Master NY Prelicensing Exam Prep

Which of the following is an example of a fee simple freehold estate?

Your ownership can be passed on to your children. (Fee simple estates have no ownership limitations and can be inherited by the owner's heirs.)

The New York City Department of Housing Preservation and Development (HPD) established the HomeFirst Down Payment Assistance Program. The criteria for the program includes __________________.

being a first-time homebuyer; (And must have saved enough to contribute to the down payment/closing costs, and the home purchased must pass the Housing Quality Standards inspection.)

Who is responsible for paying for homeowners insurance?

buyer

Both federal and New York state laws allow a property to pass to surviving spouses without taxation, but this type of lien has to be paid out of the remaining estate proceeds before other heirs may inherit.

deceased person's debt lien; must be satisfied before other heirs may inherit the money or the property

Which term means the power of the government to take private land for public use?

eminent domain

Which clause allows a landlord to increase the lease payment during the lease term?

escalation (This is the definition of a lease escalation clause, which allows the landlord to increase the lease payments given a specific set of circumstances, during the lease term.)

Which of these tells cooperative purchasers what they can and cannot do in and on the property?

house rules

Capitalization is the process of using ______.

income to calculate value. (The process uses a capitalization rate that's based on comparable companies.)

A situation where a broker serves as broker for more than one firm is ________.

legal, (Provided the broker's license is displayed at every office, it is legal for the broker to act as broker for more than one firm.)

What's it called when a number of percentage points is added to the index to determine the rate for an adjustable rate mortgage?

margin; is the number of percentage points added to the index to determine the rate. The margin is constant throughout the life of the mortgage, and the index value is the variable.

Which type of lease is one in which the tenant pays the rent and some expenses related to the property (e.g., maintenance) separately?

net lease, (Is one in which the tenant pays some extra expenses—such as taxes, maintenance, or insurance—for the property.)

Which element of a valid contract is established by getting the signatures of all parties?

offer and acceptance

Elmer died and left a will. Before his estate can be distributed according to his wishes, it must go through ______.

probate

If a landlord refuses to rent an apartment to two single women who live together, this is discrimination on the basis of what federally protected class?

sex

Blane owns a barbershop. He polls his customers and learns that they tend to come from less than a mile away. That's probably because Blane's store is in which type of location?

strip mall

Juan secures a fixed rate amortized 30-year loan for $295,000 at 4.25%. If his monthly P&I payment is $1,750, how much interest does he pay in the second month of the loan?

$1,042.29; in the first month, Juan pays $1,044.79 in interest ([$295,000 x .0425] ÷ 12). His monthly payment (stated in the question) is $1,750, so that means he paid the principal down $705.21 ($1,750 - $1,044.79). His new principal balance is $294,294.79 ($295,000 - $705.21). We use the new principal balance amount to calculate interest for the next month. Juan pays $1,042.29 in interest ([$294,294.79 x .0425] ÷ 12).

A licensee sells a property for $525,000. The total commission rate is 6%, which is split evenly with the cooperating agent. What amount goes to the listing broker after this split?

$15,750

If a contractor violates Article 36-A relating to payment schedules, how high can the fine be?

$250 or 5% of the contract price, up to $2,500

The capital gains exclusion for couples filing jointly who have lived in their primary residence at least two of the five years immediately preceding the sale of the home is up to $500,000. What is the capital gains exclusion for single taxpayers?

$250,000

Licensees who want to work with foreign investor clients may be interested in pursuing the ______ designation as part of their career goals.

(CIPS) Certified International Property Specialist

Alana and Michael want to build a 5,000-square-foot ranch home on two acres of land they just bought. Once the house is built, how many acres of land will remain unbuilt?

1.89 acres; onr acre is equal to 43,560 square feet, so their parcel is 87,120 square feet (43,560 x 2). Subtract the house's 5,000 square feet from that, and you get 82,120 square feet. Divide that by 43,560, and you end up with approximately 1.89 acres.

The manufacturer of soundproofing, decorative material, shingles, and siding with asbestos was outlawed in which year?

1973, (Not permitted to use asbestos in the creation of soundproofing, decorative material, shingles, and siding)

Rancher Ross was thrilled to learn he could sell his property's mineral rights to a company that's looking for oil. He didn't realize he'd also created an ______, allowing them to bring drilling equipment onto his land.

A EASEMENT BY IMPLICATION is created by the parties' conduct. A mineral right is worthless unless the minerals can be accessed, so selling the right implies that Ross granted the oil company permission to bring drilling equipment onto his land.

Jardin passed away suddenly, and when his family started looking through his documents, they found a handwritten will. Which of these statements about the will is true?

A handwritten will, also called a holographic will, may be valid if it meets other terms for validity.

