CONTINUED)

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 177
 Integrating the Contractual Handling
of Money with Commission Rules (CONTINUED)
Firms are permitted to earn interest on trust accounts so long as there is a written agreement
specifying: 16. .

In the event of a dispute regarding the earnest money, there are two options for the brokerage
prior to releasing the earnest money to either party:
17.
18.

Firms are permitted to transfer the earnest

money from their brokerage account to the
attorney/escrow agent:
19.

It is prohibited for any licensee or brokerage to engage in the

20.
or 21. of client monies.

There is an exception to the commingling rule for

real estate brokerages operating a trust account.
The brokerage is permitted to keep
22. in
the trust account without it being considered
commingling of funds.

Trust accounts must be balanced every 23. days.

178 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
1. Money belonging to another
2. Firm’s trust account
3. Escrow agent/attorney
4. Provisional broker
5. BIC
6. Immediately
7. 3 banking days
8. Acceptance of contract
9. Due diligence for delivery
10. Earnest money to an escrow agent/attorney
11. Inspection payments
12. Repair payments
13. Survey payments
14. Settlement distributions other than to them or their firm
15. Direction of the buyer
16. Written instructions with the client
17. Written consent between the parties
18. Deposit with clerk of courts
19. No more than 10 days
20. Conversion
21. Commingling
22. $100 or whatever the bank requires
23. Every 30 days

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 179
 Student Notes

180 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 Section 8:
Dealing with Multiple Offers

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 181
 Dealing with Offers & Counteroffers
A licensee is required to submit 1. offers right up through and including
the 2. .

All offers must be presented 3. but never later than

4. days.

When multiple offers are created the offers should be presented to the seller at
5. .

When multiple buyers exist, neither the buyers nor the buyers have any right to know
of the existence of other offers because the existence of multiple offers is not a
6. .

Because all buyers must be treated fairly and equally,

a licensee may not disclose the conditions or terms of
any buyers offer without first obtaining the
7. .

The Proper Use of Addendum 340-T

Response to Buyer’s Offer

The form acts a 8. of the buyer’s

offer. It does not create a 9. .

The form does invite the buyer to take the following action:
10.

182 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
1. Initial and date each change.

2. Keep all communication prompt.

3. Consider starting over again with a blank form.

4. Seek out phones calls and conversations for clarification.

5. Make it clear the inquiries and questio ns are not creating a counteroffer.

6. Consider referral to an attorney for complex negotiatio ns and changes.

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 183
184 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 The Real World Scenarios

The following scenarios occur often in the real world. There is no one right answer to these
scenarios, but your understanding the various forms, rules and contract provisions are essential
to protecting and promoting your client’s interest when they occur.

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 185
 Jack, a buyer, had been fully preapproved for a loan program where bond money was being
used to supplement his down payment. He signed a standard Form 2T Offer to Contract and
Purchase, which was accepted with a due diligence date of March 10 and a closing date of
March 25. He tendered a $1,000 due diligence fee to the seller and provided his broker with a
$5,000 earnest money check. The purchase price of the property was $245,000. On March 16,
Jack was informed that the bond program had run short of funds, but that new funds would
come available in April and that the lender could close by April 30.

Discuss the various options and negotiate a resolution of the scenario referencing and
utilizing the proper forms.

186 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 Scenario #2 – The Reluctant Seller

Sally was initially excited about selling her home for $179,000. She even gave the buyer a very
long 120-day timeframe to close. She accepted a $250 due diligence fee and the buyer has a
$3,000 earnest money deposit. Since she signed the offer, Sally has learned that a new
shopping center is moving into her neighborhood and it has already substantially increased
property values. Sally is having second thoughts and has informed the buyer and her agent
that because she now believes the house is worth more than $200,000 she does not think she
is going to honor the contract and is considering not closing.

Discuss the various options and negotiate a resolution of the scenario referencing and
utilizing the proper forms.

