Kentucky real estate laws are set out primarily in Chapter 324 of the Kentucky Revised Statutes and enforced by the Kentucky Real Estate Commission (KREC).1KENTUCKY REAL ESTATE COMMISSION. Kentucky Real Estate Commission Home Together with federal fair housing and tax rules, they control how agents must behave, what sellers must disclose, how money moves through a deal, and what recourse you have when something goes wrong. The sections below walk through the rules that most often affect buyers, sellers, and licensees.
What Agents Owe Their Clients
Kentucky real estate agents owe their clients fiduciary duties. Under the KREC’s standards of professional conduct at 201 KAR 11:121, those duties include loyalty, obedience to lawful instructions, disclosure, confidentiality, reasonable care and diligence, and accounting.2Kentucky Legislative Research Commission. 201 KAR 11:121 – Standards of Professional Conduct In practical terms, your agent has to put your interests first, keep your private information private, tell you about anything that could affect the property’s value, and handle your money properly. Failing on any of these counts as gross negligence under KRS 324.160 and can trigger discipline.3Kentucky Legislative Research Commission. Kentucky Revised Statutes KRS 324.160 – Sanctions – Grounds for Sanctions
Dual Agency
Kentucky allows dual agency, but with restrictions. Under KRS 324.121, when a principal broker designates separate agents inside the firm for the buyer and the seller, only the principal broker (or a designated manager) is treated as a dual agent, and only in a limited fiduciary capacity.4Kentucky Legislative Research Commission. Kentucky Revised Statutes KRS 324.121 – Designation of Licensee as Exclusive Agent The agent must inform both parties and get consent before the arrangement takes effect. If you see a dual agency disclosure in front of you, read it carefully. It narrows the advice either side can receive, and you can decline.
Seller’s Property Condition Disclosure
For single-family residential sales involving a licensed agent, KRS 324.360 requires the seller to complete and sign a written disclosure form describing the property’s known condition before the buyer makes an offer.5Kentucky Legislative Research Commission. Kentucky Revised Statutes KRS 324.360 – Form for Sellers Disclosure of Conditions The form covers structural issues, water damage, mechanical systems, and other known problems. Not every sale is covered. New-home sales where the builder offers a warranty, auction sales, and court-supervised foreclosures are exempt.
Lead-Based Paint Disclosure
Federal law layers on for homes built before 1978. Under 42 U.S.C. ยง 4852d, the seller must inform the buyer about any known lead-based paint hazards, provide any related inspection reports, and hand over the EPA pamphlet “Protect Your Family from Lead in Your Home.” The buyer gets at least 10 days to arrange a lead inspection, though the parties can agree to a different timeline.6Environmental Protection Agency (EPA). Disclosure of Information on Lead-Based Paint and Lead-Based Paint Hazards Both agents in the transaction are responsible for making sure the disclosure happens, and skipping it can lead to federal penalties.
Contracts, Escrow, and Closing Costs
Everything in Writing
Kentucky’s statute of frauds, KRS 371.010, requires real estate contracts to be in writing to be enforceable.7Kentucky Legislative Research Commission. Kentucky Revised Statutes KRS 371.010 – Statute of Frauds – Contracts to Be Written A verbal agreement to buy or sell property is not binding in Kentucky. Every purchase agreement, listing contract, and lease should be documented and signed.
Escrow
Under KRS 324.111, brokers must deposit earnest money and security deposits into a federally insured escrow account, kept separate from the broker’s own funds.8Kentucky Legislative Research Commission. Kentucky Revised Statutes KRS 324.111 – Escrow Account of Broker Mishandling escrow is one of the most common grounds for discipline, and the KREC audits these accounts.
Real Estate Transfer Tax
Kentucky charges the seller a transfer tax at $0.50 for every $500 of the property’s declared value, or $1.00 per $1,000.9Kentucky Legislative Research Commission. Kentucky Revised Statutes KRS 142.050 – Real Estate Transfer Tax On a $300,000 home, that’s $300. It is collected when the deed is recorded with the county clerk.
Capital Gains on a Home Sale
If you sell your primary residence and meet the ownership and use requirements, federal tax law lets you exclude up to $250,000 of gain from income, or $500,000 for married couples filing jointly.10Internal Revenue Service. Publication 523 – Selling Your Home You generally need to have owned and used the home as your main residence for at least two of the five years before the sale. Anything above the threshold is taxed as capital gain.
FIRPTA for Foreign Sellers
When a foreign person sells U.S. real property, the buyer is generally required to withhold 15% of the total sale price under the Foreign Investment in Real Property Tax Act and remit it to the IRS.11Internal Revenue Service. FIRPTA Withholding If you are the Kentucky buyer, the withholding duty is on you. Getting it wrong can make you personally liable, so professional tax advice is worth the cost here.
