North Carolina Real Estate Contracts: What the Exam Tests
Offer to Purchase and Contract, due diligence fee, earnest money, and NC contract law for the provisional broker exam.
North Carolina uses standardized contract forms developed by NC REALTORS® and the NC Bar Association. The exam tests specific NC contract provisions, particularly the due diligence fee system.
The NC Offer to Purchase and Contract (Form 2-T)
The standard residential contract in North Carolina is the jointly drafted Offer to Purchase and Contract (Form 2-T) from NC REALTORS® and the NC Bar Association. This form is industry-standard but not mandatory.
Key provisions tested on the exam:
Due Diligence Period and Due Diligence Fee
North Carolina uses a Due Diligence Fee system that's unique among states:
Due Diligence Fee: - Paid directly to the seller (not held in escrow) - Earned by the seller immediately upon contract acceptance — non-refundable - In exchange, the buyer has the unconditional right to terminate during the due diligence period for any reason - If buyer terminates during due diligence: seller keeps due diligence fee; earnest money is returned to buyer - If buyer proceeds to closing: due diligence fee is typically credited toward the purchase price
This is very similar to Texas's option period/option fee — and both are frequently confused with each other. Know that NC calls it the "due diligence fee."
Due Diligence Period: - Negotiated by the parties - Buyer uses this time for inspections, financing confirmation, title review, survey - Buyer has absolute right to terminate before the deadline - After the deadline, buyer can no longer terminate for due diligence reasons
Earnest Money
- Held in escrow by the listing broker or closing attorney
- Amount negotiated by parties
- If buyer terminates during due diligence: earnest money returned to buyer
- If buyer defaults after due diligence period: seller may retain earnest money as liquidated damages
Key distinction: Due diligence fee → seller keeps if buyer terminates. Earnest money → buyer gets back if terminates during due diligence.
Deed of Trust (Not Mortgage)
North Carolina uses a deed of trust for real estate financing, not a traditional mortgage: - Grantor (borrower) conveys title to a trustee - Beneficiary (lender) holds the promissory note - If borrower defaults, trustee can conduct non-judicial foreclosure (power of sale) without going to court
Non-judicial foreclosure is faster than court-supervised judicial foreclosure used in mortgage states.
Common Exam Questions
Q: A NC buyer pays a $1,000 due diligence fee and $3,000 earnest money. On day 8 of a 14-day due diligence period, the buyer terminates due to inspection issues. What does the seller receive? A: The seller keeps the $1,000 due diligence fee (already earned). The buyer receives the $3,000 earnest money back.
Q: Under a NC Offer to Purchase, if the buyer fails to close after the due diligence period expires without any valid termination, the seller's remedy includes: A: Retaining both the due diligence fee AND the earnest money as liquidated damages (per the contract terms).
Q: In a NC deed of trust, who holds legal title during the loan period? A: The trustee (not the borrower or lender).
[Practice North Carolina contract questions at CARealestate.com/states/north-carolina](https://carealestate.com/states/north-carolina)
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