North Carolina
Postlicensing Course Syllabus
POST 302
CONTRACTS AND CLOSING
(Student Version)
September 2023 Edition
North Carolina Real Estate Commission
P.O. Box 17100
Raleigh, NC 27619
(919) 875-3700
Email: educ@ncrec.gov
© September 2023 North Carolina Real Estate Commission.
All rights reserved.
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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.
Step Up Notices: At the direction of the Commission, enforcement notices are inserted to alert
students to areas of brokerage practice that represent a significant number of law and rule
violations that appear in consumer complaints and subsequent disciplinary actions against
licensees. It is hoped that the Step Up notices will encourage understanding of the issues and
better adherence to laws and rules surrounding these volatile topics.
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 & 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. Separate course pre-approval is required for each delivery type.
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. Any Postlicensing coursework performed by an
unlicensed person cannot be used for Postlicensing educational credit. License candidates who
have passed the license exam but have not yet received their NC broker license should not be
allowed to register for the course.
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 course
include the current editions of:
• North Carolina Real Estate Manual (hereinafter called Manual),
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• North Carolina Real Estate License Law and Commission Rules (hereinafter called
LLCR), and
• the Commission’s Residential Square Footage Guidelines booklet.
These publications can be ordered in print or digital format through the Commission’s website
or
the EP.
Text references throughout the syllabus are for the July 2023 edition of the LLCR and the 2023
edition of the Manual. For your benefit, in the digital version of the Manual, all Manual chapters
referenced in this course syllabus are consolidated within Chapter 25. POST 302, Contracts and
Closing in the digital version of the Manual. Italicized [Digital REM search words] after a
subheading will help you narrow your digital search for a Manual reference.
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 the
full 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 accurate and
relevant information;
(2) communicate correct grammar and vocabulary;
(3) utilize a variety of instructional techniques that require students to analyze and apply course
content, 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.
End-of-Course Examinations and Completion Standards: For successful completion of the
course, 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 the
homework assignment(s).
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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 is
75%. The Commission requires that certified EPs and approved instructors use end-of-course
examinations that are comprehensive in scope. EPs and instructors shall safeguard the integrity
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 own
expense, 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 adjustments may be made in the order of presentation
as long as they are logical.
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.
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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, and
requiring students to complete practical work assignments to demonstrate
both 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.
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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
5
TILA-RESPA Integrated Disclosure Rule (TRID)
and Real Estate Settlement Procedures Act (RESPA) …………
2
6
The Settlement Statement…………………………………………..
6.75
7
Other Topics (Alternate Conveyance Contracts;
License Status and Education Issues)…………………………….
0.75
Subtotal
27
End-of-Course Examination
(including a complete settlement problem)
3
Total
30
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Post 302
Contracts and Closing
Postlicensing Course Syllabus
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]
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
H. Addenda: adds something to the original contract; becomes part of the contract
I. Amendments: changes some term(s) of the original contract through later mutual
written agreement
II. Essential Elements of a Contract (Manual, Chapter 10, Contract Law, pp. 295-303)
A. Mutual Assent / Offer and Acceptance / Meeting of the Minds (Manual, Chapter
11, Sales Contract Procedures, pp. 357-364)
Required Activity: Thoroughly review the offer and acceptance concept by using
varied fact situations, including situations that involve electronic communication of offer
and acceptance and communication to agents vs. principals.
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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); Rule
58A .0106(a)]
i. Even if property is already 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
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4. Termination of offers
a. Counteroffer (a new offer with partial or conditional acceptance of original
offer 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) [Digital
REM 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 in
a multiple offer scenario.
