Kentucky Real Estate Broker Exam — All Questions

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 The older 'when specific real estate assistance is first given' language came from 201 KAR 11:400, which has been repealed, so candidates working from older study material routinely key the wrong trigger; the word 'assistance' appears nowhere in 11:121.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.