OR PL LAW - CLOSING PROCESS

Purchasers Insurance

1. Amount of Purchase $ 2. Initiated by Sale 3. Protects Buyer

Mortgagee's Insurance

1. Protects Lender 2. Assumes Lien Property 3. Covers Mortgage

Leasehold Insurance

1. covers terms of lease 2. value of property 3. protects tentant

A standard title insurance policy would give coverage for which of the following? A governmentally-imposed restriction on the use of the property. A claim on the title that the purchaser could have discovered upon a physical inspection of the property. A missing heir. All of these.

A Missing heir The standard title policy and extended coverage policy will cover loss due to forged documents (false impersonations), undisclosed heirs, lack of capacity (minors, mental incompetents, legal incapacity), mistaken legal interpretation of wills, misfiled documents, etc. The standard policy will exclude items not shown in the public records, e.g., rights of parties in possession, unrecorded easements, facts an accurate inspection or survey would show (e.g., encroachments), taxes and assessments not yet due or payable; zoning and governmental restrictions; unpatented mining claims; certain water rights; and recorded encumbrances specifically excluded by the policy.

American Land Title Association (ALTA) extended coverage policy form protection is normally required by I. owners of real property. II. purchasers of real property. III. lenders secured by real property liens. • I only • II only • III only • I and II

An "ALTA" extended coverage policy is normally required by to lenders. An extended coverage policy will cover everything the standard policy covers plus unrecorded liens, easements, any unrecorded instruments affecting the title, rights of parties in possession, encroachments, defects in surveys, etc.

Seller Entries in closing

Credits to the seller are all amounts he is to receive at closing, such as the purchase price and reimbursement for prepaid expenses. For the seller, any item that is paid into his escrow account is a credit. (Money into the account is a credit.) The debits reflect how the funds owed him are to be disbursed. Any item that is paid out of his account, even if paid to him, at closing, is a charge or debit. (Checks written by escrow are debits.)

A standard coverage title policy insures against • building code changes. • unrecorded easements. • forged recorded deeds. • all of these.

Forged Recorded Deeds The standard title policy and extended coverage policy will cover loss due to forged documents (false impersonations), undisclosed heirs, lack of capacity (minors, mental incompetents, legal incapacity), mistaken legal interpretation of wills, misfiled documents, etc. The standard policy will exclude items not shown in the public records, e.g., rights of parties in possession, unrecorded easements, facts an accurate inspection or survey would show (e.g., encroachments), taxes and assessments not yet due or payable; zoning and governmental restrictions; unpatented mining claims; certain water rights; and recorded encumbrances specifically excluded by the policy.

Very often a preliminary title report for an owner's title insurance policy states that it is subject to the "rights of the parties in possession" because the party in possession may be an I. adverse possessor. II. owner of an unrecorded deed.

I & II. A party in possession could be anyone in possession of the property who does not have a recorded interest.

A title insurance company would do which of the following before issuing a standard policy? I. Examine the chain of title. II. Require a surveyor's certification against encroachments.

I only - A title insurance company would do which of the following before issuing a standard policy? I. Examine the chain of title. II. Require a surveyor's certification against encroachments.

If the buyer in a real estate transaction deposits funds in escrow, the escrow agent can pay out funds in accordance with written instructions of the I. principals to the escrow transaction. II. buyer alone in the event the buyer is unable to obtain the financing which was a condition of the agreement to purchase.

I only - Since the escrow agent represents both parties, he must perform only in accordance with the instructions of both parties

Which of the following is TRUE regarding title insurance? I. The policy will protect the insured party's interest forever. II. Subsequent owners of the piece of property must obtain their own title insurance if they want it. • I only • II only • I and II • Neither I nor II

I. & II The interest of the named insured is covered forever. The policy need not be renewed. If the insured sells the property and is sued 10 years later because of a defect in the title, he would still be covered by the policy. His heirs and devisees are extended the same protection. However, new owners (not heirs or devisees) would need their own policies for their protection

Title insurance will give protection against I. undisclosed heirs. II. forgery in the chain of title. III. zoning restrictions.

