Kentucky Real Estate Broker Exam — All Questions

KRS 324.281 fixes the make-up of the Kentucky Real Estate Commission. The Governor appoints:

• a.Nine members, six of them licensees and three of them citizens at large
• b.Five members, all of them active real estate licensees of five years' standing
• c.Seven members, six of them active licensees of ten years' standing and one a citizen at large✓
• d.Eleven members, half named by the Governor and half by the Kentucky Association of Realtors board

KRS 324.281(1) is specific: the Governor appoints seven persons, at least six of whom have been residents for ten years and whose vocation for at least ten years has been that of an active real estate licensee, and one of whom shall be a citizen at large not associated with or financially interested in the business regulated. Terms run three years, no appointee after July 14, 2000 may serve more than two consecutive terms, a majority is a quorum, no more than four members may belong to one political party, and no two may live in the same county (324.281(2), (4)). The private trade association does have a role, but it is nomination rather than appointment: under 324.281(3) the Kentucky Association of Realtors supplies a list of at least three names within sixty days, the Governor may reject the list and ask for another, and if the association misses the deadline the Governor appoints without it. Five and nine are the sizes of other states' boards, not Kentucky's.

Which of the following does KRS 324.281(5) place on the Kentucky Real Estate Commission as a duty?

• a.Setting the commission rates licensees may charge consumers in the Commonwealth
• b.Conducting the licensing examinations, or contracting with an entity to conduct them✓
• c.Requiring every Kentucky licensee to join a local board or association of Realtors
• d.Regulating the business activities of not-for-profit condominium and homeowner associations

KRS 324.281(5)(c) makes it the commission's duty to 'conduct examinations for applicants eligible under this chapter or alternatively to contract with an entity to conduct examinations' — which is why PSI, not KREC, sits in the testing center. The rest of the subsection is of a piece: promulgate administrative regulations under KRS Chapter 13A, hold disciplinary hearings, conduct continuing-education seminars, investigate irregularities, and cooperate with other agencies. Rate-setting appears nowhere in KRS Chapter 324; what the chapter regulates is who may pay a fee to whom, in 324.020(4) and 324.160(4)(f). Community associations are expressly outside the commission's reach — KRS 324.2812 says nothing in the chapter or its regulations extends its jurisdiction to community association managers or to the management or business activities of not-for-profit townhouse, condominium, homeowner or neighborhood associations. And membership in a Realtor board is voluntary; the commission neither requires nor polices it.

How does the Kentucky Real Estate Commission acquire the authority to audit a principal broker's escrow accounts?

• a.The commission may audit only after a consumer files a sworn complaint alleging a shortage
• b.The commission obtains a warrant from the Circuit Court of the county where the office is located
• c.The principal broker signs a permit granting that permission upon licensure and at each renewal✓
• d.The commission asks the bank, which may release the records without notifying the broker

KRS 324.111(5) settles it in one sentence: 'Upon licensure and each renewal, the principal broker shall sign a permit giving the commission the permission to audit all his or her escrow accounts.' The broker consents in advance, as a condition of holding the license, so no court process is needed and the bank is not the gatekeeper. The commission's wider investigative powers point the same way: KRS 324.150(2)(d) lets it enter the office or branch office of any principal broker to inspect documents it requires to be kept there, and 324.150(2)(a)-(f) add subpoenas, oaths, examination of witnesses and witness fees. Nor does a complaint have to come first — 324.150(1)(a) lets the commission or its staff investigate a licensee on its own initiative, and reserves the mandatory investigation for a verified written complaint that states a prima facie case.

A Kentucky licensee is found by final order to have committed fraud violating KRS 324.160 and refuses to pay. What may the recovery fund pay out?

