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What the official subject covers
- 1
Clients, customers, principals, agents, subagents, and broker's agents
- 2
Loyalty, confidentiality, disclosure, obedience, reasonable care, and accounting
- 3
Creation, scope, ratification, estoppel, and termination of agency
- 4
Seller, landlord, buyer, and tenant agency
- 5
Dual agency, designated sales agents, informed consent, and undisclosed dual agency
- 6
Real Property Law section 443 disclosure forms and timing
- 7
Listings, buyer-representation agreements, compensation, and antitrust risks
- 8
Independent contractor and employee distinctions
The exam lens
Identify whom the licensee represents before choosing a duty.
Section 443 timing depends on the licensee's role. First substantive contact is not the deadline for every recipient.
Dual agency requires informed consent from the affected principals.
Subject vocabulary
Know these terms before the scenarios
Open any term for a direct definition, the exam cue, a New York example, the common mix-up and links to the source material.
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Complete lessons
Learn the rules, then apply them.
Work in order the first time. Each lesson gives you the rule, why it matters, a New York example, the common mistake and a short recall check.
Chapter 1
Agency foundations
Learn who represents whom, how authority begins, how compensation differs from representation, and which duties continue after agency ends.
1Agent, principal, client and customer
Exam rule
Under Section 443, an agent is a licensed broker, associate broker or salesperson acting as a fiduciary. The principal is the client the agent represents. A customer may receive help but is not represented. The client receives fiduciary duties. Every party is still owed honest and fair dealing. A general agent may handle a broad range of ongoing matters. A special agent has limited authority for a stated task. A real estate listing broker is usually a special agent.
Why it matters
Start every agency question by naming the client. Then decide how much authority the agent received and what duties are owed to everyone else.
New York scenario
A listing agent helps an unrepresented buyer submit an offer. The seller remains the client and the buyer remains a customer. The help alone does not create buyer agency.
Common misconception: A license permits brokerage work. It does not make every person the licensee helps a client.
Check your recall
Who is the principal?
The principal is the client whom the agent represents.
How does a customer differ from a client?
A customer may receive lawful help, but the agent does not owe that person fiduciary advocacy.
How does a special agent differ from a general agent?
A special agent has limited authority for a stated task. A general agent may handle a broader range of ongoing matters.
- Real Property Law §443: Agency Disclosure: Real Property Law §443(1)(a) and §443(4)(a) to (b), agent, client and opposing-party duties
- Real Estate Salesperson 77-Hour Curriculum: Subject 2, items A and B; key term general agent; key term special agent
2Agency versus brokerage activity
Exam rule
Brokerage is licensed real estate activity. Agency is a fiduciary relationship. They are not the same. A salesperson performs brokerage work through a supervising broker. The brokerage agreement and the parties' conduct determine whether the firm represents a seller, buyer, landlord or tenant. Section 443 does not apply when a licensee works in an agreed non-agent role. Common-law and other legal duties may still apply.
Why it matters
The exam may describe licensed work but no agency. First identify the work. Then decide if the person is also a client.
New York scenario
A licensee gives a customer public facts and access to a property. Those services are brokerage activity, but they do not prove that the licensee represents the customer.
Common misconception: A commission, an MLS entry or help with an offer does not identify the client by itself.
Check your recall
What does brokerage describe?
Brokerage describes licensed real estate activity.
What does agency describe?
Agency describes a fiduciary relationship with a principal.
Does Section 443 govern an agreed non-agent role?
No. Its disclosure rules do not apply to that role, but common-law and other duties may remain.
- Real Property Law §443: Agency Disclosure: Real Property Law §443(1)(a), §443(5) and §443(6), fiduciary capacity, non-agent capacity and common law
- Real Estate Salesperson 77-Hour Curriculum: Subject 2, item C
3Creating agency and authority
Exam rule
Express agency starts with a stated agreement. Implied agency can arise from conduct. Ratification occurs when a principal knows about an unauthorized act and accepts it. Estoppel may stop a principal from denying authority. It applies when the principal caused another person to reasonably rely on that authority. Payment alone does not create agency. The agreement and conduct must show who is represented.
Why it matters
Creation questions hide the answer in the conduct. Ask what the principal said or did, what the agent did, and what happened afterward.
New York scenario
An owner learns that a broker accepted an offer without authority and then knowingly accepts the benefit. Those facts may support ratification.
Common misconception: Do not mix up ratification and estoppel. Ratification accepts a past act. Estoppel protects a person who relied on what the principal did.
Check your recall
What creates express agency?
A stated agreement creates express agency.
What fact points to ratification?
The principal knowingly accepts an act that was not authorized when performed.
What fact points to estoppel?
The principal caused another person to reasonably believe the agent had authority.
