Kentucky Real Estate Broker Exam — All Questions

Kentucky's statute of frauds, KRS 371.010, reaches real estate twice. Which pair must be written and signed by the party to be charged?

• a.A contract for the sale of real estate, and any lease of real estate whatever its length
• b.A contract for the sale of real estate, and a promise to pay a commission for a sale or lease✓
• c.A contract for the sale of real estate, and a promise to lend money for a consumer credit purchase
• d.A promise to pay a commission, and every oral arrangement a licensee makes with a prospective client

KRS 371.010(6) covers 'any contract for the sale of real estate, or any lease thereof for longer than one year' — note the carve-out, which is why a lease of a year or less is outside the statute and the second choice overstates it. KRS 371.010(8) is the provision that catches practitioners: 'any promise, agreement, or contract for any commission or compensation for the sale or lease of any real estate or for assisting another in the sale or lease of any real estate.' A Kentucky broker's fee arrangement therefore belongs in writing if he wants to sue on it. The closing words of the section supply the test — no action shall be brought unless the promise 'or some memorandum or note thereof, be in writing and signed by the party to be charged therewith, or by his authorized agent.' Kentucky law does contemplate oral brokerage arrangements: 201 KAR 11:121 Section 5(1)(b) requires the Guide to Agency Relationships before a contemplated oral agreement. And KRS 371.010(9), on commitments to lend, expressly excludes consumer credit transactions and credit cards.

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.