NY Real Estate Prep

Category: Study Guides

  • Agency terms on the NY real estate exam

    Agency is the single most heavily weighted vocabulary area on the New York salesperson exam. The questions rarely ask for a definition outright — they describe a situation and expect you to name the relationship, or to know which duty was breached. Article 12-A of the Real Property Law governs licensing here, and the agency disclosure form has its own timing rules that get tested repeatedly.

    22 terms you need to know

    Agency
    The fiduciary relationship between a principal and an agent. In NY, agency relationships must be disclosed in writing at first substantive contact.
    Agency Disclosure Form
    A written form required in NY at the first substantive contact about a specific property, disclosing whether the licensee represents the buyer, seller, or both.
    Article 12-A
    The section of NY Real Property Law that governs real estate brokers and salespersons — licensing, supervision, advertising, escrow, agency disclosure , discipline, and ethics.
    Broker
    A real estate licensee qualified to operate independently and supervise salespersons. In NY, brokers must hold an Article 12-A license issued by the DOS.
    Commingling
    Mixing client or escrow funds with the broker’s own funds. Strictly prohibited under NY license law — a serious violation.
    Commission
    Compensation paid to a broker for services, typically a percentage of the sale price. In NY, salespersons receive their commission only through their sponsoring broker .
    DOS (NY Department of State)
    The state agency that licenses and regulates NY real estate brokers and salespersons through the Division of Licensing Services.
    Designated Agent
    A licensee designated by a broker to represent one party (buyer or seller) in a transaction. Permits a single brokerage to represent both sides via designated agents with informed consent.
    Dual Agency
    A situation where one agent represents both buyer and seller in the same transaction. In NY, requires written informed consent from both parties.
    Exclusive Agency Listing
    A listing where the broker is the only agent authorized but the seller retains the right to sell without paying commission if they find the buyer themselves.
    Exclusive Right to Sell Listing
    A listing where the broker earns commission no matter who finds the buyer — including the seller. The most protective form for the broker.
    Fiduciary Duties
    The duties an agent owes a principal: loyalty, obedience, disclosure, confidentiality, accountability, and reasonable care (often remembered as OLD-CAR).
    Listing Agreement
    A contract between a seller and a broker authorizing the broker to market the property for compensation. Types include exclusive right to sell, exclusive agency, and open listings.
    MLS (Multiple Listing Service)
    A cooperative system in which broker members share listings and agree to share commissions.
    Net Listing
    A listing where the broker keeps any amount above a net price agreed with the seller. Discouraged or prohibited in many states due to conflict of interest. Permitted in NY but heavily scrutinized.
    Open Listing
    A non-exclusive listing where the seller may engage multiple brokers and pays commission only to the one who actually procures the buyer.
    Power of Attorney
    A written authorization to act on someone else’s behalf in real estate transactions and other matters.
    Principal
    (1) The party an agent represents. (2) The portion of a mortgage payment that reduces the loan balance.
    Property Management
    Operation, control, and oversight of real estate on behalf of an owner. Property managers in NY who lease space generally need a real estate broker’s license.
    Real Estate Salesperson
    A licensee who must work under the supervision of a sponsoring broker. Cannot accept compensation directly from anyone other than the sponsoring broker in NY.
    Salesperson Sponsorship
    In NY, every salesperson must be sponsored by a licensed broker. A salesperson cannot operate independently.
    Subagent
    An agent of an agent. Rare in modern NY practice due to disclosure requirements.

    Commonly confused

    Client vs customer

    A client is the principal your brokerage represents and owes full fiduciary duties. A customer is the other party — you owe honesty and fair dealing, but not loyalty or confidentiality. Giving a customer advice you owe only to a client is how agents create accidental agency.

    Dual agency vs designated agency

    Dual agency is one brokerage representing both sides, which requires informed written consent from both. Designated agency is the broker appointing different agents within the firm to each side. Undisclosed dual agency is a licence violation.

    Broker vs salesperson

    A salesperson must be sponsored by and work under a broker, and cannot hold escrow funds or be paid directly by a client. A broker can operate independently and supervise salespeople.

    How this is tested

    Expect situational questions: an agent shows a buyer a property listed by their own brokerage, or discloses a seller’s bottom line. You need to identify the relationship first, then the duty owed. Learn these terms in pairs — principal and agent, client and customer, disclosed and undisclosed dual agency.

