CSLB General Building (B) — All Questions

In New York, real estate salespersons and brokers are licensed and regulated primarily by the:

• a.Federal Trade Commission
• b.Local county clerk
• c.Internal Revenue Service
• d.New York Department of State, Division of Licensing Services✓

New York real estate licenses are issued and regulated by the Department of State (DOS) through its Division of Licensing Services. The DOS enforces Article 12-A of the Real Property Law and can discipline licensees. Specific rules and fees can change, so licensees should confirm current requirements with the DOS.

The New York statute governing the licensing and conduct of real estate brokers and salespersons is:

• a.The Uniform Commercial Code
• b.Regulation Z
• c.Article 12-A of the Real Property Law✓
• d.The Statute of Frauds only

Article 12-A of the New York Real Property Law is the licensing law that defines brokers and salespersons and sets rules for their conduct. The Department of State administers it. Requirements under this article can be amended, so licensees should verify current provisions.

A New York real estate salesperson may lawfully collect a commission directly from:

• a.The buyer, at closing
• b.Their sponsoring broker only✓
• c.Any party to the transaction
• d.The Department of State

A salesperson works under and is paid only by their sponsoring broker, never directly by a buyer or seller. The broker receives the commission and then compensates the salesperson per their agreement. Accepting compensation directly from a principal can be grounds for discipline.

An agent's fiduciary duty of obedience requires the agent to:

• a.Obey the buyer even when it conflicts with the seller-principal
• b.Follow all lawful instructions of the principal✓
• c.Follow any instruction, even illegal ones
• d.Ignore the principal's wishes to maximize commission

The duty of obedience requires an agent to follow the principal's lawful instructions promptly. An agent must never obey directions that are illegal, such as instructions to discriminate. In such a case the agent should refuse and may need to withdraw from the agency.

The fiduciary duties an agent owes a principal can be remembered by the acronym OLD CAR. The 'C' stands for:

• a.Compensation
• b.Contract
• c.Compliance
• d.Confidentiality✓

OLD CAR stands for Obedience, Loyalty, Disclosure, Confidentiality, Accountability, and Reasonable care. Confidentiality requires keeping the principal's private information secret, even after the relationship ends. These duties define the agent's fiduciary relationship with the principal.

In New York, the agency disclosure form must generally be presented to a prospective buyer or seller:

• a.At the closing table
• b.Only if the client requests it
• c.At the time of first substantive contact✓
• d.After an offer is accepted

New York requires licensees to provide the statutory agency disclosure form at the time of first substantive contact with a prospective buyer or seller. This ensures consumers understand whom the agent represents before sharing confidential information. Exact timing rules and form content can change, so confirm current DOS requirements.

A dual agent in New York is a broker who:

• a.Represents two different buyers on two different properties
• b.Represents both the buyer and the seller in the same transaction✓
• c.Works for two brokerage firms at once
• d.Holds both a broker and a salesperson license

Dual agency exists when one broker represents both the buyer and the seller in the same transaction, creating a conflict of interest. New York permits it only with the informed, written consent of both parties. Because loyalty is divided, the dual agent cannot fully advocate for either side.

A designated sales agent arrangement in New York allows a supervising broker to:

• a.Represent no one in the transaction
• b.Appoint different agents to represent the buyer and the seller✓
• c.Let a salesperson work without a sponsoring broker
• d.Let the seller act as their own agent

With the written consent of both parties, a supervising broker who has dual agency may appoint one licensee to represent the seller and another to represent the buyer as designated sales agents. Each designated agent can advocate for their respective client. The supervising broker remains a dual agent overall.

Which of the following would create an agency relationship by ratification?

• a.A signed listing agreement
• b.A principal accepting the benefits of unauthorized acts after the fact✓
• c.A written buyer-broker contract
• d.A formal power of attorney

Agency by ratification arises when a principal approves or accepts the benefits of an agent's previously unauthorized actions. This retroactively creates the agency relationship. Express agency, by contrast, is created by a clear agreement such as a signed listing.

Commingling, which is prohibited for New York brokers, refers to:

• a.Representing two clients in one deal
• b.Advertising more than one listing at a time
• c.Mixing client escrow funds with the broker's own business or personal funds✓
• d.Working with multiple cooperating brokers

Commingling is the improper mixing of client trust or escrow funds with the broker's own money, and it is a violation of license law. Brokers must keep client deposits in a separate escrow or trust account. Converting those funds to personal use is the even more serious offense of conversion.

The federal Fair Housing Act prohibits discrimination based on all of the following EXCEPT:

• a.The buyer's occupation✓
• b.Religion and national origin
• c.Race and color
• d.Sex, disability, and familial status

The federal Fair Housing Act protects seven classes: race, color, religion, national origin, sex, disability, and familial status. Occupation is not a federally protected class. New York State and local laws add further protected categories, so licensees must check applicable state and local rules.

The practice of inducing owners to sell by suggesting that people of a particular protected class are moving into the neighborhood is called:

• a.Steering
• b.Puffing
• c.Redlining
• d.Blockbusting✓

Blockbusting, also called panic selling, is illegal under fair housing law and involves scaring owners into selling by exploiting fears about changing neighborhood demographics. Steering is directing buyers toward or away from areas based on protected class. Redlining is denying loans or services in certain areas.

