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KY Real Estate practice questions

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Question 1Kentucky License Law, Commission Rules, and Statutory Requirements

Which of the following activities requires a Kentucky real estate license?

  1. An attorney preparing a deed for a client at the client's request
  2. A person who negotiates leases of property for others for a fee Correct answer.
  3. An owner selling a home the owner has lived in for years
  4. A bank employee taking a mortgage loan application from a customer

Explanation

KRS Chapter 324 requires a license for any person who, for another and for compensation or the promise of compensation, lists, sells, exchanges, purchases, rents, or leases real estate. Owners dealing with their own property and attorneys performing legal services fall within statutory exemptions. A lender taking a loan application is not performing brokerage services.

Question 2Kentucky License Law, Commission Rules, and Statutory Requirements

A Kentucky sales associate may lawfully accept compensation for brokerage services from:

  1. the sales associate's principal broker Correct answer.
  2. the buyer in the transaction
  3. either party to the transaction, if the payment is disclosed
  4. the listing broker, if the associate acted as a buyer's agent

Explanation

A sales associate is licensed through a principal broker and may be paid for brokerage activity only by that principal broker. Any commission split or referral fee must flow through the brokers rather than directly to the associate. Direct payment from a consumer or another licensee violates the license law.

Question 3Kentucky License Law, Commission Rules, and Statutory Requirements

Which combination satisfies the minimum personal qualifications for a Kentucky real estate sales associate license?

  1. At least 18 years old with a high school diploma or its equivalent Correct answer.
  2. At least 21 years old with a GED and three years of experience
  3. At least 18 years old with a bachelor's degree
  4. At least 16 years old with a high school diploma

Explanation

KRS 324.045 requires an applicant to be at least eighteen years of age and to hold a high school diploma or its equivalent, in addition to completing approved pre-license education and passing the licensing examination. No college degree or experience is required for the sales associate license.

Question 4Kentucky License Law, Commission Rules, and Statutory Requirements

How is membership of the Kentucky Real Estate Commission structured?

  1. Three brokers, two sales associates, and two public members
  2. Five brokers, one sales associate, and one member of the public Correct answer.
  3. Seven actively practicing brokers, each maintaining a separate brokerage office
  4. Four brokers and three members of the general public

Explanation

KRS 324.030 creates a seven-member Commission composed of five licensed real estate brokers, one licensed sales associate, and one public member. The mix is designed to keep both industry expertise and a consumer perspective on the body.

Question 5Kentucky License Law, Commission Rules, and Statutory Requirements

Who appoints the members of the Kentucky Real Estate Commission?

  1. The Kentucky Bar Association
  2. The Governor Correct answer.
  3. The Commissioner of Agriculture
  4. The state Senate

Explanation

Commission members are appointed by the Governor from the categories specified in the statute. The Commission exercises its licensing and disciplinary functions independently even though it is attached to a state department for administrative purposes.

Question 6Kentucky License Law, Commission Rules, and Statutory Requirements

A member of the Kentucky Real Estate Commission is appointed to a term of:

  1. At the pleasure of the appointing authority
  2. Four years Correct answer.
  3. Two years
  4. Five years

Explanation

Commissioners serve four-year terms, with staggered appointments so the body does not turn over all at once. A member may be reappointed subject to the statutory limits on consecutive service.

Question 7Kentucky License Law, Commission Rules, and Statutory Requirements

A principal broker receives a $2,000 earnest money deposit in a Kentucky transaction. The broker must:

  1. deposit it in a separate escrow account kept apart from the broker's own funds Correct answer.
  2. hold it in the broker's personal account until the closing takes place
  3. deposit it in the brokerage's general business operating account and record the deposit
  4. deliver it to the seller immediately, because the seller is entitled to the funds

Explanation

KRS 324.220 requires a principal broker to place trust funds such as earnest money and security deposits in a separate escrow account and prohibits commingling them with the broker's personal or operating funds. The broker holds the deposit as a fiduciary until closing or until the parties agree otherwise.

