New York Real Estate Salesperson — All Questions

The appraisal approach that estimates value by comparing recently sold similar properties is the:

• a.Income approach
• b.Sales comparison approach✓
• c.Gross rent multiplier approach
• d.Cost approach

The sales comparison approach estimates value by analyzing recent sales of comparable properties and adjusting for differences. It is the primary method for valuing single-family homes. It rests on the principle of substitution.

The appraisal approach most appropriate for valuing an income-producing apartment building is the:

• a.Cost approach
• b.Income approach✓
• c.Sales comparison approach
• d.Assessment approach

The income approach values property based on the income it produces, often by capitalizing net operating income. It is best suited to investment and commercial properties such as apartment buildings. The cost and sales comparison approaches are more common for other property types.

A property has a gross annual rent of $30,000 and a gross rent multiplier of 9. What is the indicated value?

• a.$270,000✓
• b.$333,000
• c.$300,000
• d.$210,000

The gross rent multiplier method multiplies gross rent by the GRM: $30,000 x 9 = $270,000. The GRM is a quick screening tool derived from comparable sales. It does not account for expenses, unlike the full income approach.

In the cost approach, the appraiser estimates value by:

• a.Capitalizing the property's net operating income at a market rate
• b.Multiplying the gross monthly rent by a market factor
• c.Adding land value to the depreciated cost of improvements✓
• d.Comparing the property only to recent foreclosure sales nearby

The cost approach estimates value as the cost to replace or reproduce the improvements, minus depreciation, plus the land value. It is especially useful for new, unique, or special-purpose properties. Depreciation accounts for physical, functional, and external loss in value.

A parcel of land measures 200 feet by 300 feet. How many square feet does it contain?

• a.60,000✓
• b.50,000
• c.600,000
• d.6,000

Area of a rectangle is length times width: 200 ft x 300 ft = 60,000 square feet. This is a basic measurement calculation used throughout real estate. For reference, one acre is 43,560 square feet.

Approximately how many acres is a parcel containing 87,120 square feet?

• a.3 acres
• b.4 acres
• c.1 acre
• d.2 acres✓

One acre equals 43,560 square feet, so divide: 87,120 / 43,560 = 2 acres. Memorizing 43,560 square feet per acre is essential for land math. Many exam problems convert between square feet and acres.

A home sells for $320,000 and the total commission rate is 6%. What is the total commission?

• a.$16,000
• b.$21,000
• c.$32,000
• d.$19,200✓

Multiply the sale price by the commission rate: $320,000 x 0.06 = $19,200. This total is typically split between the listing and selling brokerages, then between broker and salesperson. Commission rates are negotiable, not set by law.

A $19,200 total commission is split 50/50 between the listing and selling brokerages, and the listing salesperson keeps 60% of their brokerage's share. How much does that salesperson earn?

• a.$11,520
• b.$3,840
• c.$9,600
• d.$5,760✓

Each brokerage gets 50% of $19,200 = $9,600. The listing salesperson keeps 60% of $9,600 = $5,760, and the brokerage keeps the remaining 40%. Commission splits are set by the agreement between broker and salesperson.

A key responsibility of a property manager is to:

• a.Personally guarantee the owner's mortgage payments
• b.Set the property tax rates for the county
• c.Maximize the owner's return while maintaining the property's value✓
• d.Appraise the property for the lender's mortgage underwriting purposes

A property manager's core duty is to protect the owner's investment by maximizing income and preserving or enhancing the property's value. This includes marketing, leasing, maintenance, and financial reporting. The manager acts as the owner's fiduciary agent.

A property owner wants a 12% annual return on a $250,000 investment. What annual net income must the property generate?

• a.$36,000
• b.$12,000
• c.$25,000
• d.$30,000✓

Multiply the investment by the desired rate: $250,000 x 0.12 = $30,000 of annual net income needed. This is the inverse of the cap rate calculation, where income divided by value gives the rate. Investors use this to test whether a property meets their return target.

A property management agreement between an owner and a property manager typically creates:

• a.A subagency to the tenant
• b.A general agency relationship✓
• c.No agency relationship at all
• d.A buyer agency relationship

A property management agreement generally makes the manager a general agent, authorized to handle a range of ongoing tasks on the owner's behalf. This is broader than the special agency of a listing broker hired for one transaction. The manager owes fiduciary duties to the owner.

