CH 10 FBE 427
RESPA prohibits:
1) Kickbacks & fees for services not performed in connection w/ the closing 2) RESPA also prohibits home sellers from requiring homebuyers to purchase title insurance from a particular title insurance company.
Proof of marketable title (3)
1. Abstract of title with an attorney's opinion 2. A policy of title insurance 3. The use of the Torrens system of title registration
What are the 3 types of delivery and acceptance methods of a deed (8th requirement)?
1. Actual Delivery --> handed directly 2. Constructive Delivery--> through escrow 3. Grantor releases all control of the deed
RESPA Penalties
1. Criminal Cases - $10,000 fine or 1 year in prison 2. Civil Cases- 3x unlawful charges + court cost and attorney fees
Special Purpose Deed (2)
1. Judicial Deed 2. Trustee Deed
Exclusions from ALTA
1. Liens imposed by law that are not shown on public records (such as unpaid property taxes). 2. Claims made by parties in possession of the property, such as tenants and adverse possessors. 3. Boundary disputes (because the title insurer does not inspect or survey the property). 4. Nonrecorded easements and servitudes, such as easements by implication, necessity, or prescription that would be disclosed by inspection and survey. 5. Zoning or building ordinances. 6. Hazardous waste that might exist on the property.
Requirements for a valid deed (8) WILDCARD
1. Must be in writing and signed by the grantor (W) 2. Grantor and grantee are clearly identified (I) 3. Grantor with legal capacity (L) 4. Property must be adequately described (D) 5. Deed must express an intent to immediately convey a property interest to grantee (C) 6. Specify the type of interest and rights given to the grantee (R) 7. Acknowledgement (A) 8. Delivered by the grantor and accepted by the grantee (D)
Two Types of Closing (2)
1. Settlement Closing/ Table Closing 2. Escrow Closing
"I hereby convey" expresses an intent to presently convey property through which requirement of a deed?
5th requirement --> Convey Property interest to grantee
The habendum clause specifies the type of interest and rights given to the grantee (fee simple, fee simple determinable, life estate, express easement) through which requirement of a deed?
6th requirement --> rights and interest must be specified habendum clause--> Clause in a deed which sets forth the extent of ownership and any exceptions or reservations to ownership.
What is a "bona fide purchaser" under a notice statute for recording deeds?
A bona fide purchaser is a purchaser who takes title to the property in good faith without notice of a prior sale by the grantor.
Under RESPA
A broker cannot accept reduced rents in exchange for referrals to an escrow agent who is his/ her landlord. PROHIBITS KICKBACKS
Day 1: O (Grantor) conveys Blackacre to A (a BFP) Day 2: O (Grantor) conveys Blackacre to B (a BFP) Day 3: O (Grantor) conveys Blackacre to C (a BFP) Day 4: A records Day 5: C records In a race-notice jurisdiction, who gets the title?
A! They were the first BFP to record.
What are the different ways in which a person may have notice of a prior sale?
Actual notice Constructive notice Inquiry notice
American Land Title Association (ALTA)
An extended coverage title insurance policy usually protecting the buyer against loss due to errors in the public records. (proper vesting of title, defects, liens, encumbrances, unmarketable, access (easement by necessity)
Day 1—O (Grantor) conveys Blackacre to A (a BFP) Day 2—O (Grantor) conveys Blackacre to B (a BFP) Day 3—B records Day 4—O (Grantor) conveys Blackacre to C (is C a BFP?) Under notice jurisdiction, who gets the title?
B because B recorded, therefore, C CANNOT be a BFP!
Day 2: O (Grantor) conveys Blackacre to B Day 3: O (Grantor) conveys Blackacre to C Day 4: B records Day 5: A records Under Pure Race Jurisdiction, who gets the title?
B because under pure race, it is whoever RECORDS first!
Day 1: O (Grantor) conveys Blackacre to A (a BFP) Day 2: O (Grantor) conveys Blackacre to B Day 3: O (Grantor) conveys Blackacre to C (a BFP) Day 4: B records Day 5: A records Under notice jurisdiction, who gets the title?