- Real Estate Salesperson 77-Hour Curriculum: Subject 2, item D
4Compensation, procuring cause and antitrust
Exam rule
Compensation is negotiable and does not decide representation. Procuring cause asks whether the broker started an unbroken chain that led to the completed deal. Competitors must set prices and business choices on their own. Price fixing sets prices together. Market allocation divides customers or areas. A group boycott is a joint refusal to deal. A tie-in conditions one service on buying another. A referral payment for covered settlement business can violate RESPA.
Why it matters
Keep representation, the right to compensation and the legality of a payment separate. Each issue uses a different rule.
New York scenario
Two firms agree that neither will take a listing below a six percent commission. That is a price-fixing issue even if each seller later signs a listing agreement.
Common misconception: Telling the parties does not make every payment lawful. Client consent covers pay from both sides. RESPA has a separate rule for mortgage and settlement referrals.
Check your recall
What does procuring cause ask?
It asks whether the broker's efforts began an unbroken chain that led to the completed transaction.
What four antitrust patterns does the syllabus name?
Price fixing, market allocation, group boycotting and tie-in arrangements.
Does disclosure make a mortgage referral payment lawful?
No. RESPA can still bar payment for referring covered settlement-service business.
- Real Estate Salesperson 77-Hour Curriculum: Subject 2, items D and H
- Real Estate License Law: March 2026: 19 NYCRR 175.7
- 12 CFR Part 1024: Real Estate Settlement Procedures Act: Regulation X, 12 CFR 1024.14(b), (c) and (g)
5Termination and duties that survive
Exam rule
Agency can end when work is done, time expires or both sides agree. It can also end through revocation or renunciation. Death, incapacity, loss of the property or law may end it too. Some duties remain. The former agent must account for property already held and protect confidential information. Ending agency may also break a contract.
Why it matters
The authority to act may stop before every legal duty does. Ask what ended, what property remains, and whether a contract was broken.
New York scenario
A listing expires. The former agent may not use the seller's confidential need for a quick sale to help a later buyer.
Common misconception: A principal often may revoke the agent's authority. The principal may still owe damages for ending the contract without a lawful reason.
Check your recall
Name four ways agency may end.
Examples include performance, expiration, mutual agreement, revocation, death and operation of law.
Does termination erase the duty to account?
No. The agent must still account for money or property already held.
Can confidentiality continue after termination?
Yes. Ending the agency does not make the former client's confidential information free to use.
- Real Estate Salesperson 77-Hour Curriculum: Subject 2, item J
- Real Property Law §443: Agency Disclosure: Real Property Law §443(4)(a) to (b), confidentiality and duty to account
Chapter 2
Duties and authority
Master fiduciary duties, authority, customer protections, broker supervision and the liability that can follow another person's acts.
1Fiduciary duties, self-dealing and misrepresentation
Exam rule
New York's forms name six fiduciary duties. They are reasonable care, undivided loyalty, confidentiality, full disclosure, obedience and the duty to account. Obedience covers lawful orders only. Accountability means the agent must answer for conduct and property handled. A secret profit or self-dealing can breach loyalty. Misrepresentation can lead to discipline, a lawsuit or lost pay. When the agent has a personal interest, full disclosure and informed consent are vital.
Why it matters
The six duties are the center of agency law. Learn what each duty requires and where a conflict, secret benefit or false statement breaks it.
New York scenario
An agent wants to buy the client's property through a hidden company. The agent must reveal the personal interest and cannot put personal profit ahead of the client.
Common misconception: Confidentiality does not allow a lie. It does not hide a fact that the law says must be disclosed.
Check your recall
What six fiduciary duties appear on New York's forms?
Reasonable care, undivided loyalty, confidentiality, full disclosure, obedience and the duty to account.
Must an agent obey an unlawful instruction?
No. Obedience applies only to lawful instructions.
Why is secret self-dealing a problem?
It puts the agent's interest against the client's interest and can violate loyalty and full disclosure.
- Real Property Law §443: Agency Disclosure: Real Property Law §443(4)(a) to (b), fiduciary and opposing-party duties
- Real Estate License Law: March 2026: Real Property Law §441-c; 19 NYCRR 175.4
- Real Estate Salesperson 77-Hour Curriculum: Subject 2, item B; key term accountability; key term misrepresentation; key term self-dealing
2Actual, apparent and unauthorized authority
Exam rule
Actual authority runs from the principal to the agent. It can be express or implied. Apparent authority comes from the principal's words or conduct toward a third party. An agent cannot create it by claiming authority. An agent who acts beyond actual authority may be personally responsible. Later ratification may bind the principal, but it does not erase every consequence for the agent.
Why it matters
Ask who spoke to whom. This separates actual from apparent authority. It also reveals an unauthorized act.
New York scenario
A seller lets a broker announce approvals in the seller's presence many times. A buyer may rely on the seller's conduct as apparent authority.
Common misconception: An agent's title or claim cannot create apparent authority. The belief must come from the principal's conduct.
Check your recall
Who communicates actual authority?