i. Is not a counteroffer; the seller is not bound, so free to negotiate and
even go under contract with others 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
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
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c. Persons mentally incompetent in fact - voidable
d. Persons intoxicated or under drug influence who do not understand what
they are doing when signing a contract - voidable
D. Lawful Objective
III. Impediments to Mutual Consent [Digital REM search for: mutual consent]
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
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
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 resulting in 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
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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
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
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b. A lease that exceeds 3 years from the “making”/signing of the lease
agreement
c. Contract modifications
d. Agency agreements are considered employment contracts, not real estate
contracts, 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 Evidence
Rule below)
3. Necessary elements for compliance with Act
a. Individual names of the parties to the 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 authorized
agent)
B. Electronic Transactions
1. Uniform Electronic Transactions Act (UETA) [Digital REM search for: UETA]
a. Applies to interstate transactions involving at least one natural person who
is
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]
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)
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Note: Brokers must be diligent about using up-to-date cybersecurity
measures. Refer to Cybersecurity section of the 2020-2021 Update and Wire
Fraud section of the 2019-2020 Update for examples of application to
brokerage transactions.
C. Discharge of Contracts [Digital REM search for: discharge of contracts]
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; obtain legal guidance
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 the
contract 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
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)
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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
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
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
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 the
mechanical 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 time
of contract that the buyer would be using the airplane for commercial
purposes, then it is foreseeable at the time of contracting that the buyer
would 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 at Incidental
Damages vs. Consequential Damages
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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)
2. Specific Performance [Digital REM search for: specific performance]
a. One party sues the other party to make them perform according to the
contract terms
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
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 crier of
sales
b. Real estate license is required for person performing any activity other than
“crier”, 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. 323-396)
I. Introductory Concepts
A. Expectation of Broker Competence [NCGS 93A-6(a)(8)]
1. Competent and accurate completion of pre-printed standard sales contract
forms
2. Understanding of all provisions in standard pre-printed forms
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3. Inclusion of all points of agreement 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
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)
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D. Requirements for Broker-Provided Preprinted Sales Contract Forms [Rule 58A
.0112] [Digital REM search for: preprinted contract]
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 the
course.
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 their
attorneys
4. Parties to the contract (including licensed parties)
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
II. Detailed Review and Completion of the Standard Sales Contract Forms Jointly
Approved by NC REALTORS® and the North Carolina Bar Association (NCBA)
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 completion
of sales contract forms by brokers continues to be one of the greatest problems in real estate
brokerage 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
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
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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 personal
use
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
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
d. Agreement for Purchase & Sale of Improved Real Property, Standard Form
580-T; commercial sales transactions
e. Agreement for Purchase & Sale of Land, Standard Form 580L-T
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 of
a price per acre purchase price; rollback taxes; leases that may need to
be terminated prior to closing; etc.)
2. Twelve (12) 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
3. Guidelines are provided for many standard NC REALTORS® forms
B. Common Mistakes in Contract Completion
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
4. Failure to clearly define all critical dates
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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]
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. 330-355) [Digital REM search
for: 2-T]
Note: Be sure to review all the Notes and Warnings in the form and use with clients.
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 is
a 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.
1(a) & (b) Names of Seller and Buyer
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)
Never use owner of record
Use full legal name of any entity party; not the dba or trade name
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1(c) Property Description
Must include a legal description that clearly identifies the contract property
Do not use the mailing address
Reference to only a tax map or number is seldom adequate
Pay close attention to the Notes in this provision
Attach Additional Provisions Addendum (Standard Form 2A11-T) if a
manufactured home is part of the Property
Required Activity: Briefly discuss where to find the information needed to
complete the Legal Description section.
1(d) Purchase Price
Due Diligence Fee (DDF) Amount
No DDF is required to create a binding contract
Made payable and delivered to Seller by Effective Date by type of funds
indicated
Details of DDF and Due Diligence Period (DDP) covered later in
Subpara. 1-h, i, j
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 Effective
Date, if checked
(Additional) EMD, if any
- May be the only EMD, but is being delivered by a later date
- Cannot be paid by personal check
- Time being of the essence in regard to payment
Page 21 of 48
Note: There is no conflict between the option to deliver initial EMD within 5
days of contract formation (Effective Date) and Rule 58A .0116(a) 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
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: (1) If a counteroffer changes any of the entries in (d), adjustment must
also to be made to the Balance line; (2) Clarify that the “cash” due at Settlement
is not actual cash but negotiable funds that the settlement agent will accept
into their trust account for distribution as part of Settlement. Buyer/buyer agent
should always confirm with settlement agent what funds are acceptable for the
Balance.