Question 8Kentucky License Law, Commission Rules, and Statutory Requirements

Under Kentucky advertising rules, an advertisement for a listed property must:

  1. identify the principal broker or brokerage by name Correct answer.
  2. be approved by the Commission before it is published or distributed
  3. state both the listing price and the commission rate
  4. name the sales associate before the brokerage

Explanation

Advertisements for listed property must identify the principal broker or brokerage by its licensed name, and a sales associate may not advertise in the associate's own name without the broker. Pre-approval by the Commission and disclosure of the commission rate are not required.

Question 9Kentucky License Law, Commission Rules, and Statutory Requirements

Which task may an unlicensed assistant lawfully perform for a Kentucky brokerage?

  1. Explain the terms of the agency agreement to a consumer
  2. Show a listed property to a prospective buyer who calls the office
  3. Schedule appointments and answer the office telephone Correct answer.
  4. Discuss the seller's willingness to negotiate on price

Explanation

An unlicensed assistant may perform clerical and administrative work such as answering the phone, scheduling showings, and assembling documents. The assistant may not perform acts that require a license, such as showing property, discussing price or terms, or explaining agency agreements.

Question 10Kentucky License Law, Commission Rules, and Statutory Requirements

When must a Kentucky licensee give a consumer the Consumer Guide to Agency Relationships?

  1. Only when the consumer asks for a copy
  2. At the closing table
  3. At the first substantive contact with the consumer Correct answer.
  4. Within five days after a purchase contract is signed

Explanation

KRS 324.310 requires delivery of the Consumer Guide at first substantive contact, which occurs when specific information about the property or the consumer's needs is exchanged. The guide lets the consumer make an informed choice among the available agency relationships.

Question 11Kentucky License Law, Commission Rules, and Statutory Requirements

A Kentucky broker may act as a dual agent in a transaction only when:

  1. the broker's managing broker approves the dual role in a signed office memorandum
  2. both the buyer and the seller give written informed consent after disclosure Correct answer.
  3. the total commission is reduced to reflect the reduced level of service
  4. the property is a residential resale rather than commercial property

Explanation

Dual agency exists when one broker represents both parties to the same transaction. Kentucky permits it only after full disclosure and with the written informed consent of both parties, because the broker cannot advocate fully for either side.

Question 12Kentucky License Law, Commission Rules, and Statutory Requirements

A Kentucky licensee acting as a transaction broker:

  1. must disclose each party's confidential information to the other party in the transaction
  2. assists both parties without representing either one Correct answer.
  3. represents the seller only but may advise the buyer on price
  4. represents both parties as a disclosed dual agent

Explanation

A transaction broker facilitates a transaction without becoming an agent of either party. The transaction broker must be honest, disclose known material facts, and account for money, but owes no loyalty or advocacy and must not reveal one party's confidences to the other.

Question 13Kentucky License Law, Commission Rules, and Statutory Requirements

Before a Kentucky licensee may begin representing a client as an agent, the licensee must:

  1. record the agreement with the county clerk
  2. obtain the principal broker's oral approval of the relationship
  3. have a written agency agreement signed by the parties Correct answer.
  4. post a surety bond with the Commission equal to the expected commission

Explanation

KRS 324.310 requires agency relationships to be created by a written agreement signed by the parties that sets out duties, term, and compensation. An oral understanding is not enough to establish agency with a Kentucky licensee, and recording or bonding is not required.

Question 14Kentucky License Law, Commission Rules, and Statutory Requirements

Which set of duties does a Kentucky agent owe to a client?

  1. Fairness and neutrality between the client and the other party to the transaction
  2. Profit maximization, complete secrecy from the broker, and independent contracting
  3. Loyalty, disclosure, confidentiality, accounting, and reasonable care Correct answer.
  4. Only the duties that are spelled out in the local multiple listing service rules

Explanation

An agent owes the client the traditional fiduciary duties of loyalty, obedience, disclosure, confidentiality, accounting, and reasonable care and skill. The agent must place the client's interests ahead of the agent's own interests and ahead of the other party's interests.

Question 15Kentucky License Law, Commission Rules, and Statutory Requirements

A Kentucky buyer's agent's duty of confidentiality to the buyer:

  1. ends when the agent's license is transferred to another broker
  2. ends when the agency agreement expires by its own terms
  3. ends when the buyer closes on the property
  4. continues after the agency relationship ends Correct answer.