C because under notice jurisdiction, it is the LAST BONA FIDE PURCHASER!
Explain the "merger doctrine."
Contract law principle that once the parties to a purchase agreement close the transaction and the deed is delivered, all promises, representations, and warranties made in the purchase agreement are "merged" and replaced by the terms of the deed.
Tana conveys her property to Declan on January 5. She offers to sell the same property to Zaiden on January 10. The next day Zaiden is at the grocery store when he overhears a conversation nearby, "Did you hear Tana sold her house to Declan last week?" Zaiden quickly leaves and heads to Tana's to accept the offer and pay in cash; he then goes straight to the recorder's office and records his conveyance. Declan finally makes it to the recorder's office a week later and records his conveyance. If this occurs in a jurisdiction where a race-notice statute controls, who has title to the property?
Declan has title to the property. Since this is a race-notice jurisdiction, the party must be both the first to record and a BFP. Here, although Zaiden recorded first, he is not a BFP because he knew Tana had already conveyed her property to Declan.
General Warranty Deed FERS COW FA QE
Deed that offers the most protection in which grantor fully warrants good clear title to the premises. 6 covenants (warranties) present: 1. Seisin 2. Right to convey 3. Free of encumbrances future: 1. Covenant of warranty 2. Quiet enjoyment 3. Further Assurances
What are the common types of deeds?
General Warranty Special Warranty Grant deed Deed of bargain and sale Quitclaim Deed Judicial Deed and Trustee Deed
What does it mean when a deed is acknowledged (7th requirement)?
Has to be notarized or seen before a witness Acknowledgment is a declaration that the person executing the deed is actually the person executing it
The TRID rule does not apply to the following:
Home equity lines of credit (HELOC) Reverse mortgages Mortgages secured by a mobile home Mortgages secured by a dwelling that is not attached to real property (that is, land)
What requirement of a deed is this: : If James A. Richards, Jim A. Richards, James Richards, and Jim Richards are the same person, the title company's identity statement would indicate that the names all refer to the same person.
Identification of Grantor/ Grantee
Trustee Deed
In a trust, the owner of the property conveys title to a trustee until the owner has paid the financial obligation to a third party (the beneficiary). When the beneficiary is not paid and the owner defaults, the trustee has the power to sell the trust property through a trustee deed. Quitclaim deed with no warranties
Tract Index System
Instead of tracing title back through each successive conveyance from the grantor to grantee, the county, parish, or township is divided into parcels of land.
Identification of Grantor/ Grantee (2 requirement of a deed) needs to have?
Need to know if they are an individual, an LLC, where that LLC is located, multiple names, if they are married and have the title alone, former names (marriage), and the disproportionate shares
Under the special warranty deed, If there were preexisting easements, liens, and mortgages on the property when the seller received title, the would the seller be liable for them?
No! In a special warranty deed, the grantor warrants that he has not caused any defects in the title during his period of owning the property.
Zachary purchased a warehouse. He was not provided a closing disclosure and believes he was entitled to one. Is Zachary entitled to a closing disclosure under the TILA-RESPA Integrated Disclosure (TRID) rule?
No, TRID does not apply to commercial properties.
Aguilar was sued by a neighbor alleging that Aguilar's improvements trespassed onto the neighbor's property. Aguilar demanded that the title insurer defend the case, but the title insurer refused. The title insurance policy contained an exclusion precluding coverage for defects known to the insured on the date of policy and not shown by the public records. Aguilar knew of the boundary question with his neighbor seven years before the policy had been issued, while the dispute was not shown in any public records. Aguilar argued that the title insurance company exclusion did not apply. Does the title insurer have a duty to defend Aguilar?
No, the insurance company does not have to defend Aguilar against claims that he knew about at the time he purchased the policy.
What is "title"?
Ownership of land
What are the three types of recording statutes used in various states for the recording of real property deeds?
Pure Race Notice Race-Notice
If an ex-wife received title to the property and wanted to sell it, a buyer might require WHAT DEED from the ex-husband if there was an ambiguity about whether the ex-wife obtained fee simple title?
