The NY real estate licensing exam tests your ability to apply concepts, not just define them. But you cannot apply a concept you cannot define. This glossary covers the most frequently tested vocabulary terms organized by topic area.
Agency Terms
Agent — A person authorized to act on behalf of another (the principal) in real estate transactions.
Principal — The person who authorizes an agent to act on their behalf. In real estate, this is typically the buyer or seller.
Fiduciary — A person who holds a position of trust and is legally required to act in the best interest of another party. A real estate agent is a fiduciary to their client.
Fiduciary duties — The legal obligations an agent owes to their principal. In New York, these include: loyalty, confidentiality, disclosure, obedience, reasonable care, and accounting.
Listing agent — The agent who represents the seller in a real estate transaction.
Buyer’s agent — The agent who represents the buyer in a real estate transaction.
Dual agency — When a single agent or brokerage represents both the buyer and seller in the same transaction. Must be disclosed and consented to by both parties in New York.
Exclusive right-to-sell listing — A listing agreement where the broker earns a commission regardless of who finds the buyer, including the seller themselves.
Exclusive agency listing — A listing agreement where the broker earns a commission unless the seller finds the buyer themselves.
Open listing — A listing agreement where multiple brokers can be hired and only the broker who finds the buyer earns a commission.
Net listing — A listing where the broker keeps everything above a set sale price as commission. Illegal in New York.
Contract Terms
Contract — A legally binding agreement between two or more parties. To be valid, a contract must have offer, acceptance, consideration, competent parties, and legal purpose.
Consideration — Something of value exchanged between parties in a contract. In real estate, this is typically money.
Contingency — A condition that must be met for a contract to become binding. Common contingencies include home inspection, financing, and appraisal.
Earnest money deposit — A good-faith deposit made by the buyer when entering into a purchase contract. Held in escrow until closing.
Escrow — A neutral third party that holds funds or documents until conditions of a transaction are met.
Void contract — A contract that has no legal effect from the beginning. Example: a contract where the seller does not own the property.
Voidable contract — A contract that is valid but can be cancelled by one party due to a defect. Example: a contract signed by a minor.
Breach of contract — When one party fails to fulfill their contractual obligations.
Specific performance — A legal remedy requiring a party to fulfill their contractual obligations rather than pay damages.
Liquidated damages — A pre-agreed amount of money to be paid if one party breaches the contract. Often the earnest money deposit.
Property Ownership Terms
Fee simple — The highest form of property ownership. The owner has complete control and can sell, lease, or pass the property to heirs.
Life estate — Ownership of property for the duration of a person’s life. The property reverts to the remainderman upon the life tenant’s death.
Joint tenancy — Ownership by two or more people with equal shares and the right of survivorship. When one owner dies, their share passes automatically to the surviving owners.
Tenancy in common — Ownership by two or more people where shares may be unequal and each owner’s share passes to their heirs (not surviving owners).
Tenancy by the entirety — A form of co-ownership available only to married couples in New York. Includes right of survivorship and protection from individual creditors.
Easement — The right to use another person’s property for a specific purpose. Example: a utility company’s right to run power lines across your land.
Easement by necessity — An easement created when a property is landlocked and has no other access to a public road.
Easement appurtenant — An easement that benefits an adjacent property and runs with the land when the property is sold.
Easement in gross — An easement that benefits an individual or company rather than an adjacent property. Example: utility easements.
License (property) — A personal, revocable right to use another’s land. Unlike an easement, it is not a property right.
Encroachment — When a structure or improvement extends onto a neighboring property.
Lien — A legal claim against a property as security for a debt. A lien must be satisfied before title can transfer clearly.
Mechanic’s lien — A lien filed by a contractor or supplier who has not been paid for work done on a property.
Finance Terms
Mortgage — A loan secured by real property. The borrower (mortgagor) pledges the property as collateral to the lender (mortgagee).
Amortization — The process of paying off a loan through regular scheduled payments of principal and interest.
Equity — The difference between a property’s market value and the outstanding mortgage balance.
Loan-to-value ratio (LTV) — The ratio of the loan amount to the appraised value of the property. A lower LTV means less risk for the lender.
Private mortgage insurance (PMI) — Insurance required by lenders when the buyer puts down less than 20%. Protects the lender, not the buyer.
Points — Upfront fees paid to a lender at closing. One point equals 1% of the loan amount. Points are used to buy down the interest rate.
Adjustable-rate mortgage (ARM) — A mortgage where the interest rate changes periodically based on a market index.
Conventional loan — A mortgage not insured or guaranteed by the federal government.
FHA loan — A mortgage insured by the Federal Housing Administration, allowing lower down payments and credit scores.
VA loan — A mortgage guaranteed by the Department of Veterans Affairs, available to eligible veterans and service members.
RESPA — The Real Estate Settlement Procedures Act. Requires lenders to provide disclosure of closing costs and prohibits kickbacks between settlement service providers.
TILA — The Truth in Lending Act. Requires lenders to disclose the annual percentage rate (APR) and total loan costs.
Valuation Terms
Appraisal — A professional estimate of a property’s market value.
Market value — The most probable price a property would sell for in a competitive and open market.
Comparative market analysis (CMA) — An estimate of value prepared by a real estate agent using recent sales of similar properties. Not the same as an appraisal.
Sales comparison approach — An appraisal method that estimates value by comparing the subject property to similar recently sold properties.
Cost approach — An appraisal method that estimates value based on the cost to replace the improvements minus depreciation, plus land value.
Income approach — An appraisal method that estimates value based on the income the property generates. Used for investment properties.
Capitalization rate (cap rate) — Net operating income divided by property value. Used to evaluate investment properties.
Depreciation — A loss in property value. Can be physical (wear and tear), functional (outdated features), or external (outside factors like nearby development).
Title and Closing Terms
Title — Legal ownership of a property.
Clear title — A title with no liens, encumbrances, or claims that would prevent transfer.
Title insurance — Insurance protecting the buyer or lender against defects in title that existed before the policy date.
Deed — The legal document that transfers ownership of real property from seller to buyer.
General warranty deed — A deed where the seller guarantees title against all claims, including those from before they owned the property.
Special warranty deed — A deed where the seller guarantees title only against claims arising during their period of ownership.
Bargain and sale deed — A deed with no warranties. The seller implies they have title but makes no guarantees.
Quitclaim deed — A deed that transfers whatever interest the grantor has with no warranties. Often used between family members or to clear title issues.
Closing — The final step in a real estate transaction where title transfers from seller to buyer.
Proration — The division of expenses (taxes, insurance, utilities) between buyer and seller at closing based on the closing date.
Practice the Full Exam
Knowing vocabulary is the foundation. Our NY Real Estate Practice Tests apply these terms in full exam-format questions across four 25-question sets.
For exam preparation strategies, see: How to Prepare for the NY Real Estate Exam
For math formulas and calculations, see: NY Real Estate Exam Math
Practice Exam Hub is not affiliated with the New York Department of State or any real estate licensing authority. This content is for general informational and educational purposes only.
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