5) TRANSFER OF PROPERTY (8%)
Which of the following would be an incorrect amount for documentary transfer tax stamps? a) $110.00. b) $55.00. c) $220.00. d) $111.00.
$111.00. - Transfer stamps come in multiples of $0.55.
Mr. Black purchased a home for $650,000. The terms of the sale stated Mr. Black will make a down payment of $200,000 and assume an existing first trust deed for the balance of the purchase price. At a basic rate of $0.55 per $500, how much will the transfer tax be?
$220.00 - Transfer taxes are charges against new money only. Since the transaction included the assumption of a $450,000 existing mortgage, the only tax charged is against the $200,000 down payment. The transfer tax rate in the county where the property is located is $0.55 per $500, which equals $1.10 per $1,000. Multiply $1.10 by 200, totaling $220 in transfer taxes paid on the sale.
The original cost basis on a duplex purchased by Mr. Brown was $750,000. The tax assessor stated the breakdown of values to be 80% improvements and 20% land. Over the first five years, Mr. Brown depreciated the improvements at a rate of 2% each year. Mr. Brown then hired a licensed contractor to install a swimming pool at a cost of $50,000. Once the pool was completed, how much will the adjusted cost basis in the property be?
$740,000.00 - Depreciation can only be taken on the improvements (80%) portion of the purchase price. In this example: 80% x $750,000 = $600,000 (improvement portion of the original basis). $600,000 x 0.02 (2%) = $12,000 per year x 5 years = $60,000 (accrued depreciation). Then, subtract the accrued depreciation from the original cost basis. $750,000 (original cost basis) - $60,000 (accrued depreciation) = $690,000 (depreciated cost basis). Finally, add $50,000 for the new swimming pool improvement + $690,000 (depreciated cost basis) = $740,000 (adjusted cost basis).
Escrow calculates prorations based on _________ days in a year.
360 -Escrow works on a 30 day month multiplied by 12 months. Thus, for the purpose of calculating prorations, escrow considers there to be 360 days in a year.
A property in probate is appraised at $960,000. At auction, the highest bid is $900,000. For the court to consider any other offer, it would have to be at least:
945500 - A probate court will only consider a subsequent bid that is raised by an amount equal to 10% of the first $10,000 ($1,000), plus 5% on the balance ($44,500).
Mike executed a grant deed to Trevor and recorded it. Later, Mike changed his mind and sought to set the conveyance aside, claiming there had been no delivery to Trevor. Why was Mike unsuccessful in his effort?
Delivery and acceptance is presumed with recording. - Look to Question 32 for a hint to resolve this question. Recording presumes delivery and acceptance since the recorded deed is mailed to the grantee.
Which of the following are not tax deductible under federal income tax laws concerning an owner-occupied single family dwelling? a) Mortgage interest payments. b) A mortgage prepayment penalty that was incurred. c) Property taxes. d) Landscaping expenses.
Landscaping expenses. - is the only option that is not tax deductible for owner-occupied residences.
Anna sold her primary residence for $950,000. She originally paid $750,000 for the property four years ago. She spent $300,000 on capital improvements during her ownership. What can Anna write-off when filing her tax return? a) 200,000 gain. b) $500,000 gain. c) $100,000 loss. d) None of the above.
None of the above. -First, determine the amount of the capital gain or loss. $750,000 purchase + $300,000 improvements = $1,050,000 adjusted basis. A sale price of $950,000 creates a $100,000 capital loss. Capital losses are not permitted on a primary residence.
Which of the following is an ad valorem tax?
Real estate tax. - valorem tax is the Real estate tax valuation.
Recorded title to a parcel of real property is vested in the name of Jennifer Baker, a single woman. After her marriage to Colin Matthews, she executes a deed to the property only in the name of Jennifer Matthews, a married woman. The discrepancy in the grantor's name is:
a cloud on the title. - An inconsistency in the names of the title holder and grantor on the deed will require clarification, creating a cloud on title until this has been accomplished.
Chain of title refers to:
an exact history of conveyances and encumbrances affecting title to a property.
The annual property taxes an owner of a home needs to pay are determined by:
assessing the land and improvements separately, then multiplying the total by one tax rate. - assessing the land and improvements separately, then multiplying the total by one tax rate.
The instrument used to transfer title to personal property is the:
bill of sale - A bill of sale is used to transfer personal property.
