Here is a good video from Bentley. This became such a known problem that even they had to address it.

https://www.youtube.com/watch?v=3_S8VP4CVho

Also, since she just bought it used, I would drain and refill the transfer case with new oil. Its very specific oil from bmw. I have included a link below. Call around to diff BMW dealers and get the best price.

Welcome to bavauto.com | Transfer Case Fluid - 1 Liter Container - Genuine BMW

Its as easy as changing your oil, except you don't have to change a filter.
There are lots of videos on youtube on how to do it. Took me 15 mins.

Where in Ca are you from?