Kentucky Real Estate Broker Exam — All Questions

Which term must appear in a listing contract completed by or at the direction of a Kentucky licensee?

• a.The multiple listing service where it will appear
• b.The date on which the listing contract expires✓
• c.A clause automatically continuing it past that date
• d.The seller's minimum acceptable net proceeds

201 KAR 11:121 Section 3(1)(e) requires the 'Date of expiration of the listing contract' among ten required terms: the listing price unless the sale is by auction; the date and time of signing for every signatory; the principal broker's first and last name and the full company name; the effective date and time of listing and of advertising if different; the expiration date; the agreed fee or compensation; an address or description sufficient to identify the parcel; the signatures and printed names of everyone needed to effect a sale, including any dower or curtesy considerations; the client's limitations or restrictions on showings; and date, time and initials for every change made before acceptance. The second choice is the mirror image of a prohibition — Section 9(6) forbids a principal broker to be party to an exclusive listing contract containing an automatic continuation beyond its fixed termination date. A stipulated net to the owner with the excess to the licensee is a net listing, defined by KRS 324.010(3) and made improper dealing by KRS 324.160(7). No multiple listing service is required at all.

A Kentucky listing licensee presents a buyer's written offer to the seller. What else does 201 KAR 11:121 Section 2 require?

• a.Written notice to the buyer's licensee of the date and time the offer went to the seller✓
• b.Presentation of only the highest of several competing offers received on the same day
• c.Written notice to the commission of the date and time the offer was presented to the seller
• d.A five-day period for the seller to consider the offer before making any formal response

201 KAR 11:121 Section 2(2)(a) adds a step many states do not have: 'A licensee representing a seller shall submit a notice in writing through electronic, text, or other media to the licensee representing a buyer of the date and time when the offer was presented to the seller.' The same paragraph requires all written offers to be submitted without delay, and 201 KAR 11:011 Section 1(46) defines 'without delay' as soon as reasonably possible given the availability of licensee and client, subject to any written agreement between them about how and when written offers will be submitted. Section 2(1) lists the services the principal broker owes under a written agreement unless the client waives them in writing — accepting and submitting all written offers, accepting earnest money deposits, assisting with offers, counteroffers and notices until completion, and answering the client's questions. Section 2(3) then makes non-compliance gross negligence in violation of KRS 324.160(4)(v). Nothing goes to the commission, no offer is filtered out, and no waiting period is imposed.

If financing is involved, a contract providing for the purchase of Kentucky property must specifically state:

• a.That the buyer will obtain financing, with no further detail required
• b.The buyer's credit score and the loan officer handling the application
• c.The interest rate, term and monthly payment quoted by the buyer's chosen lender
• d.The manner of financing, and the amount and underwriter of any encumbrance✓

201 KAR 11:121 Section 3(5) requires a contract providing for the purchase of property, where financing is involved, specifically to state '(a) The manner in which the purchase shall be financed; and (b) The amount of any encumbrance and whether it is to be underwritten by the seller or a commercial institution or otherwise.' The regulation is asking who is carrying the debt and how large it is — which is what a seller needs in order to judge the offer — rather than the pricing of the loan. Rate, term and payment are matters between the buyer and his lender, and a credit score is confidential information the licensee has no business writing into a contract; 201 KAR 11:011 Section 1(13) defines confidential information as material that may compromise a client's or prospective client's negotiating position. A bare statement that financing will be obtained fails the word 'specifically'. Note the lineage: the old standalone rule, 201 KAR 11:040, 'Contracts to contain financing provisions,' was repealed by 201 KAR 11:002, and this requirement now lives in 11:121.

Which provision must an offer to purchase completed by a Kentucky licensee contain?

