Multiple-choice
A question format with several options, only one of which is correct.
Getting Started: Exam Essentials
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New York Real Estate Salesperson Examination — key terms, tricks & tips
Everything from the course in one searchable place: 494 entries. Use it to review before a practice test or look up a word you forgot.
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Passing Score
The minimum percentage of correct answers needed to pass an exam.
Getting Started: Exam Essentials
Content Areas
Specific topics or subjects covered within an examination.
Getting Started: Exam Essentials
Time Limit
The maximum duration allowed for completing an exam.
Getting Started: Exam Essentials
Score Report
A document detailing exam performance, often showing strengths/weaknesses.
Getting Started: Exam Essentials
Understanding the NY Salesperson Exam Structure
75 questions, 120 minutes, 70% to pass: 'Seventy-Five Questions, One-Twenty Minutes, Seventy Percent to Success!'
Getting Started: Exam Essentials
Understanding the NY Salesperson Exam Structure
The New York Salesperson exam requires a 70% passing score. This is a precise fact to memorize. Keywords to spot in questions might be 'passing percentage' or 'minimum score'.
Getting Started: Exam Essentials
Understanding the NY Salesperson Exam Structure
Spending too much time on a single difficult question, leading to rushing through easier ones later.
Getting Started: Exam Essentials
Understanding the NY Salesperson Exam Structure
Not reviewing the score report after a failed attempt, missing the opportunity to focus study on weak areas.
Getting Started: Exam Essentials
Understanding the NY Salesperson Exam Structure
Guessing randomly without eliminating any incorrect answers first, which reduces your chances of getting it right.
Getting Started: Exam Essentials
Active Learning
Engaging with material through notes, flashcards, and practice.
Getting Started: Exam Essentials
Content Outline
Official list of topics covered on the exam.
Getting Started: Exam Essentials
Time Management
Strategically allocating time during study and exams.
Getting Started: Exam Essentials
Elimination Strategy
Removing incorrect answer choices to narrow options.
Getting Started: Exam Essentials
Practice Questions
Sample questions used to test knowledge and format.
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Study Plan
A structured schedule for preparing for an exam.
Getting Started: Exam Essentials
Keywords
Words in questions that significantly alter meaning.
Getting Started: Exam Essentials
Effective Study Strategies & Test-Taking Tips
PACE Yourself: Plan, Actively learn, Check understanding, and Enjoy breaks!
Getting Started: Exam Essentials
Effective Study Strategies & Test-Taking Tips
The New York Salesperson exam is 75 questions, and you need a score of 70% or higher to pass. Know the major topic areas and their approximate percentage weight on the exam.
Getting Started: Exam Essentials
Effective Study Strategies & Test-Taking Tips
Cramming all material the night before the exam.
Getting Started: Exam Essentials
Effective Study Strategies & Test-Taking Tips
Only passively reading textbooks without active engagement.
Getting Started: Exam Essentials
Effective Study Strategies & Test-Taking Tips
Spending too much time on a single difficult question during the exam.
Getting Started: Exam Essentials
Freehold Estate
Ownership interest of indefinite duration.
Property Ownership Fundamentals
Leasehold Estate
Possessory interest for a definite period.
Property Ownership Fundamentals
Fee Simple Absolute
Highest, most complete form of ownership.
Property Ownership Fundamentals
Life Estate
Ownership for the duration of a person's life.
Property Ownership Fundamentals
Tenancy in Common
Co-ownership with no right of survivorship.
Property Ownership Fundamentals
Joint Tenancy
Co-ownership with right of survivorship (PITT).
Property Ownership Fundamentals
Tenancy by the Entirety
Joint tenancy for married couples in NY.
Property Ownership Fundamentals
Cooperative
Shares in a corporation, proprietary lease.
Property Ownership Fundamentals
Condominium
Individual unit ownership plus common elements.
Property Ownership Fundamentals
Forms of Ownership & Estates in Land
PITT for Joint Tenancy: Possession, Interest, Time, Title. If any are missing, it's a Tenancy in Common!
Property Ownership Fundamentals
Forms of Ownership & Estates in Land
The New York exam often distinguishes between real property (condos) and personal property (co-op shares) for tax and transfer purposes. Memorize the 'four unities' (PITT - Possession, Interest, Time, Title) required for joint tenancy.
Property Ownership Fundamentals
Forms of Ownership & Estates in Land
Confusing joint tenancy with tenancy in common, especially regarding the right of survivorship.
Property Ownership Fundamentals
Forms of Ownership & Estates in Land
Forgetting that co-op owners own shares (personal property) and not the real estate itself.
Property Ownership Fundamentals
Forms of Ownership & Estates in Land
Misunderstanding that tenancy by the entirety is only for married couples in New York and includes special protections.
