PSI Exam Prep: Transfer of Title

Question 1

it protects buyers and lenders (through separate policies) against financial loss that might be incurred because of title defects discovered after closing.

Answer 1

Title insurance

Question 2

The title policy will include a schedule of exceptions, which describes items the policy doesn’t cover, such as:

Answer 2

Any liens recorded after the effective date of the title policy
Any claims not shown in public records
Claims against a title by anyone who lives or lived on the property

Question 3

it gives the title insurance company the right to pursue the party who caused the loss instead of the covered party

Answer 3

subrogation

Question 4

it is a summary of the property’s title history. Attorneys and title companies who prepare abstracts research public records as well as other information to identify the title history.

Answer 4

A title abstract (abstract of title)

Question 5

establishes the path of property ownership from its first owner to the current owner. The chain begins with the current owner and works backwards.

Answer 5

The chain of title

Question 6

it establishes chain of title

Answer 6

The grantor-grantee index

Question 7

this title has no defects or clouds to which a reasonable buyer would object. It’s not necessarily a perfect title. Sellers can convey this title if the title search reveals no doubt about property ownership and there aren’t any liens or encumbrances that won’t be cleared at closing.

Answer 7

A marketable title

Question 8

it is one against which there may be known defects (such as easements), but the title company has notified the parties of the defect and has agreed. As the less rigid title standard, this title is still acceptable to most buyers. A key concern is that sellers who offer this title may not have to clear up title problems that come up before closing.

Answer 8

An insurable title

Question 9

The most common title defect in a real estate transaction is the seller’s existing

Answer 9

mortgage lien.

Question 10

it (also called a full covenant and warranty deed) offers the greatest warranty to buyers and is the preferred type of deed in most situations.

Answer 10

A general warranty deed

Question 11

What are the six covenants (promises) a general warranty deed provides?

Answer 11

seisin, right to convey, against encumbrances, quiet enjoyment, further assurances and warranty forever

Question 12

The grantor holds title to and possession of the property.

Answer 12

Covenant of seisin

Question 13

The grantor has the right to convey both title to and possession of the property.

Answer 13

Covenant of right to convey

Question 14

The grantor assures the grantee that there are no encumbrances against the title other than those identified in public records or the deed

Answer 14

Covenant against encumbrances

Question 15

The grantor assures that the grantee’s use and enjoyment of the property will be unimpaired and unrestricted, subject to public police powers and private deed restrictions.

Answer 15

Covenant of quiet enjoyment

Question 16

The grantor promises to take whatever actions necessary (within his power) to correct any title defects

Answer 16

Covenant of further assurances

Question 17

n this most important covenant, the grantor promises to protect and defend the title against lawful claims made by others.

Answer 17

Covenant of warranty or warranty forever

Question 18

this deed typically warrants only against title defects acquired during the grantor’s ownership of the property. It guarantees that the grantor owns and may convey the property, and warranties that the property is free of any debts or encumbrances not noted in the deed. This deed is most often used in conveying commercial properties.

Answer 18

A special warranty deed

Question 19

it is most often used in tax or foreclosure sales. It generally has no expressed warranty against encumbrances but does typically imply a warranty that the grantor has title and the right to covey.

Answer 19

A bargain and sale deed

Question 20

it carries with it no warranties to the grantee. It only releases any of the grantor’s property rights to the grantee. The quitclaim deed is typically used to clear up a simple cloud on

Answer 20

A quitclaim deed

Question 21

conveys real estate to a trustee for the beneficiary named in the trust agreement. For example, in states that use a non-judicial foreclosure process, the deed is conveyed to a trustee who holds it until the mortgage loan is paid in full OR until the borrower defaults and the lender must foreclose.

Answer 21

A deed in trust (or deed of trust)

Question 22

it defines the type of interest and rights the grantee will have

Answer 22

Habendum clause

Question 23

What are the elements a deed must have?

Answer 23

1. have to be in writing
2. Names of the grantors and grantees
3. Act of conveyance
4. Consideration
5. Legal description
6. Any limitation Clause
7. Grantor’s signature
8. acceptance by the grantee
9. Acknowledgment

Question 24

it means that the parties have personal knowledge of a particular event.