Explanation

The duty of confidentiality protects information the client would not want disclosed, and it survives termination of the agency relationship. The former agent may not later use or reveal that information to the client's disadvantage.

Question 16Kentucky License Law, Commission Rules, and Statutory Requirements

A sales associate at a Kentucky brokerage runs an online advertisement for a listing that omits the brokerage's name. Who may the Commission discipline?

  1. Only the principal broker, because associates are not permitted to advertise at all
  2. Both the associate and the principal broker, who must supervise the associate's advertising Correct answer.
  3. Only the sales associate, because the associate personally placed the advertisement online
  4. Neither, because online advertising falls outside the Commission's rules

Explanation

Every advertisement must identify the principal broker or brokerage, and the principal broker is responsible for supervising the associates and their advertising. Because the supervisory duty was breached, the Commission may discipline both the associate who placed the ad and the principal broker.

Question 17Kentucky License Law, Commission Rules, and Statutory Requirements

An unlicensed person finds a buyer for a Kentucky listing and demands a share of the commission. In court, the person:

  1. may recover if the broker promised to pay a share in a signed writing
  2. cannot recover the commission because the agreement is unenforceable Correct answer.
  3. may recover if the buyer actually closes on the property
  4. may recover if the person is related to the broker

Explanation

A person who performs brokerage services without a license may not sue to collect compensation, and the agreement is unenforceable as against public policy. A broker who shares a commission with an unlicensed person also violates the license law and faces discipline.

Question 18Kentucky License Law, Commission Rules, and Statutory Requirements

A Kentucky licensee who sells a property the licensee personally owns must:

  1. disclose in writing that the licensee holds a real estate license Correct answer.
  2. list the property with a different brokerage
  3. pay a referral fee to the Commission
  4. obtain the Commission's written approval before the property is advertised

Explanation

A licensee selling or leasing property in which the licensee has an ownership interest must disclose the licensed status in writing so the other party knows they are dealing with a real estate professional. The disclosure is typically placed in the contract or the advertising.

Question 19Kentucky License Law, Commission Rules, and Statutory Requirements

Which person is exempt from Kentucky's real estate licensing requirements?

  1. An owner selling the owner's own real property Correct answer.
  2. A property manager who leases units for owners for a monthly fee
  3. A person who negotiates purchases of foreclosed homes for a group of investors
  4. A person who lists newly built homes for a builder for a fee

Explanation

The licensing statutes exempt owners acting on their own behalf, along with attorneys performing legal services and certain public officials and lenders. A person who lists or negotiates property for a builder or for investors for compensation is providing brokerage services and needs a license.

Question 20Kentucky License Law, Commission Rules, and Statutory Requirements

Under Kentucky's designated agency approach, when one associate in a brokerage represents the seller and another associate represents the buyer in the same transaction:

  1. each associate represents that associate's own client under the principal broker's supervision Correct answer.
  2. the buyer must be represented by a different brokerage firm
  3. both parties become clients of the same individual sales associate for the entire transaction
  4. the broker becomes a dual agent and must withdraw from the transaction

Explanation

Designated agency allows the principal broker to designate one associate to represent the seller and another to represent the buyer in the same transaction. Each associate advocates for that associate's own client while the principal broker supervises the office, and the arrangement must be disclosed and consented to.

Question 21Kentucky License Law, Commission Rules, and Statutory Requirements

Which of the following is grounds for disciplinary action by the Kentucky Real Estate Commission?

  1. Misrepresenting a property's square footage to a prospective buyer Correct answer.
  2. Working part-time as a sales associate while holding an active license
  3. Declining to accept a buyer as a client
  4. Refusing a seller's request to reduce the commission rate at the closing table

Explanation

The Commission may discipline a licensee for misrepresentation, fraud, dishonest dealing, and similar conduct in a real estate transaction. Refusing to reduce a commission, working part-time, or declining a particular client are not violations of the license law.

Question 22Kentucky License Law, Commission Rules, and Statutory Requirements

How many hours of continuing education must a Kentucky licensee complete each year to keep an active license?