    Keep studying

    Test yourself. The free timed practice exam uses this vocabulary in exam-style questions, and the 484 free flashcards drill the definitions.

  • The T-method

    Whole x Rate = Part. One triangle that solves commission, tax, interest and percentage problems on the NY exam.

    Whole × Rate = Part  ·  Part ÷ Rate = Whole  ·  Part ÷ Whole = Rate

    How to solve it, step by step

    1. Identify which of the three values you have and which is missing.
    2. Draw a T: the whole on the bottom left, the rate on the bottom right, the part on top.
    3. Cover the value you are solving for. If the two remaining sit side by side, multiply. If one sits above the other, divide.
    4. Convert every percentage to a decimal before calculating.

    Worked examples

    A home sells for $400,000 with a $24,000 commission. Rate = Part ÷ Whole = $24,000 ÷ $400,000 = 6%.
    Solving for the whole: a 6% commission produced $9,000. Sale price = $9,000 ÷ 0.06 = $150,000.

    What the NY exam actually asks

    Most NY percentage questions are the same problem wearing different clothes. Identify which of the three values you are missing, and the T tells you whether to multiply or divide.

    Try one yourself

    A property sold and the broker received $19,500, which represented 6.5% of the sale price. What was the sale price?

    Show the answer

    $300,000. You have the part and the rate, so divide: $19,500 ÷ 0.065 = $300,000.

    Common mistakes

    • Guessing whether to multiply or divide. Draw the T and cover the unknown.
    • Mislabelling which figure is the whole. The whole is the number the percentage is taken of.
    • Leaving the rate as a whole number instead of a decimal.

    Questions students ask

    Does the T-method work on interest and tax questions too?

    Yes. Any question of the form “X is what percent of Y” fits the same triangle.

    What counts as the whole?

    The figure the percentage is taken of — usually the sale price, loan amount, or assessed value.

    Related formulas

    Practise this. The free 10-question math quiz drills these formulas, and the free timed practice exam puts them under exam conditions.

  • PITI and the monthly interest calculation

    PITI = Principal + Interest + Taxes + Insurance. How to compute first-month interest on the NY exam.

    PITI = Principal + Interest + Taxes + Insurance
    Interest = Loan Balance × Rate × Time

    How to solve it, step by step

    1. Take the outstanding loan balance.
    2. Multiply by the annual interest rate.
    3. Divide by 12 for one month’s interest.
    4. Subtract that interest from the total payment to find the principal portion.

    Worked examples

    A $300,000 loan at 6% annually. First month’s interest = $300,000 × 0.06 ÷ 12 = $1,500.
    Splitting a payment: if the monthly principal-and-interest payment is $1,800 and interest is $1,500, then $1,800 − $1,500 = $300 goes to principal in month one.

    What the NY exam actually asks

    Amortisation means interest is charged on the remaining balance, so the interest portion shrinks every month while the payment stays level. The exam usually asks only for the first month.

    Try one yourself

    A $250,000 loan carries a 7.2% annual rate. What is the first month’s interest?

    Show the answer

    $1,500. $250,000 × 0.072 = $18,000 a year, divided by 12 = $1,500 for the first month.

    Common mistakes

    • Using the annual rate without dividing by 12.
    • Assuming the split between principal and interest stays constant. It changes every month.
    • Including taxes and insurance when the question asked only for principal and interest.

    Questions students ask

    Why does the interest portion fall each month?

    Interest is charged on the remaining balance. As principal is repaid, the balance drops, so less interest accrues.

    What does PITI stand for?

    Principal, Interest, Taxes and Insurance — the four components of a typical escrowed mortgage payment.

    Related formulas

    Practise this. The free 10-question math quiz drills these formulas, and the free timed practice exam puts them under exam conditions.

  • How to calculate property tax from a mill rate

    Tax = Assessed Value x Mill Rate / 1,000. One mill is $1 per $1,000 of assessed value, worked for the NY exam.

    Tax = Assessed Value × Mill Rate ÷ 1,000   (1 mill = $1 per $1,000)

    How to solve it, step by step

    1. Find the assessed value. Apply the assessment ratio to market value if one is given.
    2. Multiply assessed value by the mill rate.
    3. Divide by 1,000.
    4. Subtract any exemptions the question specifies.