The principal communicates actual authority to the agent.
Who creates apparent authority?
The principal creates it through words or conduct that reach a third party.
Can the agent create apparent authority alone?
No. The reasonable belief must trace back to the principal.
- Real Estate Salesperson 77-Hour Curriculum: Subject 2, items B and D
3Client duties versus customer duties
Exam rule
A client receives fiduciary advocacy. A customer does not receive undivided loyalty. Duties to the other side depend on the agent's role. A seller's or landlord's agent must use reasonable skill and care and act honestly. The agent also discloses known property facts that have a material effect on value or appeal, unless law provides otherwise. A buyer's or tenant's agent owes similar care and honesty. That agent discloses known facts about the client's ability or willingness to perform when it does not conflict with duties to the client.
Why it matters
The opposite party is protected, but the disclosure rule is not identical for every agent. Read the role before choosing what must be revealed.
New York scenario
A seller's agent may not reveal the seller's confidential minimum price. The agent still cannot lie about the property and must make disclosures required by law.
Common misconception: Some facts are not material defects under Section 443-a. A buyer may submit a written inquiry. The seller may choose whether to reply.
Check your recall
Who receives undivided loyalty?
The agent's client receives undivided loyalty.
What does a seller's agent owe the buyer?
Reasonable skill and care, honest and fair dealing, good faith and required disclosure of known material property facts.
What does a buyer's agent disclose to the seller?
Known facts about the buyer's ability or willingness to perform when disclosure is consistent with duties to the buyer.
- Real Property Law §443: Agency Disclosure: Real Property Law §443(4)(a) to (b), duties to clients and opposing parties
- Real Property Law §443-a: Disclosure obligations: Real Property Law §443-a(1) to (3), excluded stigmas and written inquiries
- Real Estate Salesperson 77-Hour Curriculum: Subject 2, item B
4Broker supervision and vicarious liability
Exam rule
A salesperson or associate broker performs licensed work under a broker's supervision. The broker must give regular guidance and oversight. Cooperation between firms does not decide agency. Agreements and disclosures do. Section 443 gives a special liability rule for a broker's agent. The principal has no direct relationship with that agent and no vicarious liability for the agent's acts. The listing, buyer's or tenant's agent that directs the broker's agent can be liable for those acts.
Why it matters
Keep supervision, cooperation and representation apart. Then ask who may be responsible for someone else's act.
New York scenario
An outside broker agrees to act as the listing agent's broker's agent. The seller cannot direct that outside broker, but the listing agent can.
Common misconception: Tax treatment as a contractor does not end Article 12-A supervision. It also does not decide the cooperating broker's role.
Check your recall
Who supervises a salesperson's licensed work?
The sponsoring real estate broker supervises that work.
Does cooperation alone create an agency role?
No. The agreements and disclosures identify the role.
Who can be liable for a broker's agent under Section 443?
The agent that directs the broker's agent can be liable. The principal has no vicarious liability under that rule.
- Real Estate License Law: March 2026: Real Property Law §§440(2), 440-a and 441(1)(d); 19 NYCRR 175.21(a)
- Real Property Law §443: Agency Disclosure: Real Property Law §443(1)(k), broker's agent direction and vicarious liability
- Real Estate Salesperson 77-Hour Curriculum: Subject 2, items B and C; key term cooperating agent; key term vicarious liability
Chapter 3
Representation choices
Compare seller, buyer, landlord, tenant, subagency, dual agency and company policy choices without losing track of the client.
1Seller and landlord agency
Exam rule
A seller's or landlord's agent represents the owner and owes that owner fiduciary duties. An affiliated salesperson serves the same client through the broker. Contact with a buyer or tenant does not change the role. An in-house deal becomes dual agency only if the brokerage represents both sides with informed written consent. In a cooperative deal, the outside broker may be a buyer's agent, broker's agent or subagent. Cooperation alone does not choose the role.
Why it matters
Listing-side questions add showings, offers and other firms to hide the client. Keep the role tied to the agency agreement and disclosure.
New York scenario
A buyer asks the listing salesperson for the seller's lowest price. The salesperson must protect the seller's bargaining position unless the seller allows disclosure.
Common misconception: An in-house sale is not automatically dual agency. The firm must actually represent both sides, and both clients must consent in writing.
Check your recall
Whom does a seller's or landlord's agent represent?
The agent represents the owner who is selling or leasing.
Does handling a buyer's offer create buyer agency?
No. Presenting the offer does not change the listing-side role.
What roles may an outside cooperating broker hold?
The broker may be a buyer's agent, broker's agent or subagent, depending on the agreement and disclosure.
