Unit 4: Recordation, Title Insurance, and Settlement (Units 8, 10, 17, 21)

Monthly OA dues of $900 were paid in advance on the first of the month with the seller owning the day of closing. For a closing on October 20, using a 360-day year, the dues would be prorated as A) debit buyer, credit seller $300. B) debit seller, credit buyer $300. C) credit buyer, debit seller $600. D) credit seller, debit buyer $600.

A) Items paid in advance will be a buyer owes seller (BOS). Debit the buyer $300 for the portion of the month the buyer will own the property ($900 total dues ÷ 30 total days × 10 days the buyer owns the property = $300).

A mortgagee's title insurance policy protects the a. lender. b. borrower. c. grantor. d. grantee.

A). A lender (mortgagee) requires the borrower to purchase a mortgagee's title insurance policy to protect the lender's security interest in the property.

Before closing on the purchase of a duplex, the buyer asked his attorney to render a title opin- ion. The attorney's title opinion will do all of the following EXCEPT A) guarantee the buyer obtains marketable title. B) disclose unreleased liens against the property. C) disclose personal judgments against the seller. D) disclose the amount and status of property taxes and special assessments.

A). An attorney's title opinion does not guarantee marketable title.

In MOST cases, for a deed to be recorded, it must be A) acknowledged. B) signed by the grantee. C) valid. D) signed by both the grantor and grantee.

A). Deeds need to be acknowledged by the grantor(s) to be recorded.

An item that has been paid in advance typically shows on the closing statement as A) debit buyer, credit seller. B) debit seller, credit buyer. C) debit seller, credit broker. D) debit seller, debit buyer.

A). Items paid in advance will be the obligation of the buyer. The seller paid the bill before closing to a date after closing; the buyer will owe the seller for this portion of the month.

Real estate professionals would be responsible for all of the following EXCEPT A) calling about the zoning to verify whether it will meet the buyer's needs. B) recommending that a buyer have a property inspection. C) disclosing all environmental issues that might impact the property even if they are located outside the property boundaries. D) verifying any statement a seller or a buyer makes that appear to be false.

A). Real estate professionals should not call about the zoning for buyers, or the real estate professional would take on the liability for the information being correct. They should recommend that the buyer call about the zoning. Licensees must recommend that buyers have a property inspection, disclose all material facts, and verify any statements that appear to be false.

The sales price of the property will show on the closing statement as A) debit buyer, credit seller. B) debit buyer, debit seller. C) credit buyer, credit seller. D) debit seller, credit buyer.

A). The sales price is a debit from the buyer, who agreed to pay the price, and a credit to the seller.

Title insurance premiums are paid A) once, at the time the policy is issued. B) monthly, with the mortgage payment. C) semiannually, along with the property taxes. D) annually, along with the homeowner's insurance premium.

A). Title insurance policies protect against title flaws that already exist but have not yet been discovered. Therefore, the title company charges only one premium, which is typically paid at closing.

A lender making a loan secured by a mortgage will probably require the borrower to buy A) a mortgagee's title insurance policy. B) a mortgagor's title insurance policy. C) an owner's title insurance policy. D) private mortgage insurance.

A). To protect their interests, lenders generally require a borrower to purchase a mortgagee's title insurance policy (also called a lender's policy or a loan policy).

A deed that has not been recorded may NOT provide A) competent parties. B) constructive notice. C) actual notice. D) a valid document.

B). A deed that has not been recorded lacks constructive notice, which is also known as legal notice.

The BEST way for a seller to prove marketable title to real property is A) to give the buyer an abstract. B) to buy an owner's title policy for the buyer. C) to provide a general warranty deed. D) a quiet title action.

B). An owner's title policy is the best proof of marketable title. An abstract must have a title opinion. A general warranty deed does not prove the title is marketable and a suit for quiet title is used to remove clouds from title.

A prorated item that has been paid in arrears typically shows on the closing statement as A) debit buyer, credit seller. B) debit seller, credit buyer. C) debit seller, credit broker. D) debit seller, debit buyer.

B). Items paid in arrears will be the obligation of the seller. The buyer will be paying the bill sometime in the future, so at closing the seller will have to give the portion the seller owes to the buyer.

Which of the following is TRUE about the recording of documents? A) All real estate documents must be recorded to be valid. B) Recording real estate documents provides constructive notice of their contents to the public. C) Recording real estate documents provides actual notice of their contents to the public. D) Recording guarantees a valid and good title.

B). Not all real estate documents have to be recorded to be valid (for example, an unrecorded deed can transfer title to the grantee). Recording provides constructive notice of the contents of a document to the public at large.

Standard coverage title insurance protects against all of the following EXCEPT A) a forged deed. B) encroachments. C) errors in the public record. D) errors in the abstract.

B). Standard coverage title insurance does not protect against claims involving surveys or encroachments, or other problems that would only be discovered through an inspection of the property.

Which of the following would give a buyer the MOST protection against losses resulting from title defects? A) Mortgage default insurance B) Owner's title insurance policy C) Mortgagee's title insurance policy D) Abstract of title

B). The best protection for a property buyer is an owner's title insurance policy.