    Worked examples

    Assessed value $200,000, mill rate 25. Annual tax = $200,000 × 25 ÷ 1,000 = $5,000.
    With an assessment ratio: a home with a $350,000 market value assessed at 60% has an assessed value of $210,000. At a mill rate of 18, tax = $210,000 × 18 ÷ 1,000 = $3,780.

    What the NY exam actually asks

    The exam separates market value from assessed value. Tax is always calculated on the assessed value, and you may have to apply an assessment ratio first.

    Try one yourself

    A home has a market value of $400,000 and is assessed at 40% of market value. The mill rate is 22. What is the annual tax?

    Show the answer

    $3,520. Assessed value = $400,000 × 0.40 = $160,000. Tax = $160,000 × 22 ÷ 1,000 = $3,520.

    Common mistakes

    • Taxing the market value instead of the assessed value.
    • Forgetting to divide by 1,000. A mill is a thousandth.
    • Ignoring exemptions such as STAR when the question includes one.

    Questions students ask

    What is one mill?

    One dollar of tax per $1,000 of assessed value, or one tenth of one percent.

    Is tax calculated on market value?

    No. It is calculated on assessed value, which is often a fraction of market value.

    Related formulas

    Practise this. The free 10-question math quiz drills these formulas, and the free timed practice exam puts them under exam conditions.

  • The gross rent multiplier formula

    GRM = Sale Price / Monthly Gross Rent. How to derive a multiplier from a comparable and apply it, with NY exam examples.

    GRM = Sale Price ÷ Monthly Gross Rent
    Annual version (GIM) = Sale Price ÷ Annual Gross Income

    How to solve it, step by step

    1. Take a comparable property that has sold and divide its price by its monthly gross rent to derive the GRM.
    2. Apply that multiplier to the subject property’s monthly rent.
    3. Keep monthly with monthly, annual with annual.

    Worked examples

    A $300,000 property rents for $2,000 a month. GRM = $300,000 ÷ $2,000 = 150.
    Applying it: a comparable property renting at $2,500/month with a GRM of 150 is worth $2,500 × 150 = $375,000.

    What the NY exam actually asks

    GRM is a quick comparison tool, not a precise valuation. The exam wants you to derive the multiplier from a sold comparable, then apply it to a subject property.

    Try one yourself

    A comparable sold for $420,000 and rented for $2,800 a month. The subject property rents for $3,100 a month. What is the indicated value?

    Show the answer

    $465,000. The GRM is $420,000 ÷ $2,800 = 150. Applied to the subject: $3,100 × 150 = $465,000.

    Common mistakes

    • Mixing monthly and annual rent. GRM uses monthly; GIM uses annual. They are not interchangeable.
    • Treating GRM like a cap rate. GRM uses gross rent and ignores expenses entirely.
    • Dividing rent by price instead of price by rent.

    Questions students ask

    Does GRM account for expenses?

    No. It uses gross rent only, which is why it is a rough screening tool rather than a valuation method.

    What is the difference between GRM and GIM?

    GRM uses monthly gross rent. GIM uses annual gross income. The multipliers are very different, so do not mix them.

    Related formulas

    Practise this. The free 10-question math quiz drills these formulas, and the free timed practice exam puts them under exam conditions.

  • The capitalization rate formula

    Cap Rate = NOI / Value, and rearranged, Value = NOI / Cap Rate. Both directions worked for the NY exam.

    Cap Rate = Net Operating Income ÷ Property Value
    Rearranged: Value = NOI ÷ Cap Rate

    How to solve it, step by step

    1. Establish net operating income — gross income minus operating expenses, before any debt service.
    2. Divide NOI by value to find the cap rate, or divide NOI by the cap rate to find value.
    3. Express the cap rate as a percentage.

    Worked examples

    A building produces $60,000 NOI and sells for $750,000. Cap rate = $60,000 ÷ $750,000 = 8%.
    Valuing a property: $80,000 NOI at a 8% cap rate → $80,000 ÷ 0.08 = $1,000,000. A lower cap rate produces a higher value.

    What the NY exam actually asks

    The exam tests the rearrangement more than the base formula. You are usually given NOI and a market cap rate and asked what the property is worth.

