Chapter 21 Flashcards
This transfer of title to real estate, also called _______________, occurs voluntarily and involuntarily.
Alienation
When the transfer of title to real estate uses a written instrument, the transfer is called a _______________.
Conveyance
_____________is an unforced transfer of title by sale or gift from an owner to another party.
Voluntary alienation
If the transferor of title to real estate is a government entity and the recipient is a private party, the conveyance is a _________________.
Public grant
If the transferor of title to real estate is a private party, the conveyance is a ______________.
Private grant
A living owner makes a private grant by means of a _________________.
Deed of conveyance, or deed
A private grant that occurs when the owner dies is a ____________________.
Transfer by will
A _________ is a legal instrument used by an owner to transfer title to real estate voluntarily to another party.
Deed
In Texas, the minimum requirements for a valid deed include:
1) properly identifies the parties involved
2) includes consideration
3) contains a sufficient and identifiable
description of the property
4) contain words of conveyance
5) signed by the competent grantor or authorized representative
6) be delivered to a legitimate grantee and accepted
A number of deeds are used to convey real estate. They include the following:
1) Full covenant and warranty deed
2) Special warranty deeds
3) Bargain and sale deed with covenants
4) Bargain and sale deed without covenants
5) Quitclaim deed
6) Executor’s deed
7) Referee’s deed
A ___________________ is the deed most used in real estate transfers and offers the greatest protection of any deed. With this type of deed the grantor gives certain covenants or warranties that promise the grantee will have ownership of the property that is unchallenged.
full covenant and warranty deed
True or false: A warranty deed warrants the title, not the construction of the real property.
True
A full covenant and warranty deed usually has five covenants.
1) Covenant of seizen
2) Covenant against encumbrances
3) Covenant of quiet enjoyment
4) Covenant of further assurance
5) Covenant of warranty forever
This covenant assures that the grantor owns the estate to be conveyed and has the right to do so.
Covenant of seizen
This covenant assures that there are no encumbrances on the property except those specifically named in the deed.
Covenant against encumbrances
This covenant assures that the grantee will not be disturbed by third party title disputes.
Covenant of quiet enjoyment
This covenant assures that the grantor will assist in clearing any title problems discovered later.
Covenant of further assurance
This covenant assures that the grantee will receive good title, and that grantor will assist in defending any claims to the contrary.
Covenant of warranty forever
The two warranties found in Texas, if there would be language in the deed to imply a warranty, are:
1) the covenant of seisin
2) covenant against encumbrances
The overall general warranty covenant is:
“I own and I will defend.”
The overall special warranty covenant is:
“I own and will defend against my acts only.”
In a ____________________, the grantor warrants only against title defects or encumbrances not noted on the deed that may have occurred during the grantor’s period of ownership or trusteeship. The deed does not protect the grantee against claims that predate the owner’s period of ownership. Also known as bargain and sale deeds with covenants, these deeds are often used by trustees and grantors who acquired the property through a tax sale.
Special warranty deed
With the special warranty deed known as a _____________________, the grantor covenants that the title is valid but does not warrant against encumbrances or promise to defend against claims by other parties. This form of deed implies that the grantor has title to the property, but the grantee doesn’t have much recourse if the title comes up with defects down the road. This form of deed is common in foreclosures and tax sales.
bargain and sale deed without covenants
The overall bargain and sale covenant is:
“I own, but won’t defend.”
A ______________ transfers real and potential interests in a property, whether an interest is known to exist or not. The grantor makes no claim to any interest in the property being conveyed and offers no warrants to protect the grantee.
Quit claim deed
A _________________ is commonly used for transfers within a family and in divorce settlements. It is also used to clear title rather than convey it. Where there is a possibility that prior errors in deeds or other recorded documents might cloud (encumber) the title, the relevant parties execute a quitclaim deed to convey “any and all” interest to the grantee.
Quit claim deed
If a party responsible for encumbering a title refuses to quitclaim the interest, the owner may file a ____________________ which requires the lienor to prove the validity of an interest. If the defendant is unable to do so, the court removes the cloud by decree.
Quiet title suit
The overall quit claim covenant is:
“I may or may not own, and I won’t defend.”
When a subdivision developer turns the subdivision road or the common ground in the subdivision over to the local government, he or she does so by what’s known as ___________________. The quitclaim deed is the form typically used for this process.
Dedication or dedication by deed
A _________________ deed is one tailored to the requirements of specific parties, properties, and purposes.