In which of the following types of financing does the seller hold a mortgage from the buyer for some or all of the purchase price?

A purchase money mortgage; also referred to as seller financing, occurs when the seller issues a mortgage to the buyer for the purchase of his own home.

FAR, or floor-to-area ratio, includes ______.

All of the habitable structures on a lot

Lindsay, a seller, signed her closing documents in advance and her interests are represented by her attorney at the closing itself. Lindsay likely lives ______.

Anywhere in New York State; local custom in NYS is for both buyers and sellers to be represented by their own attorney's

Once a taxpayer has received an unfavorable decision from SCAR, what can be done?

Attempt to initiate an Article 78 proceeding; which is a last-ditch legal process for protesting a governmental authority's decision. An option would have been a tax certiorari proceeding, but not after SCAR has occurred.

In New York, which attorney may be involved in the closing?

Attorneys for the seller, buyer and lender

Brad and his buyer client, Sharon, are meeting with the seller's agent, Marjorie. Marjorie doesn't seem to be in an agreeable mood, until she hears the sound of an ice cream truck going by outside. She smiles, and says it reminds her of her childhood and how wonderful it was to hear that sound on a hot summer day. This is an example of which type of anchor?

Auditory

Ken, Barbie, and Skipper owned a property as a joint tenancy. When Skipper moved out of state, she sold her interest to Midge. Two years later, Ken died. How is the interest in the property divided?

Barbie owns two-thirds, and Midge owns one-third. (Joint tenancy includes the right of survivorship, so Ken's interest will pass to the other tenants. But because Midge bought in later than the others, she isn't considered a joint tenant. Ken's share will therefore pass entirely to Barbie.)

Belinda, a buyer, is about to submit a $40,000 earnest money deposit with a purchase contract on a house. It looks like the money will be held for about five weeks, and she thinks, "it sure would be great if that money could earn interest in the meantime." Can her earnest money deposit earn interest?

Belinda's earnest money deposit CAN earn interest, but only if the seller agrees and their lawyers put it in writing.

Which of the following statements is true regarding community property rights and property ownership?

Both partners may own other properties purchased before the marriage separately (in severalty), but any properties purchased during their marriage are owned equally.

In which form of price determination does the real estate professional often just drive by the property and take photos, then complete paperwork for the lender?

Broker's Price Opinion (broad opinion of price and not a detailed analysis.)

To comply with advertising rules, you must include all of the following details on your ads.

Broker's name and contact information

Which of the following would property managers be expected to personally do as part of their assigned duties?

Budget preparation and oversight for managing the property.

Which of the following statements about community property rights in New York is false?

Community property rights exist in New York. (New York does not recognize community property rights, so stating that community property rights exist in New York would be false.)

Local regulations have to be more protective of wetlands than the current state regulations. A municipality can regulate the wetlands by setting up a separate Wetlands Commission or ________ to monitor the wetlands.

Conservation Advisory Council

A deed states, "For love and affection, the receipt and sufficiency of which is hereby acknowledged." What does this statement represent in the deed?

Consideration (something of value) is required for transfer of this deed. (In a traditional sale, the consideration is the purchase price stated in the deed. In deed transfers, "for love and affection" may be the consideration offered.)

Which loans involve increased risk for the lender and therefore usually come with a higher rate?

Construction loans involve increased risk because the lender is lending on what's being built and not what's already built. If the builder flaked, the lender would be left with an unfinished building.

What type of notice results from publicly recording a title transfer?

Constructive notice; (The purpose of recording is to give the public constructive notice of a transfer of ownership. Recording doesn't transfer title; it informs the public that a transfer of title has occurred.)

Amanda helps her neighbor sell his home by assisting with negotiations. She receives no compensation for her assistance. Based on this one transaction, Amanda ______.

Doesn't need a real estate license (Remember that compensation is one factor in the requirement for licensure.)

Which of the following is a life estate in property held by a widow?

Dower; is a life estate in property held by a widow.

Which type of easement is commonly seen when land is landlocked with no access to roads?

Easement by necessity

Jordan bought 25 acres along a navigable river. Several years later, Jordan calculates that the river has slowly carried away almost two acres of land. What process caused this?

Erosion; the gradual loss of land due to natural forces, such as water carrying away sediment.

The state's claim to property when a property owner dies, leaving no will, heirs or creditors, is the power of ______.

Escheat

Being a retail property manager includes being responsible for ______.

Establishing some leases as percentage leases where a base rent per square foot is augmented by a percentage share in the tenant's gross

Jake, who was leasing a house, retained possession even after his right to possess had terminated. Jake has a(n) ______.

Estate at sufferance (because the landlord is suffering the tenant's presence without express agreement. Jake is now a holdover tenant.)

Which entity services rural development loans?

