KY Real Estate key terms

The state agency created by statute to license Kentucky brokers and sales associates, adopt administrative regulations, approve prelicensing and continuing education courses, and discipline licensees who violate license law.

The broker who holds the firm's license and is responsible for supervising every affiliated licensee plus the office's trust accounts and records. Kentucky requires each brokerage to have one principal broker of record.

A licensee who provides brokerage services only while affiliated with and supervised by a principal broker. A sales associate may not accept payment for brokerage work directly from a client or customer.

A separate bank account in which a broker holds money belonging to others, such as earnest money deposits. Kentucky rules require prompt deposit, accurate records, and no mixing with the firm's own funds.

Placing client money into the broker's personal or operating account, or otherwise mixing client funds with the broker's own. Kentucky treats commingling as a license law violation even if every cent is later repaid.

Using or spending money that belongs to a client, such as a deposit being held in trust. Conversion is more serious than commingling and can lead to license revocation, restitution, and criminal prosecution.

The coursework an active licensee must complete during each renewal period on subjects the commission approves, such as license law, agency, and contracts. Failing to finish it can leave the license inactive.

A fund built from licensee fees that can reimburse a consumer who wins a court judgment against a licensee for a brokerage act and cannot collect it. Awards are capped, and the licensee may have to repay the fund.

Paying a commission, referral fee, or other compensation for brokerage services to someone who holds no license. Kentucky prohibits the payment and can discipline the licensee who makes it.

A relationship in which a licensee is authorized to act for a principal and owes that principal fiduciary duties. In Kentucky it is normally created by a written agreement between the broker and the client.

The legal obligations an agent owes a client: care, obedience, loyalty, disclosure, confidentiality, and accounting. These duties belong to the client, while honest and fair dealing is owed to everyone else.

A consumer who receives truthful information and fair dealing from a licensee but has no agency agreement with the broker. The licensee does not owe fiduciary duties to a customer.

A brokerage arrangement in which the principal broker assigns one licensee to represent the buyer and another to represent the seller in the same transaction, so each designated agent advocates for only one side.

A situation in which the same licensee or firm represents both buyer and seller in one transaction. Kentucky requires the informed written consent of both parties and limits what confidential information may be shared.

The commission-prescribed written explanation of Kentucky agency choices and duties that a licensee must give a consumer at the earliest practical time, generally at first substantive contact.

The legal rule that certain agreements must be written and signed to be enforceable, including real estate sales contracts, leases longer than one year, and agency agreements in Kentucky.

A contract provision that makes a party's obligation depend on a stated event, such as the buyer obtaining financing or selling an existing home. If the condition fails, the party may cancel without breach.

The most complete ownership interest in real property, lasting indefinitely and passing to heirs or devisees. It is subject only to government powers and private encumbrances.

An ownership interest that lasts only for the lifetime of a named person, after which the property passes to a remainderman or back to the grantor. A life tenant must not commit waste.

A right to use another person's land for a limited purpose, such as a driveway or utility line, without owning the land. It is an encumbrance that runs with the property.

Any claim, lien, easement, restriction, or lease that affects title to or use of property without preventing its transfer. Encumbrances can reduce value and must be disclosed to buyers.

A deed in which the grantor promises to defend title against all claims, including those created by earlier owners. It gives the buyer the broadest set of title covenants.

A deed that transfers whatever interest the grantor may have with no promises about title. It is often used to clear a cloud on title or to transfer property between family members.

Co-ownership by two or more people holding equal undivided shares with the right of survivorship, so a deceased owner's share passes to the survivors instead of through probate.

A property description that traces the boundaries of a parcel using directions, distances, and landmarks from a starting point. It is common in Kentucky and must close to describe the tract accurately.

The loan amount divided by the property's appraised value or purchase price, whichever is lower. A higher ratio usually means a larger down payment requirement or mortgage insurance.

The four parts of a monthly mortgage payment: principal, interest, taxes, and insurance. Lenders use PITI to judge how large a payment a borrower can reasonably afford.

A fee paid at closing to lower the interest rate on a mortgage, with one point equal to one percent of the loan amount. Points are treated as prepaid interest.

A loan whose interest rate changes on a set schedule based on a named index, so the monthly payment can rise or fall. Caps limit how much the rate may change at one time.

An appraisal method that estimates value by comparing the subject property with recent sales of similar properties and adjusting for differences. It is the most reliable approach for owner-occupied homes.

A licensee's opinion of a likely listing or sale price based on comparable properties, prepared to help a client choose a price. It is not an appraisal and requires no appraiser credential.

A listing agreement giving one broker a commission no matter who finds the buyer, even if the seller finds the buyer personally. It gives the broker the strongest incentive to market the property.

A cooperative database in which participating brokers share listing information and offers of compensation to cooperating brokers. Joining it does not by itself create an agency relationship with buyers.

A written statement in which the seller reveals known defects and conditions of the property to buyers. Kentucky requires the form for most residential sales, subject to limited statutory exemptions.

A group of people shielded from housing discrimination by law, such as race, color, religion, sex, disability, familial status, and national origin under federal law, with additional classes under Kentucky law.

Directing buyers toward or away from neighborhoods because of the race or other protected characteristics of the people who live there. It is a fair housing violation even when no one is refused service.

Telling homeowners that members of a protected group are moving into the area so they will list or sell out of fear. The practice is illegal because it exploits and promotes panic selling.

Money a buyer deposits to show good faith, later applied to the purchase price at closing. The contract states who holds the deposit and how it is refunded or forfeited.

The final step in a sale, when funds are disbursed, the deed is delivered, and title passes to the buyer. A closing agent such as a title company or attorney usually handles the paperwork.