Special purpose deed
A ______________________ deed is used by an executor to convey a decedent’s estate; also called an executor’s deed.
Personal representative’s deed
A ______________ deed is used in bankruptcies and foreclosures.
Referee’s deed
A ________________ deed is used by a court-appointed guardian to transfer property of minors or mentally incompetent persons.
Guardian’s deed
A _____________________ deed is used to convey foreclosed property sold at public auction.
Sheriff’s deed
A ____________________ is used to convey property to a third party trustee as collateral for a loa
Deed of trust
A ________________ is used to convey property to the trustee of a land trust - not to be confused with deed of trust.
Deed in trust
A __________________ deed is used to convey land to a condominium developer; it is accompanied by the condominium declaration when recorded.
Master deed
A ___________________ deed is used to convey co-owned property in compliance with a court order resulting from a partition suit. A partition suit terminates an estate when one or more co-owners want to dissolve their relationship and are unable to do so without the assistance of a court.
Partition deed
A _______________ deed is used to transfer government property to private parties. This transfer is called a public grant.
Land patent
A ___________________ deed is used to convey property sold at a tax sale.
Tax deed
What is the negative aspect of a bargain and sale deed with covenants?
The deed does not protect the grantee against claims that predate the owner’s period of ownership.
_____________________ is a transfer of title to real property without the owner’s consent.
Involuntary alienation
Involuntary alienation occurs primarily by the processes of _____________________________.
descent and distribution, escheat, foreclosure, eminent domain, adverse possession, and estoppel
Involuntary alienation occurs when a title-holder dies without a valid _________. The state’s statutes of descent and distribution identify heirs and the respective shares of the estate they will receive. In the absence of heirs, title transfers to the state or county by escheat.
Will
True or false: Property that has been abandoned for a statutory period may also escheat to the state or county. This is an example of involuntary alienation.
True
A property owner who fails to fulfill loan obligations or pay taxes may lose an estate through ______________. This is an example of involuntary alienation.
Foreclosure
Various government and public entities can transfer private property to the public sphere by the ____________________. The transfer is involuntary, even though the owner receives compensation.
Power of eminent domain
An _________________ is someone who enters, occupies, and uses another’s property without the knowledge or consent of the owner, or with the knowledge of an owner who fails to take any action over a statutory period of time.
Adverse possessor
To claim legal title, the adverse possessor must:
1) Be able to show a claim of right or color of title as reason for the possession
2) Have notorious possession, which is possession without concealment
3) Maintain a consistent claim of hostile possession, which is a claim to ownership and possession regardless of the owner’s claims or consent
4) Occupy the property continuously for a statutory period of time
5) In some states, pay taxes
A _______________ is based on the adverse possessor’s occupying and maintaining the property as if he or she were the legal owner.
Claim of right
_______________ results when a grantee has obtained defective title, or received title by defective means, but occupies the property as if he or she were the legal owner.
Color of title
_________________________ give constructive notice to the public, including the legal owner, that a party other than the legal owner is occupying and claiming to own the property
Notorious possession and hostile possession
True or false: It is possible for adverse possession notice to prevail over notice by recordation as the dominant evidence of legal ownership, provided the possessor has occupied the property continuously for the statutory period of time.
True
True or false: The adverse possessor does not automatically get title to the property by meeting the criteria. In order to obtain the title, the possessor must have a legal action to quiet title.
True
An owner can avert the danger of involuntary alienation by adverse possession by ____________________.
Inspecting the property within statutory deadlines and evicting any trespassers found.
____________ prevents a person from claiming a right or interest that is inconsistent with the person’s previous statements or acts.
Estoppel
________________ can prevent an owner from re-claiming a property that was transferred under false pretenses.
Estoppel
What is an example of estoppel?
An owner conveys a property with a defective title. The grantor is fully aware of the defect but makes no disclosure to the grantee. The grantor later cures the defect and then claims to be the rightful owner of the property on the basis of the effort and expense of clearing the title. Estoppel disallows the grantor’s claim because of the prior conveyance action. The grantee remains legal owner and benefits from the cleared title as well.
An example of estoppel:
1) A city entered into a contract with another party. The contract stated that it had been reviewed by the city’s council and that the contract was proper. Estoppel applied to estop the city from claiming the contract was invalid.
2) A creditor unofficially informs a debtor that the creditor forgives the debt between them. Even if such forgiveness is not formally documented, the creditor may be estopped from changing its mind and seeking to collect the debt, because that change would be unfair.