  1. Twelve hours
  2. Three hours
  3. Six hours Correct answer.
  4. Eighteen hours

Explanation

Kentucky requires six hours of approved continuing education each year to renew an active license. The requirement is measured over the Commission's annual continuing education period and includes subject areas specified by rule.

Question 23Kentucky License Law, Commission Rules, and Statutory Requirements

A Kentucky sales associate's license is:

  1. held by and registered with the associate's principal broker Correct answer.
  2. issued to the associate's team leader on the associate's behalf
  3. held by the Commission until the associate qualifies for a broker license
  4. held personally by the associate and kept at the associate's residence

Explanation

A sales associate's license is issued through and held by the principal broker, who is responsible for the associate's brokerage activity. If the associate leaves the brokerage, the license must be transferred, and until then it is inactive and the associate may not practice.

Question 24Kentucky License Law, Commission Rules, and Statutory Requirements

The buyer and seller in a Kentucky transaction dispute who is entitled to the earnest money. The principal broker holding the funds should:

  1. split the money evenly between the two parties to end the disagreement
  2. give the money to the seller, because the seller holds legal title to the property
  3. give the money to the buyer, because the buyer originally deposited the funds
  4. hold the funds in escrow pending a written agreement or a court order Correct answer.

Explanation

The broker is a stakeholder, not a judge of the parties' dispute. The broker must keep the deposit in escrow until the parties sign a written release or a court orders disbursement, and may file an interpleader action if the dispute cannot be resolved.

Question 25Kentucky License Law, Commission Rules, and Statutory Requirements

A Kentucky real estate brokerage organized as a limited liability company must:

  1. obtain a separate sales associate license for the company itself
  2. be owned entirely by licensed sales associates
  3. register with the Commission as an unlicensed business entity that employs licensees
  4. hold a broker license with a designated principal broker Correct answer.

Explanation

A business entity that provides brokerage services must itself hold a real estate broker license, and a licensed broker must be designated as the principal broker responsible for the entity's operations. The entity license is separate from the individual licenses of the associates who work there.

Question 26Kentucky License Law, Commission Rules, and Statutory Requirements

Which applicant meets Kentucky's minimum age and education requirements for a real estate sales associate license?

  1. An 18-year-old who has a GED certificate Correct answer.
  2. A 20-year-old who never finished high school
  3. A 21-year-old who has no diploma but passed the exam
  4. A 17-year-old who has a high school diploma

Explanation

Kentucky requires a sales associate applicant to be at least 18 years old and to hold a high school diploma or its equivalent, such as a GED certificate. Passing the licensing exam does not substitute for the education requirement. Age alone without the diploma or equivalent is also insufficient.

Question 27Kentucky License Law, Commission Rules, and Statutory Requirements

Which activity requires the person performing it to hold a Kentucky real estate license?

  1. Owning and leasing out a duplex you purchased as an investment
  2. Selling your own home without help from a brokerage
  3. Managing rental units for a property owner for a monthly fee Correct answer.
  4. Clerical work for a title company preparing closing documents

Explanation

Kentucky license law covers leasing and renting real property for another person for compensation, so fee-based property management is licensed brokerage activity. Owners dealing with their own property are not acting for another. Clerical or title work does not involve negotiating real estate transactions for a fee.

Question 28Kentucky License Law, Commission Rules, and Statutory Requirements

In Kentucky, the commission rate a brokerage charges on a listing is:

  1. fixed by local multiple listing service rules
  2. set by the Kentucky Real Estate Commission
  3. negotiated between the broker and the client Correct answer.
  4. capped by statute at six percent of price

Explanation

Real estate commissions in Kentucky are competitively negotiated between the broker and the client, and neither the Commission nor an MLS may set or fix rates. Any schedule of rates published or agreed among brokers raises antitrust concerns. No statute imposes a percentage cap.

Question 29Kentucky License Law, Commission Rules, and Statutory Requirements

Real estate licenses in Kentucky are issued and regulated by the:

  1. Office of the Secretary of State
  2. Kentucky Real Estate Commission Correct answer.
  3. Kentucky Association of REALTORS®
  4. Kentucky Department of Insurance

Explanation

The Kentucky Real Estate Commission administers the state's real estate license law, issuing licenses and disciplining licensees. Trade associations such as the Association of REALTORS® are private membership organizations with no licensing authority. Neither the Department of Insurance nor the Secretary of State licenses real estate brokers or sales associates.

