National Real Estate #3

All of the following would be considered evidence of marketable title EXCEPT A) a certificate of title by a real estate attorney. B) an abstract of title with a legal opinion. C) a certificate of title by a real estate broker. D) a title commitment or title insurance policy.

The answer is a certificate of title by a real estate broker. A certificate of title may be prepared by a title company, licensed abstractor, or attorney, but not a real estate broker.

A title insurance policy that protects the interests of a mortgagee is called A) a leasehold policy. B) an ALTA policy. C) a lender's policy. D) a certificate of sale policy.

The answer is a lender's policy. The mortgagee is the lender. The mortgagee's policy is transferable.

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

The answer is a mortgagee's title insurance policy. 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).

The legal process used to clear a title is A) a novation. B) a lis pendens. C) a quitclaim deed. D) a suit to quiet title

The answer is a suit to quiet title. The legal process used to clear title issues is a lawsuit to quiet title. A court will recognize valid claims to real property and "quiet" the rest. A quitclaim deed is often used to cure a single problem with the title.

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 A) a certificate of title. B) an abstract of title. C) a chain of title. D) a title insurance policy.

The answer is a title insurance policy. Although a certificate of title is used as evidence of ownership, it does not protect against unrecorded liens or hidden defects. A title insurance policy protects the policyholder from title defects.

Title insurance will cover title defects found A) before closing and listed as exceptions. B) before closing. C) before or after closing. D) after closing.

The answer is after closing. Title insurance covers only those defects listed in the policy and found after closing. If defects are found before closing (called exceptions), the seller must clear them and the title or the buyer must accept the property title with the defect.

Which of the following would create a cloud on title? A) All of these B) An incorrect date C) A slight error in the legal description D) Misspelling of a grantor's name

The answer is all of these. A cloud on title can be created by a misspelling of a grantor's name, an incorrect date, or a slight error in the legal description.

A property buyer should object to any defects in the title to the property A) before recording the deed from the seller. B) no later than 90 days of the recording of the deed from the seller. C) before acceptance of the deed. D) within one year of the transfer of title.

The answer is before acceptance of the deed. Once a buyer has accepted a deed with unmarketable title, the only available legal recourse may be to sue the seller under any covenants of warranty contained in the deed.

property serves as A) no notice of ownership because farm properties frequently are leased to others . B) notice of the priority of the new owners to the rights of other claims to the property. C) constructive notice to the world of the rights of the new owners in the property. D) actual notice to the world of the rights of the new owners in the property.

The answer is constructive notice to the world of the rights of the new owners in the property. The fact that someone occupies the property serves to alert other persons of a possible claim of ownership.

A deed that has not been recorded will NOT provide A) actual notice. B) competent parties. C) constructive notice. D) an essential element.

The answer is constructive notice. Properly recording documents in the public record serves as constructive notice to the world of an individual's rights or interest, as does the physical possession of a property. Because the information or evidence is readily available to the world, a prospective purchaser or lender is responsible for discovering the interest. A deed that has not been recorded lacks constructive notice, which is also known as legal notice.

Which of the following would NOT be acceptable evidence of ownership? A) Title insurance policy B) Attorney's opinion C) Abstract D) Deed to the current owner signed by the last seller

The answer is deed to the current owner signed by the last seller. The existence of a deed to the current owner is not evidence that the owner actually received title. The absence of any deed, however, would indicate that the owner probably does not have title. A favorable attorney's opinion based on examination of an abstract (the report of a title search) and a policy of title insurance are strong evidence of title held by the owner.

Which of the following is NOT covered by an extended title insurance policy? A) Defects that may be discovered by an inspection B) Certain unrecorded liens C) Rights of parties in possession D) Defects and liens listed in the policy

The answer is defects and liens listed in the policy. A title company will not cover against defects that appear in a title search. These are included in the policy as exclusions.

Defects and liens listed in the title policy are included in the policy as A) credits. B) debits. C) exclusions. D) coverages.

The answer is exclusions. A title company will not cover against defects that appear in a title search. These are included in the policy as exclusions.

Which of these would be covered in a standard title insurance policy? A) Easements and restrictive covenants B) Unrecorded liens C) Forged documents D) Defects discoverable by physical inspection

The answer is forged documents. Title insurance protects against forged documents, but does not protect against claims of parties in possession because the grantee should have visited the property; nor does it cover unrecorded liens. Easements and restrictive covenants are found in the deed and should be known to the grantee.

The commitment to issue a title policy includes all of the following EXCEPT A) legal description. B) estate or interest covered. C) full sale price of the property. D) name of the insured party.

The answer is full sale price of the property. The commitment to issue a title policy includes the name of the insured party, legal description of the real estate, estate or interest covered, conditions and stipulations under which the policy is issued, and a schedule of all exceptions, including encumbrances and defects found in the public records and any known unrecorded defects. It does not include the full sale price of the property.

Which of the following BEST describes chain of title? A) It is the examination of the record and hidden risks such as forgeries, undisclosed heirs, errors in the public records, and so on. B) It is a history of all documents and legal proceedings affecting a specific parcel of land. C) It is an instrument or document that protects the insured parties (subject to specific exceptions) against defects in the record of a property's ownership. D) It is a report of the contents of the public record regarding a particular property.

The answer is it is a history of all documents and legal proceedings affecting a specific parcel of land. Chain of title is the entire history, or record, of recorded transactions affecting a property, while an abstract is a summary of relevant facts found when examining the history. Title insurance is used to protect against defects in the record of a property's ownership and is issued only after a title examination, which evaluates the public records of the property.

