Transfer of Title

Question 1

Deeds

Answer 1

The purpose of a deed is to transfer title between the owner/grantor and the receiver/grantee; deeds DO NOT guarantee or provide ownership; deeds DO NOT have to be recorded for title to transfer, title passes upon acceptance of the grantee

Question 2

Warranty Deed/General Warranty Deed

Answer 2

Five covenants and a guarantee of title (BEST for grantee)

Question 3

Covenants in a Warranty Deed

Answer 3

1. Covenant of Seisin - grantor has the right to convey;
2. Covenant of Quiet Enjoyment - grantee will not be disturbed by others;
3. Covenant Against Encumbrances - there are no unspecified encumbrances;
4. Covenant of Further Assurance - cooperation in signing additional documents;
5. Warranty Forever - guarantee of defense

Question 4

Limited (Special) Warranty Deed

Answer 4

Warrants only those defects and encumbrances that occur during the grantor’s period of ownership

Question 5

Quitclaim Deed

Answer 5

Used as a problem solver and to terminate deed restrictions; NO promises, NO guarantees

Best for granor

Question 6

Bargain & Sale Deed

Answer 6

Contains only implied warranties that the grantor holds the tile and possessions of the property

Question 7

Public Grant

Answer 7

Government transfers ownership by land parent to private property

Question 8

Essential Elements of a Valid Deed

Answer 8

1. Competent grantor (18+ & sound mind);
2. Executed by grantor(s);
3. Identifiable grantee;
4. Delivered and accepted by grantee(s) – title & possession of property (unless otherwise agreed) pass at this point;
5. Legal description;
6. Consideration (money or something or value);
7. Words of conveyance (granting clause)

Question 9

Probate

Answer 9

The process of distributing all of a deceased’s assets; a will MUST go through probate for real & personal property to be distributed; joint tenants DO NOT go through probate to claim title to the property

Question 10

Devise

Answer 10

The act of transferring the deceased’s interest in real estate to another by will (hook to DEED)

Question 11

Bequest

Answer 11

The act of transferring a deceased’s interest in personal property to another (hook to BILL OF SALE)

Question 12

Adverse Possession

Answer 12

Ownership granted by the courts due to Open, Continuous, Exclusive, Actual, and Notorious (Hostile) possession (OCEAN) of another’s land for a minimum statutory period

Question 13

Prescriptive Easement

Answer 13

An easement prescribed by the courts due to Open, Continuous, Actual, and Notorious (Hostile) use of another’s land for a minimum statutory period (NOT exclusive)

Question 14

Recording

Answer 14

NOT required for validity, gives constructive notice to protect interests, and determines priority (first in time, first in right)

A deed that is not recorded creates the risk that a later interest could take priority and does NOT have constructive notice of ownership

Question 15

General Recording Requirements

Answer 15

1. Recorded deeds/mortgages must be acknowledged by grantors/mortgagors;
2. Documents must be dated;
3. Signatures should be notarized (required in most states)

Question 16

Abstract with a Title Opinion

Answer 16

Abstract of title is a historical summary of all conveyances and encumbrances against the property

Question 17

Title Commitment/Report

Answer 17

Unlike the abstract, which lists historical information, the title commitment/report lists current title status and title defects (mortgages, easements, etc.) but no history of documents

It is the promise to ensure the title; it WILL NOT cover items listed as exceptions and defects

Question 18

Title Insurance Policy

Answer 18

Protects against defects discovered in the title AFTER closing (not BEFORE closing)

Question 19

Owner’s Title Insurance Policy

Answer 19

Protects owner (buyer) and heirs while they have an interest

Question 20

Mortgagee’s Title Insurance Policy

Answer 20

Protects the lender giving title coverage

Question 21

Quiet Title Action

Answer 21

Used to clear title problems found in the abstract or title report

Question 22

Credit to Seller

Answer 22

Anything that increases the amount of money the seller takes from the closing (e.g., sales price)

Question 23

Debit to Seller

Answer 23

Anything that decreases amount of money the seller takes from the closing (e.g., brokerage fee, mortgage payoff, or contract for deed)

Question 24

Credit to Buyer

Answer 24

Anything that decreases the amount of money the buyer must bring to closing (e.g., earnest money, new loan, or contract for deed); ALL loans are ALWAYS buyer credit

Question 25

Debit to Buyer

Answer 25

Anything that increases the amount of money the buyer must bring to the closing (e.g., sales price, recording the warranty deed, loan origination, or discount points if paid by buyer)

Question 26

Capital Gains Taxes For the Principal Residence

Answer 26

1. There is no tax on the first $250,000 of gain (single) or $500,000 of gain (married) from the sale of a principal residence;
2. Owner must have lived in the residence two out of the last five years (does not have to be consecutive)

Question 27

Capital Gains Taxes For the Investment Property

Answer 27

1. Used by investment property owners to defer payment of capital gains taxes;
2. Allows an investor to sell one property and buy another without paying capital gains taxes

Investor does not pay until selling the second property

Question 28

Deductible Items

Answer 28

Points, origination, interest, and taxes (POIT)

Question 29

NOT Deductible Items

Answer 29

Principal, homeowner’s insurance premiums, HOA fees

Question 30

Depreciation Tax Reduction for Investment Property

Answer 30

Residential income property must be depreciated over a 27.5 year period using straight-line depreciation

Commercial income property must be depreciated over 30 years using straight-line depreciation

Question 31

Straight Line Depreciation

Answer 31

Requires that an asset must be depreciated by equal amounts each year over it’s useful life