Directing prospective buyers toward or away from certain neighborhoods based on their race or religion is known as:

• a.Novation
• b.Blockbusting
• c.Commingling
• d.Steering✓

Steering is the illegal practice of channeling homebuyers to or from particular neighborhoods based on a protected characteristic, limiting their housing choices. It violates the Fair Housing Act. Agents must let clients choose freely and provide equal service to all.

Under New York law, earnest money deposits held by a broker must be:

• a.Deposited into the broker's personal account for safekeeping
• b.Placed in a separate escrow or trust account✓
• c.Given directly to the seller immediately
• d.Kept in cash in the office safe

Brokers must hold earnest money and other client funds in a separate escrow or trust account, keeping them apart from the broker's own money. This prevents commingling and protects the parties' deposit. Funds are released according to the contract terms or with proper authorization.

An agency relationship is terminated by all of the following EXCEPT:

• a.The agent being briefly unavailable for a day✓
• b.Mutual agreement of the parties
• c.Completion of the purpose of the agency
• d.Death or incapacity of either party

Agency ends by performance, expiration, mutual agreement, revocation, renunciation, or death or incapacity of a party, among other events. A brief temporary absence does not terminate the relationship. Some duties, such as confidentiality, may survive termination.

A licensee who exaggerates a property's qualities with a non-factual opinion, such as calling a view 'the most breathtaking in town,' is engaging in:

• a.Fraud
• b.Misrepresentation
• c.Puffing✓
• d.Steering

Puffing is an exaggerated opinion or sales talk that a reasonable person would not take as a statement of fact, and it is generally legal. It becomes actionable misrepresentation or fraud when it involves false statements of material fact. Agents should still be cautious to avoid crossing that line.

In New York, a real estate salesperson's license is:

• a.Held by and works under their sponsoring broker✓
• b.Displayed on the wall of every property they show
• c.Renewed every ten years automatically
• d.Kept independently, allowing solo practice

A New York salesperson's license is maintained by and works under the sponsoring broker who supervises their activity. The salesperson cannot operate independently. Licensing details, including renewal periods and continuing education, are set by the DOS and can change.

A seller's agent owes the fiduciary duty of loyalty to the:

• a.Seller (principal)✓
• b.Buyer
• c.Lender
• d.General public

The duty of loyalty requires the agent to place the principal's interests above all others, including the agent's own. A seller's agent owes that loyalty to the seller. The agent must still treat the buyer honestly and fairly and disclose known material defects.

A material defect that a seller's agent knows about the property must be:

• a.Concealed to protect the seller
• b.Reported only to the Department of State
• c.Revealed only if the buyer asks directly
• d.Disclosed to prospective buyers✓

Even while representing the seller, an agent must honestly disclose known material defects to buyers and cannot participate in active concealment or fraud. The duty of honesty to third parties coexists with loyalty to the principal. Failing to disclose can expose the agent to liability.

The relationship in which a broker represents a buyer client is known as:

• a.Seller agency
• b.Subagency to the listing broker
• c.Buyer agency✓
• d.Facilitator status

Buyer agency is created when a broker agrees to represent the buyer's interests, typically through a buyer-broker agreement. The broker then owes fiduciary duties to the buyer. This differs from a traditional arrangement where all agents represented the seller.

Which act by a licensee would most likely be grounds for revocation of a New York real estate license?

• a.Converting a client's escrow deposit for personal use✓
• b.Presenting all written offers to the seller
• c.Recommending the buyer obtain a home inspection
• d.Providing the agency disclosure form on time

Converting client escrow funds to personal use is a serious violation of trust and license law and can lead to revocation and other penalties. Presenting offers, recommending inspections, and timely disclosure are proper professional practices. The DOS enforces these standards under Article 12-A.

An agent acting under an express written listing agreement is an example of:

• a.Agency by estoppel
• b.Ostensible agency
• c.Express agency✓
• d.Agency by ratification

Express agency is created by a clear, stated agreement between principal and agent, whether written or oral, such as a signed listing contract. Implied agency arises from conduct, and agency by estoppel or ratification arise in other ways. A written listing is the classic example of express agency.

A broker who represents neither the buyer nor the seller as a client but merely helps both complete a deal may be acting as a:

• a.Dual agent
• b.Broker's agent
• c.Designated agent
• d.Facilitator or transaction broker✓

A facilitator, sometimes called a transaction broker, helps parties complete a deal without owing full fiduciary duties to either as a client. This limited role differs from single or dual agency. New York agency disclosure requirements still apply to clarify the relationship for consumers.

New York's fair housing protections extend beyond the federal classes to include additional categories such as:

• a.Occupation and education level
• b.Only race and religion
• c.Age, marital status, sexual orientation, and gender identity, among others✓
• d.Political party affiliation nationwide

New York State's Human Rights Law adds protected classes beyond the federal list, including age, marital status, sexual orientation, gender identity, military status, and more. Local laws may add further categories. Because these lists are periodically expanded, licensees should verify the current protected classes.