• a.The date and time on which the offer expires✓
• b.The asking price advertised in the listing service
• c.The closing attorney or title agency to be used
• d.A statement that the buyer is already pre-approved

201 KAR 11:121 Section 3(2)(d) requires the 'Date and time when the offer expires' — one of nine required terms. The others: the purchase price or a valid escalation clause carrying a maximum purchase price; the amount of the contract deposit if given, who is to hold it, and the period within which it must be delivered; the date and time of signing for each signatory; an address or description sufficient to identify the parcel; the signatures of all parties making the offer and the printed first and last name of the licensee who completed or directed the offer; date, time and initials for every pre-acceptance change; a provision setting the date by which, or the range within which, closing shall occur and when possession passes to the buyer; and the proposed payment terms. Section 3(4) adds the back-up-offer rule: an offer on property already under an executory contract must say in writing that it is contingent on that contract's nonperformance and indicate the disposition of any contract deposit, inserted by the preparing licensee if he knows of the existing contract or made by the listing licensee as a counteroffer.

A seller whose home is listed with another firm calls a Kentucky licensee and asks to list with her instead. What does 201 KAR 11:121 allow her to do?

• a.Discuss a listing that starts when the current one expires, on a Seller-Initiated Listing Form✓
• b.Advise the seller how to cancel or amend the existing listing before signing anything new
• c.Nothing at all until the current listing expires, whoever initiated the contact between them
• d.Sign a listing that takes effect immediately, because it was the seller who initiated the contact

201 KAR 11:121 Section 3(7)(a) states the bar — 'Prior to the expiration of a current listing agreement, another licensee shall not contact the seller to obtain a subsequent listing agreement' — and (b) opens the door on three conditions together: the seller initiates the contact, the proposed listing contract states that it shall not take effect until the current listing expires, and the licensee and seller properly complete and sign the Seller-Initiated Listing Form, KREC Form 403, incorporated by reference in Section 11. The same paragraph adds that nothing prohibits approaching a seller after the current listing is canceled or expires. Signing something effective immediately would defeat the second condition. Counseling the seller on how to get out is separately forbidden: KRS 324.165(2) bars a licensee from counseling another licensee's client on the manner in which the client may terminate or amend an existing listing contract or agency relationship, and KRS 324.165(3) makes that improper conduct under 324.160(4)(u). And doing nothing overreads the rule, which is why the form exists.

Kentucky requires a licensee to give a consumer the agency-relationship disclosure:

• a.Only where the consumer is not already represented by an attorney
• b.After the purchase contract has been signed by both of the parties
• c.Before a contemplated written or oral brokerage agreement is entered into✓
• d.After closing, once the transaction has funded and the deed has been recorded

Kentucky ties the disclosure to agreements, not to assistance. Under 201 KAR 11:121 Section 5(1) the licensee completes, times, dates and delivers the commission's Guide to Agency Relationships at the earliest of three moments: prior to entering a contemplated written agreement to provide real estate brokerage services for compensation, prior to entering a contemplated oral agreement to provide such services, or prior to signing an agency consent agreement. The older 'when specific real estate assistance is first given' language came from 201 KAR 11:400, which has been repealed, so candidates working from older study material routinely key the wrong trigger; the word 'assistance' appears nowhere in 11:121. Section 5(2) requires the licensee to solicit the prospective client's signature and, on a refusal, to document the delivery or attempted delivery with a date and time. A disclosure delivered after closing arrives when every negotiation has ended; waiting for the signed purchase contract is the same problem one step earlier. And the duty does not turn on whether the consumer has counsel — though Section 5(4) does except auctions and commercial transactions.

What must the Kentucky Agency Consent Agreement disclose that the Guide to Agency Relationships does not?

• a.The names of the other clients the brokerage currently represents in that price range
• b.The commission rate the principal broker charges his other clients in the same local market
• c.Any known business, family or personal relationship with another party to the transaction✓
• d.The licensee's disciplinary history with the Kentucky Real Estate Commission, if any

201 KAR 11:121 Section 6(2)(c) requires the Agency Consent Agreement to provide, if applicable, 'any known business, family, or personal relationship the licensee has with another party to the contemplated transaction who is not a party to the Agency Consent Agreement and an explanation of the nature of the relationship or relationships.' 201 KAR 11:011 defines each term: a business relationship is a mutual, ongoing financial interest outside the current transaction, including prior representation of that party; a family relationship is any known familial relationship; a personal relationship is a platonic or nonplatonic friendship. Section 6(2) also requires the names of client, licensee and principal broker and the full company name, the specific agency relationship proposed, and whether the transaction involves an unrepresented party. Section 6(1) requires it completed, delivered and consented to in writing before entering a written brokerage agreement or completing a contract, offer or lease; Section 6(3) requires it updated with fresh written consent if the relationship later changes; Section 6(5) terminates that form of agency on provision of the agreed services or at closing. Other clients' identities are confidential, and no disciplinary-history disclosure is required on the form.