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)
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
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 written notice
1(e) Earnest Money Deposit [Rule 58A .0116] [Digital REM search for: earnest money]
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 the
transaction. Pay particular attention to application Rule 58A .0116(b)(3-4) regarding
following Buyer’s instructions for delivery to and the timing of deposit by the Escrow
Agent.
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 contract
1(f) Escrow Agent
Should be the name of a brokerage company or closing attorney; not an
individual broker unless they are a sole proprietor
Page 22 of 48
EMD checks should be made payable to named Escrow Agent
Do not sign acknowledging receipt of monies unless actually received
Permission given for an interest-bearing trust account
Disputed EMD [NCGS 93A-12; Rule 58A .0116(d)]
Both brokers and attorneys serving as escrow agents may use the
disputed funds rule
90-day written notification to all parties claiming ownership of the monies
of 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 funds
will escheat to the state
Does not apply to residential tenant security deposits
1(g) Effective Date
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
Initials of the parties at the bottom of each contract page, or lack thereof, do
not affect contract formation
Oral agreements are meaningless per Statute of Frauds
1(h, i, j) Due Diligence [Digital REM search for: due diligence fee]
Buyer’s opportunity to fully investigate the Property to determine whether to
proceed with or terminate contract
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
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)
Page 23 of 48
Contract termination must be made in writing and delivered to Seller or
Seller’s agent before DDP expiration
EMD is not at risk until after DDP
1(k) & (l) Settlement [Digital REM search for: settlement]
All executed documents and funds necessary to complete the transaction
delivered to settlement agent
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 time
being 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.
1(m) Closing
Completion of the legal process to transfer title
Recordation of the deed and deed of trust required prior to disbursement of
funds held by settlement agent
Note: Settlement and Closing are not interchangeable terms. The
settlement meeting and closing may not happen on the same day,
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 to
minimize the problem.
1(n) Special Assessments
Buyer responsibilities addressed in Para. 6(a)
Seller responsibilities addressed in Para. 8(l)
Paragraph #2: Fixtures and Exclusions [Digital REM search for: fixtures]
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
Items leased or not owned by the Seller should be listed in (d)
Items that will not convey should be clearly identified in (e) to avoid later
dispute
Seller must repair any damage caused by removal of excluded items
Page 24 of 48
Paragraph #3: Personal Property
Any personal property owned by Seller that will convey with the property
must be clearly specified here
Verbal agreement and/or personal items listed in MLS are not enforceable
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 the
possible effect of any personal property listed in the sales contract.
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 be
resolved 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 in writing 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
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
Page 25 of 48
Review of Documents, if applicable
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
Protective/restrictive covenants
Owner association documents
Insurance
Note: The availability and cost of homeowners insurance and/or flood
insurance can be problematic on some properties.
Appraisal
Note: There are no financing or appraisal contingencies in this contract.
Survey
Reveals boundaries and setback lines
Identifies encroachments & easements
Locates mandatory septic repair field, if applicable
Usually required for title insurance policy coverage for homeowner, but
not lender
Note: Buyer should be strongly encouraged to consult an attorney about
the benefits of ordering a new survey even if lender does not require one.