Property Ownership Fundamentals
Encumbrance
Any right or interest in land held by another party.
Property Ownership Fundamentals
Lien
A financial claim against property as security for a debt.
Property Ownership Fundamentals
Easement
A non-possessory right to use another's land for a specific purpose.
Property Ownership Fundamentals
Dominant Tenement
The property that benefits from an easement appurtenant.
Property Ownership Fundamentals
Servient Tenement
The property that is burdened by an easement appurtenant.
Property Ownership Fundamentals
Deed Restriction
A private agreement limiting how land can be used.
Property Ownership Fundamentals
Encroachment
Physical intrusion of one property onto another.
Property Ownership Fundamentals
Encumbrances: Liens, Easements, and Restrictions
LEED: Liens, Easements, Encroachments, Deed Restrictions – all are encumbrances!
Property Ownership Fundamentals
Encumbrances: Liens, Easements, and Restrictions
New York law distinguishes between specific liens (e.g., property tax, mortgage, mechanic's) and general liens (e.g., judgment, federal tax). Be able to identify which type applies to common scenarios.
Property Ownership Fundamentals
Encumbrances: Liens, Easements, and Restrictions
Confusing a lien (financial claim) with an easement (right to use).
Property Ownership Fundamentals
Encumbrances: Liens, Easements, and Restrictions
Believing an encumbrance always prevents the sale of a property.
Property Ownership Fundamentals
Encumbrances: Liens, Easements, and Restrictions
Not understanding that deed restrictions 'run with the land' and bind future owners.
Property Ownership Fundamentals
Deed
A legal document transferring real property title.
Property Ownership Fundamentals
Grantor
The current owner conveying property title.
Property Ownership Fundamentals
Grantee
The new owner receiving property title.
Property Ownership Fundamentals
Consideration
Something of value exchanged in a deed.
Property Ownership Fundamentals
Acknowledgment
Notarization of a signature, proving authenticity.
Property Ownership Fundamentals
Delivery & Acceptance
Final steps for title transfer effectiveness.
Property Ownership Fundamentals
Warranty Deed
Deed offering maximum title protection to grantee.
Property Ownership Fundamentals
Quitclaim Deed
Deed conveying interest without warranties.
Property Ownership Fundamentals
Deeds & Transfer of Title
Deed: **D**elivery, **E**lements, **E**xecution, **D**escription. Remember these 'D's for a valid deed!
Property Ownership Fundamentals
Deeds & Transfer of Title
The California exam emphasizes the distinction between different deed types and their associated warranties. Pay close attention to who is protected and to what extent for each deed.
Property Ownership Fundamentals
Deeds & Transfer of Title
Confusing a deed with a title; a deed is the instrument of transfer, title is the ownership itself.
Property Ownership Fundamentals
Deeds & Transfer of Title
Forgetting that delivery and acceptance are crucial for a deed to be effective, not just signing.
Property Ownership Fundamentals
Deeds & Transfer of Title
Mixing up the protections offered by different deed types, especially warranty vs. quitclaim.
Property Ownership Fundamentals
Recording
Filing documents with the county to provide public notice of property interests.
Property Ownership Fundamentals
Actual Notice
Direct, first-hand knowledge of a fact or legal matter.
Property Ownership Fundamentals
Constructive Notice
Legal presumption of knowledge due to public recording of a document.
Property Ownership Fundamentals
Title Search
Examination of public records to determine property ownership and defects.
Property Ownership Fundamentals
Abstract of Title
A chronological summary of all recorded documents affecting a property.
Property Ownership Fundamentals
Title Insurance
Protects against financial loss from defects in title that occurred in the past.
Property Ownership Fundamentals
Marketable Title
Title free from reasonable doubt as to ownership and significant defects.
Property Ownership Fundamentals
Torrens System
A system of land registration where a court issues a conclusive certificate of title.
Property Ownership Fundamentals
Recording & Title Assurance
To remember the purpose of Recording: R-E-C-O-R-D = R</b>eliable, E</b>vidence, C</b>onstructive Notice, O</b>wnership, R</b>ights, D</b>efense.
Property Ownership Fundamentals
Recording & Title Assurance
The New York exam will test your understanding of the difference between actual and constructive notice, and the primary purpose of recording. Know that title insurance protects against past defects, not future ones. Be aware that the Torrens system exists in NY, but is rarely used.
Property Ownership Fundamentals
Recording & Title Assurance
Confusing actual notice with constructive notice: Actual is direct knowledge, constructive is presumed by law (often through recording).
Property Ownership Fundamentals
Recording & Title Assurance
Believing recording is required for a deed to be valid between parties (it's not, but it's essential for protection against third parties).