All of the following may be impound requirements for a borrower, except: a) property insurance b) bond payments c) property taxes d) mortgage interest
mortgage interest. - The exception here is mortgage interest. The other three answer selections are related in that monies are accumulated in the impound account against an annual or semi-annual payment.
Recording is not required for a:
grant deed. - A grant deed is valid whether or not it is recorded.
A person holding title to real property in severalty:
has sole ownership of the property. - The word 'severalty' is similar to 'sever.' Thus, a person holding title to real property in severalty has sole ownership of a property.
In an escrow statement, the term 'recurring costs' is in reference to:
impound account items. - Recurring means costs that will repeat. In this question, only impounds are recurring.
A standard policy of title insurance covers:
incompetence of any of the parties. - Only the American Land Title Association (ALTA) policy will give additional coverage, such as for encroachments and prescriptive easements. Incompetence of any of the parties is covered by both standard and extended policies.
During a sales escrow, the escrow officer receives two structural pest control reports. The escrow officer is to:
notify the buyer and seller of the discrepancy and obtain written instructions as to which report to use. - Remember, only the principals can make decisions about transaction terms to escrow.
The words 'time, title, interest and possession' are most closely related to which of the following concepts:
joint tenancy. - Time, title, interest and possession (TTIP) relate to joint tenancy only.
To establish title by adverse possession, an occupant must show:
they have paid all taxes assessed against the property during their occupancy. - Only answer choice D fits the requirements for adverse possession. The period of possession must be at least five years, not two. This is why answer choice C is incorrect.
Which of these persons or entities may not engage in the escrow business? a) A real estate broker. b) A domestic or foreign corporation. c) A principal in the transaction. d) An attorney.
A principal in the transaction. -A principal in the transaction cannot perform as an escrow agent in the same transaction as they are not impartial or neutral.
Which is not true of a tenancy in common? a) Interests may be unequal. b) A tenant in common may not will their interest in the property to others on their death. c) An individual owner can sell their interest without the consent of the other tenants. d) The owner does not own a specific part of the property.
A tenant in common may not will their interest in the property to others on their death. - Answer selections A, C and D are true of a tenancy in common, as distinct from a community interest such as joint tenancy. However, a tenant in common may will their interest in the property to others on their death.
A standard policy of title insurance does not cover: a) unrecorded liens. b) easements and liens on the property not revealed by the public records. c) rights of parties in possession. d) All of the above.
All of the above. - Only the American Land Title Association (ALTA) policy covers these items. Recognize how information in this question can make it possible to answer other questions regarding alternative title insurance policies.
A land contract, when compared to a grant deed transfer, is different in the: a) interest conveyed. b) signatures of the principal parties. c) designation of purchase price. d) All of the above.
All of these will differ between a contract and a deed.
Sara and Marshal are joint tenants. Marshal obtains a loan from a lender secured by his interest in the property. When Marshal dies:
Sara owns the property free and clear of the encumbrance. - Joint tenants receive title clean of any obligations made by the deceased partner. Further, joint tenants do not need to be married and joint tenancy is not limited to only two people.
Which of the following will not terminate an escrow? a) Agreement of the parties. b) The broker's order to terminate escrow. c) One of the parties' inability to meet a contingency. d) The destruction of the property during the escrow
The broker's order to terminate escrow. - The broker is not a principal to the escrow and therefore has no authority to cancel it. A mutual agreement between the parties or the failure of a contingency to occur will cancel the escrow, as will the destruction of the property during the escrow.
An offer based on a $300,000 loan assumption was made and accepted. During escrow, it was discovered the loan was for $290,000, not $300,000. What is the most probable outcome?
The buyer can void the contract. - This is an example of a contingency in an escrow. This contingency favored the buyer and allowed them to void the sale since the loan balance was not as previously stated.
Which of these is most correct concerning delinquent taxes and redemption rights?
The effect of a 'sale to the state' by the tax collector is to start the redemption period running. - The redemption period begins with the sale.
Which of the following would most likely result in the termination of a real estate sales escrow? a) The mutual agreement of the buyer and the seller. b) The revocation by the broker for the buyer. c) The death of the seller. d) The cancellation of the escrow by the seller.
The mutual agreement of the buyer and the seller. - Escrow can be cancelled by mutual agreement between both principals, not unilaterally by one party. The broker is not a party to the escrow, therefore, they cannot authorize termination. In the event of the death of either party, their estate is still responsible for performing.