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 187
 Helm Simulator (CONTINUED)

Scenario #3 – The Exubera nt Inspector

Raphael signed a purchase contract and tendered a $500

due diligence fee and a $10,000 earnest money check
regarding a property he agreed to purchase for $289,000.
His due diligence date is May 20 and has not yet passed.
On May 10, Raphael received a very lengthy and detailed home inspection report that indicated
the home was in terrible shape. The inspector noted problems with the roof, the foundation and
the electrical system. Raphael has obtained estimates that indicate the cost o f the repairs will be
approximately $28,000. The seller does not agree that all of the repairs are necessary.

Discuss the various options and negotiate a resolution of the scenario referencing and
utilizing the proper forms.

Now renegotiate the resolution if the facts had been that Raphael’s due diligence date had
already passed and he did not receive the final home inspection report nor obtain the
estimates until after May 20.

188 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 Helm Simulator (CONTINUED)

Scenario #4 – The Unfortuna te Storm

Desiree agreed to sell her home to Barbara for

$189,000. Barbara tendered a $1,000 due diligence fee
and $2,500 in earnest money. Two weeks before the
closing date and after the due diligence period had
expired, a wind storm caused significant damage to the roof of the home. The damage will
cost about $22,000 to repair and is covered under Desiree’s home owner’s insurance policy.
However, due to a high volume of claims, the repairs are going to take approximately 6 weeks.

Discuss the various options and negotiate a resolution of the scenario referencing and
utilizing the proper forms.

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 189
 Helm Simulator (CONTINUED)

Scenario #5 – The Delayed Construction Project

Jacob and Beth signed a purchase contract to sell their

home for a price of $424,000. They accepted a due
diligence fee of $2,000 and the buyers’ have deposited
earnest money of $15,000 with a closing date of June 18.
Jacob and Beth have just been informed that the construction of their new home will not be
completed until August 1 and they would like to delay the closing date.

Discuss the various options and negotiate a resolution of the scenario referencing and
utilizing the proper forms.

190 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 What are the best and brightest ideas you got
from this section of the material?

1.

2.

3.

4.

5.

6.

7.

8.

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 191
 1. All
2. Through and including the day of closing
3. Immediately
4. 3 days
5. Presented at the same time
6. Material fact
7. Offeror’s consent
8. Express rejection of the offer
9. Not a counteroffer
10. Rewrite your offer on different terms

192 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
Other Types of Purchase Contracts
 Critical Reading Information

• Chapter 10 – Contract Law

• Chapter 11 – Sales Contract & Practices

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 193
 In North Carolina, the Vacant Land Contract
should NOT be used to transfer parcels where
1. is involved.

Subdivided land requires compliance with NC

Subdivision laws and statutes.

A subdivision in North Carolina exists when a parcel of

land is divided into 2. lots.

There are two exceptions:

• No lot is smaller than 3. acres
• A division of up to a 4. lot
into as many as 3 lots by a single owner.

The NC Subdivision requirements mandate approval by the municipality or county where the
subdivision is going to be located. The final step in the subdivision approval process is issuance
of a FINAL PLAT APPROVAL.

Prior to approval of a final plat map, the developer may do/not do the following:

What They Can Do What They Cannot Do

5. 6.

194 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 Applies when the sale of lots occurs
7. .

Only applies to developments of

8. lots or more.

Requires that the buyers be provided with a HUD Property

report containing:
9.
10.
11.
12.
13.

Buyer must be provided with the report

14.

There is a 15. day rescission period on such transactions.

Failure to provide allows the buyer to revoke the contract and a full refund of all monies paid
for a 16. period.

Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate 195
 regard to due diligence on vacant land.

196 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
1. What is the purpose and use of this form?

2. Is there any limit on the size of the parcel?

3. Is there still a due diligence period?

4. How are the earnest money and due diligence fees handled?

5. What are 10 items of the buyer’s due diligence (paragraph 2b)?

6. What are the items about which the seller makes representations (paragraph 5a)?

7. What are the seller’s obligations (paragraph 6a)?

8. Can a licensee still use with this contract the addenda we discussed for the Residential
Offer to Purchase and Contract?

