New York Real Estate Practice Study Guide Exam 2 2026

REAL ESTATE New York Real Estate Practice Study Guide Exam 2 2026 Which of the following is not a fiduciary duty that a real estate agent owes to a client? a. Principal b. Obedience c. Accountability d. Confidentiality - Correct Ans-a. Principal Fiduciary duties include Obedience (obey reasonable and legal instructions), Loyalty (diligence to serve the best interests of the client), Disclosure (promptly communicate all information about the transaction), Confidentiality (cannot disclose information given in faith and trust without the permission of the client), Accountability (financial accountability including accurate record keeping) and Reasonable Skill and Care (agents possess the necessary skills and training to perform the requested services). Principal is a person who bound by an agency relationship to represent their client. A special agent is authorized to do the following: a. to represent the principle in a broad range of general matters. b. to act as a Power of Attorney in a real estate transaction. c. to act on behalf of the principal in specific transactions. d. to represent an agent for cooperation and compensation. - Correct Ans c. to act on behalf of the principal in specific transactions. Which of the following statements on leasehold estates are true? a. A leasehold estate is for a limited time. b. A leasehold estate grants possession, but not title. c. A and B are true d. Neither A nor B are true - Correct Ans-c. A and B are true A leasehold estate grants temporary right of possession to a property without title for a defined amount of time. The title stays with the landlord. The owner of a leasehold estate is a lessee or tenant and has exclusive right of use. Which of the following is not an essential element of a lease? a. A formal, legal description of the property. b. A lease term c. A clause addressing when the tenant is takes possession of the property. d. Signatures of the lessee and lessor. - Correct Ans-a. A formal, legal description of the property. A lease does not require a legal description. A street address or other informal reference as to the location of the property may be used as long as both parties are in agreement and have a clear understanding of its location. Additionally, apartment or REAL ESTATE CLASSICS 2902 building numbers should be used if more than one unit share the same street address. A lease term, specified rent, date of possession and the signature of the parties are elements of a lease. If the loan-to-value ratio is .85 and the purchase price for a property is $250,000. What is the amount the buyer is mortgaging? a. $37,500 b. $212,500 c. $221,500 d. $294,117 - Correct Ans-b. $212,500 $250,000 x .85 = $212,500. Purchase price times the loan-to-value ratio equals the mortgage amount. The down payment is $37,500. If a lender charges $2,775 loan origination fee and the mortgage amount of the property is $370,000, what is the loan origination percent payable at closing? a. 1.33% b. 1 % c. .75% d. .0075% - Correct Ans-c. .75% $2,775 / $370,000 = .0075 or .75%. Loan origination fee divided by mortgage amount equals the loan origination percentage. 7.The impact of borrowed funds to purchase property when capital is not available is called: a. Liquidity b. Time value of money c. Leverage d. Rate of return - Correct Ans-c. Leverage Leverage is the effect borrowed funds have on investment returns. Leverage may increase or decrease an investor's return than if paid in all cash. The investor borrows money for a purchase with the expectation that the investment's financial return out weighs the cost of borrowing the money. A developer wants to build single family homes, a few groupings of townhomes and a small apartment building along with a small park with basketball courts and walking trails. This is an example of what type of zoning? a.Cluster zoning b.Incentive zoning c.Residential zoning d.Commercial zoning - Correct Ans-a.Cluster zoning Cluster zoning is an example of multi-use zoning where a number of residential uses are allowed in one zone. Typically, the builder places residences closer together in exchange for leaving certain areas open and available to the community. In eminent domain, what value is the owner entitled to as compensation for the taking of real property? REAL ESTATE CLASSICS 2902 a.Actual cost b.Appraised value c.Market value d.Fair market value - Correct Ans-d.Fair market value Eminent domain is the government's constitutional or statutory power to take private property for the public use. The property owner is paid the fair market value (FMV) of the property. FMV is basically the price that a buyer with reasonable knowledge of the asset would pay under conditions where the buyer is acting in his or her own self interest without undue influence and with sufficient time to complete the transaction. Market value is simply the price shown in a listing and does not take into account other market factors. The appraised value is only the opinion of one appraiser. To determine FMV, typically the owner and the government will negotiate and attempt to arrive at an agreement of sale. However, in the event a value is not agreed to, the parties will typically call expert witnesses at trial to testify to the FMV based on a number of factors, such as the size of the property, the accessiblity of the property, zoning, level of development and current or potential use. Different valuation approaches can be used to determine FMV, for example, market approach, income approach and cost approach. What is the difference between Assessed Value and Appraised Value? a. One estimates the property value for insurance coverage and the other is used to compute property taxes. b. One is used to determine what a bank is willing to lend for the property and the other is used to determine a return on a certain dollar investment. c. One is used to determine a return on a certain dollar investment and the other is used to compute property taxes. d. One is used to compute property taxes and the other is used to determine what a bank is willing to lend for the property. - Correct Ans-d. One is used to compute property taxes and the other is used to determine what a bank is willing to lend for the property. Assessed value is a dollar amount of worth determined by a town, city or village assessor which is applied to a local tax rate to calculate the amount of real property tax. Assessed value is documented in local tax records and is reviewed every one to two years by the municipality. Appraised value is an estimate of value of a property at a given time for a specific purpose used to determine value is sufficient to secure payment of a mortgage loan. Appraised value is documented in a Uniform Residential Appraisal Report (URAR).d. One is used to compute property taxes and the other is used to determine what a bank is willing to lend for the property. In an appraisal of commercial property, which of the following criteria is used to determine the properties highest and best use? a. Physically possible b. Financially feasible c. Maximally productive d. All of the above. - Correct Ans-d. All of the above. Highest and best use refers to the use of the land that preserves its usefulness, provides the greatest income and results in the highest property value. This is REAL ESTATE particularly important with commercial properties. Evaluating what is legally allowable, physically possible, maximally productive and financially feasible are all tests that must be considered.