Property Ownership Fundamentals
Recording & Title Assurance
Thinking title insurance prevents defects; it covers losses from defects, it doesn't prevent them.
Property Ownership Fundamentals
Zoning
Local government regulation of land use and structures.
Land Use Controls & Regulations
Master Plan
Long-range guide for community development and growth.
Land Use Controls & Regulations
Variance
Permission to deviate from specific zoning requirements due to hardship.
Land Use Controls & Regulations
Special Use Permit
Allows a specific, compatible use not permitted as-of-right.
Land Use Controls & Regulations
Setback
Distance a building must be from property lines.
Land Use Controls & Regulations
Nonconforming Use
Existing use that violates current zoning, but was legal when established.
Land Use Controls & Regulations
Spot Zoning
Illegal rezoning of a small parcel inconsistent with the area.
Land Use Controls & Regulations
Density
Number of dwelling units or structures per unit of land.
Land Use Controls & Regulations
Zoning & Master Plans: Shaping Our Communities
Zoning: Z-one for Z-pecific O-rdinances N-arrowing I-ntended N-eighborhood G-rowth.
Land Use Controls & Regulations
Zoning & Master Plans: Shaping Our Communities
New York's zoning authority comes from the state's police power delegated to local municipalities. Be aware of the difference between a 'variance' (hardship, minor deviation) and a 'special use permit' (compatible use, specific conditions).
Land Use Controls & Regulations
Zoning & Master Plans: Shaping Our Communities
Assuming a property's current use is automatically permitted under current zoning; it might be a legal nonconforming use.
Land Use Controls & Regulations
Zoning & Master Plans: Shaping Our Communities
Confusing a variance (hardship-based deviation) with a special use permit (compatible use with conditions).
Land Use Controls & Regulations
Zoning & Master Plans: Shaping Our Communities
Believing that a master plan is a legally binding law; it's a guide that informs zoning laws.
Land Use Controls & Regulations
Building Codes
Minimum standards for construction and occupancy safety.
Land Use Controls & Regulations
Permit
Official authorization to perform a specific construction activity.
Land Use Controls & Regulations
Environmental Regulations
Laws protecting the environment and public health.
Land Use Controls & Regulations
CERCLA (Superfund)
Federal law for cleaning up hazardous waste sites.
Land Use Controls & Regulations
Lead-Based Paint Disclosure
Required for homes built before 1978 due to health risks.
Land Use Controls & Regulations
Asbestos
Hazardous material used in older building insulation.
Land Use Controls & Regulations
Radon
Naturally occurring radioactive gas, a lung cancer risk.
Land Use Controls & Regulations
Underground Storage Tanks (USTs)
Can leak hazardous materials into soil and water.
Land Use Controls & Regulations
Building Codes & Environmental Regulations
B-E-S-T: Building codes Ensure Safety; Environmental regs Protect The planet.
Land Use Controls & Regulations
Building Codes & Environmental Regulations
Memorize that federal lead-based paint disclosure applies to homes built before 1978. This is a common exam question.
Land Use Controls & Regulations
Building Codes & Environmental Regulations
Assuming older properties are 'grandfathered in' for all code violations.
Land Use Controls & Regulations
Building Codes & Environmental Regulations
Not disclosing known environmental hazards, even if the seller tries to hide them.
Land Use Controls & Regulations
Building Codes & Environmental Regulations
Believing that an environmental issue is 'not a big deal' without expert assessment.
Land Use Controls & Regulations
Conditional Use Permit
Another name for a special use permit.
Land Use Controls & Regulations
Rezoning
Changes the underlying zoning classification of a property or area.
Land Use Controls & Regulations
Public Hearing
A meeting where the public can comment on proposed land use changes.
Land Use Controls & Regulations
Conditions
Specific requirements attached to a special use permit.
Land Use Controls & Regulations
Zoning Board of Appeals
Body that reviews requests for variances and special use permits.
Land Use Controls & Regulations
Special Land Use Permits
Special Uses are 'C'onditional – they always come with 'C'onditions!
Land Use Controls & Regulations
Special Land Use Permits
New York State refers to these as 'Special Use Permits' or 'Conditional Use Permits.' The exam will test your ability to distinguish them from variances and rezonings, focusing on the 'conditions' aspect and the public hearing process.
Land Use Controls & Regulations
Special Land Use Permits
Confusing a special use permit with a variance; a variance addresses hardship, a special use permit allows a compatible but non-conforming use.
Land Use Controls & Regulations
Special Land Use Permits
Assuming a special use permit changes the underlying zoning of the property; it does not.
Land Use Controls & Regulations
Special Land Use Permits
Forgetting that special use permits almost always come with specific conditions that must be met.
Land Use Controls & Regulations
Police Power
Government's right to regulate for public health, safety, welfare.