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 Working in new construction requires that you know whether you are working with a licensed
agent or not. NCREC Commission Rules allow unlicensed individuals who are W2 employees
to be involved in the sale of their employer’s own property without licensure.

Contractors are licensed by 17. .

198 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
1. What is the purpose and use of this form?

2. What is the limitation on improvements and

additional work?

3. Who pays for all labor, materials and costs under

this Addendum?

4. What is a building deposit and how is it handled?

5. What are the buyer’s options to cancel the Contract?

6. What warranties does the builder make?

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 1. What is the difference between this form and
Addendum 2A3-T?

2. How does the building deposit differ from the earnest money and due diligence fee?

3. What is a “Pre-construction Evaluation Period” and how is it used?

4. Why is there a plans and specifications section?

5. What are the buyer’s obligations?

6. What are the additional contingencies for the seller?

7. How are changes in construction handled?

8. What happens if there are construction delays?

200 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
A seller can assist the buyer when traditional financing is not available by:
18.
19.
20.

All FHA, VA, and Conventional loans are 21.

so long as the borrower qualifies in the same manner and method as the original owner.

Approval by the lender is almost always required so as not to trigger the

22. or 23. in most loans.

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 1. When writing an offer and using this Addendum
where does the licensee get all of the information
on the first page?

2. Who is making the representations about the loan in this Addendum?

3. Should the buyer and the buyer’s agent verify the representations? How?

4. Who pays all of the assumption costs?

5. What unique pro-rations have to occur when using this Addendum?

6. What is unique about the property insurance?

7. How is the seller’s ongoing liability for the loan handled?

8. Is the seller relieved of liability under this Addendum?

202 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 All of the following are synonymous terms
where the seller is simply acting as the bank.
Transfers full title to the owner and has a lien

typically executes a Promissory Note and a

Deed of Trust to the seller. The seller retains no ownership of the home.
24.
25.
26.

When subordinate financing is utilized the 27. should always be

informed and all financing should appear on the 28. .

In the event of a default in North Carolina, state statutes prevent the seller from obtaining
29. .

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 1. Does the borrower obligate themselves to execute
a Promissory Note and Deed of Trust to
the seller?

2. Should the drafted Promissory Note & Deed of Trust accompany the Addendum?
Who must prepare these?

3. Does this Addendum provide for subordinate financing?

4. How are payments collected and handled? By whom?

/2017

204 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
Land Contracts in North Carolina have all of the following characteristics:
30.
31.
32.
33.

NC State law requires all of the following in a Land Contract or Deed of Trust:
34.
35.
36.

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 Options in North Carolina must be in
37.

Options are 38.

because only one party is bound.

206 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
1. Subdividing
2. Two or more
3. 10 acres
4. 2 acre parcel into 3 lots by a single owner
5. Write contracts
Take reservations
Sign contracts
Hold deposits
6. Cannot transfer, convey, or close until after final plat approval
7. Across state lines
8. 25 lots or more
9. Distance to paved roads
10. Number of homes occupied
11. Soil conditions and septic
12. Type of title
13. Existence of liens
14. Prior to signing lease or purchase contract
15. 7 day
16. 2 years
17. NC Licensing Board for General Contractors
18. Assumptions
19. Seller financing & carrybacks
20. Contracts for deed
21. Assumable
22. Alienation Clause
23. Due on Sale Clause

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 Section 9: Other Types of
Purchase Contracts Notebook Guide (CONTINUED)

24. Seller financing

25. Seller carryback
26. Subordinated seller mortgage
27. Lender
28. Closing disclosures
29. Deficiency judgment
30. Buyer provides downpayment
31. Seller retains title
32. Buyer makes payments
33. Sellers transfers title upon full payment
34. 3-day cancellation
35. Seller must record within 5 days of execution
36. Buyer must be given 30 days to cure any default
37. Writing
38. Unilateral contract

208 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate
 this section of the material?

1.

2.

3.

4.

5.

6.

7.

8.

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 Student Notes

210 Superior School Postlicensing 302: Contracts & Closing • © Superior School of Real Estate