NY Real Estate Exam NY Real Estate Contracts & Closings — Questions and Answers
Question 1: What is the role of an attorney in a NY real estate transaction?
- NY strongly recommends and customarily requires attorneys for both buyer and seller to review contracts, conduct closings, and protect client interests (Correct answer)
- Attorneys are optional in NY real estate
- Only the seller needs an attorney
- Attorneys are prohibited from real estate closings
Correct answer: NY strongly recommends and customarily requires attorneys for both buyer and seller to review contracts, conduct closings, and protect client interests
New York is an 'attorney state' where lawyers customarily handle contract preparation, title review, closing document preparation, and settlement proceedings, unlike many other states where title companies perform these functions.
Question 2: What is a 'binder' or 'offer to purchase' in NY real estate?
- An informal agreement showing intent to purchase, which is generally NOT legally binding in NY until a formal contract is signed by both parties (Correct answer)
- A legally binding purchase contract
- A mortgage commitment letter
- A title insurance policy
Correct answer: An informal agreement showing intent to purchase, which is generally NOT legally binding in NY until a formal contract is signed by both parties
In NY, a binder or verbal agreement is generally not enforceable under the Statute of Frauds. The transaction becomes binding only when a formal written contract is signed by both parties with their attorneys' approval.
Question 3: What is the standard contract contingency period in NY residential transactions?
- There is no standardized contingency period; terms are negotiated between attorneys, but mortgage contingencies typically allow 30-60 days (Correct answer)
- 7 days for all contingencies
- No contingencies are allowed in NY
- 90 days minimum for all contingencies
Correct answer: There is no standardized contingency period; terms are negotiated between attorneys, but mortgage contingencies typically allow 30-60 days
NY contracts are heavily customized by attorneys. Mortgage contingencies typically allow 30-60 days for loan approval. Inspection contingencies, if included, are also negotiated rather than standardized.
Question 4: What is the standard down payment at contract signing in NY?
- Typically 10% of the purchase price, held in the seller's attorney's escrow account (Correct answer)
- 1% of the purchase price
- No down payment is required at contract signing
- 50% of the purchase price
Correct answer: Typically 10% of the purchase price, held in the seller's attorney's escrow account
The customary contract deposit in NY is 10% of the purchase price, held in the seller's attorney's escrow account (IOLA account) until closing or as otherwise directed by the contract terms.
Question 5: What is a 'time of the essence' clause in a NY real estate contract?
- A provision making the closing date a firm deadline, where failure to close by that date constitutes a material breach (Correct answer)
- A clause requiring quick responses to offers
- A provision about business hours
- A clause about inspection scheduling
Correct answer: A provision making the closing date a firm deadline, where failure to close by that date constitutes a material breach
A time of the essence clause makes the closing date a hard deadline. Without it, NY courts generally allow reasonable adjournments. With it, failure to close by the specified date can result in contract termination and forfeiture of deposit.
Question 6: What transfer taxes apply to real estate sales in New York?
- NY State transfer tax (0.4%), plus NYC transfer tax (1-1.425% in NYC), plus mansion tax (1%+ on sales over $1 million) (Correct answer)
- No transfer taxes exist in NY
- Only federal transfer taxes apply
- A flat $500 fee per transaction
Correct answer: NY State transfer tax (0.4%), plus NYC transfer tax (1-1.425% in NYC), plus mansion tax (1%+ on sales over $1 million)
NY imposes a state transfer tax ($2 per $500 of consideration, effectively 0.4%). NYC adds its own transfer tax. The 'mansion tax' adds 1% on residential sales over $1 million, with higher rates for properties over $2 million.
NY Real Estate Exam NY Real Estate Contracts & Closings
What is the role of an attorney in a NY real estate transaction?