Land Use Controls & Regulations
Eminent Domain
Government's right to take private property for public use with compensation.
Land Use Controls & Regulations
Condemnation
Legal process to exercise eminent domain.
Land Use Controls & Regulations
Just Compensation
Fair market value paid for property taken via eminent domain.
Land Use Controls & Regulations
Escheat
Property reverts to the state when no heirs or will exist.
Land Use Controls & Regulations
Ad Valorem Tax
Tax based on the assessed value of property.
Land Use Controls & Regulations
Impact of Regulations on Property
PETE: Police Power, Eminent Domain, Taxation, Escheat – the four government powers over property.
Land Use Controls & Regulations
Impact of Regulations on Property
The California exam frequently tests the distinction between police power (no compensation) and eminent domain (requires just compensation). Remember that 'public use' in California has been broadly interpreted.
Land Use Controls & Regulations
Impact of Regulations on Property
Confusing police power (no compensation) with eminent domain (requires compensation).
Land Use Controls & Regulations
Impact of Regulations on Property
Believing that any government regulation that reduces property value is a 'taking' requiring compensation.
Land Use Controls & Regulations
Impact of Regulations on Property
Forgetting that escheat only applies when there are no heirs AND no will.
Land Use Controls & Regulations
Appraisal
Unbiased, professional opinion of property value.
Valuation & Market Analysis
Sales Comparison Approach
Compares subject to similar, recently sold properties.
Valuation & Market Analysis
Cost Approach
Estimates replacement cost minus depreciation, plus land.
Valuation & Market Analysis
Income Capitalization Approach
Converts future income into present value.
Valuation & Market Analysis
Comparable (Comp)
Recently sold property similar to the subject.
Valuation & Market Analysis
Depreciation
Loss in value from physical, functional, or external causes.
Valuation & Market Analysis
Net Operating Income (NOI)
Property's income after operating expenses, before debt/taxes.
Valuation & Market Analysis
Capitalization Rate (Cap Rate)
Rate of return used to convert income into value.
Valuation & Market Analysis
The Appraisal Process & Approaches to Value
Remember the three approaches to value with 'SIC': Sales (Comparison), Income (Capitalization), Cost.
Valuation & Market Analysis
The Appraisal Process & Approaches to Value
The California exam often emphasizes the different types of depreciation (physical, functional, external) and which approach to value is best suited for different property types (e.g., residential vs. income-producing).
Valuation & Market Analysis
The Appraisal Process & Approaches to Value
Confusing an appraisal with a CMA (Comparative Market Analysis); CMAs are less formal and not used for lending.
Valuation & Market Analysis
The Appraisal Process & Approaches to Value
Adjusting the subject property instead of the comparable property in the sales comparison approach.
Valuation & Market Analysis
The Appraisal Process & Approaches to Value
Applying the wrong approach to value for a given property type (e.g., income approach for a single-family home).
Valuation & Market Analysis
Comparative Market Analysis (CMA)
An informal estimate of property value by a licensee.
Valuation & Market Analysis
Comparable Properties (Comps)
Recently sold properties similar to the subject property.
Valuation & Market Analysis
Subject Property
The property for which the value estimate is being made.
Valuation & Market Analysis
Adjustments
Modifications made to comp prices for feature differences.
Valuation & Market Analysis
Market Analysis Techniques
CMA: Comparables Make Adjustments! Remember to always adjust the comparable, not the subject property.
Valuation & Market Analysis
Market Analysis Techniques
The New York exam emphasizes the distinction between a CMA and an appraisal. Know that a CMA is not an appraisal and cannot be used for federally related transactions.
Valuation & Market Analysis
Market Analysis Techniques
Presenting a CMA as an appraisal or formal valuation.
Valuation & Market Analysis
Market Analysis Techniques
Using outdated or geographically distant comparables.
Valuation & Market Analysis
Market Analysis Techniques
Adjusting the subject property instead of the comparable property.
Valuation & Market Analysis
Social Factors
Population, demographics, cultural trends affecting value.
Valuation & Market Analysis
Economic Factors
Income, employment, interest rates, supply/demand influencing value.
Valuation & Market Analysis
Governmental Factors
Zoning, taxes, building codes, infrastructure affecting value.
Valuation & Market Analysis
Physical Factors
Location, topography, improvements, natural resources affecting value.
Valuation & Market Analysis
Supply and Demand
Economic principle where value is set by availability vs. desire.
Valuation & Market Analysis
Zoning Ordinances
Local laws regulating land use and development.
Valuation & Market Analysis
Factors Affecting Property Value
Remember 'SEGP' for the four factors: Social, Economic, Governmental, Physical. Think of a 'SEGway' to value!
