Although the steps involved in selling a home are similar regardless of where within the United States you live, Kentucky's real estate laws and practices are unique in some respects. Here’s an overview of the basics—from finding a real estate agent to making legally required disclosures to buyers.
Working With a Kentucky Real Estate Agent
Most people selling their home in Kentucky choose to work with a licensed real estate broker or agent. A good agent will help prepare and price your house, market it to prospective buyers, review offers, and negotiate with buyers up through the closing.
Before signing up with an agent, get references from other home sellers and check customer reviews on sites such as Zillow and Realtor.com. Double check the licenses of Kentucky real estate agents through its Department of Professional Licensing.
Signing a Listing Agreement in Kentucky
Once you find a real estate agent you want to work with, you’ll sign a “listing agreement,” giving the agent the right to market and handle the sale of your house. Most agents use standard forms created by their state or local Realtor association, such as the Kentucky Association of Realtors.
Listing agreements typically cover the following terms.
- Commission that you (the property seller) will pay. This customarily ranges from 5-6% of the house sales price, to be ultimately split between your real estate agent and the buyer’s agent. However, as you might have seen headlines about, recent lawsuits and court settlements have raised the possibility that this fee structure might change. It hasn't radically changed yet, though.
- Type of listing. Most listing agents will have you sign an exclusive right to sell listing, which obligates you to pay a commission to the agent regardless of who brings in the buyer. Other arrangements are possible, however, such as an open listing, in which you agree to pay a commission to whichever agent brings in a buyer, or an exclusive agency listing, in which you agree that your agent is the only one authorized to sell your house, but that you will pay a commission only if the agent brings in the buyer (not, for example, if you do).
- Duration of listing. In all cases, the listing agreement will cover a set amount of time, such as 90 days, before expiring (though you could always renew it, if the house remains unsold and both of you agree to this).
- List price. Your agent will recommend the appropriate selling price by comparing prices of similar homes (“comps”) that have been listed in your immediate area and on experience with whether pricing lower or higher than actual value is more likely to inspire bids. To educate yourself as to whether the agent is recommending an appropriate price, the National Association of Realtors’ website is a good source of information on prices of houses currently on the market, and Zillow provides data on actual selling prices.
- Items included or not included in the sale. For example, you might plan to leave behind a built-in dishwasher (which is therefore part of the property that the agent is contracted to sell), but exclude a refrigerator that you plan to move to your new home.
- Duties and obligations of seller and real estate agent. Your agreement will spell out how the real estate agent will list or market your house, what type of insurance you must maintain on the property, and more.
Making Real Estate Disclosures in Kentucky
State law in Kentucky (Kentucky Revised Statutes § 324.360, 2000) requires that sellers fill out and provide buyers a disclosure form, which includes details on the property such as:
- condition of the basement, including leakage
- condition of the roof, including leakage
- working condition of various component systems
- presence of hazardous substances such as asbestos or radon
- source and condition of water supply, and
- other information as specified by the real estate commission (which did indeed choose to add many more questions to the disclosure form, covering everything from wood-boring pests to threatened legal actions against the property).
Disclosures must be on a Seller’s Disclosure of Property Condition form established by the Kentucky Real Estate Commission. Certain types of sales (such as newly built homes, if a warranty is offered) are exempt from state disclosure rules. The form lists various house features and asks you to answer either "N/A" (not applicable), "Yes," "No," or "Unknown." In some cases, you're also asked to provide dates and details, such as the age of the water heater or how often the basement leaks.
In addition, if your house was built before 1978, you must comply with federal Title X disclosures regarding lead-based paint and hazards. See the lead disclosure section of the EPA’s website for details.
What Goes Into Kentucky Offers, Counteroffers, and Purchase Agreements
A buyer who wants to purchase a particular Kentucky home will make the seller a written offer, specifying terms such as the price, proposed down payment, and any contingencies (conditions to the closing), such as a satisfactory inspection report or the buyers’ arranging financing or selling their current house.
You may reject an offer outright, accept it as, or (as is more typical) respond with a counteroffer. A counteroffer accepts some or most of the offer terms, but suggests changes to others, such as a higher price or a closing date that’s sooner than the buyer proposed.
A legally binding contract is formed when you accept and sign the buyer's signed final offer (agreeing to any changes from the original offer) and notify the buyer of its acceptance. The transaction now goes into what’s called “escrow.”
What Is Escrow?
Escrow is the time period between signing the purchase agreement and closing on the house. You and the buyer will agree on an escrow or title agent, a neutral third party, to serve as intermediary and supervise the process (possibly preparing title reports, as well as monitoring the processing of the buyer's loan, removal of contingencies, and so on).
The buyer typically has a lot more to do during this time period than the seller. By the close of escrow, the buyer will need to finalize financing, remove all contingencies, have the house appraised (typically required by mortgage lenders), and get title insurance—usually under set deadlines.
Of course, if you added contingencies to the contract (such as that you find a new house to buy), you will have work to do as well. And you'll need to cooperate with the buyer on scheduling home inspections and the appraisal.
Issues often come up that require negotiating, such as who will pay for repair problems identified in an inspection report. The buyer might insist that you either pay to remedy a defect or lower the purchase price. If you cannot reach agreement, the buyer may have the right to back out of the deal.
What Happens at the Closing on Your Kentucky Home
By the close of escrow, you and the buyer should have fulfilled all the terms of your purchase agreement. At the closing itself (sometimes a meeting of the parties, other times conducted in separate locations and even on different days, and sometimes virtually), all final documents and funds will be exchanged between buyer and seller.
The buyer pays you the purchase price, and you give the buyer a deed and other transfer documents and clear title to the house or condo. You pay off any outstanding loans on your property and pay commissions to the real estate agents (per your listing agreement).
Sellers do not usually need to be present at a Kentucky closing so long as all costs are paid and documents are signed. Typically, the buyers will sign the final documents at the office of their title company or escrow agent and pick up the keys. Then the escrow agent will record the new deed in the buyer's name at a local government office, and the home is officially theirs.
Working With a Kentucky Real Estate Lawyer
Unlike some states, Kentucky does not require that sellers involve a lawyer in the house-selling transaction.
Even if it’s not required, you might decide to engage a lawyer at some point in the process—for example, to review the final contract or to assist with closing details. Or, you might want a lawyer’s help drafting a lease agreement if you plan to rent the home back for an extended period of time after the house closing, or if problems show up on the title report such as a lien on your property.
And if selling your home without a real estate agent (a “for sale by owner” or FSBO), it could be useful to hire an attorney to help with the legal paperwork.