Zoning & Government Regulations
May affect Buyer’s intended use of property
Can help identify
- Adjacent land use
- Possible road construction
- School attendance zones
- Possible violations of any law, ordinance, permit or government
regulation
Flood Hazard (and any flood insurance requirement)
Utilities & Access
Page 26 of 48
Street/Roads
Public or private status
Discover if public streets/roads were accepted for public maintenance
If not publicly maintained, determine who is responsible for maintenance
Discover private street/road maintenance agreement, if any, and provide
to buyer
Lender may require road maintenance agreement if road is private
Special Assessments
4(c) Sale/Lease of Existing Property [Digital REM search for: contingent sale]
Material fact that speaks to Buyer’s ability to perform
Not a contingent sale condition of the contract
4(d) Repair/Improvement Negotiations/Agreement
Property being sold in its current condition (as is) unless other agreements
are specified in the contract
Repair Negotiation Agreements, if any, should be resolved in writing as part
of the contract before the end of the DDP; agreed upon repairs must be
complete prior to Settlement [see Para. 8(n)]
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 agents
and contractors (even if contract fails)
4(g) Buyer’s Right to Terminate
For any reason or no reason
IF any agreed-upon DDF was delivered
Written notification by 5 p.m. of stated date, TIME BEING OF THE
ESSENCE
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
Page 27 of 48
4(h) Closing shall constitute Acceptance unless other provisions made in writing
Required Activity: Determine best way(s) to handle contract terms, such as incomplete
repairs 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 may
reasonably 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) Funds to Complete Purchase
Information for Seller to use in response to offer
Material fact if Buyer must obtain financing to close this transaction
Specified financing terms agreeable to Buyer
Seller is advised to obtain documentation of Buyer’s ability to close if no
financing is needed (e.g., proof of funds)
5(b) Other Property
Information for Seller to use in response to offer
Material fact if Buyer must sell or lease other property to close this
transaction
Seller is strongly advised to review contract for sale of Buyer’s current
property prior to accepting offer
Contract is not conditioned on sale or lease of Buyer’s other property
5(c) Performance of Buyer’s Financial Obligations
5(d) & (e) Property Disclosures [NCGS 47E-2]
Residential Property and Owners’ Association Disclosure Statement
Status of Buyer’s receipt of required Statement
If exempt, indicate under what scenario
Mineral and Gas and Oil Rights Mandatory Disclosure Statement
Status of Buyer’s receipt of required Statement
If exempt, indicate under what scenario
Page 28 of 48
Paragraph #6: Buyer Obligations
6(a) Responsibility for Special Assessments: Buyer takes title subject to future approved
special assessments
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 documents
6(c) Authorization to disclose information
Paragraph #7: Seller Representations
Note: Seller is liable for the accuracy of all representations made and Buyer may
reasonably 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) Ownership: Length of Seller’s property ownership
7(b) Lead-Based Paint, if applicable [Digital REM search for: lead-based paint
disclosure]
Applicable for most residential property built prior to 1978
Use Lead-Based Paint or Lead-Based Paint Hazard Addendum (2A9-T)
7(c) Owners’ Association(s) & Dues
7(d) Fuel Tank(s)/Fuel
Determine the location, type, and ownership of any fuel tanks on the
property
Seller may continue to use any fuel through Settlement, but cannot remove
or resell fuel from the tank
Note: Ability of Buyer to continue to use leased tanks after closing,
especially underground ones, should be verified.
7(e) Leases
Page 29 of 48
Paragraph #8: Seller Obligations
Note: If Seller fails to comply with the 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. Remember that an attorney
should be consulted to determine if a material breach has occurred.
8(a) Evidence of Title, Payoff Statement(s) and Non-Foreign Status
8(b) Authority to Disclose Information
8(c) Access to Property
Reasonable access through time of Closing or Buyer Possession
Including working, existing utilities at Seller’s expense
8(d) Removal of Seller’s Property
All Seller’s personal property that is not part of the sale
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
Seller to provide General Warranty Deed
Fee simple marketable title free of all liens, encumbrances or defects except
for:
Ad valorem taxes for current year
Utility easements
Unviolated covenants, conditions or restrictions
Other encumbrances assumed or approved by Buyer
Legal access to a public right of way
Consider using Short Sale Addendum (2A14-T) if possibility of short sale
8(h) Governmental Compliance
Contract condition that Property be free of material violations of law,
ordinance, permit, or government regulation
Unless Seller discloses such violation(s) prior to Effective Date
Seller has option of curing violation discovered after Effective Date
Page 30 of 48
If violation discovered after Effective Date is not cured prior to Closing,
Buyer may either (1) proceed to Closing or (2) terminate the Contract and
receive a refund of any EMD and DDF.
8(i) Deed, Taxes & Fees
Seller pays for deed preparation, excise tax, and any conveyance fees
Identify exact legal name(s) of Buyer(s) for new deed
Optional indication of Buyer’s relationship or legal status can be helpful to
Settlement Agent (e.g., spouses, siblings, unmarried person, corporation,
LLC, etc.)