Quitclaim Deed --> If the ex-husband had no interest in the property, no interest would pass, but if he did still retain an interest in the property, the purchaser would obtain that interest.
A mortgage lender charges customers $20 for a flood-hazard report, but the firm providing that information charged the bank only $15. This is a violation of?
RESPA
Assume the following series of events has taken place: Day 1: O (Grantor) conveys Blackacre to A (a BFP) Day 2: O (Grantor) conveys Blackacre to B Day 3: O (Grantor) conveys Blackacre to C (a BFP) Day 4: A records Day 5: B records Under a race statute, who owns Blackacre? Under a notice statute, who owns Blackacre? Under a race-notice statute, who owns Blackacre?
Race: A Notice: C Race-Notice: A
Rental Homes, LLC, is a limited liability company owned by Sue Jones. Sue is the sole manager of the LLC. The LLC owns a residence. Sue desires to sell this residence to Barack. In order for the LLC to properly transfer title to Barack, how should the deed be signed?
Rental Homes, LLC, Sue Jones, Manager
You are assisting in a residential real estate transaction with an expected closing of July 10 (a Wednesday). On July 8, the lender sends a closing disclosure that matches the Loan Estimate. Will the closing still occur on July 10? If not, when will closing occur?
The Closing Disclosure needs to be provided at least THREE business days before the closing is consummated; therefore, the closing will occur July 11th.
Kelly has two children, Parry and Jane. Kelly wants to convey his home to his daughter, Jane, but does not want Perry to know about the conveyance until after he is deceased. Kelly prepares a deed properly describing the home, has it notarized, and stores it in his office drawer. He tells Jane where the deed is and to pick it up after he dies. When Kelly dies, Jane goes to his desk, takes the deed, and records it. Which of the following best describes the title to the home?
The home is now part of Kelly's estate because the deed was not delivered to Jane before Kelly died. Proper conveyance of property requires delivery of the deed.
A deed may provide that the grantor retain the right to extract oil and gas from the property. (T/ F)
True
Title insurance can help deal with receiving title through a forged signature on a quitclaim deed (T/F)
True
An unsigned deed is not a valid legal document. (T/F)
True However, a third party can sign the deed on behalf of the grantor through a power of attorney
A person with a physical impairment that impedes his ability to sign could have another person sign the deed on his behalf. The signature on the deed should conform exactly to the name shown as grantor. (t/f)
True through power of attorney
a minor can receive title to real property through a deed (T/F)
True; Under the 3rd requirement (Legal Capacity) of a deed, a minor can receive title to real property through a deed, but the minor would be unable to transfer title to a third person until he reached the age of majority (usually 18 years old).
Grant Deed
Type of deed with 2 covenants: 1. The grantor has not sold the property before 2. Property is free of undisclosed encumbrances made by the grantor
Use Torrens System for Title Registration (Proof of Marketable Title)
Use of a certificate and deed to identify ownership in the property Certificate is considered title that you take to the county recorder. The seller has to cancel their title before the buyer records the new certificate
Settlement Closing/ Table Closing
Used throughout the U.S. except the west the parties and other interested individuals meet in person on an agreed date and time. The parties will often meet at a settlement company At the meeting the parties and lawyers will review the closing documents, sign the documents, pay and receive consideration for the property (most often, money), and receive title to the real estate. The closing is presided over or supervised by a settlement agent (can be attorney or broker, lender)
Marketable title is not affected by:
Visible easements covenants, constrictions zoning and local land-use restrictions Adverse possession
Escrow Closing
West US Both the buyer and the seller deliver documents to an escrow agent, who holds the documents in trust until all parties meet the closing conditions. The parties do not meet to sign documents or exchange considerations. Instead, at the time of entering into the contract of sale, they sign an escrow agreement, which requires the deposit of documents and funds with the escrow agent within agreed timelines. The escrow agent facilitates the efforts of the parties to close the transaction.
