New York Real Estate Salesperson — All Questions

New York brokers who hold client deposits must keep those funds in:

• a.A personal savings account
• b.Cash kept in the office safe until closing
• c.The broker's general business operating account
• d.A separate escrow or trust account✓

Client deposits, such as earnest money, must be held in a separate escrow or trust account, kept apart from the broker's own funds. This prevents commingling and protects the parties' money until it is properly disbursed.

Paying or receiving an unearned fee for referring a homebuyer to a particular title company violates:

• a.The Sherman Act's rule against tying
• b.Regulation Z alone, which governs credit disclosure
• c.The Real Estate Settlement Procedures Act (RESPA)✓
• d.The Statute of Frauds writing rule

RESPA Section 8 prohibits paying or accepting kickbacks or unearned fees for referring settlement-service business, such as steering buyers to a title company for a fee. Only fees for services actually performed are permitted.

Two competing brokerages that agree to charge the same commission rate are engaged in illegal:

• a.Blockbusting
• b.Steering buyers by their protected class
• c.Price fixing under antitrust law✓
• d.Dual agency in the same transaction

Commission rates are negotiable and must be set independently by each brokerage. An agreement among competitors to fix commission rates is a per se antitrust violation under the Sherman Act.

Several brokers agree not to cooperate with a new discount brokerage in town. This is an illegal:

• a.Net listing arrangement
• b.Price fixing
• c.Tie-in arrangement
• d.Group boycott✓

An agreement among competing brokers to refuse to deal with a particular competitor is an illegal group boycott under antitrust law. Like price fixing, group boycotts are treated as per se violations.

An unlicensed personal assistant working for a broker may lawfully:

• a.Host an open house alone and answer buyers' questions
• b.Perform clerical tasks such as scheduling and data entry✓
• c.Negotiate the price and terms directly with a buyer's agent
• d.Solicit listings from homeowners and independently show homes

Unlicensed assistants may perform ministerial and clerical tasks, such as scheduling, data entry, and administrative support. They may not perform licensed activities like negotiating, soliciting listings, or independently showing property and discussing its substantive details.

Paying a commission or finder's fee to an unlicensed person for referring real estate business is generally:

• a.Required in every single transaction
• b.Encouraged by the state as good practice
• c.Prohibited under New York license law✓
• d.Allowed if each fee stays under $500

New York license law generally prohibits paying commissions or referral fees to unlicensed persons for real estate brokerage activity. Compensation for brokerage services may be paid only to licensed brokers (who then pay their salespersons).

The Department of State's possible sanctions against a New York licensee who violates license law include:

• a.Reprimand, fines, suspension, or revocation of the license✓
• b.Only an informal verbal warning from the department
• c.Automatic imprisonment imposed without any court proceeding at all
• d.Forfeiture of the client's earnest money deposit to the state

For violations of Article 12-A, the Department of State may reprimand a licensee, impose fines, or suspend or revoke the license after a hearing. Criminal penalties, if any, would be pursued separately through the courts.

An agency relationship that arises from the conduct of the parties rather than a written agreement is:

• a.Gratuitous agency
• b.Express agency
• c.Universal agency, which grants the agent authority to handle essentially all of one's affairs
• d.Implied agency✓

Implied agency is created by the parties' conduct, when their actions reasonably indicate they have agreed to an agency relationship. Express agency, by contrast, is created by a clear oral or written agreement such as a signed listing.

A seller who fires a broker without cause before an exclusive-right-to-sell listing expires:

• a.Converts the exclusive-right-to-sell listing into a net listing by operation of state law
• b.Owes the broker absolutely nothing under any circumstances once the listing is canceled
• c.Automatically transfers the existing listing agreement to a different competing brokerage
• d.May have the power to revoke but could be liable for damages or a commission✓

A principal generally has the power to revoke an agency, but doing so without cause before the term ends may breach the contract, exposing the seller to liability for damages or the commission. Power to terminate is not the same as the legal right to do so without consequences.

An agency 'coupled with an interest,' in which the agent holds a financial stake in the property itself, is unusual because it:

• a.Requires no consideration between the parties
• b.Can always be revoked at will by the principal
• c.Automatically terminates at the end of each calendar month
• d.Generally cannot be revoked by the principal alone✓

An agency coupled with an interest gives the agent an ownership or security interest in the subject property, so the principal generally cannot revoke it unilaterally. This protects the agent's financial stake.