FSA (Farm Service Agency)

When filing a SCAR petition, which of these steps do taxpayers follow?

File with the clerk's office within 30 days of the last date allowed for filing the final assessment roll. (The homeowner must demonstrate ownership of the property and file with the clerk's office within 30 days of the last date allowed for filing the final assessment roll. The tax certiorari proceeding is an alternative to SCAR, not a step in SCAR.)

A commercial landlord finds herself in trouble because the rent she is collecting is not keeping up with inflation due to the type of leases she signed with her tenants. She has the longest tenancies of commercial landlords she knows, which is probably because she signed with them ______ leases.

Flat rate

One of Jackie's creditors sued her in civil court. As a result of the judgment against her, her house, car, and art collection were all subject to sale in order to pay the creditor. What type of lien is this?

General; A general lien is placed against all of an individual's or a business's real and personal property, not just a specific property. General liens include judgment liens—such as in this case—income tax liens, and decedent's debts.

Which homeowners policy is used for mobile homeowners?

HO-7

Broker Tom receives a $10,000 commission from the sale of one of his listings. He's permitted to share proceeds from the commission with ________.

His affiliated licensees involved with the transaction and the broker of other licensees involved in the transaction

Harrison owns a shopping center that had significant retail client turnover in the past couple of years. He's asked the property manager, Prasad, to revamp the marketing plan to try to eliminate turnover. Prasad completed the market analysis; what step should he undertake next?

Identify appropriate retail targets. Prasad would have ensured that rents are appropriate during the market analysis phase, and messaging and advertising would come after a target population has been identified.

Why do investors have a special interest in the impact income taxes have?

Income tax is a significant factor in return on investment.

Which of the following is a characteristic of a tax rate?

It is certified by the NYS Office of Real Property Tax Services, and it may be a separate tax rate for homestead vs. non-homestead properties.

Lenders look at a HELOC balance of less than $50,000 as if ________________.

It were a credit card

Who underwrites the loan?

Mortgage banker

Additional documents that may be part of a closing, depending on the type of transaction, include which of the following?

Mortgage insurance policy, homeowners policy, and flood insurance policy.

As of 2013, taxpayers may now use a simplified method where one rate is multiplied against the square footage of the home. What is the current rate?

Multiply $5 against the square footage of the home used for business purposes

Which entity oversees rent-controlled apartments in New York?

NYS Division of House and Community Renewal

If a buyer makes no effort to secure financing, can the buyer use the mortgage contingency clause in the sales contract to back out of the transaction and get a refund of the down payment deposited?

No; because the buyer did not act in good faith, the seller may retain the down payment (The mortgage contingency clause only provides the buyer the right to cancel the contract and receive the earnest money back if the buyer acts in good faith and makes an effort to secure financing.)

Existing uses in a new zoning district or in a rezoned district can be grandfathered from compliance with the zoning requirements and is known as ________.

Non-conforming use; can occur when existing uses in a new zoning district or in a rezoned district are grandfathered from compliance with the zoning requirements.

Which of the following describes sub-agency?

Norm is a listing agent. He allows Stu, an agent from another firm, to present an offer from an unrepresented buyer.

An office property manager is responsible for which area of property management?

Office property managers need to consider how much build out or change to the design, floor plan, and power requirements a tenant will require.

Which of the following is an accurate description of plumbing?

One part brings the water in, one part sends it away, and the two parts never meet.

Bonnie always schedules an in-person meeting with prospective buyers before she begins sending them data on properties. Why might this be?

One purpose of this meeting is to help her define the buyers' needs, wants, and readiness to purchase. She also demonstrates her professionalism to her potential clients and builds rapport with them during the meeting. (She needs to have them sign an agency agreement before she can work with them)

What is a wrap-around mortgage?

One that may involve seller financing (the buyer's new loan wraps around the seller's existing financing. The seller uses a portion of the buyer's payments to the seller to pay on the original loan.)

If a community isn't growing in an orderly fashion, which local land use group is likely at fault?

Planning board

Whose role is it to develop the comprehensive master plan?

Planning board members

What is found on the declarations page of an insurance policy?

Premium, limits, coverage, and deductibles, but not market demographics

Property owners may keep, sell, or lease their rights. Which of the following do those rights include?

Profit and license (Property ownership rights don't include the right to infringe on another's rights or to avoid paying taxes. They do include the right to profit by taking products from the soil and the right to license others to use the land for limited purposes, such as hunting.)

An easement dictates that property owner A gives the right to property owner B to use a portion of the property. Which term describes property A?

Property A is the servient estate. It serves the dominant estate, Property B.

What's the best definition of real property?

Real property includes real estate, plus all of the interests, benefits, and rights included in ownership

If the property owner selects an insurance broker, what service(s) is she likely to find?