An investor is buying a partially renovated property in "as is" condition, and plans to complete the needed work and the sell the home. The seller has agreed in the purchase contract to provide the buyer with an extended title insurance policy at closing. The title commitment shows there are two mechanics' liens against the property and unpaid property taxes. At closing, who will be responsible for paying off these liens? A) The buyer, because the buyer is purchasing it "as is" B) The seller, because the liens are for work done on the property C) They can be left in place for the new buyer/ investor to assume D) The title company, because they found the liens after the policy was ordered

B). The seller is responsible for paying off all liens incurred before closing, and mechanics' liens take priority from the day the work was done. The property taxes are already in first position, which would mean the investor could not get a loan because lenders will not allow this type of lien to have priority over a loan. The title company would be responsible if the liens were found after the policy was issued. A new buyer would not take title with these liens.

Legal action taken on a title claimant's behalf to resolve all clouds on title is known as a A) suit for damages. B) foreclosure suit. C) suit to quiet title. D) partition suit.

C). Clouds are removed from the title in a suit to quiet title.

Who bears the obligation to disclose lead-based paint in residential properties built before 1978? A) Seller B) Seller and listing broker C) Seller and all brokers D) Seller and lender

C). Federal law requires sellers and all brokers provide certain important information about lead-based paint before a prospective buyer is obligated under contract to purchase the home.

Jacobson deeds property to Keene, who neither records her deed nor takes possession of the property. Jacobson later deeds the same property to Linder, who records his deed and takes possession of the property. Linder is not aware of the earlier conveyance to Keene. Who holds legal title to the property? A) Jacobson, because Keene did not record her deed B) Keene, because her deed is dated first C) Linder, because his deed was recorded first D) Keene and Linder as tenants in common, because the form of ownership was not specified in the deed

C). In a race/notice recording system, subsequent purchasers who record their deed first have good title to the property, as long as they did not have actual notice of the earlier conveyance.

A second mortgage can be distinguished from a first mortgage by the date the mortgage was A) acknowledged B) given. C) recorded. D) delivered and accepted.

C). Priority of rights is determined by the date of public notice. The most accepted form of public notice is document recordation.

Radon is A) considered a stigma that must not be disclosed. B) harmless to adults. C) a radioactive odorless and colorless gas. D) not considered an issue unless discovered.

C). Radon is an odorless, colorless radioactive gas and must be disclosed if the seller knows of its presence.

The requirements for recording are determined by A) the county clerk. B) title insurance companies. C) state law. D) federal law.

C). Recording requirements are set by state statutes (laws).

When a buyer records the deed from the seller, the legal consequence is to A) transfer title. B) give the seller assurance of holding a first lien. C) serve as constructive notice of the buyer's ownership interest. D) protect the seller from existing adverse claims.

C). Recording serves constructive notice (also called legal notice) of interests in real property.

All of the following would be prorated at closing EXCEPT A) rents. B) taxes. C) security deposits. D) water bill.

C). Security deposits are not prorated. The full amount is transferred from the seller to the buyer to hold for the tenant.

The main purpose of recording documents is BEST described as A) a race to the courthouse to be first in time. B) the best method to guarantee marketable title. C) a way to create public notice and a record of legal documents. D) the system to create actual notice for buyers.

C). The main purpose of recording is to create a system for all legal documents, not just real estate, to be shown to the public, to create legal or constructive notice. A race to the courthouse may or may not be a requirement for recording because each state sets their own rules.

The obligation of real estate professionals in a transaction involving a property built before 1978, which therefore may have lead-based paint, is to A) give the buyer the disclosure. B) make sure the seller inspects the property and removes all lead-based paint. C) make sure all parties are in compliance with the law. D) give the buyer an EPA booklet and have the buyer sign the disclosure.

C). The obligation of real estate professionalsin regard to lead-based paint is to make sure all the parties are in compliance with the law.

All of the following pairs match EXCEPT A) mold and humidity. B) asbestos and friable. C) radon and radioactive. D) CO and odoriferous.

D). CO is an odorless gas, so it is not odoriferous (which means having an odor).

An example of a stigmatized property is one that A) suffered from mold. B) had not received any offers. C) has radon gas issues. D) was the site of a suicide.

D). Suicide is considered a stigma, and state law determines whether it may be disclosed.

A chain of title is BEST described as a. all the records created in the sale of a property. b. the recorded documents listed in a title commitment. c. a historical summary of recorded documents for a property. d. the recorded documents from patent to the current title holder.

D). The chain of title is created by the recording of all documents from when the government gave or sold the land to an individual, typically a patent, to the present. Both an abstract and title commitment are based upon the chain of title.

A chain of title is a a. form of land measurement used by surveyors on plat maps. b. form of title insurance resulting in a strong guarantee. c. encumbrance on title that may prohibit sale of the land. d. property history of successive conveyances and recorded interests.

D). The chain of title links the present owner to all previous owners of the property.

A title search follows documents from the current to the first known source. In doing so, the examiner is following or creating the A). title commitment. B). title opinion. C). owner's policy. D). chain of title.

D). The examiner is following the chain of title.

Which of the following would benefit most from, and therefore be most concerned with, recording a mortgage? a. Title insurance company b. Grantor c. Mortgagor d. Mortgagee

D). The mortgagee (lender) wants to make certain that the mortgage is recorded, to provide notice of the mortgagee's lien against the property.

Before closing, a cloud on the title was found. Which of the following should the seller use to clear the title? A) Abstract with a title opinion B) Title commitment C) Title insurance D) Suit to quiet title

D). The seller would use a suit to quiet title. Title commitments and opinions would identify the cloud on the title, but not clear it.