______________ is an involuntary alienation common law doctrine which transfers the property of a person who dies without heirs to the state. It serves to ensure that property is not left in “limbo” without recognized ownership.
Escheat
True or false: In some jurisdictions, escheat can also occur when an entity, typically a bank, credit union or other financial institution, holds money or property which appears to be unclaimed, for instance due to a lack of activity on the account by way of deposits, withdrawals or any other transactions for a lengthy time in a cash account. In many jurisdictions, if the owner cannot be located, such property can be escheated to the state.
True
The process by which an owner can lose title to his or her property because an adverse possessor entered, occupied, and used the property without the knowledge or consent of the owner, or with the knowledge of the owner who failed to take any action over a statutory period of time.
Adverse possession
Someone who possesses all ownership interests owns _______________ to the property.
Legal title
__________________ is the interest or right to obtain legal title to a property in accordance with a sale or mortgage contract between the legal owner and a buyer or creditor.
Equitable title
An example of legal title vs. equitable title:
A buyer enters into a contract for deed to purchase a house. The seller lends the bulk of the purchase price to the buyer for a term of three years. The buyer takes possession of the property and makes payments on the loan. During this period, the seller retains legal title and the buyer owns equitable title. If the buyer fulfills the terms of the agreement over the three-year period, the buyer has an enforceable contract to obtain legal title.
A _______________________ is a legal instrument for the voluntary transfer of real and personal property after the owner’s death. It describes how the maker of the will, called the testator (if male) or testatrix (if female), wants the property distributed.
Will or last will and testament
A beneficiary of a will is called an _______________.
Heir or devisee
The property transferred by the will is the __________.
Devise
A will is an ____________________, meaning it can be changed any time during the maker’s lifetime
Amendatory instrument
A ________________ will is in writing and witnessed by two disinterested people.
Witnessed will
A __________________ will is in the testator’s handwriting, dated and signed.
Holographic will
An _________________ will is on pre-printed forms meeting the requirements of state law.
Approved will
A __________________ will is made orally, and written down by a witness; generally not valid for the transfer of real property.
Nuncupative will
State law establishes requirements for a valid will. The law generally requires that:
1) The testator be of legal age and mentally competent
2) The testator indicate that the will is the “last will and testament”
3) The will be signed. Texas requires that the will must be signed in the presence of two witnesses above the age of 14 who are willing to give their names as a witness.
4) The completion of the will be witnessed and signed by the witnesses
5) The will be completed voluntarily, without duress or coercion
A court proceeding called _____________ generally settles a decedent’s estate
Probate
When a person dies having left a valid will it is called ________________.
Testate
When a person dies and has failed to leave a valid will, it is called ____________.
Intestate
True or false: Real property may be exempted from probate if it is held in a land trust. Probate of real property occurs under jurisdiction of courts in the state where the property is located, regardless of where the deceased resided.
True
A probate court’s objectives are to:
1) Validate the will, if one exists
2) Identify and settle all claims and outstanding debts against the estate
3) Distribute the remainder of the estate to the rightful heirs
If a will does not name an executor, the court will appoint an __________________ to fulfill this role.
Administrator
True or false: If the decedent died with a valid will, he or she is said to have died testate. The court hears the claims of lienors and creditors and determines their validity. First in line are the superior liens: those for real estate taxes, assessment taxes, federal estate taxes, and state inheritance taxes. If the estate’s liquid assets are insufficient to pay all obligations, the court may order the sale of personal or real property to satisfy the obligations.
True
___________________ occurs when a title-holder dies without a valid will.
Involuntary alienation
True or false: In intestate with heirs, the estate passes to lawful heirs according to the state’s laws of descent and distribution, or succession. Laws of descent, also known as title by descent, stipulate who inherits and what share they receive, without regard to the desires of the heirs or the intentions of the deceased.
True
The _____________________ declares that separate property (as opposed to community property) is distributed in different ways.
Texas Law of Descent and Distribution
If an intestate decedent has no heirs, the estate ____________, or reverts, to the state or county after all claims and debts have been validated and settled.
Escheats
If there are heirs, the estate will pass to them according to title by descent or the state’s laws of succession. If there are no heirs, the estate will go to the state or county after all claims and debts have been settled. This happens when a person dies _____________.
Intestate
The __________________ requires certain documents to be in writing to be enforceable.
