Key Takeaways
- Written listing agreements are required for brokers to earn a commission in Kentucky
- Kentucky uses standard agreement types: Exclusive Right to Sell, Exclusive Agency, and Open Listing
- Buyer representation agreements establish the broker's duties and compensation terms
- All listing agreements must include essential terms: price, term, commission, and property description
- Net listings are PROHIBITED in Kentucky as they create a conflict of interest
Representation Agreements & Prohibited Practices
In Kentucky, written agreements are required to establish agency relationships and earn commissions.
Types of Listing Agreements
1. Exclusive Right to Sell
| Feature | Description |
|---|---|
| Commission earned | If property sells by ANY source |
| Broker exclusivity | Only one broker |
| Owner can sell | Yes, but still pays commission |
| Most common | Yes, preferred by brokers |
2. Exclusive Agency
| Feature | Description |
|---|---|
| Commission earned | If property sells through agent |
| Broker exclusivity | Only one broker |
| Owner can sell | Yes, without paying commission |
| Common | Less common than Exclusive Right |
3. Open Listing
| Feature | Description |
|---|---|
| Commission earned | Only if that broker procures buyer |
| Broker exclusivity | None—multiple brokers possible |
| Owner can sell | Yes, without paying commission |
| Common | Least common, least favorable |
PROHIBITED: Net Listings
Net listings are PROHIBITED in Kentucky because they create conflicts of interest:
| What is a Net Listing? | Why Prohibited? |
|---|---|
| Seller sets minimum net amount | Agent's interest conflicts with seller's |
| Agent keeps everything over net | Incentive to undervalue property |
| No standard commission | Invites disputes and fraud |
Exam Alert: Net listings are a prohibited practice in Kentucky. Using a net listing can result in disciplinary action by KREC.
Required Listing Agreement Elements
Kentucky listing agreements must include:
| Element | Requirement |
|---|---|
| Property description | Address and/or legal description |
| Listing price | Seller's asking price |
| Commission terms | Amount or percentage |
| Expiration date | Definite termination date |
| Broker information | Name, license number |
| Signatures | Seller and broker |
Buyer Representation Agreements
Purpose
A Buyer Representation Agreement establishes:
- Agency relationship with buyer
- Broker's duties to buyer
- Compensation terms
- Duration of representation
Types of Buyer Agreements
| Type | Description |
|---|---|
| Exclusive Buyer | Buyer works only with this broker |
| Non-Exclusive Buyer | Buyer may work with multiple brokers |
Required Elements
| Element | Purpose |
|---|---|
| Scope of representation | Types of property sought |
| Geographic area | Where buyer wants to purchase |
| Compensation | How broker will be paid |
| Duration | Start and end dates |
Protection Periods (Safety Clauses)
What is a Protection Period?
A protection period (safety clause) protects the broker's commission after the agreement expires.
| If This Happens | Broker Earns Commission |
|---|---|
| Agreement expires | No, unless... |
| Client buys/sells within protection period | Yes, if broker procured client |
| Client listed with another broker | Usually no (override clause) |
Standard Protection Period
- Typically 30-90 days after expiration
- Applies to clients broker introduced during term
- Broker should provide written list of prospects
Termination of Agreements
How Agreements End
| Method | Description |
|---|---|
| Expiration | End date reached |
| Completion | Transaction closes |
| Mutual consent | Both parties agree to terminate |
| Breach | Material violation by either party |
Early Termination
A listing can be withdrawn by the seller, but:
| Situation | Consequence |
|---|---|
| Seller withdraws | May still owe commission per agreement |
| Broker terminates | No commission owed |
| Mutual termination | Per agreement terms |
Key Point: Withdrawal does not automatically relieve commission obligation—review agreement terms.
Under which type of listing agreement does the broker earn a commission regardless of who sells the property?
Why are net listings prohibited in Kentucky?
What is the typical duration of a protection period (safety clause) in Kentucky listing agreements?