Valuation & Market Analysis
Factors Affecting Property Value
The California exam frequently tests on the impact of governmental regulations, such as Proposition 13 (property tax limits) and environmental laws, on property value and development potential. Understand how these specific state-level controls affect the market.
Valuation & Market Analysis
Factors Affecting Property Value
Overlooking the cumulative effect of multiple factors; value is rarely influenced by just one thing.
Valuation & Market Analysis
Factors Affecting Property Value
Failing to consider local-specific governmental regulations which can vary greatly.
Valuation & Market Analysis
Factors Affecting Property Value
Confusing short-term market fluctuations with long-term value trends.
Valuation & Market Analysis
Market Value
Most probable price a property should bring in a fair, open market.
Valuation & Market Analysis
Investment Value
Value of a property to a specific investor.
Valuation & Market Analysis
Assessed Value
Value for property tax purposes.
Valuation & Market Analysis
Principle of Substitution
Buyer won't pay more than cost of an equally desirable substitute.
Valuation & Market Analysis
Principle of Contribution
Value of a component is its addition to overall property value.
Valuation & Market Analysis
Principle of Conformity
Maximum value when property is in harmony with its surroundings.
Valuation & Market Analysis
Understanding Property Value
M-A-I-L-S for types of value: Market, Assessed, Investment, Liquidation, Salvage.
Valuation & Market Analysis
Understanding Property Value
The California exam frequently asks about the definition of market value and the distinction between market value and market price. Be precise with the 'most probable price' wording.
Valuation & Market Analysis
Understanding Property Value
Confusing market value with market price (market price is what it *did* sell for, market value is what it *should* sell for).
Valuation & Market Analysis
Understanding Property Value
Assuming cost always equals value (e.g., spending $100k on a renovation doesn't guarantee a $100k increase in value).
Valuation & Market Analysis
Understanding Property Value
Not considering the impact of neighborhood characteristics on a property's value.
Valuation & Market Analysis
Conventional Loan
Not insured or guaranteed by a government agency.
Real Estate Financing
FHA Loan
Government-insured loan with lower down payment requirements.
Real Estate Financing
VA Loan
Government-guaranteed loan for eligible veterans.
Real Estate Financing
Fixed-Rate Mortgage
Interest rate remains constant throughout the loan term.
Real Estate Financing
Adjustable-Rate Mortgage
Interest rate can change periodically based on an index.
Real Estate Financing
Mortgage Banker
Originates and funds loans, often selling them on the secondary market.
Real Estate Financing
Mortgage Broker
Intermediary connecting borrowers with various lenders.
Real Estate Financing
Types of Mortgages & Sources of Financing
FHA, VA, USDA: 'G' for Government-backed! Conventional: 'C' for Common, but no government 'C'overage.
Real Estate Financing
Types of Mortgages & Sources of Financing
The exam often tests your ability to differentiate between the primary characteristics of FHA, VA, and conventional loans, especially regarding down payment requirements and mortgage insurance (e.g., FHA requires MIP, VA has a funding fee, conventional may require PMI).
Real Estate Financing
Types of Mortgages & Sources of Financing
Confusing mortgage bankers (who lend their own money) with mortgage brokers (who connect borrowers to lenders).
Real Estate Financing
Types of Mortgages & Sources of Financing
Assuming all government-backed loans have no down payment (only VA and USDA can, FHA requires some).
Real Estate Financing
Types of Mortgages & Sources of Financing
Not understanding the risk of rising payments with an adjustable-rate mortgage (ARM).
Real Estate Financing
Underwriting
Lender's process of evaluating borrower's risk.
Real Estate Financing
Loan Application (Form 1003)
Standard form for borrower's financial details.
Real Estate Financing
Credit Report
History of borrower's debt and payment patterns.
Real Estate Financing
Debt-to-Income (DTI) Ratio
Measures borrower's monthly debt payments vs. gross income.
Real Estate Financing
Loan Commitment Letter
Formal offer from lender to provide financing.
Real Estate Financing
Closing
Final step where documents are signed and funds disbursed.
Real Estate Financing
Loan Application & Underwriting Process
Remember the '3 Cs' of Underwriting: Capacity, Credit, Collateral. Think of a 'CCC' (Triple C) bond rating, which is good for stability!
Real Estate Financing
Loan Application & Underwriting Process
The California Residential Mortgage Lending Act (CRMLA) regulates mortgage lenders and brokers. Be aware of disclosure requirements, such as the Loan Estimate and Closing Disclosure, mandated by TRID (TILA-RESPA Integrated Disclosure) rules.
Real Estate Financing
Loan Application & Underwriting Process
Assuming pre-qualification is the same as pre-approval.
Real Estate Financing
Loan Application & Underwriting Process
Not understanding the importance of debt-to-income ratios.