Statute of Frauds
Texas requires that all documents relating to any interest in land must be recorded in ____________________________.
The office of the county clerk in the county in which the property is located.
True or false: An original signature is not required on a document that will be electronically submitted for recording.
True
___________________, or legal notice, is knowledge of a fact that a person could have or should have obtained.
Constructive notice
The foremost method of imparting constructive notice is by _____________________________.
Recordation of ownership documents in public records
An example of constructive notice of ownership:
John Doe records the deed of conveyance, he has given constructive notice of ownership.
__________ is actual knowledge of something.
Actual notice
Receiving ________________ means learning of something through direct experience or communication.
Actual notice
An example of actual notice:
A person provides actual notice by producing direct evidence and the other party receives actual notice by seeing direct evidence, such as by reviewing the deed, reading title records, or physically visiting the property to see who is in possession.
True or false: A Torrens certificate is not merely a record but is the title itself.
True
True or false: Torrens-registered property is not subject to a general judgment lien, nor can title be lost through adverse possession.
True
True or false: In the Torrens system of recording, the title passes only when the conveyance has been duly registered on the title certificate itself.
True
To enter a property in the Torrens system:
1) a court action must first clear title by giving notice to all potential interest holders that they must express their claims.
2) at the end of the proceeding, the court decrees that the title is accepted into Torrens registration.
3) the Torrens registry retains the original registration documents and provides copies to the recorder or other appropriate office
4) all subsequent transactions affecting title must follow the proper Torrens recording procedures and requirements.
A ______________ is a title that is so free of defects that the buyer is certain he or she will not have to defend the title.
Marketable title
In order to deliver a marketable title, the seller must have proof of ownership of the property, also known as ___________________.
Evidence of title
____________________ refers to the succession of property owners of record dating back to the original grant of title from the state to a private party.
Chain of title
If there is a missing link in the chronology of owners, or if there was a defective conveyance, the chain is said to be broken, resulting in a ______________ title to the property.
Clouded title
To remove a cloud from a title, an owner may need to initiate a ______________________, which clears the title record of any unrecorded claims.
Suit to quiet title
The two forms of evidence most used in a suit to quiet title are the _________________________.
Abstract of title with attorney’s opinion and the title insurance policy
Before a lender will agree to lend money on a property, the lender will order a _______________ on the property.
Title search
The title search on a property will reveal:
1) The legal description of the property
2) The owners of record
3) Any outstanding liens or encumbrances on the property
A ____________ is an indication of debt secured by the property.
- Outstanding property tax bills
- Mortgage loans
- Court-ordered judgments
Lien
An ______________ indicates that some other party has some rights or claim to the property.
- A utility right-of-way
- Neighbor’s fence or garage encroaching
- Driveway easement through the property
Encumbrance
An ____________________ is an historical summary of all consecutive grants, conveyances, wills, records and judicial proceedings that affect the title to a particular property. It will also include a statement of the status of all recorded liens and encumbrances affecting the property.
Abstract and opinion
The person who prepares an abstract and opinion is called an _________________.
Abstractor
The ________________ searches documents that are recorded or registered with the county recorder, country registrar, circuit court and other official sources. The abstractor then summarizes the findings and arranges them in chronological order, beginning with the original grant of title.
Abstractor
True or false: In today’s real estate world, an abstract done by an abstractor is not considered an official document. The abstractor is responsible for only what appears in the records, so he or she cannot be held liable for any defect that was not found in the records.
True
True or false: Things such as encroachments or forgeries would not be revealed in the public records search. If a lender wants a more expert analysis of the title, the lender will request an opinion of the abstract from a lawyer. But even a lawyer issuing an opinion does not issue a guarantee or insure against possible defects.
True
A ______________________ is commonly accepted as the best evidence of marketable title.
Title insurance policy
What does a title insurance policy do?
1) combines the abstracting process with an insurance program
2) guarantees the validity and accuracy of the title search
3) title insurance company warrants to “make good” any loss arising from a defect in the title or from any liens or encumbrances on the property
4) the insurance policy that the title company issues will protect the policy holder against losses that arise from such “hidden” defects
The title insurance company:
1) Examines all records pertaining to the property’s recorded history.
2) Reviews risks that might not appear in the public record.
3) Interprets the legality of the records.
4) Helps the property owner correct any defects.
5) Insures the property against economic loss.
