Kentucky Real Estate Salesperson Exam — All Questions

Real estate licensees in Kentucky are regulated by:

• a.The county property valuation administrator
• b.The Kentucky Association of Realtors
• c.The Kentucky Real Estate Commission✓
• d.The Kentucky Department of Revenue

The Kentucky Real Estate Commission (KREC) licenses and disciplines brokers and sales associates under KRS Chapter 324. A trade association is a private membership organization and has no licensing authority, and taxing or assessment offices do not regulate licensees.

In Kentucky, a sales associate may perform licensed real estate activity only:

• a.After registering each transaction with the Commission
• b.Under the supervision of, and on behalf of, a principal broker✓
• c.Independently once the license is issued
• d.As a member of a real estate trade association

A Kentucky sales associate must be affiliated with and supervised by a principal broker and acts on that broker's behalf. Compensation flows through the principal broker; a sales associate may not accept payment directly from a buyer or seller. The principal broker is responsible for supervision and for handling client escrow funds.

The Kentucky Real Estate Education, Research, and Recovery Fund is used primarily to:

• a.Insure buyers against declines in property value
• b.Reimburse consumers who suffer an actual loss from certain licensee misconduct and cannot collect a judgment✓
• c.Fund the Commission's payroll
• d.Provide grants to real estate schools only

The Recovery Fund compensates members of the public who obtain a final judgment against a licensee for fraud, misrepresentation, or deceit in a licensed transaction and cannot otherwise collect, subject to statutory limits. When the fund pays a claim, the licensee's license is suspended until the fund is repaid. The fund also supports education and research but is not a general operating fund.

The largest fine the Kentucky Real Estate Commission may levy against a licensee for a violation is:

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

The sanctions the commission may order are suspension, revocation, a fine not to exceed $1,000, probation of up to twelve months, required completion of real estate coursework, and a formal or informal reprimand. A Circuit Court may add its own penalty in an unlicensed-practice prosecution, but the commission's own fine ceiling is $1,000. Cite: KRS 324.160(1) (eff. April 4, 2024).

A person whose Kentucky real estate license has been revoked may not be issued another license for:

• a.One year from the date of revocation
• b.Two years from the date of revocation
• c.Ten years from the date of revocation
• d.Five years from the date of revocation✓

Revocation carries a five-year bar. After the five years, relicensure is still discretionary with the commission, and the applicant must retake the appropriate examination and meet all current licensing requirements. Kentucky's definitions section states the same five-year minimum. Cite: KRS 324.220 (eff. July 14, 2000); KRS 324.010(18).

Under Kentucky law, a person who engages in real estate brokerage without a license commits:

• a.A Class A misdemeanor, then a Class D felony✓
• b.A violation punishable only by a commission fine
• c.A Class B misdemeanor for every offense
• d.A Class C felony for a first offense

Unlicensed brokerage is a Class A misdemeanor the first time and a Class D felony for any subsequent offense. A Circuit Court may add a fine of $100 to $1,000 or up to six months' imprisonment, plus the amount of any commission paid or received, and each transaction counts as a separate offense. Cite: KRS 324.990 (eff. July 13, 2004).

A Kentucky listing that sets a stipulated net price for the owner and lets the licensee keep the excess as compensation is:

• a.Permitted if the seller consents in writing
• b.Permitted only on commercial property
• c.Improper dealing, and a ground for discipline✓
• d.Permitted if the principal broker approves it

That arrangement is the statutory definition of a net listing, and KRS 324.160(7) makes obtaining, negotiating, or attempting to negotiate one improper dealing. There is no consent exception, no commercial carve-out and no broker-approval route. Cite: KRS 324.010(3) (eff. June 29, 2023); KRS 324.160(7) (eff. April 4, 2024).

A consumer complaint against a Kentucky licensee must be filed with the commission no more than one year from:

• a.The date the real estate transaction closed
• b.Actual knowledge of the cause of action✓
• c.The date the listing agreement was signed
• d.The date the commission opens its investigation

The one-year clock runs from actual knowledge of the cause of action or from the point circumstances would reasonably have put the complainant on notice, not from closing. The complaint must be sworn on KREC Form 300, notarized, and must allege a prima facie violation of KRS 324.160. The same one-year limit governs a recovery fund claim. Cite: 201 KAR 11:190, Section 1 (eff. 12-16-2019); KRS 324.420(6).

Once the commission serves a prima facie complaint on a Kentucky licensee, the licensee's notarized answer is due within:

• a.Twenty days✓
• b.Ten days
• c.Thirty days
• d.Sixty days

The licensee must return a notarized answer on the commission's form within twenty days and must deliver a copy to the complainant. The complainant may then file one reply within ten days, and the respondent one reply to that. Cite: KRS 324.151(3) (eff. June 25, 2009); 201 KAR 11:190, Section 2(5).

Payments from the Kentucky Real Estate Education, Research, and Recovery Fund are capped at:

• a.$10,000 per claimant and $25,000 against one licensee
• b.$25,000 per claimant and $100,000 against one licensee
• c.$50,000 per claimant, no aggregate cap
• d.$20,000 per claimant, $50,000 per licensee✓

The fund pays an aggregate not to exceed $20,000 per claimant, with combined payments to all claimants against any one licensee capped at $50,000, and only after the licensee has been found guilty of fraud and has refused to pay within twenty days of the final order. The commission must keep a minimum fund balance of $400,000. Cite: KRS 324.410(1)-(2) (eff. July 12, 2012).

After the recovery fund pays a claim, the Kentucky licensee responsible must reimburse the fund in full plus interest at:

• a.Six percent a year
• b.Eight percent a year
• c.Ten percent a year✓
• d.Twelve percent a year

The licensee's license is suspended, or may be permanently revoked, until the fund is reimbursed in full plus ten percent per annum, and the commission is subrogated to the aggrieved party's rights to the extent of its payment. Cite: KRS 324.420(3) and (5) (eff. June 27, 2019).

When an affiliated licensee violates KRS Chapter 324, the Kentucky principal broker:

• a.Is not primarily liable absent knowledge✓
• b.Is automatically liable for every act of an affiliate
• c.Is liable only if he or she shared the commission
• d.Has no responsibility for an affiliate's conduct

A principal broker is not held primarily liable for an affiliate's violation absent knowledge and a failure to prevent it. Separately, though, the principal broker and any designated manager must exercise adequate supervision over affiliates and employees, and failing to do so is itself a violation of the chapter. Cite: KRS 324.160(6) (eff. April 4, 2024).

If a Kentucky principal broker dies or becomes incapacitated, the commission may let an affiliated sales associate close the existing business for a temporary period not to exceed:

• a.Thirty days
• b.Six months✓
• c.Ninety days
• d.One year

The commission decides case by case and may permit one of the affiliated sales associates to complete and close the deceased or incapacitated broker's existing business for up to six months. The affiliate requesting that status files KREC Form 206. Cite: KRS 324.425 (eff. July 14, 2000); 201 KAR 11:210, Section 15.

A Kentucky licensee who fails to renew on time faces a late fine, before a new license is issued, not to exceed:

• a.$50
• b.$100
• c.$200✓
• d.$1,000

The statutory late-renewal fine is capped at $200, and not receiving a renewal form or a mail failure is no excuse. A license not renewed at the end of the biennial period reverts to expired status and may be reactivated before one year has lapsed if the delinquent fees are paid. Cite: KRS 324.090(2)-(3) (eff. January 1, 2020).