I. & II. The standard title policy and extended coverage policy will cover loss due to forged documents (false impersonations), undisclosed heirs, lack of capacity (minors, mental incompetents, legal incapacity), mistaken legal interpretation of wills, misfiled documents, etc. The standard policy will exclude items not shown in the public records, e.g., rights of parties in possession, unrecorded easements, facts an accurate inspection or survey would show (e.g., encroachments), taxes and assessments not yet due or payable; zoning and governmental restrictions; unpatented mining claims; certain water rights; and recorded encumbrances specifically excluded by the policy.

Which of the following title defects will, if loss results, fall under the coverage of a standard form owner's title insurance policy? I. Forged grantor's signature in recorded chain of title. II. Title lost through adverse possession not yet confirmed by suit. I only II only I and II Neither I nor II

I. Only The standard title policy and extended coverage policy will cover loss due to forged documents (false impersonations), undisclosed heirs, lack of capacity (minors, mental incompetents, legal incapacity), mistaken legal interpretation of wills, misfiled documents, etc. The standard policy will exclude items not shown in the public records, e.g., rights of parties in possession, unrecorded easements, facts an accurate inspection or survey would show (e.g., encroachments), taxes and assessments not yet due or payable; zoning and governmental restrictions; unpatented mining claims; certain water rights; and recorded encumbrances specifically excluded by the policy

For a buyer to be certain the property he is purchasing has no encroachments he should obtain a I. survey. II. standard title insurance policy.

I. only - The standard policy does not cover unrecorded facts a survey or inspection would reveal. An encroachment can be determined only by a survey or inspection.

A standard title insurance policy ordinarily I. must be renewed every year. II. protects only the party named as the insured party in the written policy.

II Only - he interest of the named insured is covered forever. The policy need not be renewed. If the insured sells the property and is sued 10 years later because of a defect in the title, he would still be covered by the policy. His heirs and devisees are extended the same protection. However, new owners (not heirs or devisees) would need their own policies for their protection.

A standard title insurance policy protects the insured against which of the following? I. The power of eminent domain. II. The lack of capacity of a grantor. III. Unrecorded easements.

II only - The standard title policy and extended coverage policy will cover loss due to forged documents (false impersonations), undisclosed heirs, lack of capacity (minors, mental incompetents, legal incapacity), mistaken legal interpretation of wills, misfiled documents, etc. The standard policy will exclude items not shown in the public records, e.g., rights of parties in possession, unrecorded easements, facts an accurate inspection or survey would show (e.g., encroachments), taxes and assessments not yet due or payable; zoning and governmental restrictions; unpatented mining claims; certain water rights; and recorded encumbrances specifically excluded by the policy.

A title insurance company will NOT insure property against I. forged documents. II. zoning restrictions. III. a mortgage of record. I only II only I and II II and III

II. Only The standard title policy and extended coverage policy will cover loss due to forged documents (false impersonations), undisclosed heirs, lack of capacity (minors, mental incompetents, legal incapacity), mistaken legal interpretation of wills, misfiled documents, etc. The standard policy will exclude items not shown in the public records, e.g., rights of parties in possession, unrecorded easements, facts an accurate inspection or survey would show (e.g., encroachments), taxes and assessments not yet due or payable; zoning and governmental restrictions; unpatented mining claims; certain water rights; and recorded encumbrances specifically excluded by the policy.

When the buyer is unable to comply with the seller's escrow instructions by depositing into escrow all of the funds required, the escrow may be closed if the I. broker provides the short funds, without informing the seller. II. escrow agent discounts the escrow fee to make up the short funds, without informing the seller. III. seller consents in writing.

III only - If the buyer is in default the seller can either agree to have the escrow closed or choose to cancel the transaction. Choices "I" and "II" would be acceptable only if the seller were informed.