Note: Refrain from using phrases such as “as directed by Buyer” or
“Buyer(s) or assigns”. Assignment of the Contract should be specified only
after consultation with an NC real estate attorney.
8(j) Agreement to Pay Buyer Expenses
A stated dollar amount credited towards Buyer expenses, if applicable
Include any FHA/VA lender and inspection costs (seller mandated fees) that
cannot be paid by Buyer
Subject to approval of Buyer’s lender
8(k) Owners’ Association Fees/Charges
8(l) Payment of Special Assessments, if any
8(m) Late Listing Penalties, if any
8(n) Negotiated Repairs/Improvements
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.
Buyer has right to verify prior to Settlement
8(o) Home Warranty
8(p) Seller’s Breach of Contract (Refer to Paragraph #23)
Page 31 of 48
Paragraph #9: Charges by Owners’ Association
Charges are split between seller and buyer
Clarifies which party pays for specified charges
Paragraph #10: Prorations and Adjustments (Based on 365 days/year) [Digital REM
search for: prorations]
Taxes on Real Property (prorated based on 365 days/calendar year)
Taxes on Personal Property (prorated based on 365 days/calendar year if
conveying with Property )
Rents, if any
Owners’ Association Dues
Note: Unless otherwise noted in the contract, in North Carolina, the seller is
responsible through the day of settlement. Therefore, they pay bills for that day
and retain any rental income for that day.
Paragraph #11: Condition of Property/Risk of Loss
Note: Paragraph 11 survives expiration of the Due Diligence Period.
Buyer rights if Property not in same or better condition at Closing as on date
of 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 proceeds
on Property claim
o Seller should maintain existing hazard insurance until they confirm
recordation of deed and receive net proceeds
o Buyer should obtain policy effective for entire day of Settlement
o Possession other than at Closing can be problematic for insurance
coverage; see Para. 13
Paragraph #12: Delay in Settlement/Closing
Delaying Party acting in good faith should give as much notice as possible
Automatic 7-day grace period to close after Settlement Date
If not closed by end of 7-day grace period, Non-Delaying Party may
unilaterally terminate contract and pursue legal remedies if desired
Written extension of Settlement Date can be negotiated (preferably prior to
end of DDP); new date will also have automatic 7-day grace period
Page 32 of 48
Paragraph #13: Possession
Shall be at Closing (after deed recordation), not Settlement
No means of access (e.g., keys (including mailbox keys), garage door
openers, security codes, 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 the
desired possession date
Use appropriate addendum if possession occurs at a time other than
Closing and/or an existing lease is involved
Required Activity: Discuss the advantages and disadvantages of allowing
possession 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 for
others (unless they are an actively licensed NC attorney)
Check appropriate boxes and attach all standard addenda that are to be
part of the contract
All attorney or party drafted addenda must be properly identified, fully
executed, and attached to become part of the contract
Paragraphs #15-23: Miscellaneous Paragraphs
#15. Assignments
Must have written consent of all parties
Except in the case of a tax-deferred exchange
#16. Tax-Deferred Exchange
#17. Parties
#18. Survival
#19. Entire Agreement/Recordation
All changes must be in writing and signed by all parties
Recordation requires written consent of all parties
Page 33 of 48
#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 sections
are not material parts of the contract; can be altered without creating a
rejection or counteroffer
#21. Execution
#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 costs
incurred conducting the Due Diligence Process
- Buyer may not terminate the Contract and sue for specific
performance
Attorneys’ Fees
Page 14: Signature and Dates
Note: Consult a NC real estate attorney if there is any doubt as to who needs to
sign
Must be signed by all Buyers and Sellers; use Additional Signatures
Addendum (3-T) if there are more than two Buyers or two Sellers
To transfer clear title, Seller spouse should sign contract, even if not named
on the deed, to assure spouse’s participation at Settlement
Verify correct signators for entities or trusts
Date all signatures to clearly establish Effective Date; although contract is
valid without dates
Wire Fraud Warning
Page 34 of 48
Page 16: Notice Information
At least one notice address must be entered for each party or their agent
approved to receive notices contemplated by the contract
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
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 17: Acknowledgment of Receipt of Monies
Listing Agent Acknowledgment of Receipt of DDF
Seller Acknowledgment of Receipt of DDF
Escrow Agent Acknowledgment of Receipt of Initial EMD
Escrow Agent Acknowledgment of Receipt of (Additional) EMD
IV. All Standard NC REALTORS® Residential Addenda
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.