If the title search fails to discover any uninsurable defects, the company issues a ___________, or commitment to insure. The binder recapitulates the property description, interest to be insured, names of insured parties, and exceptions to coverage.
Binder
True or false: Title insurance is paid for one time, when the property passes from one owner to another. It stays in effect until the property sells again.
True
A _________________ will repay the balance of the mortgage if a claim against the property voids the title and covers up to the amount of the principle on the loan.
Loan policy
________________ insure property owners against the specific kinds of claims listed in the policy.
Owner policies
When a person buys a house and purchases a mortgagee policy, a title company will automatically issue an owner policy unless the owner ____________________.
Rejects the owner policy in writing
An owner policy only covers the policy holder up to ____________________.
the value of the property at the time the owner purchased the policy.
An owner policy does not cover any increase in value of the property, unless the owner purchases an ______________________.
Increased value endorsement
True or false: An owner policy remains in effect as long as the owner or the owner’s heirs own the property or are liable for any title warranties made when the owner sells the property. A policy holder should keep the owner policy, even if he or she transfers the title or sells the property.
True
True or false: If someone claims an interest in an owner’s property, a title company will defend the title in court and pay for any actual loss under certain circumstances
True
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.
An _________________ is someone who enters, occupies, and uses another’s property without the knowledge or consent of the owner, or with the knowledge of an owner who fails to take any action over a statutory period of time.
Adverse possessor
An _________________ is an historical summary of all consecutive grants, conveyances, wills, records and judicial proceedings that affect the title to a particular property.
Abstract and opinion
In the special warranty deed, the grantor warrants that he will __________________________.
Defend the title against defects arising under and through him, but no others
Which authority regulates Involuntary Title Transfers?
State law
True or false: The Commission requires the listing broker to obtain the consent of the seller prior to offering a commission split to a cooperating broker.
True
True or false: If the listing broker intends to offer different levels of commission splits to different types of brokers, the listing broker must disclose to the seller that by establishing levels of commissions, the broker might be limiting the exposure of the listing.
True
____________________ are usually listed in the MLS service or by agreement between brokers. These terms must be agreed to in advance between the listing broker and the cooperating brokers.
Cooperative commission splits
The listing broker is responsible for the accuracy of what for closing?
The settlement statements and making sure that all parties get signed copies of the settlement statements
The brokers that earn a split of the commission are known as what?
Cooperating brokers
True or false: The role of the listing broker is to ensure that the closing occurs on time and that all documents necessary to the closing are accurately and timely produced
True
When a property goes under contract, that event then generates more checklists:
1) inspections to be ordered
2) disclosures to be made
3) title report to be inspected
Explain what a checklist is and does.
They are quick and simple tools aimed to buttress the skills of expert professionals
In a real estate closing company, a checklist will usually provide places for what important information?
The checklist will generally provide a place to check off the item received and the initials of the person responsible
A number of forms must be filled out and signed during the loan application. These will include the following:
1) Permission to Request Credit Report
2) Uniform Residential Loan Application
3) Loan Estimate
4) Verification of Employment (VOE)
5) Verification of Deposit (VOD)
The borrower signs a statement giving __________________ from credit reporting agencies.
permission to request a credit report
True or false: The standard application form approved by both Fannie Mae (Form 1003) and Freddie Mac (Form 65), is the form most commonly used for loan applications.
True
In October 2015, the new TRID Rule went into effect which combined the good faith estimate and the Truth in Lending form into one form called the _________________.
Loan Estimate Form
The creditor is generally required to provide the Loan Estimate within ________________ of the receipt of the consumer’s loan application.
Three business days
Criteria of a Loan Estimate:
1) must contain a good faith estimate of credit costs and transaction terms, including APR
2) must be in writing and contain the information prescribed by the TRID rule
3) delivery must satisfy the timing and method of delivery requirements.
4) creditors may only use revised or corrected Loan Estimates when specific requirements are met.
5) in certain situations, mortgage brokers may provide a Loan Estimate.
True or false: Many lenders today accept copies of at least 30 days’ worth of pay stubs and two years of W-2 forms instead of sending out and waiting for the return of a VOE. Other employment-related information that may be requested includes proof of pensions, retirement, social security, or disability; proof of income from rentals or other investments; and proof of child support or alimony paid or received.
True
True or false: Many lenders today accept three months’ bank statements instead of waiting for a VOD to be returned. Many banks now charge the customer a fee for providing the information requested on the VOD.