Commission

If there was a broker in a transaction, the seller usually pays the listing broker a sales commission. It is usually a percentage of the selling price of the property, negotiated between the seller and the broker. When several brokers work together to sell a property, the commission may be split among them, but the split may not be shown on the closing statement.

quiet title action

In the event persons are not cooperative in removing title defects, legal action can be taken to remove the cloud. Court action taken to remove a cloud on title is called quiet title action.

What do Both Standard & Extended Title Insurance have in common

Like the standard policy, the extended coverage policy excludes loss caused by public land use controls (such as zoning and building restrictions), any other government rights of police power or eminent domain, or defects created or known by the insured prior to the date of the policy.

Extended Coverage is usually used in ____________ policies

Mortgagee's

What are the 2 basic forms of title insurance available?

Standard & Extended

Extended coverage Title Insurance Includes

The ALTA lender's policy provides all of the coverage of the standard policy, plus coverage of matters not shown by public records. These may include items requiring an inspection of the property to discover (e.g., rights of parties in possession such as adverse possessors and owners with unrecorded deeds, unrecorded easements, encroachments and observable defects).

For the buyer, any items that must be paid for out of his account at closing are charges (debits). Every check written by escrow (such as to pay closing costs) to be paid out of the escrow account is a debit. All funds put into the account to pay off those charges are credits. Therefore, every check written by someone other than escrow (the lender's check for a new loan, the buyer's check to close, etc.) is a credit. The Buyers Credits are:

The buyer's credits are: • items for which he paid before closing. • items for which he will not pay until after closing. • items which are owed him by the seller. • cash he pays to close the transaction.

What is the cost of a title insurance policy?

The cost of a title insurance policy is a one-time premium. Coverage will protect the insured party's interest forever (as long as he has liability) and need not be renewed. The premium is based on the amount of coverage provided. For an owner's or purchaser's policy, the premium is based on the cost of the property; for a lender's policy, it is based on the loan amount.

What is a settlement meeting?

The legal closing process varies somewhat throughout the country. In many parts of the country, closing takes place at a settlement meeting (a "table" closing). This meeting may be attended by the buyer and the seller, their representatives, representatives of any lenders involved, representatives of the brokers, and attorneys representing various parties. At the meeting, papers are signed and delivered, the closing statement is reviewed, and funds are disbursed.

Who regulated Title Issuance Companies

These companies are regulated by a state insurance commissioner.

Standard Coverage Title Insurance includes ALTA American Land Title Association

Usually, standard coverage is provided in the owner's policy. The form, developed by the American Land Title Association (ALTA) protects the insured against loss caused by: • title to the estate or interest in the property being vested at the date of the policy other than as stated in the policy. • any defect in or lien or encumbrance on the title. • unmarketability of the title. • lack of a right of access to and from the land.

When and where do settlement meetings occur?

When and where the meeting occurs is determined by agreement of the buyer and seller in the sales contract. It may take place at the lender's office, a broker's office, a title company, or a closing attorney's office. In states considered attorney states, lawyers carry out the closing functions at settlement meetings.

The chain of title is a complete record of ?

all recorded instruments affecting the subject property traced back to the original source, which was often a conveyance from the government to a private person. It consists of all recorded title transfers, encumbrances, satisfactions of liens, and court proceedings pertaining to the land and the owners.

The cost of owner's title insurance is based primarily on

cost of the property

In any real estate transaction, there are closing (or settlement) costs. These are moneys that the buyer and seller pay to close the transaction. What is included, the amount, and who pays,

depends on the transaction and its terms, the existence of any liens against the parties or the real estate, and the type of financing to be used in the sale. In a transaction with conventional financing, the party responsible for payment of various closing costs is determined by agreement of the parties. In the accounting performed on a closing statement, the buyer and seller each have a series of debits (charges) and credits.