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 notice
that 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 is
performed 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
Page 35 of 48
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 and
assigning one specific property to each group (all students in the same group will write an
offer on the same property but keep the terms to themselves). For this exercise, instructors
will need to provide the tax card information.
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
I. 2A11-T: Additional Provisions Addendum
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
7. Off-site and/or Separate Septic Lot, Boat Slip, Garage, Parking Space, Storage
Unit
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
Page 36 of 48
3. Rights to Terminate
4. Dates established for DDP and Settlement
5. Other Offers
6. Issues with Foreclosure/Bankruptcy/Tax Consequences
V. Review of Other Specialized Sales Contracts
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. 362-366)
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 contract
parties required by Rule 58A .0106
Page 37 of 48
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/or
terms that might be acceptable to the Seller
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 to original offer, 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’s
Offer
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]
Page 38 of 48
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
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 closing
attorney
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 as
there 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 but
not 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
2. Both parties should provide information to Settlement Agent as soon as
available to expedite Closing
Page 39 of 48
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
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.
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]
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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 as
soon 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 of
BCD 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
3. Notify Buyer of certified funds needed to close
Note: Broker should alert client to the possibility of wire fraud scams and coach
them on how to keep their funds safe. Refer to the Wire Fraud section of the
2019-2020 Update course for suggestions.
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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
Note: Refer to the Wire Fraud section of the 2019-2020 Update course for
cautions and suggestions about educating client on the proper way to send
and receive funds safely.
e. Avoid performing unlawful practice of law activities
Note: A broker is strongly discouraged from attempting to act as a settlement
agent
5. Settlement Meeting Procedures
a. Location and parties attending
i. Buyer generally attends
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ii. Seller may not attend if all documents have been signed
iii. Listing broker and selling broker should attend, unless broker’s license is
no longer on active status on settlement date
b. Review of documents
c. Post-settlement meeting tasks: title update, recording, disbursing funds, tax
reporting requirements, etc.
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. 475-
486)
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
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
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E. Prohibited Kickbacks or Referral Fees
1. Applies to all service providers including real estate brokers for payment or
receipt 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 business
days following loan application
2. Educational booklet about the buying and borrowing process [available at
consumerfinance.gov/owning-a-home/explore/home-loan-toolkit/]
G. Written Estimate of Settlement Charges (the Loan Estimate) within 3 business
days 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 illegal
profits
4. Civil lawsuits for treble damages
5. Violation of License Law 93A-6(a)(10) for brokers
Page 44 of 48
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 unless
there 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
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
Page 45 of 48
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
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’s
behalf (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
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
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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. 1
st
; unpaid after Sept. 1
st
).
b. Rents
c. Homeowner’s Dues
II. Buyer’s Closing Disclosure
Required Activity: After reviewing the basics, students must complete at least one closing
disclosure 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.
Section 7: Other Topics (45 minutes) Level 2
I. Alternate Conveyance Contracts (Manual, Chapter 11, Installment Land Contract, pp.
367-376)
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 payment
method 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 days
of execution
4. Buyer must be allowed up to 30 days to cure a default
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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
3. Rights of parties
a. Optionor
i. Gives up right to sell property to anyone other than optionee during
option 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
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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 matching
a 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
II. License Status and Education Issues [NCGS 93A-4; Rules 58A .0503, A .0504, A .0505,
and A .0506]
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) [Rules
58A .0504(b); 58A .1702]
D. Requirements and procedures to activate an Inactive license [Rules 58A .0504(c)
& (d), .1703]
E. Requirements and procedures to reinstate an Expired license (Same process for
a Revoked or Surrendered 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--
