Free Kentucky Contracts Practice Test — LicenseIQ

Question 1

A buyer pays $10,000 for a 12-month option to buy a house for $250,000. During the option period:

Accepted Answer

The option binds only the optionor. The optionee may exercise or let it lapse (forfeiting the option money).

Question 2

A Kentucky counteroffer must include:

Accepted Answer

201 KAR 11:121 §3(3) requires amended terms, signing date and time, expiration date and time, signatures of all counteroffering parties, and initialed changes.

Question 3

Which item must a Kentucky listing contract contain?

Accepted Answer

201 KAR 11:121 §3(1) requires an expiration date, along with price, signing times, principal broker and company names, fee, property description, signatures, showing limits, and initialed changes.

Question 4

Midway through a listing, a buyer from the same office makes the transaction an in-house sale. What does the regulation require?

Accepted Answer

201 KAR 11:121 §6(3) requires updating the agreement and obtaining new written consent if the agency relationship changes.

Question 5

Which is NOT a permitted basis for releasing a contract deposit from escrow?

Accepted Answer

KRS 324.111 allows release on performance, written agreement of all parties, court order, or the certified-letter procedure. An agent's opinion is not a basis for release.

Question 6

The federal law that prohibits price fixing, group boycotts, market allocation and tie-in agreements is the:

Accepted Answer

The Sherman Antitrust Act of 1890 prohibits conspiracies in restraint of trade, including these practices.

Question 7

A contract that has all legal elements but where one party may cancel is:

Accepted Answer

A voidable contract is valid but one party may rescind it (e.g., a minor, or a party induced by misrepresentation or duress). A void contract lacks an essential element and has no legal effect.

Question 8

A contract signed by a 17-year-old buyer is generally:

Accepted Answer

Contracts with minors are voidable at the minor's option; the adult party remains bound. A contract with someone adjudged insane is void.

Question 9

A listing agent receives a buyer's signed offer at 3:00 p.m. on Tuesday. What is the latest the seller's disclosure may be delivered to the buyer?

Accepted Answer

72 hours = 3 days. Tuesday 3:00 p.m. + 72 hours = Friday 3:00 p.m. (KRS 324.360).

Question 10

A financing contingency in a purchase agreement protects the:

Accepted Answer

A financing (mortgage) contingency lets the buyer cancel without penalty if unable to secure the specified loan by the deadline.

Question 11

A seller says, 'I will pay any broker a 5% commission if they bring me a buyer.' This promise creates a(n):

Accepted Answer

In a unilateral contract only one party is bound (to pay if the act is performed); the other party has no obligation to act. Most real estate contracts are bilateral.

Question 12

An offer uses an escalation clause instead of a fixed price. What makes it valid under Kentucky rules?

Accepted Answer

201 KAR 11:121 §3(2) permits a purchase price or a valid escalation clause with a maximum price.

Question 13

After presenting a buyer's offer to the seller, what notice must the seller's licensee give the buyer's licensee?

Accepted Answer

201 KAR 11:121 §2(2)(a) requires written notice of the date and time of presentation to the seller.

Question 14

Under the statute of frauds, a real estate sales contract must be:

Accepted Answer

The statute of frauds requires real estate sales contracts to be in writing and signed to be enforceable.

Question 15

A contract that is missing an essential element, such as consideration, is:

Accepted Answer

Missing an essential element makes a contract void from the start. A voidable contract appears valid but may be canceled by one party.

Question 16

Which item must the Agency Consent Agreement disclose?

Accepted Answer

201 KAR 11:121 §6(2) requires disclosure of known business, family, or personal relationships with another party, with an explanation, and whether there is an unrepresented party.

Question 17

Which event terminates a listing agreement by operation (force) of law?

Accepted Answer

Agency ends by performance, expiration, mutual agreement, or situationally by force of law (bankruptcy, condemnation), death or incapacity, destruction of the property, or breach.