When the public records have been examined, a written summary of the chain of title is known as a(n):
abstract of title. - The record of title is summarized in the abstract of title.
abstract of title (q. 17) adjusted basis (q. 25) ad valorum (q. 22) adverse possession (q. 38) American Land Title Association (ALTA) (q. 16) California Veteran (CalVet) loan (q. 37) chain of title (q. 39) cloud on title ( q. 33) California Land Title Association (CLTA) (q. 12) contingency (q. 40) conveyance (q. 41) delinquent taxes (q. 20) escrow (q. 1, 3, 4, 23) impounds (q. 42) joint tenancy (q. 10, 11) personal property (q. 24) preliminary title report (prelim) (q. 15) property tax assessment (q. 21) probate sale (q. 35) proration (q. 2, 6, 27) recording (q. 18, 19) recurring costs (q. 5) severalty (q. 8) sheriff's sale (q. 36) tax deduction on personal residence (q. 26) tax foreclosure sale (q. 29) tenancy in common (q. 7) title (q.13, 14) transfer by contract (q. 34) transfer by deed (q. 30, 31, 32) transfer stamp (q. 28) vesting (q. 9)
color of title escheat mortgage interest deduction (MID) parol evidence Proposition 13 (Prop 13)
All of the following items contained in a closing statement are generally prorated, except:
delinquent interest. - Delinquent interest is a seller expense and not prorated for the buyer.
A deed:
does not have to be recorded to transfer title. - This question runs parallel to Question 19. A deed does not need to be recorded to be valid, but must be recorded to give constructive notice (answer selection A).
The California Land Title Association (CLTA) standard policy and the American Land Title Association (ALTA) policy does not protect the insured against:
encumbrances which are created or become encumbrances after issuance of the policy. -Both the California Land Title Association (CLTA) standard and American Land Title Association (ALTA) policies provide coverage for all answer selections except C.
Escrow closes on the 16th day of February (28 days). The seller receives $500 in rent for the month of February. The seller:
owes the buyer $250. - Remember, escrow calculates a month as 30 days, as stated in Question 2 so disregard the reference to the literal number of days in the month. The 16th day of the month is first day of the second half of the month and thus the seller owes the buyer precisely half of $500.
Implied warranties are not included in a:
quitclaim deed. - The quitclaim deed is the exception here. There are no guarantees or warranties with a quitclaim deed.
Unless otherwise licensed, a real estate licensee is prohibited from doing all of the following, except: a) sell real estate. b) give legal advice. c) draft building plans. d) give tax advice.
sell real estate. - Answer selections B, C and D are not covered under real estate licensure.
A writ of execution is issued for a(n):
sheriff's sale - A sheriff's sale will cause a writ of execution to be drawn and recorded.
On April 1, 2020, an escrow agent opened a preliminary title report order for the sale of a property. The seller purchased the home in 1998, financing it with a Federal Housing Administration (FHA) loan on which they are currently making payments. A preliminary title report dated April 5, 2020 will:
show a deed of trust with the seller as trustor. - On April 5th the seller will still be the owner and the trustor on the Federal Housing Administration (FHA) loan. Thus, answer choice B is the only correct answer.
A grant deed has been executed once it has been:
signed by the grantor. - A signature completes the execution. The transfer process requires delivery and acceptance to be complete.
At a tax foreclosure sale, the winning bidder receives a(n):
tax deed. - The answer to this question is contained in the language of the question itself.
When an eligible veteran purchases a home under the CalVet program, the grant deed is in favor of:
the California Department of Veterans Affairs. - The CalVet sale is a land sales contract with the California Department of Veterans Affairs as the seller (vendor).
A deed is recorded and indexed based on:
the grantor and grantee names alphabetically. - The names of both parties to the transfer are named and indexed accordingly.
An American Land Title Association (ALTA) policy of title insurance goes beyond the protection afforded by a California Land Title Association (CLTA) policy in guarding against:
the location of property lines according to a formal survey. - is one of the extended benefits of an American Land Title Association (ALTA) policy.
All of the following may be added to the original cost basis of real property to arrive at an adjusted basis for federal income tax purposes, except:
the monthly mortgage payments. - Mortgage payments are the exception. The other three answer selections have similarities and may be added to the original cost basis of real property to arrive at an adjusted basis for federal income tax purposes.