A seller's agent learns the seller will accept far less than the list price. The agent may disclose this to a buyer:

• a.Only with the seller's authorization✓
• b.Whenever the buyer asks about it
• c.Automatically, since it is never confidential
• d.Freely, if it will speed up the closing

A seller's bottom-line price is confidential information, and the seller's agent may not reveal it to a buyer without the seller's consent. Doing so would violate the fiduciary duties of loyalty and confidentiality owed to the seller.

Under New York law, a licensee generally is NOT required to disclose that a death occurred in a home or that it is reputedly haunted because these are:

• a.Conditions that automatically make the home uninhabitable and void any resulting sales contract
• b.Material physical defects that must always be disclosed to every prospective buyer in writing
• c.Facts the Department of State forbids licensees from ever discussing with a prospective buyer
• d.Non-material stigma facts, though the agent still must not knowingly make false statements✓

New York law shields licensees from liability for failing to disclose that a property was the site of a death or is reputedly haunted, treating these as non-material 'stigma' facts. However, a licensee may not knowingly make a false statement in response to a direct question.

A seller's agent asked by a buyer whether a prior occupant had AIDS should:

• a.Decline to answer, since this is confidential, protected information not subject to disclosure✓
• b.Answer truthfully and in detail using whatever medical information the agent may have heard
• c.Guess an answer based on neighborhood rumor so as not to appear evasive to the buyer
• d.Report the inquiring buyer to the Department of State for asking an improper question

A prior occupant's medical condition, such as AIDS, is protected information and is not a material defect requiring disclosure. Disclosing it could violate fair housing protections for persons with disabilities, so the agent should decline to answer.

Telling a buyer 'this is the best-built home in the neighborhood' as sales enthusiasm is generally:

• a.Fraud, because any positive statement is a guarantee
• b.Negligent misrepresentation allowing rescission
• c.Puffing, which is a permissible statement of opinion✓
• d.A fair housing violation that discourages buyers

Puffing is exaggerated opinion or sales talk that a reasonable person would not take as a statement of fact, and it is generally lawful. It crosses into misrepresentation or fraud only when it involves false statements of material fact.

A hidden structural crack that a buyer could not discover on a reasonable inspection is a:

• a.Trade fixture the seller may remove before closing
• b.Purely cosmetic condition that need not be disclosed at all
• c.Latent (hidden) defect that must be disclosed if known✓
• d.Patent defect, obvious to anyone who inspects

A latent defect is a hidden problem that a buyer could not reasonably discover on inspection. If the seller or agent knows of a material latent defect, it generally must be disclosed; a patent defect, by contrast, is open and obvious.

If a brokerage refers clients to an affiliated mortgage company it partly owns, RESPA generally requires the brokerage to:

• a.Do nothing at all, because RESPA does not apply to referrals between affiliated companies
• b.Charge each referred client a mandatory referral fee for connecting them to the lender
• c.Hide the ownership relationship so that the referral appears fully neutral to the client
• d.Provide a written affiliated business arrangement disclosure and not require use of that company✓

Under RESPA, when a brokerage refers clients to an affiliated settlement-service provider, it must give a written affiliated business arrangement disclosure, and it generally cannot require the consumer to use that provider. The disclosure lets consumers shop elsewhere.

In agency terminology, the person the agent represents is the 'client' (principal), while the third party the agent deals with fairly but does not represent is the:

• a.Trustee
• b.Fiduciary
• c.Customer✓
• d.Subagent

The client (principal) is the party the agent represents and owes fiduciary duties, while the customer is the third party the agent deals with honestly and fairly but does not represent. Understanding this distinction helps clarify who is owed which duties.

The New York agency disclosure form should be signed and dated by:

• a.The prospective buyer or seller acknowledging receipt, and the licensee✓
• b.The title insurance company that is responsible for clearing title before the closing date
• c.The mortgage lender financing the purchase, as a condition of approving the buyer's loan
• d.The Department of State, which must countersign every agency disclosure form before use

The agency disclosure form is signed and dated by the consumer to acknowledge receipt and by the licensee. It documents that the required disclosure was made; it is not signed by the Department of State, lender, or title company.

A licensee who contacts a for-sale-by-owner to solicit the listing must still:

• a.Conceal the fact that they hold a real estate license so the owner will speak more freely
• b.Immediately report the for-sale-by-owner homeowner to the Department of State for review
• c.Comply with license law, including honestly identifying themselves as a licensee✓
• d.Offer to personally purchase the owner's home before discussing a possible listing agreement

When soliciting a for-sale-by-owner, a licensee must still follow license law, including honestly identifying themselves as a real estate professional. Concealing licensure or misleading the owner would violate professional standards.