Real Estate Financing
Loan Application & Underwriting Process
Failing to disclose all financial information honestly and completely.
Real Estate Financing
Foreclosure
Legal process for lender to repossess property due to loan default.
Real Estate Financing
Judicial Foreclosure
Foreclosure requiring court action and judgment.
Real Estate Financing
90-Day Pre-Foreclosure Notice
NY requirement for lenders before starting foreclosure lawsuit.
Real Estate Financing
Referee
Court-appointed official who conducts foreclosure auction.
Real Estate Financing
Deficiency Judgment
Lender's claim for remaining debt after property sale.
Real Estate Financing
Usury Laws
State laws setting maximum legal interest rates on loans.
Real Estate Financing
Civil Usury Rate
Maximum legal interest rate for general loans (16% in NY).
Real Estate Financing
Foreclosure Procedures & Usury Laws
F-A-I-L: Foreclosure, Auction, Interest (Usury), Lender. Remember these key elements!
Real Estate Financing
Foreclosure Procedures & Usury Laws
The California exam emphasizes both judicial and non-judicial (trustee's sale) foreclosures, with non-judicial being more common. Memorize the specific timelines for each type, including the notice of default and notice of sale periods. Also, know that California has specific anti-deficiency laws protecting borrowers in certain situations.
Real Estate Financing
Foreclosure Procedures & Usury Laws
Confusing judicial foreclosure (court action) with non-judicial foreclosure (no court action, rare in NY for residential).
Real Estate Financing
Foreclosure Procedures & Usury Laws
Not understanding the 90-day pre-foreclosure notice is a mandatory step in New York.
Real Estate Financing
Foreclosure Procedures & Usury Laws
Ignoring usury laws when reviewing loan terms, potentially exposing clients to illegal rates.
Real Estate Financing
Promissory Note
Borrower's promise to repay debt; makes borrower personally liable.
Real Estate Financing
Mortgage
Document pledging property as security for a debt, creating a lien.
Real Estate Financing
Mortgagor
The borrower who gives the mortgage to the lender.
Real Estate Financing
Mortgagee
The lender who receives the mortgage from the borrower.
Real Estate Financing
Deed of Trust
Three-party instrument securing a loan; involves trustor, beneficiary, trustee.
Real Estate Financing
Acceleration Clause
Allows lender to demand full loan repayment upon borrower default.
Real Estate Financing
Defeasance Clause
Requires lender to release lien once loan is fully repaid.
Real Estate Financing
Due-on-Sale Clause
Allows lender to demand full loan repayment upon property transfer.
Real Estate Financing
Understanding Mortgage Instruments
Note = NO personal liability. Mortgage = MY property is collateral. Deed of Trust = Three parties, Trustee holds title.
Real Estate Financing
Understanding Mortgage Instruments
New York is a 'lien theory' state, meaning the borrower retains legal title to the property, and the mortgage creates a lien. Be aware that 'title theory' states use deeds of trust where the trustee holds legal title until the debt is paid. The exam often tests the difference in parties and foreclosure processes between these two systems.
Real Estate Financing
Understanding Mortgage Instruments
Confusing the promissory note (the debt) with the mortgage (the security for the debt).
Real Estate Financing
Understanding Mortgage Instruments
Mixing up the roles of mortgagor/mortgagee or trustor/beneficiary/trustee.
Real Estate Financing
Understanding Mortgage Instruments
Forgetting that New York is a lien theory state primarily using mortgages, not deeds of trust.
Real Estate Financing
Principal
The party who hires an agent to represent them.
Laws of Agency
Agent
The licensee authorized to act on behalf of a principal.
Laws of Agency
Third Party/Customer
A party in a transaction not represented by the agent.
Laws of Agency
Express Agency
Agency created by a clear, explicit agreement, usually written.
Laws of Agency
Implied Agency
Agency created by the actions or conduct of the parties.
Laws of Agency
Special Agent
Authorized to perform a specific act or transaction.
Laws of Agency
General Agent
Authorized to act in a range of matters for the principal.
Laws of Agency
Universal Agent
Has broad authority to act in all matters for the principal.
Laws of Agency
Types & Creation of Agency Relationships
PACT: Principal, Agent, Customer, Third party. Remember these four roles!
Laws of Agency
Types & Creation of Agency Relationships
New York requires a written agency disclosure form to be presented and signed at the first substantive contact. Memorize the parties involved: Principal (Client), Agent, Third Party (Customer).
Laws of Agency
Types & Creation of Agency Relationships
Confusing a customer with a client: A client is represented; a customer is not.
Laws of Agency
Types & Creation of Agency Relationships
Believing implied agency is sufficient in New York: Written disclosure is legally required.