The process of weighing the value estimates from multiple appraisal approaches into a final opinion of value is called:

• a.Capitalization
• b.Reconciliation✓
• c.Amortization
• d.Depreciation

Reconciliation is the final step of an appraisal where the appraiser weighs the results of the different approaches to arrive at a single value opinion. It is a judgment process, not a simple averaging. The appraiser gives most weight to the most reliable approach for that property.

A comparable property sold for $310,000 but has an extra bathroom worth $10,000 that the subject property lacks. To adjust, the appraiser would:

• a.Make no adjustment
• b.Add $10,000 to the comparable's price
• c.Subtract $10,000 from the comparable's price✓
• d.Add $10,000 to the subject's price

In the sales comparison approach, adjustments are made to the comparable, not the subject. Because the comparable is superior by one bathroom, the appraiser subtracts its $10,000 value to reflect what it would have sold for if it matched the subject. Superior features are subtracted, inferior ones added.

A tenant who remains in possession after the lease expires without the landlord's consent creates a:

• a.Estate for years
• b.Periodic tenancy
• c.Tenancy at will
• d.Tenancy at sufferance✓

A tenancy at sufferance arises when a tenant stays past the lease term without permission, becoming a holdover tenant. It gives the tenant the least protection, and the landlord may pursue eviction. If the landlord accepts rent, it may convert to a periodic tenancy.

A lease with a definite beginning and ending date, such as a one-year lease, is an:

• a.Estate at sufferance
• b.Estate for years✓
• c.Periodic estate
• d.Estate at will

An estate for years is a leasehold with a fixed, definite term that ends automatically on the stated date without notice. A periodic estate renews for successive periods until proper notice is given. Both are common residential leasing arrangements.

A buyer's agent notices visible mold and water staining during a showing. The best practice is to:

• a.Tell the buyer to ignore it since it is cosmetic
• b.Personally guarantee the home is safe
• c.Recommend the buyer obtain a professional inspection✓
• d.Say nothing to avoid alarming the buyer

Agents are not experts on defects, so the prudent practice is to advise the client to hire a qualified inspector to evaluate potential problems like mold. This protects the buyer and limits the agent's liability. Agents should never conceal known material conditions.

A property manager prepares an operating budget mainly to:

• a.Determine the mortgage interest rate the lender will charge
• b.Calculate the income taxes the owner will owe that year
• c.Set the price at which the building will eventually be sold
• d.Project income and expenses to guide financial decisions✓

An operating budget forecasts the property's expected income and expenses, helping the manager plan for maintenance, reserves, and cash flow. It is a key financial management tool. Comparing actual results to the budget reveals how the property is performing.

A comparative market analysis (CMA) prepared by a salesperson differs from a formal appraisal in that a CMA:

• a.Sets the exact loan amount the lender will advance
• b.Is a certified, USPAP-compliant opinion of value
• c.Is an informal pricing estimate, not a certified appraisal✓
• d.May be performed only by a state-licensed appraiser, never a salesperson

A CMA is an informal analysis of comparable sales that helps a seller or buyer estimate a listing or offer price. It is not an appraisal, which is a formal, USPAP-compliant opinion of value prepared by a licensed or certified appraiser.

A broker price opinion (BPO) is typically used to:

• a.Substitute fully for an appraisal in a federally related loan
• b.Determine the assessed value used for property taxes
• c.Certify that the title is marketable and unencumbered
• d.Give a lender or client a quick estimate of likely sale price✓

A broker price opinion is a broker's estimate of a property's probable selling price, often used by lenders for non-lending decisions such as evaluating short sales. It is not a substitute for an appraisal in federally related mortgage transactions.

The most common consequence of significantly overpricing a listing is that it:

• a.Sells faster and at full asking price every time
• b.Lowers the annual property taxes while it is listed
• c.Guarantees multiple competing offers within the first week or two
• d.Tends to sit on the market and may ultimately sell for less✓

Overpriced listings tend to languish on the market, grow stale, and often ultimately sell for less after price reductions. Accurate pricing based on a CMA usually produces a faster sale closer to market value.

Federal law requires disclosure of known lead-based paint hazards for residential housing built:

• a.After the year 2000
• b.Only within New York City
• c.Before 1950
• d.Before 1978✓

The federal Residential Lead-Based Paint Hazard Reduction Act (Title X) requires disclosure of known lead-based paint and hazards for most housing built before 1978, when residential lead paint was banned. It applies nationwide, not just in New York City.