A purchaser's title insurance policy is

designed to protect a buyer (vendee) purchasing real estate under a contract for deed (or land sales contract). This policy is issued at the time the contract is initiated in the amount of the contracted purchase price.

Title insurance is the most widely used type of title _________.

evidence

Closings are?

in the real estate sales agreement there is a date by which time both the buyer and seller are called upon to fulfill their obligations and a time is of the essence clause, requiring that both parties comply with all deadlines. If they cannot, they need to sign an addendum extending the deadline. When they finally are ready to fulfill their obligations, the seller provides the closing agent with a deed, and the buyer provides the funds necessary to close.

• An abstract of title

is a digest in chronological order of the title history to a particular parcel of real estate. It is a full historical summary of all matters affecting the title, but it provides no guarantee or insurance of title. A person receiving an abstract will obtain an attorney's opinion, certifying the legal nature of the title and any defects or other rights disclosed in the abstract.

• A certificate of title

is an opinion of the title without the title abstract. The certificate states that the title company's abstractor has searched the public record, studied the title records and found the title properly vested in the present owner, subject to the encumbrances cited in the certificate.

A mortgagee's title insurance policy

is issued to protect a lender (a mortgagee or beneficiary) whose lien is secured by the borrower's property. It also insures any person to whom the mortgage or deed of trust is assigned. The policy assures him that the title vests in the borrower and that the mortgage lien has the priority required. This policy insures the lender against loss, up to the amount of the mortgage balance; therefore, overage lasts until the debt is paid in full, but declines as the mortgage balance is reduced.

A prudent buyer wants to have evidence of _____________ title and assurance that someone other than he will take whatever action is necessary to make the title ___________.,

marketable

• Title registration (also known as the Torrens system)

may be used in a few states. In some of these states, the purported owner may submit an abstract of title to the court and file a quiet title suit. If the court determines that the applicant has title, the court decree and all other legal documents submitted as evidence are given to the county registrar of title.

The escrow agent, also called an escrow officer does?

prepares escrow instructions based on the purchase and sale agreement. These instructions create a separate agreement between the buyer and escrow and the seller and escrow; they may amend the sales agreement.

An owner's title insurance policy is used to

protect a buyer (a grantee), who receives a deed to the property upon closing, against adverse claims to the ownership of the property, except those exclusions listed in the policy. The policy is issued in the amount of the full purchase price paid for the real property (not including the value of any personal property included in the sale). The policy ordinarily protects only the party named as the insured party in the written policy, his heirs and his devisees. It does not cover the lender or subsequent purchasers.

What is a spot survey performed when associated with Extended title insurance?

showing the location of easements, encroachments and improvements. This coverage may also extend to losses caused by unrecorded deeds and unrecorded liens.

Title Insurance is a document that.....

that protects insured parties (subject to specific exceptions) against loss by encumbrances, defective title, or adverse claims to title, resulting from defects in the title company's examination of the title record and against hidden risks. It does not cover defects arising after the effective date of the policy. Title insurance guarantees that the insured party will be defended free of charge against all covered title claims and paid up to the amount of the policy to satisfy any valid claims.

A buyer's closing statement presents

the buyer's closing costs and credits in detail so that he will know what is expected of him at closing.

An owner's title insurance policy protects

the owner, his heirs and devisees. - The interest of the named insured is covered forever. The policy need not be renewed. If the insured sells the property and is sued 10 years later because of a defect in the title, he would still be covered by the policy. His heirs and devisees are extended the same protection. However, new owners (not heirs or devisees) would need their own policies for their protection.