When a Kentucky principal broker uses designated agency, KRS 324.121(1) requires that:

• a.The designation be renewed in writing for each additional property the client considers
• b.The two designated agents work out of different registered branch offices of the company
• c.The designation be filed with the commission before the transaction is allowed to proceed further
• d.The designation be in writing, and the principal broker not designate himself as an agent✓

KRS 324.121(1) lets a principal broker designate one or more affiliated licensees to act as agent for a seller or lessor, and one or more others for a buyer or lessee or prospective buyer or lessee, to the exclusion of all other affiliated licensees. Then come the conditions: 'The designation procedure shall be made in writing and communicated to all licensees affiliated with the principal broker,' each designated agent 'shall inform and obtain the consent' of the party designated to, and 'The principal broker shall not designate himself or herself as a designated agent.' That last sentence is the one candidates miss, and it follows from subsection (2), which makes the principal broker or designated manager the dual agent in such a transaction — he cannot be both. KRS 324.010(14) defines designated agency and 201 KAR 11:011 Section 1(19) defines a designated agent. Nothing is filed with the commission, nothing turns on which office a licensee works from, and the designation is not property-by-property.

A Kentucky designated-agency firm has one licensee representing the seller and another the buyer in the same sale. Who is the dual agent?

• a.No one at all, because designated agency eliminates dual agency in Kentucky entirely
• b.Only the principal broker, or a designated manager under the principal broker's direction✓
• c.Every licensee affiliated with the firm, because agency runs to the company as a whole
• d.Both designated agents, since their firm stands on both sides of the same transaction anyway

KRS 324.121(2) is precise: where a principal broker designates licensees for the seller and for the buyer in the same transaction, 'only the principal broker or a designated manager working under the principal broker's direction shall be deemed to be a dual agent representing the seller and buyer in a limited fiduciary capacity.' That dual agent must keep confidential information relating to either party in an individual file maintained and accessed by himself only, and must not disclose it to the other party. 201 KAR 11:011 Section 1(21) draws the contrast the exam wants: in a firm that does not practice designated agency, dual agency means the principal broker and all affiliated licensees simultaneously represent both sides; in a designated-agency company, only the principal broker or designated manager is the dual agent. So the designated agents themselves are not dual agents, and the relationship has not disappeared. KRS 324.121(3) adds that no exchange of information among the consumers, principal broker, designated manager, firm or licensees is imputed as a matter of law, and 201 KAR 11:121 Section 9(11) locks the confidential file to the principal broker, designated manager and appointed designated agent.

A Kentucky licensee wants to buy a property listed with her own brokerage. What does KRS 324.160(4)(e) require of her?

• a.Indicating her status as a licensee in writing on the offer to purchase itself✓
• b.Obtaining the commission's written approval in advance of making the offer
• c.Telling the seller she is a licensee orally before the offer has been accepted
• d.Resigning her affiliation with the brokerage company before making any offer

KRS 324.160(4)(e)1. is explicit about both the fact and the form: 'A real estate licensee shall not directly or indirectly buy property listed with him or her or with the broker with whom the licensee is affiliated, nor acquire an interest therein, without first indicating in writing on the offer to purchase his or her status as a licensee.' Sub-paragraph 2. requires the same written disclosure to all parties, on the sales contract or the offer, before a licensee becomes a party to a contract to purchase; sub-paragraph 3. requires written disclosure of any interest before a licensee sells or receives compensation on property in which he owns an interest. All three demand writing, which is why an oral heads-up satisfies none of them. Nothing in the chapter makes the licensee resign or seek advance approval; what the head of 324.160(4)(e) does prohibit is acting for more than one party in a transaction without the knowledge of all parties, and KRS 324.160(4)(m) separately reaches a licensee who acts in the dual capacity of licensee and undisclosed principal.