- Real Property Law §443: Agency Disclosure: Real Property Law §443(1)(d), (h), (m), (o) and §443(4)(a) to (b), seller and landlord agency
- Real Estate Salesperson 77-Hour Curriculum: Subject 2, item I
2Buyer and tenant agency
Exam rule
A buyer's or tenant's agent is engaged to find property or negotiate terms for that client. The agent owes the buyer or tenant fiduciary duties and does not represent the owner. A person may choose to stay a customer, so everyone does not need an agent. Compensation may come from the client, the listing side or another agreed source. The payment route does not decide representation.
Why it matters
Buyer and tenant agency gives the property seeker an advocate. The exam often tries to change the role by changing who pays.
New York scenario
A buyer's agent learns that the buyer can pay more. The agent does not volunteer that fact to the seller unless the buyer allows it or law requires it.
Common misconception: Seller-funded compensation does not turn a buyer's agent into the seller's agent.
Check your recall
Whom does a buyer's or tenant's agent represent?
The agent represents the buyer or tenant who engaged the agent.
Must every buyer or tenant have an agent?
No. A person may remain an unrepresented customer.
Does the payment source decide representation?
No. The agency agreement and conduct decide the role.
- Real Property Law §443: Agency Disclosure: Real Property Law §443(1)(c), (n) and §443(4)(a) to (b), buyer and tenant agency
- Real Estate Salesperson 77-Hour Curriculum: Subject 2, items E, H and I
3Subagency and the broker's agent alternative
Exam rule
A subagent serves a principal through another agent. The subagent owes fiduciary duties to that principal and customer duties to the other side. The principal may face vicarious liability for a subagent's authorized acts. A blanket unilateral offer of subagency was an old MLS practice. It is not an automatic rule today. A seller may reject subagency. Firms can still work together through buyer agents or broker's agents. A broker's agent has no direct relationship with the principal and follows the engaging agent's direction.
Why it matters
Subagency is not required when firms cooperate. Ask who created the role, who is served and who may direct the outside broker.
New York scenario
An outside broker brings a buyer to a listing. Check the agreement and forms before assigning a role. The outside broker may represent the buyer instead of serving the seller as a subagent.
Common misconception: MLS access or an offer of compensation does not create subagency by itself.
Check your recall
Who does a subagent serve?
A subagent serves the principal through another agent.
May a seller reject subagency?
Yes. Cooperation can instead use buyer agency or a broker's agent relationship.
How is a broker's agent different?
A broker's agent has no direct relationship with the principal and takes direction from the agent that engaged it.
- Real Property Law §443: Agency Disclosure: Real Property Law §443(1)(h), (k) and (o), subagents and broker's agents
- Real Estate Salesperson 77-Hour Curriculum: Subject 2, items E and F
4Disclosed and undisclosed dual agency
Exam rule
Dual agency exists when one agent or brokerage represents both sides of the same deal. A single licensee can be the dual agent, or a broker can become dual through different affiliated licensees. Both principals must give informed written consent. The agent must explain the conflict and the loss of undivided loyalty. Undisclosed dual agency breaches fiduciary duties. It can lead to discipline, loss of compensation and civil liability.
Why it matters
Dual agency limits the advice and loyalty either side can receive. Consent must come before the agent performs the conflicting role.
New York scenario
A listing firm also wants to represent the buyer. A compensation disclosure is not enough. Both clients must understand the dual role and consent in writing.
Common misconception: Silence, oral notice or consent from only one side does not create lawful dual agency.
Check your recall
When does dual agency exist?
It exists when one agent or brokerage represents opposing sides in the same transaction.
What consent does dual agency require?
Both principals must give informed written consent.
What can undisclosed dual agency cause?
It can cause discipline, loss of compensation and civil liability for breaching fiduciary duties.
- Real Property Law §443: Agency Disclosure: Real Property Law §443(1)(i), §443(3)(f) and §443(4)(a) to (b), dual agency and consent
- Real Estate License Law: March 2026: 19 NYCRR 175.7
- Real Estate Salesperson 77-Hour Curriculum: Subject 2, items G and H
5Dual agency with designated sales agents
Exam rule
A dual-agent broker may appoint one affiliated salesperson or associate broker for each client. Both principals must give informed written consent. Each designated sales agent advocates for the assigned client in negotiations. Neither can provide the full range of fiduciary duties or undivided loyalty. The supervising broker remains a dual agent. The form must name the agent appointed for each client.
Why it matters
Designation gives each client a day-to-day advocate, but it does not remove the brokerage-level conflict.
New York scenario
One salesperson is named for the seller and another for the buyer. The written form identifies both agents and explains the limits of the arrangement.
Common misconception: A designated sales agent does not become a separate brokerage. The supervising broker is still a dual agent.
Check your recall
Who must consent to designated agency?
Both principals must give informed written consent.
What must the form identify?
It names the sales agent appointed for each client.
Does the supervising broker stop being a dual agent?
No. The supervising broker remains a dual agent.
