Chapter 9

Use the following formula to calculate the tax rate: $1.25 for every $500 of the sale price. The transfer tax is being paid by the seller on the sale of a $250,000 property. In this transaction, the seller must pay

The answer is $625. $250,000 ÷ 500 = $500 × 1.25 = $625.

Which of the following is TRUE regarding a transfer tax in Texas?

The answer is Texas does not have a transfer tax.

All of the following would be considered evidence of marketable title EXCEPT

The answer is a certificate of title by a real estate broker.

A title search would uncover which of the following?

The answer is a deed restriction. Deed restrictions must be recorded and would appear in a title search of the public records.

All of the following may be used to prove ownership EXCEPT

The answer is a deed.

The process of probate is

The answer is a formal judicial process.

A seller delivered title to a buyer at closing. A title search had disclosed no serious defects, and the title did not appear to be based on doubtful questions of law or fact or to expose the buyer to possible litigation. The seller's title did not appear to present a threat to the buyer's quiet enjoyment, and the title insurance policy provided was sufficient to convince a reasonably well-informed person that the property could be resold. The title conveyed would commonly be called

The answer is a marketable title. In this situation, a marketable title is conveyed.

A certificate of title may be prepared by all of the following EXCEPT

The answer is a real estate broker.

Chain of title is MOST accurately defined as

The answer is a record of a property's ownership.

A document that protects against hidden risks, such as forgeries and loss due to defects in the title, and is subject to specific exceptions is called

The answer is a title insurance policy.

An examination of all of the public records to determine whether any defects exist in the chain of title is

The answer is a title search.

An owner of real estate was declared legally incompetent and was committed to a state mental institution. While institutionalized, the owner wrote and executed a will. The owner later died and was survived by a spouse and three children. The real estate will pass

The answer is according to the state laws of descent.

A woman bought acreage in a distant county, but never went to see it and did not use the ground. A man moved his mobile home onto the land, had a water well drilled, and lived there for 22 years. The man may become the owner of the land if he has complied with the state law regarding

The answer is adverse possession.

A title search is an examination of which of the following?

The answer is all of these. Once the title search is complete, a summary report called an abstract of title is created. It is a summary of various events and proceedings that affected the title throughout its history.

Standard coverage in an owner's title insurance policy would cover

The answer is all of these. Standard coverage in an owner's title insurance policy would cover defects found in public records, forged documents, incompetent grantors, incorrect marital statements, and improperly delivered deeds. It would not include changes in land use brought about by zoning ordinances.

The transfer declaration states all of the following EXCEPT

The answer is amount of all loans secured by the property.

Extended coverage in an owner's title insurance policy would NOT cover

The answer is changes in land use brought about by zoning ordinances.

Standard coverage in an owner's title insurance policy would cover all of the following EXCEPT

The answer is changes in land use brought about by zoning ordinances.

An abstract of title includes which of the following?

The answer is chronological list of recorded instruments.

The legal presumption that information may be obtained by an individual through due diligence is

The answer is constructive notice.

Properly recording documents in the public record provides what type of notice to the world of an individual's rights or interest?

The answer is constructive.

Which type of deed is used by a trustor?

The answer is deed of trust.

Which of the following is NOT proof of ownership?

The answer is deed. A warranty deed contains no proof of the condition of the grantor's title at the time of the conveyance.

What types of deeds are typically NOT exempt from a transfer tax?

The answer is deeds made in connection with a sale.

Standard title insurance protects the buyer from

The answer is defects found in public records.

Heirs are associated with

The answer is descent and distribution. The primary heirs of the deceased are the surviving spouse, children, brothers, sisters, aunts, and uncles.

Real estate that is inherited from a person who died testate is called a

The answer is devise. The gift of real property by will is called a devise, and the person who receives property by will is called a devisee.

When a person dies testate, title to real property transfers to the

The answer is devisee. A person who dies testate has died with a valid will. The gift of real property by will is called a devise, and a person who receives real property by will is called a devisee.

What is the definition of codicil?

The answer is document that modifies a will. Any modification, amendment, or addition to a previously executed will is contained in a separate document called a codicil.

For a will to be valid, it must be

The answer is executed. A will must be executed and prepared according to the laws of the state in which the real estate is located.

Which type of deed is used to transfer property by a court order or will?

The answer is executors' deed.

The commitment to issue a title policy includes all of the following EXCEPT

The answer is full sale price of the property.

Which of the following are traditionally covered by a standard title insurance policy?

The answer is improperly delivered deeds.

A homeowner who lost most of her shoreline from a hurricane lost land by

The answer is involuntary alienation.

Title to property may be transferred without the owner's consent by

The answer is involuntary alienation. Involuntary alienation is the transfer of property without the consent of the property owner.

What type of a will is conveyed by orally dictating the individual's desires?

The answer is nuncupative. Some states do not permit real property to be conveyed by oral (nuncupative) wills.

The date and time a document was recorded helps to establish

The answer is priority.

Land is considered adequately described when the

The answer is professional surveyor can locate the property.

Constructive notice is

The answer is properly recording documents in the public record.

What type of deed provides the grantee with the least protection?

The answer is quitclaim deed.

Which of the following is TRUE about the recording of documents?

The answer is recording real estate documents provides constructive notice of their contents to the world. Not all real estate documents have to be recorded to be valid (i.e., an unrecorded deed can transfer title to the grantee). Recording provides constructive notice of the contents of a document to the public.

Probate is a formal judicial process that does all of the following EXCEPT

The answer is see that assets are distributed correctly for single people only.

Which of the following must have legal capacity?

The answer is testator. A testator must have legal capacity to make a will. There are no rigid tests to determine legal capacity.

A will can be altered by the

The answer is testator. While the testator is alive, he may change the will as often as he would like.

The mortgagee received a title insurance policy on the property a buyer is pledging as security for the mortgage loan. Which of the following is TRUE?

The answer is the amount of coverage is commensurate with the loan amount.

What happens if a will has been modified?

The answer is the court will decide how the document should be probated.

What happens if more than one will exists in a probate situation?

The answer is the court will decide how the documents should be probated.

Which of the following would occur between two people as joint tenants with rights of survivorship if one of them dies?

The answer is the property would immediately pass to the other tenant. Property held in joint tenancy passes immediately.

Which of the following is NOT a requirement for making a will?

The answer is the will must be delivered to the person receiving the property while the testator is still alive. A testator must have legal capacity to make a will and must be of legal age and of sound mine. The drawing of a will must be a voluntary act.

With regard to the legal requirements to make a will, which of the following is FALSE?

The answer is there are rigid tests to determine legal capacity.

All of the following are true regarding public records EXCEPT

The answer is they guarantee marketable title.

How many title policies are typically issued at a closing?

The answer is two. The owner's policy is for the benefit of the owner (buyer) and the lender's policy is for the benefit of the mortgage company.

Extended coverage in an owner's title insurance policy would cover which of the following?

The answer is unrecorded liens not known by the policyholder.

Which of the following is NOT covered by a standard title insurance policy?

The answer is unrecorded rights of parties. Unrecorded rights of parties in possession are covered by an extended coverage policy.

The buyer and seller go under a sales contract. At closing the seller has consented by

The answer is voluntary alienation. When the seller signs the contract and closing documents, the seller is stating that the purpose of the sale of the property was voluntary.