Chapter 14: Escrow & Title Insurance Flashcards
What is escrow?
The process in which a disinterested third party holds all money and documents relating to a transaction until all of the terms and conditions of the escrow instructions have been satisfied.
Who needs title insurance and why?
Both the buyer and the lender need title insurance. Insurance for the buyer ensures a clear title and protects his or her investment. Insurance for the lender protects the lender’s interest in the property.
What is the difference between CLTA and ALTA policies? How does ALTA-R differ from ALTA?
CLTA is the basic standard policy and ALTA provides extended coverage.
ALTA includes a survey and ALTA-R does not.
What items are not covered by any title insurance policy?
Defects known to the insured but not disclosed to the title insurer.
Government zoning regulations.
What is the Closing Disclosure?
The required form that details the costs that the buyer and seller will pay at closing.
What is the ultimate result of using the Closing Disclosure form?
The buyer will see the actual debits and credits for the purchase and know exactly how much money to bring to closing. The seller will know exactly how much he or she will receive at closing.
If an item is paid for in advance by the seller, how will it be handled on the settlement statement?
The buyer will receive a debit and the seller will receive a credit.
What do you call those items that have been incurred by the seller but not paid, and how will they be handled on the settlement statement?
These items are paid in arrears. The buyer will get a credit and the seller will get a debit.
Proof of ownership of a property is called:
Marketable title
Abstract of title
Evidence of title
Title commitment
Evidence of title
The seller must deliver a marketable title at closing, one that is so free of defects that the buyer is certain he will not have to defend the title; however, the seller must first have proof of ownership of the property, or evidence of title.
Which of the following is not an item that a buyer usually pays at closing?
Fee for clearing the title
Mortgage recording fee
Homeowner’s insurance
ALTA policy
Fee for clearing the title
RESPA applies to all of the following EXCEPT which?
Condominium purchase
Seller-financed loan
Loan involving a second mortgage
Federally-insured loan
Seller-financed loan
Which statement is not true about opening escrows?
The escrow holder will need information about the broker’s commission.
The escrow holder will use the purchase agreement as the basis for writing the escrow instructions.
The buyer’s and seller’s agents will sign the escrow instructions.
Once escrow instructions are signed, changes can only be made with the written agreement of all parties.
The buyer’s and seller’s agents will sign the escrow instructions.
Accepting referral fees:
Is common business practice.
Could be a violation of state licensing laws.
Is forbidden under any circumstances.
Is permissible in amounts under $50.
Could be a violation of state licensing laws.
Which item is not covered by CLTA, ALTA or ALTA-R insurance policies?
Claims of persons in possession of the property
Mining claims
Zoning ordinances
Unrecorded federal real estate liens
Zoning ordinances
CLTA, ALTA, and ALTA-R are all title insurance policies, and no title insurance policy covers against defects known to the insured but not disclosed to the title insurer or government zoning regulations.
Which of the following statements is NOT true regarding a broker acting as an escrow agent?
A broker may advertise that he or she is an escrow agent.
A broker cannot use the word “escrow” in a fictitious name.
The broker must conduct the escrow personally and not delegate any escrow activities.
Written escrow instructions must include a statement with the broker’s name, indicating he or she is a licensed real estate agent.
A broker may advertise that he or she is an escrow agent.