- Real Property Law §443: Agency Disclosure: Real Property Law §443(1)(j), (q) and §443(4)(a) to (b), designated sales agents and limitations
- Real Estate Salesperson Forms and Disclosures: Buyer and Seller and Landlord and Tenant forms, designated-agent appointments
6Single agency, company policies and conflicts
Exam rule
A brokerage may represent only sellers, only buyers, or one side in each deal. It may allow consensual dual agency for in-house deals or use designated sales agents. A company policy does not replace disclosure or consent. The other party may stay unrepresented or hire an unaffiliated agent. A licensee should spot conflicts early, explain lawful choices and document the selected role. A personal interest, including buying a client's property, requires full disclosure and careful consent.
Why it matters
A clear company policy can help stop hidden dual agency. Each deal still needs the right forms and agreements.
New York scenario
A listing firm's buyer prospect wants undivided loyalty. The buyer may hire an outside buyer's agent while the listing firm remains the seller's single agent.
Common misconception: The choice that creates the largest commission is not automatically the lawful or loyal choice.
Check your recall
What is single agency?
The brokerage represents one side of the transaction, not both.
Can company policy replace written dual-agency consent?
No. Both clients still must give the consent required by law.
What should a licensee do when a conflict appears?
Identify it early, explain lawful choices and document the role the parties select.
- Real Property Law §443: Agency Disclosure: Real Property Law §443(4)(a) to (b), single, dual and designated agency choices
- Real Estate Salesperson 77-Hour Curriculum: Subject 2, items H and I
Chapter 4
Disclosure and agreements
Apply Section 443 to covered property, current forms, first substantive contact, refusals, agreements and changes in agency role.
1Covered property and current disclosure forms
Exam rule
Section 443 covers residential real property improved by a one-to-four family dwelling or a condominium or cooperative apartment used or intended as a home. It excludes vacant land where a dwelling is still to be built. Since January 1, 2011, New York has used one form for buyers and sellers and another for landlords and tenants. The earlier form is historical. The current form explains agency roles and says it is not a contract.
Why it matters
Check the property and transaction before choosing a form. Then keep the disclosure separate from the agreement that creates representation.
New York scenario
A co-op apartment used as a home is covered. Vacant land for a future home is not.
Common misconception: Signing the disclosure form does not create a listing agreement or an exclusive buyer agreement.
Check your recall
What property does Section 443 cover?
It covers improved one-to-four family homes and residential condo or co-op apartments.
Does it cover vacant land for a future home?
No. The definition excludes that unimproved land.
What two current forms does New York use?
One form covers buyers and sellers. The other covers landlords and tenants.
- Real Property Law §443: Agency Disclosure: Real Property Law §443(1)(f), §443(2) and §443(4), covered property and forms
- Real Estate Salesperson Forms and Disclosures: Buyer and Seller and Landlord and Tenant disclosure forms
- Real Estate Salesperson 77-Hour Curriculum: Subject 2, item L
2First substantive contact, signature and refusal
Exam rule
A listing agent gives the form to the owner before the listing agreement. A seller's or landlord's agent gives it to the other side at first substantive contact. A buyer's or tenant's agent gives it to the client before the agency agreement and to the other side at first substantive contact. The statute does not define that phrase. Treat it as the point when casual talk becomes a meaningful discussion of a property, needs, finances or transaction terms. Give a copy of the signed form and keep one for at least three years.
Why it matters
Timing, role and records decide most disclosure questions. Deliver the form before advice or facts make the contact substantive.
New York scenario
A buyer refuses to sign. The agent does not sign for the buyer. The agent writes the facts under oath or affirmation and keeps the declaration for at least three years.
Common misconception: Waiting for an offer, contract or closing is too late. Refusal changes the record to keep, not the duty to deliver the form.
Check your recall
When does a listing agent give the form to the owner?
Before entering into the listing agreement.
What should the signature page make clear?
It identifies the licensee, brokerage, represented party, agency role, signatures and date.
What happens when a person refuses to sign?
The agent makes a written declaration under oath or affirmation and keeps it for at least three years.
- Real Property Law §443: Agency Disclosure: Real Property Law §443(3)(a) to (e), timing, copies, acknowledgment, refusal and three-year retention
- Real Estate Salesperson Forms and Disclosures: Current disclosure forms, role boxes and signature page
- Real Estate Salesperson 77-Hour Curriculum: Subject 2, items L and M
3Listing and representation agreements
Exam rule
An open listing lets several brokers compete, and compensation usually follows procuring cause. Under an exclusive right to sell, the owner owes the agreed commission even if the owner finds the buyer. Under an exclusive agency, the owner pays no commission when the owner alone finds the buyer. If another broker finds the buyer, New York's required explanation says the owner owes both that broker and the present broker. Rentals may use an exclusive right to rent. Buyer brokers may use an exclusive right to represent.
Why it matters
The agreement type controls services and commission rights. Read the name, the duration and who found the buyer before choosing a rule.