Question 30Kentucky License Law, Commission Rules, and Statutory Requirements

A licensed Kentucky sales associate may be affiliated with:

  1. as many brokers as she wishes, if she discloses them all
  2. one principal broker at a time Correct answer.
  3. two brokers, if both sign her license application
  4. any broker who agrees to pay her a share of commissions

Explanation

A Kentucky sales associate's license is held under a single principal broker, who is responsible for supervising her brokerage activity. The license must be transferred whenever she changes brokerages. Multiple simultaneous affiliations would leave supervision and compensation responsibility undefined.

Question 31Kentucky License Law, Commission Rules, and Statutory Requirements

A Kentucky sales associate leaves Broker A to join Broker B. Before she may provide brokerage services for Broker B, she must:

  1. complete an additional pre-license course
  2. notify only the local association of REALTORS®
  3. wait 30 days after leaving Broker A
  4. have Broker B submit the transfer so her license is affiliated with Broker B Correct answer.

Explanation

A sales associate practices only under the principal broker to whom her license is currently attached, so the transfer must be submitted and processed before she works for the new brokerage. No waiting period applies once the transfer is effective. Additional pre-license education is not required for a change of brokerage.

Question 32Kentucky License Law, Commission Rules, and Statutory Requirements

A Kentucky licensee places her license on inactive status. While it is inactive, she may:

  1. represent only members of her own family
  2. act as a transaction broker without a brokerage
  3. continue to list and sell property part-time
  4. renew the license but not perform brokerage services Correct answer.

Explanation

An inactive license remains valid and may be renewed, but the holder may not perform acts requiring an active license, such as listing, showing, or negotiating for compensation. The restriction applies to all clients, including relatives. To resume brokerage activity, the licensee must reactivate under a principal broker.

Question 33Kentucky License Law, Commission Rules, and Statutory Requirements

A Kentucky licensee is helping a buyer complete a preprinted offer form. The licensee may:

  1. add a legal contingency of her own choosing
  2. draft a new financing clause for the buyer
  3. explain how a court would enforce the clause
  4. complete the blanks as the buyer directs Correct answer.

Explanation

Licensees may fill in blanks on preprinted forms at a party's direction, but drafting contract language or interpreting legal consequences is the practice of law. Advising on enforcement of contract terms is legal advice. The parties' attorney should supply or modify clauses outside the form.

Question 34Kentucky License Law, Commission Rules, and Statutory Requirements

Within a Kentucky brokerage, responsibility for supervising licensees and ensuring compliance with license law rests with the:

  1. sales associate with the most years of experience
  2. Commission's regional field representative
  3. principal broker Correct answer.
  4. office manager, whether licensed or not

Explanation

The principal broker holds the brokerage license and is accountable for the acts of the licensees practicing under it, including advertising and escrow handling. Experience does not shift that statutory duty to an associate. An unlicensed office manager cannot assume it.

Question 35Kentucky License Law, Commission Rules, and Statutory Requirements

A Kentucky principal broker uses $800 of a client's $3,000 earnest money deposit to pay the brokerage's rent, intending to replace it at closing. This conduct is:

  1. prohibited only if the transaction later fails to close
  2. prohibited, because escrow funds may not be used for the broker's expenses Correct answer.
  3. acceptable if the funds are restored before closing
  4. acceptable if the broker records the withdrawal in a ledger

Explanation

Earnest money and other client funds must be held in a trust or escrow account and kept separate from the broker's operating money. Using them for office expenses is conversion of client funds and grounds for discipline, whether or not the money is later restored. Ledger entries cannot authorize the use.

Question 36Kentucky License Law, Commission Rules, and Statutory Requirements

A Kentucky seller's agent learns that the basement has flooded repeatedly and the seller has not told the buyer. The agent must:

  1. withdraw from the listing and say nothing further
  2. keep quiet, because the seller is the agent's client
  3. disclose the known material fact to the buyer Correct answer.
  4. tell only the buyer's lender, in confidence

Explanation

A Kentucky licensee owes the client loyalty and confidentiality, but that duty does not extend to concealing known material adverse facts about the property from other parties to the transaction. The licensee must disclose such facts. Neither silence nor selective disclosure satisfies the duty.