True
Whether the loan is being packaged for in-house underwriting or for submission to a commercial lender, there are three major areas of consideration. The underwriter must be able to validate:
1) the borrower
2) the property
3) the title to the property
Credit scores range from a high of 800+ to a low of 400 and one may roughly interpret them as follows:
- Under 400 shows high risk of default
- Under 620 shows possible risk of default
- Over 680 shows little risk of default
- Over 750 shows very little risk of default.
Consumers may correct errors in their credit reports by writing to all three repositories. The credit agency should respond within ___________.
30 days
Define Loan Estimate:
An itemized list of all costs related to obtaining and closing on a mortgage loan.
The creditor/lender is generally responsible for insuring that the Closing Disclosure is delivered to the buyer no later than _______________ before consummation.
3 business days
True or false: Loan servicers must provide borrowers with an annual escrow statement which summarizes all inflows and outflows in the prior 12-month period.
True
RESPA applies to what types of purchases?
1) Of residential property – that is, one-to-four family homes, cooperatives and condominiums
2) Involving first or second mortgages
3) Financed by a federally-related loan
RESPA does not apply to what kinds of loans?
1) seller-financed loans
2) loan assumptions (unless the lender has changed the terms of the assumed loan or charges more than $50 for the assumption).
RESPA specifically prohibits what action?
RESPA specifically prohibits any payment or receiving of fees or kickbacks when a service has not been rendered
Depending on where and with whom you practice, the business of real estate is a ____________________.
Checklist-driven activity
Financed by a federally-related loans are loans ______________________________.
That are insured by a federal agency, those that are insured or guaranteed by VA or FHA, HUD-administered loans, or those that will be sold to Fannie Mae, Freddie Mac or Ginnie Mae
What is the latest date that a “settlement agent” is allowed to provide the seller with the Closing Disclosure?
At consumption of the transaction
TRID gives the buyer the right to review the completed Closing Disclosure form how long before closing?
Three business days
TRID requires the lender to provide a Loan Estimate within how long of the borrower submitting a loan application?
3 days
A __________________ is a limited, non-invasive examination of the condition of a home, often in connection with the sale of that home. Home inspections are usually conducted by a home inspector who has the training and certifications to perform such inspections.
Home inspection
In a _________________, the home inspector describes the condition of the home at the time of inspection but does not guarantee future condition, efficiency, or life expectancy of systems or components.
Home inspection
A ______________________ covers a home’s major mechanical systems — electrical, plumbing, heating, and cooling — and its construction from roof to foundation, exterior to interior.
Standard home inspection
A ___________________ is a check for damage caused by wood-eating insects like termites, carpenter ants or beetles.
Pest inspection
____________________ is the examination of the soil conditions on the property to determine if there is any settling or drainage problems.
Soil inspection
A _____________________ is a visual inspection of the foundation elements, bearing walls, beams and columns, floor slabs, framing, crawlspace areas, and drainage. The inspector observes these components for signs of movement, distress, damage, and/or the ability to adversely affect the rest of the structure.
Structural inspection
A ___________________________ looks at environmental issues such as radon, asbestos, lead-based paint, underground storage tanks or contaminated water. We discussed these issues in an earlier chapter.
Environmental inspection
Explain what happens with every inspection ordered.
For every kind of inspection ordered, the reports must be approved or rejected by the buyers or the lender, any repairs must be done and then re-inspected, and the buyers and lender must get notification of the final results.
There are four kinds of evidence of title:
1) abstract and opinion
2) certificate of title
3) title insurance
4) Torrens certificate
True or false: The certificate of title is used extensively in the Eastern states, and some Southern states. In urban centers in a great many sections of the country, title insurance occupies a dominant position in real estate transactions. In farm areas the abstract and opinion method is common.
True
Before a lender will agree to lend money on a property, the lender will order a ______________ to be sure there are no liens on the property.
Title search
The ______________ is responsible for paying the fee for the title search.
Buyer
A title search is performed primarily to answer three questions regarding a property on the market:
1) Does the seller have a saleable interest in the property?
2) What kind of restrictions or allowances pertain to the use of the land? These would include real covenants, easements and other equitable servitudes.
3) Do any liens exist on the property which need to be paid off at closing? These would be mortgages, back taxes, mechanic’s liens, and other assessments.
The contract states that the Title Company has __________ after receiving the contract; the Seller shall furnish to Buyers a commitment for title insurance.