Fair Housing
The federal Fair Housing Act prohibits housing discrimination based on race, color, national origin, religion, sex, familial status, and disability.12U.S. Department of Housing and Urban Development (HUD). Housing Discrimination Under the Fair Housing Act Kentucky’s own civil rights laws at KRS Chapter 344 extend those protections at the state level.13Kentucky Housing Corporation. Fair Housing in Kentucky The rules reach nearly every part of a transaction: advertising, showings, negotiation, loan approval, and rental conditions. Steering buyers away from certain neighborhoods, refusing to rent to families with children, or rejecting an offer based on national origin all count.
Federal civil penalties are adjusted each year for inflation. As of 2025, a first violation can run up to $26,262. A respondent with a prior discriminatory housing practice within the preceding five years faces up to $65,653, and someone with two or more prior violations within seven years faces up to $131,308.14Federal Register. Adjustment of Civil Monetary Penalty Amounts for 2025 The Kentucky Commission on Human Rights investigates state complaints, and courts can award compensatory and punitive damages.
Advertising Rules
KRS 324.117 bars any real estate advertising that is intentionally false, misleading, or deceptive.15Kentucky Legislative Research Commission. Kentucky Revised Statutes KRS 324.117 – Advertisinga> Every ad for a listed property must show the name of the real estate company on the licensee’s license, or the name of the principal broker the licensee works under. The only exception is a licensee advertising their own personal property. The rule applies equally to print, social media, and online listings. Marking a property “sold” or “pending” when it isn’t, inflating square footage, or leaving out material conditions all count as violations, and the KREC can fine or suspend licensees who cross the line.
Penalties and How to File a Complaint
KRS 324.160 lets the KREC impose fines of up to $1,000 per violation, suspend or revoke a license, order remedial education, or put a licensee on probation with restrictions on their practice.3Kentucky Legislative Research Commission. Kentucky Revised Statutes KRS 324.160 – Sanctions – Grounds for Sanctions The per-violation cap can stack quickly. Representing both sides without proper disclosure, for example, is separate from any misrepresentation that occurs in the same deal.
If you believe a licensee has acted improperly, you can file a complaint directly with the KREC using its Sworn Statement of Complaint form (KREC Form 300). Your complaint has to allege a specific violation of KRS 324.160. Vague dissatisfaction with a transaction is not enough.16Legal Information Institute (LII) / Cornell Law School. 201 KAR 11:190 – Consumer and Administrative Complaints; Discipline; Administrative Hearings A screening committee reviews the complaint, may order an investigation, and recommends action to the full commission. If the evidence supports a violation, the case can move to a formal administrative hearing.
Protections for Buyers and Sellers
Consumer Protection Act
The Kentucky Consumer Protection Act at KRS Chapter 367 prohibits deceptive practices and false advertising in commercial transactions, including real estate. If you were misled during a purchase, you can complain to the Kentucky Attorney General’s Office, which has broad enforcement authority under the act. The seller’s disclosure requirement at KRS 324.360 also gives buyers a written record to point to if problems appear after closing that the seller knew about but didn’t reveal.5Kentucky Legislative Research Commission. Kentucky Revised Statutes KRS 324.360 – Form for Sellers Disclosure of Conditions
Title Insurance
Kentucky law does not require owner’s title insurance in every transaction, but it is one of the strongest protections a buyer can buy. A title policy covers defects that existed before you bought the property but weren’t caught during the title search, such as improperly recorded deeds, undisclosed heirs, unpaid property taxes, or liens from prior owners. Lenders usually require a separate lender’s policy as a condition of the mortgage, but that policy protects only the lender. An owner’s policy protects your equity, and the premium is a one-time cost that is a small fraction of the purchase price.
Seller Remedies When a Buyer Backs Out
Sellers have recourse when a buyer breaches a purchase agreement. Most Kentucky contracts include a liquidated damages clause letting the seller keep the earnest money if the buyer defaults without a valid contingency. Sellers can also sue for breach of contract when actual damages exceed the earnest money, though the outcome depends on the contract language and the facts of the breach.
Becoming Licensed in Kentucky
If you’re planning to work in the field rather than buy or sell, the KREC handles all licensing. You must complete 96 hours of KREC-approved pre-licensing education covering property law, finance, and ethics, or satisfy the requirement with six academic credit hours in real estate at an accredited college.17KENTUCKY REAL ESTATE COMMISSION. Broker Education Hours After passing the Kentucky Real Estate Sales Associate Exam, you file an application with the KREC ($120 for an inactive license, $130 for active), clear a fingerprint background check, and get sponsorship from a licensed Kentucky broker.18KENTUCKY REAL ESTATE COMMISSION. License Fees
To keep an active license, you need six hours of continuing education every calendar year (three of them in real estate law), finished by December 31.19KENTUCKY REAL ESTATE COMMISSION. Continuing Education20Kentucky Legislative Research Commission. Kentucky Revised Statutes KRS 324.395 – Errors and Omissions Insurance21Legal Information Institute (LII) / Cornell Law School. 201 KAR 11:220 – Errors and Omissions Insurance Requirements Letting the policy lapse is itself a basis for disciplinary action.