Net listings are discouraged and considered risky in New York because they:

• a.Guarantee the seller will receive the highest possible price in every market condition
• b.Eliminate the seller's need to receive and sign any agency disclosure form in the deal
• c.Create a conflict of interest and the potential to overcharge the seller✓
• d.Are legally required for all commercial real estate transactions completed within the state

In a net listing, the broker keeps everything above a net amount the seller sets, which creates a conflict of interest and the temptation to conceal the property's true value. Because of the potential for abuse, net listings are strongly discouraged or restricted.

Under a typical listing, a broker is generally considered to have earned the commission when they:

• a.Produce a ready, willing, and able buyer on the seller's terms✓
• b.Enter the property into the multiple listing service
• c.Advertise the home on several of the popular online marketing platforms
• d.Hold a single well-attended open house one weekend

Under a typical listing, the broker earns the commission by producing a buyer who is ready, willing, and able to purchase on the seller's stated terms, or one the seller accepts. Simply marketing the property does not by itself earn the fee.

In a commission dispute between brokers, the one who set in motion the uninterrupted chain of events leading to the sale is the:

• a.Procuring cause✓
• b.Listing broker
• c.The subagent broker
• d.Transaction facilitator

Procuring cause is the broker whose efforts started the uninterrupted chain of events that led to the sale. In a commission dispute, being the procuring cause is central to determining which broker earned the fee.

A seller instructs their agent not to show the home to families with children. The agent must:

• a.Comply quietly to keep the client and the commission
• b.Follow the instruction, since the seller is the agent's principal
• c.Charge families with children a higher asking price
• d.Refuse the illegal instruction and may withdraw from the listing✓

The duty of obedience applies only to lawful instructions. Refusing to show a home to families with children violates the familial status protection, so the agent must refuse the illegal instruction and may need to withdraw from the listing.

New York's residential agency disclosure requirement generally applies to transactions involving:

• a.Only newly built apartment buildings over ten units
• b.Only large vacant tracts of commercial land
• c.Government-owned office buildings
• d.One-to-four-family residential properties✓

New York's agency disclosure requirement applies to residential real property containing one to four dwelling units. The rule is designed to protect consumers in typical home purchase and sale transactions.

Today most New York cooperating brokers work as buyer's agents or broker's agents rather than subagents because subagency:

• a.Is now completely illegal in every state and cannot be used under any circumstances
• b.Exposed the buyer to an agent who actually owed fiduciary duties to the seller✓
• c.Guarantees the cooperating broker a substantially higher commission on every closing
• d.Requires absolutely no agency disclosure to be given to either party in the transaction

Under subagency, the cooperating broker owed duties to the seller even while working with the buyer, which could disadvantage buyers who assumed they were represented. To avoid this, most cooperating brokers now act as buyer's agents or broker's agents.

A broker can be held responsible for the wrongful acts of a salesperson performed within the scope of employment under the concept of:

• a.Escheat to a state
• b.Novation of contract
• c.Vicarious liability✓
• d.Subrogation of claims

Under vicarious liability, a supervising broker can be held responsible for the wrongful acts a salesperson commits within the scope of their employment. This is why brokers must properly supervise their affiliated licensees.

A licensee's online listing photos and descriptions must be:

• a.Approved in advance by the Department of State
• b.Exaggerated to attract clicks
• c.Truthful and not materially misleading✓
• d.Free of the broker's name

Advertising, including online photos and descriptions, must be truthful and not materially misleading, and it must identify the broker. Misrepresenting a property's features or condition can constitute misrepresentation and violate license law.

An agent who fails to submit a buyer's written offer to the seller has most likely breached the duty of:

• a.Accounting for all funds and documents held for the client
• b.Confidentiality owed to the principal
• c.Loyalty owed to the buyer, who prepared the written offer
• d.Reasonable care and diligence, as well as obedience✓

Agents must promptly present all written offers to the seller unless instructed otherwise. Failing to do so breaches the duties of reasonable care and obedience owed to the seller-principal, and it can lead to discipline.

The wallet-size identification the Department of State issues to a New York licensee is commonly called the:

• a.Certificate of occupancy
• b.Estoppel certificate
• c.Pocket card✓
• d.Master deed

The Department of State issues each licensee a pocket card as evidence of licensure, which the licensee carries and produces on request. It shows the licensee's status and sponsoring broker.