Under the federal lead-based paint rule, a buyer of a pre-1978 home must be given the opportunity to conduct a lead inspection or risk assessment, generally for:

• a.30 days measured from the scheduled closing date
• b.24 hours from the moment the contract is signed
• c.10 days, unless the parties agree in writing to a different period✓
• d.No period at all, because the inspection opportunity is entirely optional

The federal lead rule gives buyers of pre-1978 homes a 10-day period (or another period the parties agree to) to conduct a lead-based paint inspection or risk assessment. Sellers must also provide required disclosures and the EPA pamphlet.

Sellers and landlords of pre-1978 housing must give buyers or tenants the EPA pamphlet titled:

• a.'Protect Your Family from Lead in Your Home'✓
• b.'Your Home Loan Toolkit'
• c.'Settlement Costs and You'
• d.'The Fair Housing Handbook for Buyers and Sellers'

Under the federal lead-based paint rule, sellers and landlords of pre-1978 housing must provide the EPA pamphlet 'Protect Your Family from Lead in Your Home,' along with disclosing known hazards and giving the inspection opportunity.

The federal lead-based paint disclosure rule generally does NOT apply to:

• a.Housing built in 1990 or later✓
• b.A pre-1978 rental apartment
• c.A 1970 condominium unit being sold
• d.A 1965 single-family home for sale

The lead disclosure rule applies to most housing built before 1978. Housing built in 1990 (well after 1978) is not covered. Certain other housing, such as zero-bedroom units and some housing for the elderly, is also exempt.

Radon, a concern in some New York homes, is a:

• a.Type of asbestos fiber commonly used in older pipe wrap and ceiling tile insulation
• b.Man-made chemical binder that was widely added to interior and exterior house paint
• c.Water contaminant that leaches into the drinking supply primarily from old lead pipes
• d.Naturally occurring radioactive gas that can seep from the ground into buildings✓

Radon is a naturally occurring, colorless, odorless radioactive gas produced by the decay of uranium in soil and rock, and it can enter buildings from the ground. Testing and mitigation systems can reduce elevated indoor radon levels.

Asbestos, once used in insulation and flooring, is most hazardous when it is:

• a.Located outdoors, where any released fibers are quickly dispersed by the open air
• b.Friable, meaning it is crumbling and releasing fibers into the air✓
• c.Sealed, encapsulated, and left completely undisturbed within the building's structure
• d.Painted over with several coats of standard interior latex paint to keep it in place

Asbestos is most dangerous when friable, meaning it can be crumbled by hand and release airborne fibers that are hazardous to inhale. Intact, undisturbed, or encapsulated asbestos generally poses less immediate risk, though disturbance during renovation can release fibers.

The federal 'Superfund' law (CERCLA) is chiefly concerned with:

• a.Liability and cleanup of hazardous-substance contamination✓
• b.Setting the interest rates lenders may charge
• c.Licensing real property appraisers nationwide
• d.Regulating fair housing advertising to prevent discriminatory preferences

CERCLA, the Comprehensive Environmental Response, Compensation, and Liability Act ('Superfund'), addresses cleanup of hazardous-substance contamination and can impose liability on current and past owners. Buyers of potentially contaminated land should perform environmental due diligence.

Development on land classified as protected wetlands generally:

• a.May require a permit and be restricted under state or federal regulation✓
• b.Requires no approvals of any kind, since wetlands are treated the same as ordinary lots
• c.Is prohibited entirely, so no construction may ever occur on any part of the parcel
• d.Is governed solely by the local homeowners association rather than any government agency

Building on wetlands is regulated to protect water quality and habitat and typically requires permits under state and federal law, with limits on what may be done. Filling or altering wetlands without approval can lead to significant penalties.

When a buyer is concerned about possible mold, the agent's best course is to:

• a.Quietly paint over any visible staining before the buyer's scheduled showing appointment
• b.Assure the buyer there is definitely no mold present anywhere within the property
• c.Tell the buyer that indoor mold is never a health concern and can be safely ignored
• d.Recommend a qualified professional inspection and remediation assessment✓

Agents are not environmental experts, so when mold is a concern the prudent course is to recommend a qualified professional inspection rather than reassure or conceal. Agents must never hide known material conditions.

Under federal TRID rules, the lender must provide the borrower the Closing Disclosure at least:

• a.3 business days before closing✓
• b.1 day before closing
• c.10 business days after the closing
• d.At the closing table, just before signing

Under the TILA-RESPA Integrated Disclosure (TRID) rules, the lender must give the borrower the Closing Disclosure at least three business days before consummation, so the borrower can review the final loan terms and costs. Certain changes restart the three-day period.