Question 37Kentucky License Law, Commission Rules, and Statutory Requirements

After closing, a Kentucky seller pays the sales associate a $500 bonus directly for her work. The sales associate:

  1. may accept it if the amount is disclosed to the broker
  2. may accept it only if the buyer's agent receives a like amount
  3. may accept it, since sellers may compensate licensees directly
  4. may not accept it; a sales associate is paid by her broker Correct answer.

Explanation

A sales associate may receive compensation for brokerage services only from the principal broker under whom she is licensed. Any commission or bonus must flow through the brokerage, which then pays the associate. Accepting payment directly from a client is a violation even when the broker knows about it.

Question 38Kentucky License Law, Commission Rules, and Statutory Requirements

A Kentucky licensee's license expires and is not renewed, but she keeps showing property and writing offers for a buyer. Her conduct is:

  1. lawful, because her broker's license remains active
  2. lawful, because renewal may be completed at closing
  3. unlicensed brokerage activity subject to enforcement Correct answer.
  4. a minor rules violation curable with a late fee

Explanation

Only an active license authorizes brokerage activity, and an expired license cannot be relied upon even though the brokerage itself remains licensed. Practicing without a license exposes the individual to discipline and to statutory penalties for unlicensed activity. Renewal later does not retroactively validate services performed while lapsed.

Question 39Kentucky License Law, Commission Rules, and Statutory Requirements

A consumer obtains a court judgment against a Kentucky licensee for fraud in a real estate transaction, and the licensee fails to pay it. The consumer may seek payment from the:

  1. local association's grievance fund
  2. state unclaimed property account
  3. Real Estate Education, Research, and Recovery Fund Correct answer.
  4. Commission's general operating account

Explanation

Kentucky maintains a recovery fund to compensate consumers who obtain judgments against licensees for conduct covered by the license law and cannot collect from the licensee. Recovery is subject to statutory limits and procedures. Neither the Commission's operating budget nor private association funds pay such judgments.

Question 40Kentucky License Law, Commission Rules, and Statutory Requirements

An out-of-state brokerage with no Kentucky license advertises and negotiates the sale of a Kentucky farm for a commission. Under Kentucky law, the brokerage is:

  1. permitted to negotiate, but not to advertise
  2. exempt, because the property is rural
  3. engaged in unlicensed brokerage and subject to enforcement Correct answer.
  4. exempt, if a Kentucky licensee attends the closing

Explanation

Kentucky requires a license for anyone who, for compensation, negotiates or advertises the sale of Kentucky real estate, regardless of where the brokerage is located. The location or character of the property does not create an exemption. Enforcement may include injunctive relief and penalties for unlicensed activity.

Question 41Agency Relationships, Fiduciary Duties, and Contracts

Which fiduciary duty requires a licensee to place the principal's interests ahead of the licensee's own?

  1. Loyalty Correct answer.
  2. Accounting
  3. Disclosure
  4. Obedience

Explanation

Loyalty obligates the licensee to put the principal's interests above the licensee's own, including avoiding self-dealing and undisclosed profit. The other duties deal with handling money, following lawful instructions, and sharing facts.

Question 42Agency Relationships, Fiduciary Duties, and Contracts

An agency relationship between a client and a real estate broker is ordinarily created when:

  1. The broker advertises the property to the public
  2. The client authorizes the broker to act for the client Correct answer.
  3. The broker is paid a commission at closing
  4. The broker and the client casually discuss housing needs

Explanation

Agency arises when the principal authorizes the agent to act on the principal's behalf and the agent consents, whether expressly or by conduct. Compensation, advertising, and informal conversation do not by themselves establish the relationship.

Question 43Agency Relationships, Fiduciary Duties, and Contracts

A brokerage represents only the seller in a transaction, and no other party to that transaction is represented by the firm. The firm is practicing:

  1. Single agency Correct answer.
  2. Subagency
  3. Dual agency
  4. Designated agency

Explanation

Single agency describes a firm that represents only one party in a transaction, here the seller. The other choices describe situations in which both sides of the transaction are represented by the same firm or by cooperating brokers acting for the seller.