    Try one yourself

    A commercial property produces $96,000 in net operating income. Comparable buildings trade at a 6% cap rate. What is the indicated value?

    Show the answer

    $1,600,000. Value = NOI ÷ cap rate = $96,000 ÷ 0.06 = $1,600,000.

    Common mistakes

    • Using gross income instead of net operating income. NOI is after operating expenses but before debt service.
    • Subtracting mortgage payments from NOI. Debt service is never an operating expense.
    • Dividing the wrong way round when solving for value.

    Questions students ask

    Is the mortgage payment an operating expense?

    No. Debt service is excluded from NOI entirely.

    Does a higher cap rate mean a better property?

    Not necessarily. A higher cap rate implies higher perceived risk and a lower value for the same income.

    Related formulas

    Practise this. The free 10-question math quiz drills these formulas, and the free timed practice exam puts them under exam conditions.

  • Area and acre conversions

    1 acre = 43,560 sq ft, 1 square mile = 640 acres. Rectangle and triangle area, worked for NY exam lot problems.

    1 Acre = 43,560 sq ft  ·  1 Sq Mile = 640 Acres
    Rectangle = Length × Width  ·  Triangle = (Base × Height) ÷ 2

    How to solve it, step by step

    1. Convert all measurements to feet.
    2. Compute the area — length × width for a rectangle, or (base × height) ÷ 2 for a triangle.
    3. Divide by 43,560 to convert square feet to acres, or multiply by 43,560 to go the other way.

    Worked examples

    A lot measures 100 ft × 200 ft. Area = 100 × 200 = 20,000 sq ft, which is 20,000 ÷ 43,560 = 0.46 acres.
    Reversed: 2.5 acres = 2.5 × 43,560 = 108,900 sq ft. Memorise 43,560 — the exam will not give it to you.

    What the NY exam actually asks

    43,560 is the one number you simply have to know. Questions combine it with rectangle or triangle area, and sometimes with a price per square foot.

    Try one yourself

    A triangular lot has a base of 300 feet and a height of 290 feet. How many acres is it, to two decimal places?

    Show the answer

    1.00 acres. Area = (300 × 290) ÷ 2 = 43,500 sq ft. Then 43,500 ÷ 43,560 = 1.00 acres — just under one acre.

    Common mistakes

    • Not knowing 43,560 from memory.
    • Forgetting to halve the product on a triangular lot.
    • Mixing units — convert everything to feet before you multiply.

    Questions students ask

    How many square feet are in an acre?

    43,560. This is not provided on the exam, so memorise it.

    How many acres are in a square mile?

    640 acres, which is also one section in the government survey system.

    Related formulas

    Practise this. The free 10-question math quiz drills these formulas, and the free timed practice exam puts them under exam conditions.

  • How to prorate taxes and rent at closing

    Daily Rate = Annual Amount / 365, then multiply by days. The 360-day banker year trap and who owes what at closing.

    Daily Rate = Annual Amount ÷ 365  →  Proration = Daily Rate × Days

    How to solve it, step by step

    1. Divide the annual amount by 365, or by 360 if the question specifies a banker’s year.
    2. Count the days precisely for the period in question.
    3. Multiply the daily rate by the number of days.
    4. Decide who is debited and who is credited.

    Worked examples

    Annual property tax $4,380. Daily rate = $4,380 ÷ 365 = $12/day. The seller owned the property 90 days into the year, so the seller owes $12 × 90 = $1,080.
    Banker’s year version: $7,200 annual ÷ 360 = $20/day. For 75 days = $1,500. The same figures over 365 days give a different answer, so read which method the question specifies.

    What the NY exam actually asks

    Prorations decide who owes what on closing day. The seller is responsible through the day of closing in most NY practice, and the exam will tell you which convention to use.

    Try one yourself

    Annual taxes are $5,475, already paid in full by the seller. Closing is 100 days before year end. Using a 365-day year, what is the buyer’s share?

    Show the answer

    $1,500. The daily rate is $5,475 ÷ 365 = $15/day. The buyer owns the property for the final 100 days, so the buyer reimburses the seller $15 × 100 = $1,500.

    Common mistakes

    • Using 365 when the question says to use a 360-day banker’s year, or the reverse.
    • Crediting the wrong party. Work out who already paid and who is being reimbursed.
    • Miscounting the days. Count carefully to the closing date.