RESPA applies to:

• a.Purchases of vacant commercial land parcels
• b.All-cash home purchases with no mortgage
• c.Federally related mortgage loans on residential property✓
• d.Residential lease agreements between landlords and tenants

RESPA governs federally related mortgage loans on residential property, requiring disclosures and prohibiting kickbacks for settlement services. It generally does not apply to all-cash deals or to purely commercial land transactions.

A lender's title insurance policy protects the:

• a.Lender up to the loan balance against title defects✓
• b.Broker's right to the earned commission
• c.Buyer's entire equity against every future title loss
• d.Seller against the risk that the buyer defaults before closing

A lender's (mortgagee) title policy protects the lender up to the loan amount against covered title defects. It does not protect the buyer's equity; a separate owner's policy is needed to protect the buyer.

A title that is free from significant defects and reasonable doubt, such that a buyer would accept it, is called:

• a.Marketable title✓
• b.Constructive title
• c.Equitable title
• d.Apparent color of title

Marketable title is title reasonably free from defects, liens, and doubt, such that a well-informed buyer would accept it. Purchase contracts typically require the seller to convey marketable title at closing.

A summary of the recorded history of conveyances and encumbrances affecting a parcel is the:

• a.A sponsor's offering plan
• b.Abstract of title✓
• c.Certificate of occupancy
• d.Closing statement

An abstract of title is a condensed history of all recorded documents affecting a parcel, used to trace the chain of title and identify encumbrances. Title examiners and attorneys review it, often together with a title search, to assess marketability.

In a deed, the party conveying title to real property is the:

• a.Grantor✓
• b.Devisee
• c.Grantee (buyer)
• d.Mortgagee

In a deed, the grantor is the party conveying title, and the grantee is the party receiving it. Remember that the party whose role ends in '-or' gives, while the '-ee' receives.

Which deed offers the buyer the greatest protection through full covenants of title?

• a.Quitclaim deed
• b.Executor's deed with limited authority
• c.Bargain and sale deed without covenants
• d.Full covenant and warranty deed✓

A full covenant and warranty deed provides the greatest protection because the grantor warrants title against all defects, even those arising before the grantor owned the property. A quitclaim deed offers no warranties at all.

A quitclaim deed is often used to:

• a.Cure a cloud on title or transfer whatever interest the grantor may have, with no warranties✓
• b.Convey title following a foreclosure sale conducted by the sheriff or a court referee
• c.Provide the strongest possible warranties that the title being conveyed is completely clear
• d.Guarantee to the buyer that the property is free of all liens and every other encumbrance

A quitclaim deed conveys only whatever interest, if any, the grantor holds, with no warranties. It is commonly used to clear clouds on title, such as releasing a possible claim, rather than for arm's-length sales.

Title actually passes to the buyer when the deed is:

• a.Notarized by a notary public at the closing
• b.Delivered by the grantor and accepted by the grantee✓
• c.Recorded in the county's land records office by the clerk
• d.Signed by the buyer at the closing table

Title passes when the deed is delivered by the grantor with intent to convey and accepted by the grantee. Recording gives public notice and protects priority but is not what actually transfers title.

When two deeds to the same property conflict, most recording statutes protect the:

• a.Party who paid the highest price
• b.Good-faith purchaser who records first✓
• c.Party living closest to the property
• d.Party who signed the purchase contract first, regardless of recording

Recording statutes generally protect a bona fide (good-faith) purchaser for value who records first, encouraging prompt recording. This is why buyers record their deeds immediately after closing.

At closing, property taxes the seller prepaid covering time after the closing date are typically:

• a.Ignored, since prepaid items are never prorated at all
• b.Kept by the buyer with no adjustment made
• c.Paid by the broker out of the commission
• d.Credited to the seller and debited to the buyer✓

Prorations divide ongoing costs fairly as of the closing date. When the seller has prepaid taxes covering time after closing, the buyer reimburses the seller, so the amount is credited to the seller and debited to the buyer.

On a closing settlement statement, the purchase price is entered as a:

• a.Debit to the buyer and a credit to the seller✓
• b.Credit to both the buyer and the seller
• c.Debit to the real estate broker
• d.Credit to the buyer, who provides the funds for the purchase

The purchase price is a debit (charge) to the buyer, who owes it, and a credit to the seller, who is entitled to receive it. Settlement statements record debits and credits to each party to arrive at the amounts due.

