Free Kentucky Real Estate Practice Exam

Q1.A Kentucky property manager terminates a management agreement with a property owner. Which of the following actions is the licensee REQUIRED to take regarding client funds held in trust?

• A.Retain the funds until the owner files a written request with KREC
• B.Transfer all client funds to the property owner or a successor manager promptly upon termination
• C.Deposit the funds into the licensee's operating account for safekeeping until further notice
• D.Hold the funds in trust for a minimum of one year before releasing them

Q2.Which federal law requires lenders to provide a Good Faith Estimate of closing costs to borrowers?

• A.Fair Housing Act
• B.Real Estate Settlement Procedures Act (RESPA)
• C.Truth in Lending Act
• D.Equal Credit Opportunity Act

Q3.Which of the following would make a real estate contract voidable?

• A.The contract involves an illegal purpose
• B.One party was a minor when the contract was signed
• C.The contract lacks consideration
• D.The property description is completely missing

Q4.A broker managing residential rentals on behalf of an owner wants to charge a fee to prospective tenants for processing their rental applications. Under RESPA, which of the following statements is most accurate regarding this practice?

• A.RESPA does not regulate application fees for rental transactions; it applies to settlement services in connection with federally related mortgage loan transactions.
• B.RESPA prohibits any application fee charged to prospective tenants as an unearned fee.
• C.RESPA requires that all rental application fees be disclosed on a Loan Estimate form.
• D.RESPA limits rental application fees to no more than $50 per applicant.

Q5.A real estate agent is working with a buyer to purchase a home with a $300,000 purchase price. Under RESPA requirements, when must the Loan Estimate be provided to the borrower?

• A.Within 1 business day of loan application
• B.Within 3 business days of loan application
• C.Within 5 business days of loan application
• D.At least 7 business days before closing

Q6.Which agent behavior constitutes illegal steering under the Fair Housing Act?

• A.Directing a buyer of a specific ethnicity toward or away from neighborhoods based on the racial composition of those areas
• B.Showing a buyer properties only within their stated price range
• C.Declining to show properties that do not meet the buyer's stated school district preference
• D.Recommending neighborhoods based on the buyer's commute requirements

Q7.A managing broker supervises a property manager who inadvertently sends a lease renewal notice only to tenants of one racial group, skipping tenants of another race for administrative convenience. As the supervising broker, what is the most accurate statement regarding the broker's potential liability?

• A.The broker may be held liable under the Fair Housing Act because a broker can be vicariously liable for discriminatory acts of supervised employees or agents performed within the scope of their employment.
• B.The broker has no liability because the property manager acted independently and without the broker's knowledge or direction.
• C.The broker is only liable if the broker personally signed the lease renewal notices.
• D.The broker is liable only if the affected tenants can prove the property manager intended to discriminate.

Q8.Under KRS Chapter 324, which of the following individuals is EXEMPT from the requirement to hold a Kentucky real estate license when performing real estate activities?

• A.A property management company employee who negotiates lease renewals on behalf of the owner
• B.An attorney-in-fact acting under a duly executed power of attorney on behalf of a principal in a real estate transaction
• C.A salaried employee of a real estate brokerage who shows rental properties to prospective tenants
• D.A person who lists and sells properties for neighbors as a favor but accepts a gift card as compensation

Q9.A Kentucky sales associate license applicant has completed the required pre-license education. Under 201 KAR Chapter 11 and KRS Chapter 324, which statement is MOST accurate regarding when the applicant may begin engaging in real estate brokerage activities?

• A.The applicant may immediately begin working under a supervising broker upon submitting a completed license application, even before KREC issues the license
• B.The applicant must wait until KREC has issued the license and the license is in active status before performing any act requiring licensure
• C.The applicant may perform ministerial acts, such as hosting open houses and preparing offers, while the application is pending review by KREC
• D.The applicant may begin performing brokerage activities after the employing broker certifies to KREC that supervision is in place

Q10.A Kentucky salesperson has satisfied the two-year active experience requirement and is applying for a broker license under KRS 324.046. Before KREC will approve the application, the applicant's supervising broker discovers the applicant failed to disclose a 15-year-old misdemeanor conviction for theft by deception on the original salesperson application. As the supervising broker who must co-sign the broker license application, which of the following best describes the broker's legal obligation and potential liability under 201 KAR 11:105 and KRS 324.160?

• A.The supervising broker must refuse to co-sign and is obligated to report the omission to KREC, because knowingly facilitating a materially false application exposes the broker to disciplinary action including license suspension or revocation under KRS 324.160(1)(a).
• B.The supervising broker may co-sign the application because misdemeanor convictions older than ten years are automatically expunged from KREC's consideration and need not be disclosed on any Kentucky real estate license application.
• C.The supervising broker has no duty to report the omission to KREC; the broker's only obligation is to verify the applicant's transaction experience hours and continuing education compliance, not the accuracy of prior disclosures.
• D.The supervising broker should advise the applicant to file an amended salesperson application correcting the omission, and once that amendment is accepted by KREC, the broker may freely co-sign the broker application with no further risk of personal discipline.

Q11.Under federal law, which statement about transfer taxes is most accurate?

• A.Transfer taxes are regulated by RESPA and must be disclosed on the Closing Disclosure
• B.Transfer taxes are a state and local matter, not regulated by federal law
• C.Transfer taxes are prohibited by the Truth-in-Lending Act
• D.Transfer taxes must be paid by the buyer under Fair Housing Act requirements

Q12.A principal broker in Kentucky fails to provide adequate supervision to a sales associate, who subsequently makes material misrepresentations to a buyer. Under KRS Chapter 324, what is the likely consequence for the principal broker?

• A.The principal broker may face disciplinary action by the Kentucky Real Estate Commission for failing to supervise, even if the broker was unaware of the associate's misconduct.
• B.The principal broker has no liability because the sales associate is an independent contractor solely responsible for their own actions.
• C.The principal broker is only liable if the buyer files a civil lawsuit within one year of the transaction.
• D.The principal broker faces disciplinary action only if the Kentucky Attorney General's office files a formal complaint.

Q13.Under the federal Truth-in-Lending Act (TILA) and Regulation Z, a lender must provide a buyer with the Loan Estimate within how many business days after receiving a completed loan application, and what is the primary purpose of that disclosure?

• A.Within 10 business days; to disclose the property's appraised value to the buyer.
• B.Within 3 business days; to provide the buyer with good-faith estimates of loan terms, projected payments, and closing costs so the buyer can compare loan offers.
• C.Within 5 business days; to confirm that the lender has approved the buyer's loan application.
• D.Within 3 calendar days; to disclose only the annual percentage rate and total finance charge.

Q14.A Kentucky licensee is working with a buyer who wants to make an offer on a property listed by the same brokerage. The principal broker wishes to assign one licensee to represent the seller and a different licensee to represent the buyer, with each acting solely in that client's interest. Under KRS Chapter 324, what type of agency arrangement is this?

• A.Dual agency, because both licensees work for the same brokerage
• B.Designated agency, because the broker has appointed separate licensees to represent each party exclusively
• C.Transactional brokerage, because neither party receives full fiduciary representation
• D.Sub-agency, because the buyer's licensee is working under the listing agreement

Q15.A property management company requires all prospective tenants to provide proof of income equal to three times the monthly rent. This practice is:

• A.Legal if applied uniformly to all applicants
• B.Always illegal under the Fair Housing Act
• C.Only legal for month-to-month leases
• D.Prohibited by the Equal Credit Opportunity Act