Answer 24

actual notice

Question 25

it means that the record is publicly available to anyone who does a records search

Answer 25

constructive notice

Question 26

may be a broker, title representative, escrow officer, or attorney, though the most common is likely to be a title company representative. This individual is also called the closing agent

Answer 26

The escrow agent

Question 27

these are shared expenses that either party owes at closing are prorated (divided between) the parties depending on when closing occurs

Answer 27

Prorations

Question 28

these are items the seller owes on closing day but that will eventually be paid by the buyer (unpaid current property taxes, for example) and appear in the seller’s debit column and the buyer’s credit column.

Answer 28

Accrued expenses

Question 29

these are those already paid by the seller but that the buyer should pay a portion of (such as prepaid real estate taxes, utilities paid in advance). These items are credited to the seller and debited to the buyer.

Answer 29

Prepaid expenses

Question 30

are Closing Disclosure (CD) and loan estimate require for home equity lines of credit (HELOCs), seller financing, or reverse mortgages?

Answer 30

NO!

Question 31

How many days are required to provide disclosure forms BEFORE loan application and BEFORE closing days?

Answer 31

3 days

Question 32

Governments like property taxes as a revenue base because

Answer 32

they’re a stable, reliable revenue source

Question 33

Transfer tax rates vary by location, but the rate is usually a percentage of the total sale price or a dollar amount per

Answer 33

$1,000 of the sale price.

Question 34

There are property tax implications for real property owners at each stage of the property ownership lifecycle

Answer 34

acquisition, ownership, and sale (reversion).

Question 35

When a non-U.S. resident (foreign person) sells real property in the U.S., the Foreign Investment in Real Property Tax Act (FIRPTA) requires that buyers withhold

Answer 35

15% of the gross sales price at closing.

Question 36

it is a property that is being sold by the lender due to the buyer’s default. The lender will usually sell the property at auction after proper notice has been provided, and often after allowing the borrower the right to cure the default.

Answer 36

foreclosure

Question 37

it is a property that the seller, with the lender’s permission, is selling for less than the seller owes against the property.

Answer 37

short sale

Question 38

In this type of sale, ownership has reverted to the lender because of a failed foreclosure sale or because the borrower surrendered ownership of the property to the lender through a deed in lieu of foreclosure are called

Answer 38

real estate-owned (REO).

Question 39

it may permit previous owners to buy the property back during a certain period of time after the foreclosure sale. This isn’t an issue with short sales.

Answer 39

Individual states’ redemption processes

Question 40

construction warranties cover structural damage or major construction defects (such as foundation issues) for

Answer 40

10 years

Question 41

Major systems (heating, air conditioning, electrical, etc.) may also be covered for a period of time, such as

Answer 41

two to five years.

Question 42

Both the FHA and VA require new-home builders to provide a

Answer 42

Warranty of Completion of Construction

Question 43

The first course of action for disputed home warranty claims is typically

Answer 43

mediation, then arbitration

Question 44

A deed states, “For love and affection, the receipt and sufficiency of which is hereby acknowledged.” What does this statement represent in the deed?

Answer 44

Consideration

Question 45

Few states require an abstract of title when conveying property. YES OR NO

Answer 45

YES~~~

Question 46

Which of these would void a deed intended to convey property?

Answer 46

he grantor must be mentally competent and of legal age, though neither of these is essential for the grantee. The grantor is required to sign the deed, and the grantee must provide some sort of consideration.

Question 47

Why does the closing agent review the purchase contract?

Answer 47

To gather closing-related information agreed to in the contract

Question 48

The primary purpose of the Real Estate Settlement Procedures Act is to ensure that buyers ______.

Answer 48

Know all settlement costs up front

Question 49

Meg is considering a move to a foreign country and wants to deed her property to her son, Christian, who’s 16. Which of these must occur to make this transfer legal?

Answer 49

Meg must sign the deed and have her signature acknowledged.

Question 50

What’s the relationship between TILA, RESPA, and TRID?

Answer 50

The Dodd-Frank Act requires that lenders use the TILA-RESPA Integrated Disclosures (TRID).

Question 51

Lynette purchased a property under a bargain and sale deed. Which statement best describes the covenants Lynette’s deed provides?

Answer 51

A bargain and sale deed may come with or without covenants of warranty. Generally, however, it’s known for not containing warranties.

Question 52

Which of these statements about the homeowner’s right of redemption is true?

Answer 52

Because of the length of time it takes to process a property after the foreclosure sale, the homeowner’s redemption period may have expired before the lender puts the REO on the market.