    Questions students ask

    Who pays for the day of closing in New York?

    Conventionally the seller is responsible through the closing date, but the exam will state the convention it wants.

    When is a 360-day year used?

    Some lenders and exam questions use a 360-day banker’s year for simplicity. Use whichever the question specifies.

    Related formulas

    Practise this. The free 10-question math quiz drills these formulas, and the free timed practice exam puts them under exam conditions.

  • How to calculate a down payment

    Down Payment = Purchase Price x Down Payment %. How it connects to the loan amount and LTV on the NY exam.

    Down Payment = Purchase Price × Down Payment %

    How to solve it, step by step

    1. Convert the down payment percentage to a decimal.
    2. Multiply by the purchase price.
    3. Subtract from the purchase price to get the loan amount if asked.
    4. Remember the down payment percentage and the LTV always total 100%.

    Worked examples

    20% down on $500,000 = $500,000 × 0.2 = $100,000. The loan is therefore $500,000 − $100,000 = $400,000.
    Reversed: a buyer puts $85,000 down on a $425,000 home. Down payment percentage = $85,000 ÷ $425,000 = 20%, which means an 80% LTV.

    What the NY exam actually asks

    Down payment and LTV are two views of the same number. If the down payment is 20%, the LTV is 80%. The exam often gives one and asks for the other.

    Try one yourself

    A buyer purchases a $340,000 home with a 15% down payment. What is the loan amount?

    Show the answer

    $289,000. The down payment is $340,000 × 0.15 = $51,000, so the loan is $340,000 − $51,000 = $289,000. That is an 85% LTV.

    Common mistakes

    • Reporting the down payment when the question asked for the loan amount.
    • Forgetting that down payment % and LTV always add to 100%.
    • Confusing the down payment with earnest money, which is only a deposit toward it.

    Questions students ask

    Is earnest money the same as the down payment?

    No. Earnest money is a good-faith deposit that is usually credited toward the down payment at closing.

    If the down payment is 15%, what is the LTV?

    85%. The two always add to 100%.

    Related formulas

    Practise this. The free 10-question math quiz drills these formulas, and the free timed practice exam puts them under exam conditions.

  • The loan-to-value (LTV) formula

    LTV = Loan Amount / Property Value. Why 80% matters, how PMI is triggered, and the appraisal twist the NY exam uses.

    LTV = Loan Amount ÷ Property Value

    How to solve it, step by step

    1. Identify the loan amount.
    2. Identify the value — the lesser of sale price and appraised value.
    3. Divide loan by value and express as a percentage.
    4. Check the 80% threshold if the question mentions PMI.

    Worked examples

    A $360,000 loan on a $400,000 property. LTV = $360,000 ÷ $400,000 = 90%. Above 80%, a conventional loan usually requires PMI.
    The appraisal twist: a home is under contract at $500,000 but appraises at $480,000. At 90% LTV the lender lends on the lower figure: $480,000 × 0.9 = $432,000.

    What the NY exam actually asks

    LTV questions test whether you know lenders use the lesser of sale price or appraised value. The 80% threshold and its link to PMI comes up repeatedly.

    Try one yourself

    A property is under contract at $520,000 and appraises at $500,000. The buyer obtains a $400,000 loan. What is the LTV?

    Show the answer

    80%. Lenders use the lower of price or appraisal, so the value is $500,000: $400,000 ÷ $500,000 = 80%.

    Common mistakes

    • Using the sale price when the appraisal came in lower. Lenders always use the lesser figure.
    • Inverting the fraction. Loan goes on top, value on the bottom.
    • Forgetting that LTV above 80% triggers PMI on conventional loans.

    Questions students ask

    What happens if the appraisal is lower than the sale price?

    The lender lends against the appraised value. The buyer must cover the gap in cash or renegotiate.

    Why does 80% LTV matter?

    Above 80% on a conventional loan, lenders generally require private mortgage insurance.

    Related formulas

    Practise this. The free 10-question math quiz drills these formulas, and the free timed practice exam puts them under exam conditions.
NY Real Estate Prep is an independent study tool for educational use only. Not affiliated with, endorsed by, or sponsored by the New York Department of State or any government or licensing authority. Practice questions are original and exam-style — not actual exam questions. Verify all licensing exam requirements at dos.ny.gov.