Real Estate Part 1 Unit 9
Define the term marketable title.
A marketable title is one that is so free of defects that the buyer is certain he or she will not have to defend the title.
The collection of rights that a person has in the ownership of real property is called what?
A title
If Bob drives to a property and sees directly that John is in possession of the home, Bob has received what kind of notice of John's claim of ownership?
Actual notice
Explain actual notice.
Actual notice is learning something through direct experience or communication, such as seeing the direct evidence provided by a will.
What is an abstract, and is it considered legal evidence of a marketable title?
An abstract is a paper record of all transactions concerning a particular piece of land, including a history of ownership, liens, and encumbrances. By itself, it is not evidence of a marketable title.
What must support an abstract to complete the evidence of merchantable title?
An attorney's letter of opinion
What is an opinion of title, and what are the steps to its creation?
An opinion is a letter from an attorney stating the title meets all ownership needs and has no questions in its history. It is created by the attorney examining a certified abstract for missing transactions, unexplained name changes, or defects and then noting necessary actions to clear up the title.
Explain constructive notice.
Constructive notice is knowledge of a fact someone could have or should have obtained, such as looking through public records.
Where would one find information based on constructive notice?
Court House Records
Which of the following best describes constructive notice?
It is knowledge one could have or should have obtained.
Which of the following best describes actual notice?
It is knowledge received or imparted through direct experience.
What does a title search reveal?
Legal description of property, owners of record, outstanding liens or encumbrances
If John records the deed of conveyance, he has imparted and Bob has received what type of notice?
Legal notice
What is the distinction between legal title and equitable title?
Legal title is possessing all ownership interests to a property, while equitable title is the interest or right to obtain legal title to a property through a sale between legal owner and buyer.
A quitclaim deed from the previous owner to the grantor corrects what?
Minor clouds on the title
Why is "notice" important in determining who holds title to real estate?
Ownership is a function of evidence. The best evidence is a combination of actual and constructive notice.
Give some examples of when one might own equitable title rather than legal title.
The buyer, during the period of contract contingency; a mortgagee who has the right to execute a strict foreclosure of the mortgage property (in a lien-theory state); a mortgagor (borrower) in a title-theory state; the buyer under a contract for deed purchase until the contract is fulfilled; the holder of an option to buy.
What is a break in the chain of title, and how is it corrected?
There is an unexplained gap or break in ownership of the property, usually caused by a name change. It is corrected by a Suit to Quiet the Title.
Why are abstracts rarely used as evidence of title today?
They're bulky and fragile.
What action identifies if any liens are on a property?
Title Search
The deed is actual proof of ownership, but it is not backed up by
a bill of sale.
A defect in the title commitment that was not identified in the sales contract is known as
a cloud.
Equitable title
a conditional right to legal title subject to an owner's agreements with buyers and creditors
A chain of title is
a series of owners in a row who have owned the property in the past.
An instrument that records the history of the property is called the
abstract of title.
To avoid situations under Caveat Emptor, the buyer is charged with the responsibility of
actual and constructive notice.
Notice of title - how ownership is evidenced to the public
actual notice: knowledge acquired or imparted directly through demonstrable evidence, e.g., presenting or inspecting a deed, visiting a party in possession constructive notice: knowledge one could, or should, have obtained, as presumed by law; imparted by recording in public records "for all to see"
Evidence of Title
allows buyer to determine exactly what rights are being conveyed marketable title - free and clear and reasonable free from risk of litigation of defects cloud - defect that turns up in title commitment but not identified in sales contract patent defect - obvious and can be seen by knowledgeable person latent defect - not obvious and could not be identified even by knowledgeable person
A road easement is an example of
an encumbrance
Two items that will cause a suit to quiet the title are
color of title and a break in the chain of title.
The right to obtain legal title to a property in accordance with a sale between the legal owner and a buyer is called
equitable title.
A title search does not reveal
history of all owners of the property.
A patent defect
is a defect in title that is obvious and can be seen by a knowledgeable person.
The two types of notice in regard to title evidence are
legal and actual notice.
Torrens system
legal method for registration of property verifies ownership and encumbrances Torrens Certificate is the title itself, not just evidence of title Land held under Torrens registration is not subject to claims of adverse possession
Constructive notice is also known as
legal notice
Someone who possesses all ownership interests in real property owns
legal title to the real property.
A person who possesses the complete bundle of rights to a property owns
legal title.
Opinion
letter from attorney who has examined the abstract and deems the title as meeting all ownership needs with no questions in its history abstract and opinion together DO NOT protect against forged documents, rights of any parties in possession, and anything that has not been recorded
The law presumes that _________________ is the legal owner of the property
owner of record
Legal title
ownership of the bundle of rights
Abstract
paper record of all transactions concerning a particular piece of land history of ownership, liens, and encumbrances must be certified to date of sale is not alone legal evidence of marketable title rarely used today due to bulk, age, fragile condition, and need to move them from office to office
Legal title
possessing all ownership interests
Serious gaps in the chain of title must be resolved via court action in a lawsuit to
quiet title
Chain of title
successive property owners from original grant to present owner break in chain corrected by Suit to Quiet the title or Quitclaim
If two parties claim severalty ownership of the same property, a court will generally decide in favor of the person who has
the most and best evidence of ownership.
Qualifying the Title
title search - legal description of property, owners of record, outstanding liens or encumbrances
Evidence of title allows a buyer to determine
what rights or interests are being conveyed before the actual conveyance.
The question of who owns title to a property is generally a function of
who has the best evidence of ownership.