A Kentucky buyer signs a contract on a condominium unit and the association's certificate has not arrived. What is the buyer's position?

• a.The contract binds the buyer, whose only remedy is an action in damages against the association board
• b.The contract is voidable for thirty days running from the date the certificate is provided
• c.The contract is void from the outset, and no deed may pass until the certificate is delivered
• d.The contract is voidable until the certificate is provided and for five days after, or until conveyance✓

KRS 381.9203(3) provides that a unit owner or the owner's agent is not liable to a purchaser for the association's failure or delay in providing the certificate, 'but the sales contract is voidable by the purchaser until the certificate has been provided and for five (5) days thereafter or until conveyance, whichever first occurs.' Two neighboring subsections dispose of the other choices. KRS 381.9203(5) says in terms that 'Failure to provide a certificate does not void a deed to a purchaser,' so nothing is void from the outset. And 381.9203(2) gives the association ten days after a written request to furnish the certificate, with the unit owner protected from liability for erroneous information the association supplied — so the buyer's remedy is the statutory right to void, not a damages action. KRS 381.9203(1) lists what the certificate must contain and requires it, along with the declaration, bylaws and rules, before execution of any contract of sale. On the license-law side, 201 KAR 11:121 Section 4(2) makes the licensee advise the client in writing of the right to receive the certificate and of the purchasing client's right to void.

When must a Kentucky listing agent deliver the Seller's Disclosure of Property Condition form to a prospective buyer?

• a.Within 72 hours of the listing agent's receipt of a written, signed offer to purchase✓
• b.At the closing table, along with the debit-and-credit closing statement
• c.Within ten days of the seller signing the listing agreement with the firm
• d.Within 72 hours of the listing agent's first showing of the property to that prospective buyer

KRS 324.360(4) sets two different moments and the exam tests the second. The seller completes and signs the form when he executes the listing agreement, and the listing agent provides a copy to any prospective buyer or the buyer's authorized representative on request; then, 'A copy of the form shall be delivered by the listing agent to any prospective purchaser or his representative within seventy-two (72) hours of the listing agent's receipt of a written and signed offer to purchase.' The agent must solicit the buyer's signature and keep the copy in the principal broker's records, recording any refusal to sign on the form itself. KRS 324.360(9) makes it a violation for a licensee to complete any portion of the form unless he owns the property or the owner requested it in writing on the form. KRS 324.360(7) exempts new homes sold with a warranty, sales at auction and court-supervised foreclosures, and 324.360(5) gives a 120-hour rule for unlisted property. The form is KREC Form 402, incorporated by 201 KAR 11:121 Section 11; the old standalone regulation, 201 KAR 11:350, was repealed.

A Kentucky buyer asks whether a death occurred in a house. What does KRS 324.162 say about the licensee's duty?

• a.An agent must disclose the fact whenever the agent knows it, whatever the source of the knowledge
• b.An agent has no affirmative duty to disclose what the chapter or federal law do not require✓
• c.An agent must disclose any death that occurred at the property within the last three years
• d.An agent must refer the question to the seller and may not answer it in any circumstances

KRS 324.162 is one sentence and it is the Kentucky answer on stigmatising factors: 'An agent licensed under this chapter representing a party in the sale, leasing, or exchange of real property shall have no affirmative duty to disclose to any person who acquires, by voluntary or involuntary transfer, a legal or equitable interest in real property, including any leasehold or security interest for an obligation, information not required by this chapter or applicable federal law.' The floor is therefore what the chapter and federal law require — the seller's own form under KRS 324.360, and federally the lead-based paint disclosure — not a three-year window Kentucky has never enacted, and not everything the agent happens to know. What the statute removes is an affirmative duty to volunteer; it does not license misrepresentation. KRS 324.160(4)(b) still reaches a substantial misrepresentation or a failure to disclose known defects substantially affecting the value of the property, and 201 KAR 11:121 Section 1(1)(f) still owes good faith and fair dealing to every party in a transaction.

A Kentucky principal broker agrees to manage a fourplex for an owner. What must be in place before he begins?