The buyer's final walk-through shortly before closing is primarily to:

• a.Sign the deed conveying title from the seller to the buyer ahead of the formal closing
• b.Confirm the property's condition and that agreed repairs were completed✓
• c.Order the lender's appraisal so the loan can be finalized before the closing takes place
• d.Renegotiate the purchase price downward based on current conditions in the housing market

The final walk-through lets the buyer verify that the property is in the agreed condition and that any required repairs were completed before closing. It is not the time to renegotiate price or to transfer title.

In New York, the state real estate transfer tax on a conveyance is customarily paid by the:

• a.Title insurance company, as part of the premium
• b.Real estate broker, out of the commission
• c.Seller (grantor), unless the parties agree otherwise✓
• d.Buyer, who pays all taxes and government fees on the purchase

In New York, the state real estate transfer tax is customarily paid by the seller (grantor), though the parties can agree otherwise. New York City and some localities impose additional transfer taxes, and rules and rates can change, so confirm current requirements.

New York's additional 'mansion tax' generally applies to residential sales of:

• a.$1 million or more, and it is typically paid by the buyer✓
• b.Under $500,000, targeting lower-priced starter homes
• c.Only commercial office and retail property, never any homes
• d.Any amount, since it applies to every residential sale

New York's mansion tax applies to residential purchases of $1 million or more and is generally paid by the buyer, starting at 1 percent with higher graduated rates in New York City. Rates and thresholds can change, so confirm the current law.

A management agreement between an owner and property manager should specify all of the following EXCEPT the:

• a.The compensation the property manager will earn for managing the owner's property
• b.The scope of the manager's authority and the specific duties they are expected to perform
• c.The term of the agreement, including its start date and how it may be ended by either party
• d.Future resale price the owner expects to receive for the building✓

A management agreement should define the manager's compensation, authority and duties, and the term of the agreement, among other things. A speculative future resale price is not a standard element of a management contract.

In New York, a residential security deposit collected by a landlord or manager must generally be:

• a.Spent immediately on advertising the unit to prospective replacement tenants
• b.Treated as nonrefundable income that the landlord may keep regardless of the condition
• c.Kept separate and returned, less lawful deductions, after the tenant moves out✓
• d.Applied directly toward the property manager's commission for leasing the apartment

New York generally limits most residential security deposits to one month's rent, requires them to be held separately, and requires timely return (less lawful deductions) after the tenant vacates. Because tenant-protection rules change, confirm the current law.

A property manager applying identical, written screening criteria to every applicant is:

• a.Violating fair housing law by imposing the very same standards on all of the applicants
• b.Following a sound practice that helps ensure fair, nondiscriminatory treatment✓
• c.Required by law to automatically reject any applicant household that includes minor children
• d.Permitted to charge applicants who belong to a minority group a higher security deposit

Applying consistent, objective, written screening standards to every applicant helps ensure compliance with fair housing law by treating applicants equally. Inconsistent standards, or ones tied to protected classes, invite discrimination claims.

A seller's agent asked by the buyer about a known leaking roof should:

• a.Truthfully disclose the known material defect✓
• b.Deny that any problem exists at all
• c.Tell the buyer to waive all inspection contingencies
• d.Change the subject to nicer features

Even while representing the seller, an agent must deal honestly with the buyer and disclose known material defects such as a leaking roof. An agent may not actively conceal defects or make false statements.

The term 'REALTOR' specifically refers to a real estate licensee who:

• a.Is a member of the National Association of REALTORS and follows its Code of Ethics✓
• b.Holds a broker license only, since salespersons are never permitted to use the designation
• c.Has simply passed the state licensing examination, whether or not they join any association
• d.Practices real estate exclusively within New York State rather than in any other state

REALTOR is a trademarked term for a licensee who is a member of the National Association of REALTORS and agrees to abide by its Code of Ethics. Not every licensee is a REALTOR; membership is voluntary.

Federal rules on appraiser independence prohibit a lender or agent from:

• a.Pressuring an appraiser to reach a predetermined value✓
• b.Paying the appraiser a customary, reasonable fee
• c.Giving the appraiser a copy of the sales contract
• d.Ordering an appraisal from a properly licensed appraiser

Appraiser independence rules prohibit coercing or pressuring an appraiser to hit a target value. Ordering the appraisal, sharing the sales contract, and paying a reasonable fee are all permissible; improperly influencing the value is not.