Question 18

An offer to purchase in Kentucky must state the deposit amount and:

Accepted Answer

201 KAR 11:121 §3(2) requires the deposit amount, the holder, and the deadline for delivery.

Question 19

A sales contract provides that if the buyer defaults, the seller keeps the earnest money as the full measure of damages. This is a:

Accepted Answer

Liquidated damages are a sum agreed in advance as compensation for breach - often the earnest money deposit.

Question 20

An agent receives an earnest money check on Monday after the offer is accepted; there are no holidays. Under Commission rules, the deposit must be made no later than:

Accepted Answer

201 KAR 11:011 defines 'without unreasonable delay' for contract deposits as within three business days of receipt. Counting Tuesday, Wednesday, and Thursday, the deadline is Thursday.

Question 21

A mortgage lender offers a salesperson $200 for every client referred. Under RESPA this is:

Accepted Answer

RESPA prohibits kickbacks and unearned referral fees between settlement service providers and real estate licensees, even if disclosed.

Question 22

A buyer contracts to buy a home for $300,000, but it appraises at $290,000. The lender offers 75% LTV. What is the maximum loan?

Accepted Answer

LTV is applied to the LESSER of price or appraised value: $290,000 x 0.75 = $217,500. Using the $300,000 price ($225,000) is the common mistake.

Question 23

A buyer offers $300,000. The seller counters at $315,000. The buyer rejects the counter and then tries to accept the original $300,000 offer terms. Is there a contract?

Accepted Answer

A counteroffer is a rejection and a new offer; the original offer cannot be revived by the buyer.

Question 24

A listing agreement in which the broker earns a commission regardless of who sells the property is a(n):

Accepted Answer

In an exclusive right-to-sell listing, the listing broker earns a commission no matter who procures the buyer, even the owner. (Reclassified to section 6 / CORE.)

Question 25

A contract clause stating that 'time is of the essence' means:

Accepted Answer

'Time is of the essence' makes performance by the stated dates essential; missing a deadline can be a breach.

Kentucky real estate contracts practice test

1. A buyer pays $10,000 for a 12-month option to buy a house for $250,000. During the option period:

2. A Kentucky counteroffer must include:

3. Which item must a Kentucky listing contract contain?

4. Midway through a listing, a buyer from the same office makes the transaction an in-house sale. What does the regulation require?

5. Which is NOT a permitted basis for releasing a contract deposit from escrow?

6. The federal law that prohibits price fixing, group boycotts, market allocation and tie-in agreements is the:

7. A contract that has all legal elements but where one party may cancel is:

8. A contract signed by a 17-year-old buyer is generally:

9. A listing agent receives a buyer's signed offer at 3:00 p.m. on Tuesday. What is the latest the seller's disclosure may be delivered to the buyer?

10. A financing contingency in a purchase agreement protects the:

11. A seller says, 'I will pay any broker a 5% commission if they bring me a buyer.' This promise creates a(n):

12. An offer uses an escalation clause instead of a fixed price. What makes it valid under Kentucky rules?

13. After presenting a buyer's offer to the seller, what notice must the seller's licensee give the buyer's licensee?

14. Under the statute of frauds, a real estate sales contract must be:

15. A contract that is missing an essential element, such as consideration, is:

16. Which item must the Agency Consent Agreement disclose?

17. Which event terminates a listing agreement by operation (force) of law?

18. An offer to purchase in Kentucky must state the deposit amount and:

19. A sales contract provides that if the buyer defaults, the seller keeps the earnest money as the full measure of damages. This is a:

20. An agent receives an earnest money check on Monday after the offer is accepted; there are no holidays. Under Commission rules, the deposit must be made no later than:

21. A mortgage lender offers a salesperson $200 for every client referred. Under RESPA this is:

22. A buyer contracts to buy a home for $300,000, but it appraises at $290,000. The lender offers 75% LTV. What is the maximum loan?

23. A buyer offers $300,000. The seller counters at $315,000. The buyer rejects the counter and then tries to accept the original $300,000 offer terms. Is there a contract?

24. A listing agreement in which the broker earns a commission regardless of who sells the property is a(n):

25. A contract clause stating that 'time is of the essence' means:

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