Laws of Agency
Types & Creation of Agency Relationships
Assuming all agency types grant the same level of authority: Authority varies significantly.
Laws of Agency
Fiduciary
A person in a position of trust and confidence.
Laws of Agency
Confidentiality
Protecting client's private information, even post-agency.
Laws of Agency
Obedience
Following all lawful instructions from the client.
Laws of Agency
Loyalty
Prioritizing the client's best interests above all others.
Laws of Agency
Disclosure
Revealing all material facts affecting the client's decision.
Laws of Agency
Accounting
Safeguarding and handling client funds/property properly.
Laws of Agency
Care (Diligence)
Exercising reasonable skill and expertise for the client.
Laws of Agency
Duties Owed to Clients
COLD-AC: Think of a COLD, AC-conditioned room where you keep all your client's secrets and serve them with utmost care!
Laws of Agency
Duties Owed to Clients
The New York exam often tests the perpetual nature of the duty of Confidentiality. Remember that while most duties end, confidentiality continues indefinitely. Look for questions about 'material facts' and 'conflicts of interest' under Disclosure.
Laws of Agency
Duties Owed to Clients
Confusing duties owed to clients (fiduciaries) with duties owed to customers (fair and honest dealing).
Laws of Agency
Duties Owed to Clients
Forgetting that Confidentiality is a perpetual duty, unlike most other fiduciary duties.
Laws of Agency
Duties Owed to Clients
Prioritizing your own commission or interests over the client's best interests.
Laws of Agency
Customer
A party in a transaction without a fiduciary relationship.
Laws of Agency
Client
A party with whom an agent has a fiduciary relationship.
Laws of Agency
Material Fact
Information that would influence a reasonable person's decision.
Laws of Agency
Misrepresentation
A false statement of fact, intentional or negligent.
Laws of Agency
Honesty
Truthfulness in all communications and dealings.
Laws of Agency
Fairness
Treating all parties impartially and without bias.
Laws of Agency
Duties Owed to Customers
HFD - Honesty, Fairness, Disclosure. Remember these three duties you owe to every Customer!
Laws of Agency
Duties Owed to Customers
New York law emphasizes that the duty to disclose material facts extends to all parties, not just clients. Be prepared to identify material facts and the agent's obligation to disclose them.
Laws of Agency
Duties Owed to Customers
Confusing duties owed to a client with duties owed to a customer.
Laws of Agency
Duties Owed to Customers
Believing that because someone is a 'customer,' you owe them no duties at all.
Laws of Agency
Duties Owed to Customers
Failing to disclose known material facts about a property to a customer.
Laws of Agency
Termination of Agency
The ending of the contractual relationship between agent and client.
Laws of Agency
Revocation
When the principal (client) cancels the agency agreement.
Laws of Agency
Renunciation
When the agent withdraws from the agency agreement.
Laws of Agency
Survival of Duty
Certain duties, like confidentiality, continue after agency ends.
Laws of Agency
Extender Clause
Protects agent's commission for sales to prospects introduced during listing.
Laws of Agency
Completion of Objective
The agency ends when the agreed-upon goal is achieved.
Laws of Agency
Termination of Agency & Disclosure Requirements
Think of 'DEAD PIGS' for reasons agency terminates: Death, Expiration, Agreement, Destruction, Performance, Incapacity, Good Faith, Sale.
Laws of Agency
Termination of Agency & Disclosure Requirements
The New York exam often tests the 'survival' of the duty of confidentiality. Remember: Confidentiality lives on, other duties generally do not.
Laws of Agency
Termination of Agency & Disclosure Requirements
Assuming all duties end immediately upon termination.
Laws of Agency
Termination of Agency & Disclosure Requirements
Disclosing confidential client information after the agency has concluded.
Laws of Agency
Termination of Agency & Disclosure Requirements
Not understanding the implications of an extender clause in a listing agreement.
Laws of Agency
Sponsoring Broker
A licensed broker who employs and supervises a salesperson.
Brokerage & Salesperson Responsibilities
Subagent
An agent appointed by another agent to assist in a transaction.
Brokerage & Salesperson Responsibilities
Independent Contractor
A self-employed person who contracts to perform work for others.
Brokerage & Salesperson Responsibilities
Employee
A person hired to work for another under their direct control.
Brokerage & Salesperson Responsibilities
Supervision
Broker's duty to oversee and guide salesperson activities.
Brokerage & Salesperson Responsibilities
Vicarious Liability
Broker's responsibility for salesperson's actions.
Brokerage & Salesperson Responsibilities
Brokerage Relationships & Salesperson Supervision
B.R.O.K.E.R. = **B**e **R**esponsible **O**ver **K**ey **E**mployees (or Contractors) **R**egularly.