• a.A current written property management agreement naming the bank and number of the escrow account✓
• b.A separate property manager certificate issued by the commission for each managed property
• c.A written agreement, but only where the broker will be collecting tenant security deposits
• d.An oral understanding, provided the owner confirms it in writing within thirty days of the start date

201 KAR 11:121 Section 10(1) is unconditional: 'A principal broker, or an affiliated licensee, shall not engage in property management without a current written property management agreement.' Section 10(2) then lists fourteen minimum contents, including the registered company name and address, the client's name and address, the address and number of units, the effective dates and whether the client agrees to automatic annual renewal, the method of early termination, the compensation, the minimum security deposit per unit, 'The name and address of the bank where the principal broker's escrow or management account is held, and, consistent with KRS 383.580(1), the account number' — information which must also appear in the lease — the KRS 383.580 security-deposit procedures, which must also appear in the lease, the conditions for paying expenses, the accounting date, a copy of the lease form attached, the client's certification of receipt, and both signatures with dates. Nothing turns on whether deposits are collected, and Kentucky issues no property manager credential: property management is real estate brokerage under KRS 324.010(1) and is defined at 324.010(9).

Kentucky sets deadlines around property management money. Which pairing is correct?

• a.Money into the escrow or management account within ten business days; final accounting within 30 days of the end
• b.Money into the escrow or management account within three business days; final accounting only if the client asks
• c.Money into the escrow or management account within three business days; final accounting within 60 days of termination✓
• d.Money into the escrow or management account by the end of the month; final accounting within 90 days of termination

Both figures come from 201 KAR 11:121 Section 10. Subsection (4): 'Money received shall be deposited into an escrow or management account of the principal broker within three (3) business days of receipt.' Subsection (10): 'Within sixty (60) days of the termination of a management agreement, a principal broker shall send the client a final accounting that contains any transaction that occurred after the last monthly accounting.' It is owed automatically, not on request. Between those two sit the running duties: subsection (9) requires a monthly accounting to the client, by unit, on the date the parties set; subsection (3) requires an owner ledger for each client and a unit ledger for each unit, plus a ledger by tenant on the client's written request; and subsections (5) to (8) require money received to be entered on the ledgers, a receipt to be given for it, expenses to be documented by invoice or receipt by unit, and security deposit adjustments to be made under KRS 383.580 and entered on both ledgers. KRS 324.111(7) adds that property management accounts be kept separate from all other accounts, or property management funds specifically identified in the escrow records.

A Kentucky property management agreement must carry the security-deposit procedures of KRS 383.580. Where a local government has adopted that Act, what does it require of the landlord?

• a.Deposits held in any account the landlord chooses, provided they are refunded within thirty days
• b.Deposits held in an interest-bearing account, with the interest paid to the tenant at move-out
• c.Deposits held by the managing broker alone, who may release them to either party on request
• d.Deposits held in an account used only for that purpose, with the tenant told the account number✓

KRS 383.580(1) requires all landlords of residential property taking security deposits to deposit them 'in an account used only for that purpose' at a regulated bank or lending institution, and provides that 'Prospective tenants shall be informed of the location of the separate account and the account number.' The sanction is severe and often tested: under 383.580(4) no landlord is entitled to retain any portion of a deposit if it was not held in a separate account and if the initial and final damage listings required by subsections (2) and (3) were not provided — a signed list of existing damage with estimated repair costs before the tenant tenders the deposit, and a matching list at the end of occupancy. Kentucky pays no statutory interest to tenants, and there is no thirty-day universal refund rule; 383.580(6) and (7) let the landlord take the deposit out after thirty days where the tenant left owing the last month's rent and made no demand, or after sixty days where a refund notice went unanswered. Note the scope: KRS 383.580 sits inside the Uniform Residential Landlord and Tenant Act, which KRS 383.500 lets cities, counties and urban-county governments adopt in their entirety and without amendment — so it binds landlords only where adopted. The licensee's duty is statewide regardless, because 201 KAR 11:121 Section 10(2)(h) and (i) require the management agreement and the lease to carry these procedures and the account number.