Where are the encumbrances and defects that will NOT be insured against under a title insurance policy stated? A) Nonexclusionary clause B) Schedule of defects C) Citation clause D) List of exclusions

The answer is list of exclusions. Title insurance does not offer guaranteed protection against all defects. The policy names uninsurable losses called exclusions.

Documents referred to as title evidence include A) general warranty deeds. B) security agreements. C) policies of title insurance. D) special warranty deeds.

The answer is policies of title insurance. Deeds are never considered title evidence. Policies of title insurance provide the best title evidence.

When multiple persons claim ownership of property and each has a recorded deed, but no one occupies the property, the person who is awarded ownership is likely to be the one who A) brought a quiet title suit in court. B) recorded the deed first. C) has a receipt from the grantor of the deed. D) has the earliest dated deed.

The answer is recorded the deed first. If there is no notice of ownership based on occupancy of the property, the person with the earliest recorded deed is likely to prevail.

Which of the following is TRUE about the recording of documents? A) Recording real estate documents provides actual notice of their contents to the world. B) To be recorded, real estate documents must first be registered with the court. C) Recording real estate documents provides constructive notice of their contents to the world. D) All real estate documents must be recorded to be valid.

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.

The person who prepares an abstract of title for a parcel of real estate A) searches the public records and then summarizes the events and proceedings that affect title. B) inspects the property. C) insures the condition of the title. D) issues title insurance.

The answer is searches the public records and then summarizes the events and proceedings that affect title. Abstractors search public records concerning property and prepare a relatively brief, written summary of their findings. This report is the abstract of title. Title insurance companies and attorneys who are asked to give an opinion of title rely on these abstracts.

A history of all recorded liens and encumbrances is revealed in A) the title insurance policy. B) the abstract. C) the unrecorded documents. D) the chain of title.

The answer is the abstract. The title insurance policy lists coverage and exceptions to the policy. Unrecorded documents have not been examined. The chain of title traces ownership. The abstract is the most complete documentation of recorded liens and encumbrances.

A 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? A) The policy is issued for the benefit of the buyer. B) The amount of coverage is commensurate with the loan amount. C) The amount of coverage increases as the borrower grows older. D) The policy guarantees that the buyer's equity will be protected.

The answer is the amount of coverage is commensurate with the loan amount. A lender's policy is used for the benefit of the mortgagee. The amount of coverage depends on the amount of the mortgage loan and is decreased as the loan balance is reduced.

The maximum loss for which the company may be liable is A) the amount of the loan. B) the face amount of the policy. C) the sale price of the property. D) none of these.

The answer is the face amount of the policy. The policy's face value is the maximum loss for which the company is liable unless the amount of coverage has been extended by use of an inflation rider.

Which of the following occurs under the Torrens system? A) The Torrens official performs exactly the same functions as the recorder of deeds. B) The original deed is mailed to the buyer after it has been registered. C) The registration of a title can be canceled by the owner at any time. D) Title passes when the grantee's application for registration has been approved and the real estate has been registered.

The answer is the registration of a title can be canceled by the owner at any time. Under the Torrens system, the applicant needs to prove ownership and then the court enters an order to register the real estate and the registrar of titles issues a certificate of title. A person acquires title only when it is registered.

A purchaser went to the county building to check the recorder's records, which showed that the seller was the grantee in the last recorded deed and that no mortgage was on record against the property. The purchaser may assume which of the following? A) The seller did not mortgage the property. B) The seller has good title. C) No one else is occupying the property. D) All taxes are paid and no judgments are outstanding.

The answer is the seller did not mortgage the property. The fact that no mortgage is on record against the property indicates, with a reasonable degree of certainty, that the seller did not mortgage the property.

What does marketable title mean? A) The title guarantees that the property will be sold easily in the future. B) The title contains only minor issues, such as the misspelling of a grantor's name. C) The title is free of defects. D) The title has been certified by the title company.

The answer is the title is free of defects. Marketable title means that the title has no defects that could carry over as a problem for the new owner at whatever time the new owner decides to sell.

Homeowners are frantic because they want to sell their property and the deed is missing. Which of the following is TRUE? A) They do not need the original deed if it has been recorded. B) They must buy title insurance. C) They should execute a replacement deed to themselves. D) They may need to sue for quiet title.

The answer is they do not need the original deed if it has been recorded. If the homeowners' deed was copied into the public record after they received it, that copy is all that is needed to start a title search. The original is not needed.

Which of the following is acceptable evidence of marketable title? A) Affidavit B) Trust deed C) Title insurance policy D) Warranty deed

The answer is title insurance policy. Proof of ownership is evidence the title is marketable, and title insurance is used to prove ownership.

The answer is all of these. A cloud on title can be created by a misspelling of a grantor's name, an incorrect date, or a slight error in the legal description.

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 lender.

Extended coverage in an owner's title insurance policy would cover which of the following? A) Defects known to the buyer B) Unrecorded liens not known by the policyholder C) Defects and liens listed in the policy D) Changes in land use brought about by zoning ordinances

The answer is unrecorded liens not known by the policyholder. Extended coverage in an owner's title insurance policy would include standard coverage plus defects discoverable through a property inspection, including unrecorded rights of persons in possession, an examination of the survey, and unrecorded liens not known by the policyholder.