New York scenario
An owner signs an exclusive agency and personally finds the buyer without broker help. The owner does not owe the listing broker under that stated arrangement.
Common misconception: The agency disclosure form is not a contract. It cannot replace a listing, rental or buyer-representation agreement.
Check your recall
What is the owner-found-buyer rule under an exclusive right to sell?
The owner still owes the agreed commission when the owner finds the buyer.
What is the owner-found-buyer rule under an exclusive agency?
The owner pays no commission when the owner alone finds the buyer.
What agreements may rental and buyer clients use?
A rental may use an exclusive right to rent, and a buyer may use an exclusive right to represent.
- Real Estate License Law: March 2026: 19 NYCRR 175.24(b)
- Real Property Law §443: Agency Disclosure: Real Property Law §443(1)(c), (e), §443(3)(a), (c) and §443(4), agreements and disclosure forms
- Real Estate Salesperson 77-Hour Curriculum: Subject 2, item K
4Advance consent and changing agency roles
Exam rule
A seller, landlord, buyer or tenant may give advance informed consent to dual agency on the statutory form. Advance consent to designated agency must identify the agent appointed for each side. Consent must match the role actually performed. If a deal changes from single agency to dual agency, disclose the change and obtain the required written consent before acting in the new role. A vague earlier conversation is not enough.
Why it matters
Agency roles can change during a deal. The documents must keep pace so each client understands the conflict and the person assigned to that client.
New York scenario
A buyer represented by the listing firm becomes interested in the firm's own listing. The broker gets both clients' written consent before the firm acts for both sides.
Common misconception: Advance consent is not permission to hide a conflict or leave the designated-agent names blank.
Check your recall
Where may advance informed consent appear?
It may be recorded on the statutory disclosure form.
What must designated-agency consent identify?
It identifies the agent appointed for each principal.
What happens before an agent changes from single to dual agency?
The change is explained and both principals give the required informed written consent.
- Real Property Law §443: Agency Disclosure: Real Property Law §443(1)(p) to (q), §443(3)(f) and §443(4), advance consent and appointments
- Real Estate Salesperson Forms and Disclosures: Buyer and Seller and Landlord and Tenant forms, advance-consent fields
- Real Estate Salesperson 77-Hour Curriculum: Subject 2, items G, L and M
Chapter 5
Independent-contractor issues
Keep federal tax, New York unemployment, workers' compensation and mandatory broker supervision in their correct lanes.
1Common-law worker factors
Exam rule
A contract label or Form 1099 does not decide worker status by itself. New York unemployment guidance examines the real relationship. It weighs supervision, direction and control. Signs of an independent business include investment, paying expenses, choosing a schedule, risking profit or loss, setting or negotiating pay, offering services to others and being free to refuse work. No single fact controls every case.
Why it matters
Worker status depends on the program and the actual facts. A written label cannot overcome daily control that points the other way.
New York scenario
A firm calls a worker an independent contractor but sets every hour, method and daily task. The label does not end the unemployment analysis.
Common misconception: Commission pay can be relevant, but it does not settle every federal and state worker-status test.
Check your recall
Does a Form 1099 settle worker status?
No. The real relationship and the governing test control.
What facts can show employer control?
Required hours, prescribed methods and detailed supervision can show control.
What facts can show an independent business?
Investment, expenses, schedule control, profit or loss risk and services offered to others are useful signs.
- Unemployment Insurance and Independent Contractors FAQ: Independent Contractors FAQ, control factors and independent-business indicators
- Real Estate Salesperson 77-Hour Curriculum: Subject 2; independent contractor; items A, B and C
2IRC Section 3508
Exam rule
Federal tax law treats a qualified real estate agent as a statutory nonemployee when three conditions are met. The worker is a licensed real estate agent. Substantially all pay is tied to sales or other output rather than hours. A written contract states that the worker will not be treated as an employee for federal tax purposes. The category can include appraisal work tied to sales or output. It does not include property-management services.
Why it matters
Section 3508 is a federal tax rule, not a universal worker test. Check every element before applying self-employed tax treatment.
New York scenario
A licensed salesperson is paid by completed transactions and signs the required federal tax contract. Those facts fit Section 3508. Hourly property management is outside that category.
Common misconception: A license alone is not enough. The pay method and written federal tax agreement also matter.
Check your recall
What three conditions does Section 3508 require?
A real estate license, output-based pay and a written federal nonemployee contract.
Does pay based on hours satisfy the output test?
No. Substantially all pay must relate to sales or other output.
Are property-management services included?
No. They fall outside this federal real estate agent category.
- IRS Employment Tax Guidelines: Qualified Real Estate Agents: Internal Revenue Manual 4.23.5.7.5.1, qualified real estate agent conditions, appraisal and property-management scope
- Real Estate Salesperson 77-Hour Curriculum: Subject 2; independent contractor; items D, E and F
3New York labor and workers' compensation
Exam rule
New York unemployment and workers' compensation use their own rules. The workers' compensation exclusion requires output-based pay and a written contract. The contract says the agent is an independent contractor and is not an employee for tax purposes. It allows chosen hours, work from home or an office, outside employment and ending the contract on notice. The firm may provide an office, clerical help and supplies. The agent pays other expenses. Both sides still follow Article 12-A.