Escrow is

the process by which a deed or other written instrument is delivered to a third person, to be delivered by him to the grantee only upon the performance or fulfillment of a certain condition. The deposit in escrow places an item beyond the control of the depositor. Because of this, death or future incapacity of either party in the transaction does not prevent the completion of the transaction. A deed is considered to be delivered when placed in escrow. Death of the grantor afterward would not affect the deed's validity. The purpose of escrow is to enable principals to the transaction (e.g., the buyer and seller) to deal with each other without risk. Responsibility for handling funds and documents is given to the neutral third party, the escrow agent in a sales transaction. The escrow agent receives and holds trust funds and documents and instructions from the buyer. He also receives documents and instructions from the seller

The seller's closing statement provides

the seller with a complete accounting of his own closing costs and credits and the amount of money he will receive from the proceeds of the sale.

A leasehold title insurance policy is

used to protect a tenant (or lessee) who is entering into a long-term lease. Coverage extends for the term of the lease. The amount of coverage is for the value of the property if the lease were for 50 or more years, or for the total amount of the rent or the value of the tenant's improvements, whichever is greater if the lease is for less than 50 years.

A purchaser's title insurance policy protects the

vendee on a land sales contract. A person buying property under a land sale contract (the vendee), would receive a purchaser's policy. A person getting a deed to the property (the grantee), would receive an owner's policy. A lessee would receive a lessee's policy. A lender would receive a mortgagee's policy.

When is the Closing or settlement completed?

when the deed is recorded and the sales proceeds are delivered to the seller

An instrument or document which protects the insured parties (subject to specific exceptions) against defects in the examination of the title record and against hidden risks, such as forgeries, is called (a/n)

• "title insurance policy." A title insurance policy protects the insured parties from loss caused by title defects. A "certificate of title" is an attorney's opinion of the status of the title, but is not insurance. The "chain of title" is the history of the title. The "abstract" is the summary of the history.

Which type of title insurance policy insures against unrecorded easements, encroachments and observable defects?

• American Land Title Association (ALTA) -An "ALTA" extended coverage policy is normally required by to lenders. An extended coverage policy will cover everything the standard policy covers plus unrecorded liens, easements, any unrecorded instruments affecting the title, rights of parties in possession, encroachments, defects in surveys, etc.

forms of title evidence that are in use:

• An abstract of title • A certificate of title • Title registration (also known as the Torrens system)

Clouds on title may be removed in a number of ways:

• An unpaid lien can be removed by payment of the lien and recording a satisfaction of lien to show payment. • A claim of a missing heir or a gap in the chain of title might be resolved through a quitclaim deed negotiated for a price. • In the event persons are not cooperative in removing title defects, legal action can be taken to remove the cloud. Court action taken to remove a cloud on title is called quiet title action.

Very often a preliminary title report for an owner's title insurance policy states that it is subject to the "rights of the parties in possession" because the party in possession may be an I. adverse possessor. II. owner of an unrecorded deed.

• I and II A party in possession could be anyone in possession of the property who does not have a recorded interest

An extended coverage title insurance policy provides coverage against which of the following? I. Unrecorded easements. II. Unrecorded liens. III. Rights of parties in possession.

• I, II and III An extended coverage policy will cover everything the standard policy covers plus unrecorded liens, easements, any unrecorded instruments affecting the title, rights of parties in possession, encroachments, defects in surveys, etc. It will not cover items specifically excluded or government regulations.

John Steele owns certain real estate clear of any mortgages or unpaid taxes. Which of the following encumbrances might cloud the title? I. A judgment. II. A recorded agreement of sale. III. An easement for a right of way.

• I, II and III Incorrect. A "cloud on the title" is any document, claim, unreleased lien or encumbrance that impairs the title. It may also refer to any encumbrance. The claim of a person holding a judgment or a recorded land sale contract (agreement of sale) and easements (rights of way) would be clouds on the title.

A loss to the insured that resulted from a forged document is covered by a(n) I. extended coverage title insurance policy. II. standard coverage title insurance policy.

• I. & II. The standard title policy and extended coverage policy will cover loss due to forged documents (false impersonations), undisclosed heirs, lack of capacity (minors, mental incompetents, legal incapacity), mistaken legal interpretation of wills, misfiled documents, etc.