Representation; Insurance brokers represent the customer rather than an individual insurance agency.

In 1990, the Clean Air Act (CAA) was amended to ______ the use of CFCs.

Restrict; Clean Air Act (CAA) was amended to restrict the use of CFCs and eliminate the production of all chemicals that deplete the ozone layer

As a buyer's agent, which of the following is a best practice to help avoid closing issues?

Review the closing statement in advance.

Which covenant term means that the grantor both has legal capacity to convey the title and also has the title to convey?

Right to convey

Which of the following covers state drinking water regulations?

Safe Drinking Water Act; covers safety regulations for the state's public drinking water.

Sean represented Jamie as a buyer's agent. Jamie purchased a property that allowed cooperating agents to receive compensation of 2.5% of the sales price upon closing of the transaction. Sean hasn't been paid and the transaction closed six months ago. What can Sean do?

Sean can bring action against the broker who did not pay his commission.

Which of these situations represents a unilateral contract?

Sherry promises to give Brent a ride home from work, and then doesn't show up. (A promise is a unilateral contract if there's no reciprocal promise. Breaching a contract in which one party performs isn't a unilateral contract.)

______ are taxed at a taxpayer's marginal tax rate.

Short term capital gains

Nellie and Victor own a suburban ranch home and fell behind on paying their property taxes when Victor lost his job last year. Victor is working again, but they still haven't saved enough to pay their back taxes. They're worried that the county may begin foreclosure proceedings. What type of lien is this?

Specific; Property tax liens are specific, because they represent a lien against a specific piece of property.

What is the purpose of an abatement program?

Stimulate community revitalization

A community that undertakes a comprehensive master plan is ______.

Taking the first step in urban planning

Once Greg and Caitlin were married, they decided to purchase a home together. Since it was a shotgun wedding after a weekend in Vegas, they made sure that their ownership included the right of survivorship as well as protection from the other spouse attempting to sell the house from under them. Though not recognized in all states, the most likely form of co-ownership under which they would make this purchase is ______

Tenancy by the entirety; concurrent ownership between two married people as an integrated legal unit. (This includes the right of survivorship as well as a requirement that conveyance can only happen when both parties consent to it.)

Which one of the following types of ownership termination allows each tenant to have a specific, divided portion (partition) of the property exclusively?

Termination of tenancy in common by partition; allows each tenant to have a specific, divided portion of the property exclusively. If the property can't be divided, the court may rule that the property be sold and the proceeds divided by the tenants.

When a condominium building is a conversion, what can the builder do without an amendment after the 90-day tenant's exclusive buying period?

The developer can negotiate/ change different prices for each unit. An amendment is not needed to the offering plan. (However, a universal change in pricing requires an amendment.)

The owner's covenants section of the property management agreement between manager Fred Baines and owner Lilian James contains three key pieces of information. First, Fred is named as the person responsible for managing the building. Secondly, Lillian is identified as the property's legal owner. What's the third key piece of information?

The fact that the owner is not facing foreclosure; (A covenant is a warranty, assurance, or promise. The owner's covenants section states that the owner actually owns the property, the property is not facing foreclosure, and the property manager is solely responsible for its management.)

Under New York law, which of the following occurs if a tenant dies during the term of a lease?

The lease becomes part of the deceased tenant's estate.

A taxpayer filing a grievance for an unlawful assessment would use what as evidence?

The only applicable claim for unlawful assessment is that the assessor was operating outside the assessing jurisdiction.

What does the quick and dirty 70% formula mean to investors?

The purchase price shouldn't be more than 70% of the repaired value

If you've shown Suzie three properties, and she decides to put an offer in on one of them but hasn't signed an agency agreement with you, who do you represent?

The seller (Unless Suzie signs an agency agreement, you'll technically represent the seller of whichever property she puts an offer on.)

In a buyer agency relationship, what relationship does the seller have to the licensee?

The seller is the licensee's customer.

What relationship is established by the property management agreement between the property manager and the owner?

The service relationship Like other agency agreements, the property management agreement details the terms of "employment" between the property manager (agent) and the owner (client).

Why might some agents work for buyers without ever having met them?

They're afraid to turn down any business. (working for buyers without an agency agreement and without ensuring buyer loyalty can be a waste of time.)

You're talking to a co-worker at lunch, and she mentions she has a box of baby clothes her kids have outgrown that she needs to get rid of. You have a baby on the way, so you offer to pay her $25, and she agrees to bring the box to work the next day and give it to you. Which of the following is true in this situation?

This is an implied contract because it is not written down and nobody signed anything.

What happens when a board decision in a condominium association goes against the will of the majority of unit owners?

Unless the bylaws provide for majority agreement, the board's will prevails

When is a commercial contract of sale used for residential property?

When the transaction involves a residential property containing five or more units