Why it matters
A federal tax result does not settle a New York program. Identify the program, then use its conditions and consequences.
New York scenario
A written contract calls a salesperson a contractor, but the broker controls every hour and work method. The paper alone does not end the status inquiry.
Common misconception: A contract obtained under duress or contradicted by real control is not a safe shortcut. Substance matters more than the label.
Check your recall
Does Section 3508 decide New York unemployment status?
No. New York unemployment uses its own governing rules.
What freedoms appear in the workers' compensation contract?
The agent chooses hours and work location, may work elsewhere and may end the contract on notice.
What may happen when the governing exclusion is not met?
The worker may be treated as an employee, and the firm may owe the coverage, contributions or withholding required by that law.
- Workers’ Compensation Coverage: Licensed Real Estate Agents: Licensed real estate agents, output-based pay and eight written-contract provisions
- Unemployment Insurance and Independent Contractors FAQ: Independent Contractors FAQ, actual relationship and unemployment coverage
- Real Estate Salesperson 77-Hour Curriculum: Subject 2; independent contractor; items D, E and F
4Required supervision versus control of methods
Exam rule
Article 12-A requires a broker to supervise licensed work. The broker must give regular, frequent and consistent guidance, instruction, oversight and supervision. The broker also keeps the transaction records required by Section 175.23. New York workers' compensation guidance says Article 12-A compliance does not by itself defeat contractor status. Enforcing license law is different from controlling every hour and ordinary work method.
Why it matters
The broker must protect the public without assuming that every contractor is an employee. Keep legal supervision and day-to-day method control in separate lanes.
New York scenario
A broker requires lawful ads, disclosures, escrow steps and transaction files. A qualifying contractor can still choose ordinary hours and work methods.
Common misconception: A contractor still needs broker supervision. Supervision alone does not decide worker status.
Check your recall
Does Article 12-A require supervision?
Yes. The sponsoring broker must supervise the salesperson's licensed activity.
What records does Section 175.23 address?
It requires the broker to maintain covered transaction records.
Does Article 12-A compliance alone defeat contractor status?
No. The workers' compensation guidance says compliance alone does not defeat the exclusion.
- Real Estate License Law: March 2026: 19 NYCRR 175.21(a) and 175.23
- Workers’ Compensation Coverage: Licensed Real Estate Agents: Licensed real estate agents, Article 12-A compliance and control of work methods
- Real Estate Salesperson 77-Hour Curriculum: Subject 2; independent contractor; items E and F
Scenario lab
See the rules in New York situations
Scenario 1
Agent, principal, client and customer
A listing agent helps an unrepresented buyer submit an offer. The seller remains the client and the buyer remains a customer. The help alone does not create buyer agency.
What the exam is testing
Under Section 443, an agent is a licensed broker, associate broker or salesperson acting as a fiduciary. The principal is the client the agent represents. A customer may receive help but is not represented. The client receives fiduciary duties. Every party is still owed honest and fair dealing. A general agent may handle a broad range of ongoing matters. A special agent has limited authority for a stated task. A real estate listing broker is usually a special agent.
Scenario 2
Subagency and the broker's agent alternative
An outside broker brings a buyer to a listing. Check the agreement and forms before assigning a role. The outside broker may represent the buyer instead of serving the seller as a subagent.
What the exam is testing
A subagent serves a principal through another agent. The subagent owes fiduciary duties to that principal and customer duties to the other side. The principal may face vicarious liability for a subagent's authorized acts. A blanket unilateral offer of subagency was an old MLS practice. It is not an automatic rule today. A seller may reject subagency. Firms can still work together through buyer agents or broker's agents. A broker's agent has no direct relationship with the principal and follows the engaging agent's direction.
Scenario 3
Required supervision versus control of methods
A broker requires lawful ads, disclosures, escrow steps and transaction files. A qualifying contractor can still choose ordinary hours and work methods.
What the exam is testing
Article 12-A requires a broker to supervise licensed work. The broker must give regular, frequent and consistent guidance, instruction, oversight and supervision. The broker also keeps the transaction records required by Section 175.23. New York workers' compensation guidance says Article 12-A compliance does not by itself defeat contractor status. Enforcing license law is different from controlling every hour and ordinary work method.
Exam traps
Misconceptions to correct now
Agent, principal, client and customer
A license permits brokerage work. It does not make every person the licensee helps a client.
Actual, apparent and unauthorized authority
An agent's title or claim cannot create apparent authority. The belief must come from the principal's conduct.