• a.Up to $50,000 per claimant, with no cap on combined payments against one licensee
• b.Whatever the Circuit Court awards, because the statutory fund carries no ceiling at all
• c.Up to $20,000 per claimant, with combined payments against one licensee capped at $400,000
• d.Up to $20,000 per claimant, with combined payments against one licensee capped at $50,000✓

KRS 324.410(1) sets both figures: the commission may pay an aggrieved person 'an aggregate amount not to exceed twenty thousand dollars ($20,000) per claimant with combined payments to all claimants against any one (1) licensee not to exceed fifty thousand dollars ($50,000).' Two further conditions ride along — the licensee must have refused to pay within twenty days of entry of the final order, and the amounts must be certain and liquidated. The $400,000 in the third choice is real but is a different number: 324.410(2) requires the commission to maintain the real estate education, research, and recovery fund at a minimum level of $400,000, investing only the excess. And the fund is not an insurer of judgments; 324.420(1) routes damages that cannot be accurately determined to the Circuit Court of the county where the violation took place, but the payout still stops at the statutory caps.

What is the largest fine the Kentucky Real Estate Commission itself may levy on a licensee under KRS 324.160(1)?

• a.$5,000
• b.$2,500
• c.$1,000✓
• d.$10,000

KRS 324.160(1)(c) authorizes the 'levy of fines not to exceed one thousand dollars ($1,000)' — a low ceiling by the standards of other states, which is why the rest of the sanction menu matters. The same subsection lets the commission suspend or revoke any license, place a licensee on probation for up to twelve months, require completion of academic credit hours in real estate courses, or issue a formal or informal reprimand, and it may order any or all of them together. A separate and larger exposure sits outside the commission: under KRS 324.990(2) a Circuit Court may fine a violator not less than $100 nor more than $1,000 or jail him up to six months, and must add to the fine the amount of any commission paid or received as a result of the violation, with each transaction treated as a separate offense. The other three figures appear nowhere in KRS Chapter 324.

Kentucky lets its commission move faster than the ordinary disciplinary process in one situation. Which?

• a.An advertisement believed misleading, which may be ordered withdrawn without any hearing
• b.An alleged escrow account violation warranting emergency action, heard under KRS Chapter 13B✓
• c.Any complaint filed by a member of the public, which suspends the license pending the hearing
• d.A licensee's failure to complete continuing education, which is punished by immediate revocation

The emergency route is written into four places for the same subject. KRS 324.150(1)(b) lets the commission conduct an emergency hearing 'when alleged escrow account violations warrant emergency action,' conducted under KRS Chapter 13B as it relates to emergency orders, and KRS 324.111(9), 324.151(4) and 324.170(3) each repeat the cross-reference. Everything else runs the ordinary way: KRS 324.170(1) requires the commission to order a hearing under KRS Chapter 13B before denying an application or ordering any disciplinary action, and where the licensee is a sales associate it must notify the principal broker by certified mail and order his attendance. KRS 324.200(2)-(3) then gives the final order to the executive director of the Kentucky Real Estate Authority, with an appeal to Circuit Court within thirty days and an automatic stay of discipline during the appeal. Missing continuing education is not revocation but automatic cancellation under 324.085(1)(a); and a complaint suspends nothing — KRS 324.151(1) requires it first to state a prima facie case.

The Kentucky Real Estate Commission may discipline a broker through its disciplinary process for:

• a.Commingling escrow funds or failing to supervise affiliated licensees✓
• b.Completing more continuing education hours each year than the law requires
• c.Negotiating the amount of the commission with a client before listing
• d.Belonging to a local board or association of Realtors in the licensee's market

The commission's authority runs through a specific route rather than through 'KRS Chapter 324' at large. KRS 324.111(1) creates the escrow duty, KRS 324.160(4)(h) reaches a licensee who fails to account for or remit money belonging to others, KRS 324.160(4)(t) reaches the violation of any provision of the chapter or any regulation under it, and KRS 324.160(6), effective April 4, 2024, provides that 'The principal broker and his or her designated manager, if any, shall exercise adequate supervision... The failure... shall constitute a violation of this chapter.' Commingling or converting escrow money and failing to supervise are therefore squarely within reach. Lawful acts are not: negotiating a commission with a client is ordinary practice and rates are negotiable, exceeding the continuing-education minimum is the opposite of a violation, and belonging to a local board of Realtors is voluntary membership in a private trade association the commission neither requires nor polices.