Question 44Agency Relationships, Fiduciary Duties, and Contracts

A firm holds a listing on a home, and a buyer represented by that same firm wants to submit an offer. Under Kentucky license law, what must occur before the firm may act as a dual agent?

  1. The firm must refer the buyer to a different brokerage
  2. Both the buyer and seller must give written informed consent Correct answer.
  3. The seller must sign a new listing agreement at a higher rate
  4. The commission must be split equally between the parties

Explanation

Dual agency is permitted in Kentucky only when both the buyer and the seller give informed consent in writing. Without that consent the firm must decline to represent one side or refer that party elsewhere.

Question 45Agency Relationships, Fiduciary Duties, and Contracts

Two licensees affiliated with the same brokerage represent the buyer and the seller in the same transaction as designated agents. In Kentucky, the brokerage is:

  1. Required to give up the listing side of the commission
  2. Permitted to do so with both parties' written consent Correct answer.
  3. Required to create a separate brokerage for each of the clients
  4. Guilty of undisclosed dual agency in every case

Explanation

Kentucky recognizes designated agency, under which different licensees in one brokerage may represent the buyer and the seller. The arrangement requires the informed written consent of both parties but does not force the firm to give up compensation or restructure.

Question 46Agency Relationships, Fiduciary Duties, and Contracts

A buyer client privately tells her licensee that she would pay $40,000 above the list price. The buyer agency agreement later expires without a purchase. The licensee now:

  1. Must disclose it to any seller who asks about the buyer
  2. Must keep the information confidential after termination Correct answer.
  3. May sell the information to another brokerage firm
  4. May reveal the information because the agency has ended

Explanation

The duty of confidentiality survives the end of the agency relationship, so information the client asked to keep private may not be revealed afterward. Only the client's informed consent or a legal compulsion would justify disclosure.

Question 47Agency Relationships, Fiduciary Duties, and Contracts

A licensee receives a $2,000 earnest money check from a buyer client. The licensee should:

  1. Deposit it promptly into the brokerage's escrow account Correct answer.
  2. Return it to the buyer until the offer is accepted
  3. Hold it in the licensee's personal account until closing
  4. Apply it to the licensee's marketing expenses

Explanation

The duty of accounting requires that client and transaction funds be kept in a separate escrow account maintained by the brokerage and be accurately recorded. Commingling those funds with personal or business money violates license law.

Question 48Agency Relationships, Fiduciary Duties, and Contracts

A seller instructs her listing licensee not to show the home on Sundays. A buyer's agent requests a Sunday showing. The listing licensee should:

  1. Terminate the listing agreement without discussion
  2. Show the home and tell the seller afterward
  3. Follow the seller's lawful instruction and decline it Correct answer.
  4. Schedule the showing because every buyer must be accommodated

Explanation

The duty of obedience requires the licensee to follow the principal's lawful instructions about the property. The seller's scheduling preference is lawful, so the licensee declines the showing rather than overriding the seller.

Question 49Agency Relationships, Fiduciary Duties, and Contracts

While showing a listing, the seller's licensee notices a basement wall that appears to be bowing. The licensee should:

  1. Cover the wall with a curtain before showings
  2. Wait for the buyer to ask about the basement
  3. Disclose the observed condition to prospective buyers Correct answer.
  4. Say nothing, because the buyer should hire an inspector

Explanation

A licensee must disclose material facts that the licensee knows or reasonably should know, including observable conditions affecting the property's value or safety. Telling the buyer to obtain an inspection does not replace that duty.

Question 50Agency Relationships, Fiduciary Duties, and Contracts

Under Kentucky law, which of the following agreements must be in writing and signed to be enforceable?

  1. An agreement to show a buyer three homes
  2. A promise to recommend a lender to a client
  3. A contract for the sale of a residential lot Correct answer.
  4. An oral agreement to split a commission between two brokers

Explanation

Kentucky's statute of frauds requires contracts for the sale of real property to be in writing and signed by the party to be charged. Promises that do not transfer an interest in land generally fall outside the statute.