Subagency and the broker's agent alternative
MLS access or an offer of compensation does not create subagency by itself.
Listing and representation agreements
The agency disclosure form is not a contract. It cannot replace a listing, rental or buyer-representation agreement.
Required supervision versus control of methods
A contractor still needs broker supervision. Supervision alone does not decide worker status.
Forms and records
Know what each document does
The exam often gives you a document and asks who uses it, what it proves or when it belongs in the transaction.
Buyer and Seller Disclosure Form
Identifies the agency role in a covered residential sale and explains fiduciary duties.
Exam cue: Timing changes with the recipient and the licensee's role. Read the scenario before choosing the deadline.
Landlord and Tenant Disclosure Form
Provides the parallel agency disclosure for covered residential leasing.
Exam cue: Disclosure is not the same as consent to dual agency.
Listing agreement
Creates the broker's authority to market property and states term, duties and compensation.
Exam cue: The listing belongs to the broker, even when a salesperson negotiated it.
Buyer representation agreement
Defines the buyer-agent relationship, scope, term and compensation obligations.
Exam cue: Compensation does not decide agency. The agreement and conduct do.
Worked examples
Practice the reasoning, not just the answer
A listing agent is about to enter a residential listing agreement with an owner. When must the statutory agency disclosure form be provided?
- AIt must come before the listing agreement
- BAt closing, with the deed and transfer documents
- COnly if the owner asks whether the agent is a fiduciary
- DOnly after the first offer arrives
1. Identify
Name the legal, financial or factual issue the question is testing.
2. Apply
Use the controlling rule. Ignore facts that do not change that rule.
3. Conclude
Choose the answer that follows the rule without adding assumptions.
Reveal answer and explanation
A. It must come before the listing agreement
A listing agent hands the seller or landlord the statutory form. That happens before the listing agreement is signed.
Why this choice works: RPL §443 requires the listing agent to provide the form before entering the listing agreement and seek a signed acknowledgment.
- Real Property Law §443: Agency Disclosure: Real Property Law §443(3)(a), disclosure before listing agreement
- Real Estate Salesperson Forms and Disclosures: Buyer and Seller Disclosure Form and Landlord and Tenant Disclosure Form
A mortgage company offers a real estate broker $400 for each referred borrower and calls the payment a document fee. Which analysis is most accurate under RESPA?
- AThe label document fee makes the payment lawful
- BThe broker must separate the referral from any actual, necessary, and distinct service paid at reasonable value
- CThe real estate brokerage exception always covers payments from mortgage companies
- DThe payment is lawful if the borrower is told about it before closing
1. Identify
Name the legal, financial or factual issue the question is testing.
2. Apply
Use the controlling rule. Ignore facts that do not change that rule.
3. Conclude
Choose the answer that follows the rule without adding assumptions.
Reveal answer and explanation
B. The broker must separate the referral from any actual, necessary, and distinct service paid at reasonable value
RESPA Section 8 bars payment for a mortgage referral. A separate payment must be for real work that is needed and distinct. It must also match the reasonable value of that work.
Why this choice works: A referral is not a compensable service. Any separate payment must be supported by real, necessary, and distinct work, with compensation tied to the reasonable value of that work.
- 12 CFR Part 1024: Real Estate Settlement Procedures Act: Regulation X, 12 CFR 1024.14(b), (c), (g)(1)(v), (g)(2), and (g)(3)
- Real Estate Salesperson 77-Hour Curriculum: Subject 2, item H
Free web sample
5 selected questions from the 184-question mobile bank
Answer one selected question at a time. These web samples are not the complete subject bank. The mobile app contains all 184 questions for Law of Agency.
Question 1 of 5
advancedA seller agrees to fund compensation that will reach the buyer’s brokerage. Which fact best identifies the buyer broker’s principal?
Choose the best answer before opening any lesson notes. Your first response is the best measure of recall.
Primary sources
Verify the rule at its source
These are the government, statutory and other authoritative materials cited in the lessons and questions above. Source links were checked as part of the August 26, 2026 review.
12 CFR Part 1024: Real Estate Settlement Procedures Act
Consumer Financial Protection Bureau
IRS Employment Tax Guidelines: Qualified Real Estate Agents
Internal Revenue Service
Real Estate License Law: March 2026
New York Department of State
Real Estate Salesperson 77-Hour Curriculum
New York Department of State
Real Estate Salesperson Forms and Disclosures
New York Department of State
Unemployment Insurance and Independent Contractors FAQ
New York State Department of Labor
Real Property Law §443: Agency Disclosure
New York State Legislature
Real Property Law §443-a: Disclosure obligations
New York State Senate Open Legislation
Workers’ Compensation Coverage: Licensed Real Estate Agents
New York State Workers’ Compensation Board
Keep practicing
Take this subject into the app.
Use the web guide to understand the rules. Use the mobile question bank to build speed, diagnose weak areas and repeat the material until it sticks.