An owner's title insurance policy will NOT provide protection against I. expenses incurred in defending a title. II. lack of intent to deliver a deed. III. governmental regulation.

• III only The title insurer will defend the title in court, and pay the expense incurred in such a defense. It will also pay if in the chain of title a deed was delivered which had not been intended to be delivered, causing the title to be defective. It will not cover government regulations.

How can a lender be sure that he has an enforceable lien?

• Mortgagee's title insurance policy.

Which of the following statements regarding title insurance is TRUE? I. Title insurance coverage passes from seller to buyer with conveyance of title. II. Title insurance must be renewed every 5 years.

• Neither I nor II The interest of the named insured is covered forever. The policy need not be renewed. If the insured sells the property and is sued 10 years later because of a defect in the title, he would still be covered by the policy. His heirs and devisees are extended the same protection. However, new owners (not heirs or devisees) would need their own policies for their protection.

In the states where it is available, which of the following would NOT be covered under an extended coverage owner's title insurance policy?

• The effect of zoning regulations.. An extended coverage policy will cover everything the standard policy covers plus unrecorded liens, easements, any unrecorded instruments affecting the title, rights of parties in possession, encroachments, defects in surveys, etc. It will not cover items specifically excluded or government regulations.

When transactions involving the sale of real estate are placed in escrow, this means that

• a designated agent agreed to by the parties holds the necessary documents until the terms are met.

Thru the Use of Escrow, the parties have:

• a place of safekeeping of funds and documents until the transaction is closed. • When the seller delivers a deed to escrow, title remains with him until the escrow instructions have been met. • a means of paying existing indebtedness. • a means of clearing clouds on the title.

When a title search reveals that there is a broken chain of title, this is best cured by

• a quiet title proceeding. - Quiet title action is court action intended to establish or settle the title to a particular property. It is used to extinguish easements, remove clouds on the title, etc.

The best way to discover a flaw in the recorded title to a piece of real property is by

• a search of title. - A title search is an examination of the public records to determine what, if any defects there are in the chain of title. It's normally performed by a title company.

An owner's policy of title insurance continues in force

• as long as the insured has liability. An owner's policy of title insurance continues in force as long as the insured has liability. Even if there is a problem discovered 60 years later, by someone who purchased the property from a person who purchased the property from the person who purchased the property from the insured. There are no annual premiums, as premiums are paid only once.

A title plant is a

• collection of real estate records.

A standard title insurance policy protects against problems arising from all of the following EXCEPT

• governmentally-imposed zoning restrictions. The standard policy will exclude items not shown in the public records, e.g., rights of parties in possession, unrecorded easements, facts an accurate inspection or survey would show (e.g., encroachments), taxes and assessments not yet due or payable; zoning and governmental restrictions; unpatented mining claims; certain water rights; and recorded encumbrances specifically excluded by the policy. It is liable for recorded items not specifically excluded, e.g., lack of capacity, forged documents, false impersonations in documents, and even items a person could detect by inspection if those items were on the public record.

.An ALTA extended title insurance policy would NOT cover

• governments regulating the use of property through zoning ordinances.

The seller's instructions indicate:

• how much he will collect. • the form of payment.

The escrow instructions also provide for the payment of:

• taxes; • existing encumbrances; • the broker's fee; • the document preparation fees; and • the escrow fee. • This date must be the same for both the seller and buyer.

Thru the use of an escrow agent: the buyers instructions indicate:

• the property being purchased. • the sale price and terms. • how items are to be paid. • the condition of the title he is to receive. • the prorate date.

When a deed is delivered into escrow by the seller

• title remains with the seller until escrow conditions have been met. - Escrow holds the deed, and the seller keeps the title, until all the conditions of escrow have been met, e.g., the buyer brings in the funds to close and the title company provides title insurance (if promised). Upon closing, the buyer will receive title. The escrow officer will not record the deed until all the escrow conditions are met.