Purchase Title Insurance (Proof of Marketable Title)
When a claim is made under a title policy, the insurer may hire lawyers to defend or negotiate the claim. The title company may obtain quitclaim deeds from these adverse claim holders to eliminate clouds on title. A cloud on title is a defect or potential defect in the owner's title arising from a lien, easement, or court order.
Does title insurance help with this: A mechanic's lien attaching to the title before the current transaction closes, but a claim of lien is recorded after the policy is issued
Yes
Under the general warranty deed, If there were preexisting easements, liens, and mortgages on the property when the seller received title, would the seller be liable for them?
Yes! In a general warranty deed, the grantor warrants that no one has ever caused any defects in the title.
The Meadows purchased property in Texas. The land the Meadows purchased stretched over two adjacent counties. When they purchased the property, the property was subject to an oil and gas drilling lease. The lease was recorded in only one of the two counties in which the property was located. The Meadows only checked one of the county records, which did not show the oil and gas drilling lease. Do the Meadows have constructive notice of the oil and gas drilling lease?
Yes, constructive notice arises when a search of the title records would have revealed a defect in title. All persons are deemed to have notice of what has been made part of the public records, even if they did not search for that information.
Amanda works for a title company. The title company has been around for 25 years and has a good relationship with many real estate agents. The title company has decided that, as a way of thanking the real estate agents who have referred business to the title company, it will hold a monthly dinner and reception for the real estate agents. Will the monthly dinner and reception violate RESPA?
Yes, the title company is providing something of value for referrals.
Judicial Deed
a deed issued as a result of a judicial foreclosure proceedings. Judicial deeds are quitclaim deeds and do not provide any warranty of title to the grantees.
Real Estate Settlement Procedures Act (RESPA)
a federal act administered by the federal Consumer Financial Protection Bureau. RESPA ensures that consumers are provided with information about the cost of their mortgages and closings.
Abstract of Title (Proof of Marketable Title)
an attorney provides a condensed, chronological summary (chain of title) of the title's history, and informs parties that it is free of any encumbrances or liens
Special Warranty Deed
contains the same warranties as a general warranty deed, with one major difference regarding the covenant period. It is only for the period the grantor has held the property, nothing before
Bobby sells his home to Freddy and provides a deed that grants a full warranty including all six present and future covenants. Bobby has given Freddy a
general warranty deed.
Deed of Bargain and Sale
implies that the grantor has a claim of ownership in the property, but the grantor makes no other covenants to the grantee. Sometimes a deed of bargain and sale is referred to as an "as is" deed. Typical for foreclosures
Title Assurance
means a person is recognized as having evidence of title in real property.
Bobby sells his home to Freddy and provides a deed that grants only the same title that Bobby has in the property, if any. Bobby has given Freddy a
quitclaim deed "If any"
Grantor/Grantee Index System
records are indexed and maintained alphabetically by the grantor's or the grantee's respective names. Along with the grantor's or the grantee's information, the index will contain a date and time, the type of document indexed (such as deed, mortgage, or easement), a short legal description, and a reference to the page and book in the public records where a copy is filed, along with the grantee's or the grantor's name. The grantor-grantee index is subject to inherent problems in tracing back title when people change names or use a different name in transferring the property.
Bobby sells his home to Freddy and provides a deed that grants a warranty that Bobby has not caused any defects in title during the period of Bobby's ownership. Bobby has given Freddy a...
special warranty deed
Closing
the completion or settlement of a real estate transaction. Both parties have fulfilled their obligations under the contract
Race- Notice Statute
the first BFP to record keeps title to the property. This statute has two requirements: a grantee who records first and is without notice of prior conflicting interests in the property.
Pure Race Statute
the first party to record takes title to the property, even if the first to record obtained his or her interest later in time.
Notice Jurisdiction
the last bona fide purchaser takes title to the property. This is the most common form of recording statute. bfp--> purchaser without notice that someone else was conveyed too
Marketable Title
title that is free from any encumbrances, defects, claims, or liens (except those the buyer is aware of and has agreed to accept) and free from reasonable doubt that the seller owns title. free from any liens or encumbrances
What is a "deed"?
written instruments used to transfer real property from on person to another Grantor (seller ) to grantee (buyer)