Brokerage & Salesperson Responsibilities
Brokerage Relationships & Salesperson Supervision
New York requires a written agreement between a broker and salesperson, specifying compensation and independent contractor status if applicable. Memorize the three criteria for independent contractor status: licensed, compensation based on sales, and written contract.
Brokerage & Salesperson Responsibilities
Brokerage Relationships & Salesperson Supervision
Confusing the tax/benefits implications of independent contractor status with the broker's supervisory responsibilities for real estate activities.
Brokerage & Salesperson Responsibilities
Brokerage Relationships & Salesperson Supervision
Believing a broker is not liable for a salesperson's actions if they were unaware of the specific misconduct.
Brokerage & Salesperson Responsibilities
Brokerage Relationships & Salesperson Supervision
Assuming an oral agreement is sufficient for the broker-salesperson relationship in New York.
Brokerage & Salesperson Responsibilities
Escrow Account
Special bank account for holding client funds.
Brokerage & Salesperson Responsibilities
Trust Account
Another name for an escrow account.
Brokerage & Salesperson Responsibilities
Earnest Money
Deposit showing buyer's serious intent to purchase.
Brokerage & Salesperson Responsibilities
Commingling
Mixing client funds with personal/business funds.
Brokerage & Salesperson Responsibilities
Conversion
Using client funds for personal/business expenses.
Brokerage & Salesperson Responsibilities
Fiduciary Duty
Broker's obligation to act in client's best interest.
Brokerage & Salesperson Responsibilities
Disbursement
Payment of funds from an escrow account.
Brokerage & Salesperson Responsibilities
Escrow Accounts & Handling Funds
C-C-C: Commingling is Confusing, Conversion is Criminal. One is mixing, the other is stealing.
Brokerage & Salesperson Responsibilities
Escrow Accounts & Handling Funds
New York State law requires brokers to deposit funds into an escrow account "without undue delay." While not a fixed number, this implies immediate action, typically within 24-48 business hours. Memorize the distinction between commingling and conversion.
Brokerage & Salesperson Responsibilities
Escrow Accounts & Handling Funds
Salespersons depositing client checks directly into their personal accounts.
Brokerage & Salesperson Responsibilities
Escrow Accounts & Handling Funds
Brokers using earnest money deposits to pay office rent before closing.
Brokerage & Salesperson Responsibilities
Escrow Accounts & Handling Funds
Releasing escrow funds in a dispute without a written agreement or court order.
Brokerage & Salesperson Responsibilities
Blind Ad
An advertisement that fails to identify the broker.
Brokerage & Salesperson Responsibilities
Bait and Switch
Advertising an unavailable property to lure in buyers.
Brokerage & Salesperson Responsibilities
Discriminatory Advertising
Ads that violate fair housing laws by targeting or excluding groups.
Brokerage & Salesperson Responsibilities
Principal Broker
The licensed broker responsible for the firm's operations.
Brokerage & Salesperson Responsibilities
Substantiate
To provide evidence to support a claim.
Brokerage & Salesperson Responsibilities
Advertising Rules & Ethical Practices
B.R.O.K.E.R. for Ads: **B**lind ads out, **R**eal info only, **O**wnership clear, **K**now the rules, **E**thical always, **R**efer to broker.
Brokerage & Salesperson Responsibilities
Advertising Rules & Ethical Practices
New York exam questions often focus on what information MUST be included in an ad. Keywords to spot include 'all advertisements,' 'must include,' or 'prohibited.' Memorize that the principal broker's name and phone number are mandatory.
Brokerage & Salesperson Responsibilities
Advertising Rules & Ethical Practices
Forgetting to include the principal broker's name and phone number in all advertisements.
Brokerage & Salesperson Responsibilities
Advertising Rules & Ethical Practices
Using vague or misleading terms like 'luxury' or 'best deal' without substantiation.
Brokerage & Salesperson Responsibilities
Advertising Rules & Ethical Practices
Advertising a property without a valid listing agreement or proper authorization.
Brokerage & Salesperson Responsibilities
Advertising Rules & Ethical Practices
Using discriminatory language or imagery in advertisements.
Brokerage & Salesperson Responsibilities
Record Keeping
Systematic process of maintaining documentation of business activities.
Brokerage & Salesperson Responsibilities
Retention Period
The minimum length of time records must be legally kept.
Brokerage & Salesperson Responsibilities
Compliance
Adherence to laws, regulations, and ethical standards.
Brokerage & Salesperson Responsibilities
Audit Trail
A chronological record of financial transactions or activities.
Brokerage & Salesperson Responsibilities
Department of State (DOS)
The New York agency regulating real estate licensees.
Brokerage & Salesperson Responsibilities
Escrow Account Records
Detailed documentation of funds held in trust for others.
Brokerage & Salesperson Responsibilities