20 days
If the Title Commitment, Copies of Restrictive Covenants (deed restrictions) and documents showing any other exceptions to the title insurance cannot be delivered within __________________, there is an automatic extension for another 15 days or by the Closing Date.
20 days
The _______________________ shows the condition of the title before the loan or sale transaction.
Preliminary title report
Buyers must acknowledge receipt of the preliminary report which contains:
1) The owner’s name and property description
2) A list of any outstanding assessments, such as taxes or bonds
3) Any covenants, conditions or restrictions
4) Recorded liens or encumbrances that must be removed before a loan can go through
A ____________________ does not provide insurance. It shows those items that the title company would choose to exclude from coverage if a policy is issued at a later time.
Preliminary title report
The person preparing the closing documents usually orders a ________________ of the property, which shows the “footprint” of the house and any deck, patio, garage or carport. It also shows other buildings on the property, driveways, fences or swimming pool.
Land survey
The term ____________ is defined as 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.
Escrow
In Texas, the escrow agent may be:
1) An attorney
2) A title company
3) A trust company
4) An escrow company
5) The escrow department of a lending institution
True or false: The buyer and seller select the escrow company through negotiation at the time the purchase agreement is drawn up and signed. Either party may choose the escrow holder.
True
The escrow holder will open an escrow in the names of the parties involved. Along with the purchase agreement, the escrow holder will need information about such items as:
1) The length of escrow
2) Terms of loans
3) Commissions
4) Instructions about inspections, such as termite reports
5) Personal property included in the sale
6) Legal description of the property
7) Earnest money deposit
During the escrow period, a number of activities will be taking place. Activities include:
1) getting an appraisal
2) ordering pest control and other inspection reports
3) arranging and approving financing
4) ordering the complete title search and title insurance
5) obtaining property insurance
6) prepare the final settlement statements for the closing meeting.
What happens if any problem is found with either the physical layout of the property or in the title search results?
It creates a cloud on the title that must be resolved prior to closing on the loan
Some expenses paid at closing must be ______________ or divided proportionately between the buyer and the seller. The most common items that fall into this category include taxes, insurance, mortgage interest, and utilities.
Prorated
True or false: Any item that is prorated is shown on the settlement statement as a debit to one party and a credit to the other party for the same amount.
True
True or false: Some items are those that were paid for in advance, so the buyer will owe the seller part of the payment.
True
True or false: For items paid in advance, the buyer will receive a debit and the seller will receive a credit.
True
Those expenses that the seller incurred but have not yet been billed for at the time of closing are items that are ___________________.
Paid in arrears
True or false: The 12 month/30 day method calculates the amounts due based on a 360-day year and a 30-day month.
True
True or false: The 365-day method calculates the amounts on the basis of a 365-day year.
True
True or false: Interest is always paid in arrears.
True
What does prorated mean?
Divided proportionately between the buyer and the seller
Any item that is prorated is shown on the settlement statement how?
As a debit to one party and a credit to the other party for the same amount
Closing agents and lenders typically use one of two methods when calculating items that need to be prorated. Name the two methods.
The 12-month/360 day method and the 365 day method
True or false: After the closing, the broker, or whoever acted as the closing agent, has the task of reporting the transaction to the IRS.
True
True or false: Licensees must not recommend specific individuals or companies to their clients. Accepting referral fees could be a violation of state licensing laws and the Real Estate Settlement Procedures Act.
True
After all the closing documents have been signed, the ____________________ arranges for the recording of the grant deed and security instrument.
Settlement statement
True or false: Several weeks after the closing, the purchaser should receive the original deed and title insurance policy.
True
True or false: If problems arise from the walk-through inspection of the property prior to closing, monies from the seller’s proceeds may be left in escrow until the purchaser is satisfied that required repairs or replacements have been made. After the purchaser signs off that the work has been completed, any remaining funds are disbursed to the seller.
True
The title to the property has transferred when _______________________. Delivery and acceptance must occur during the lifetime of the seller.
The deed is delivered and accepted by the buyer
All real estate sales must be reported to the Internal Revenue Service after closing. The sale must be reported on a ___________.
Form-1099
What can a lender require a borrower to do with regard to taxes and insurance and why would the lender make this requirement?
Lenders can require the borrower to maintain an escrow account for property taxes and insurance, so that the lender is sure money will be available for the payments.
Also referred to as settlement, the ______________ is the culmination of the real estate transaction.
Title closing
“__________________” is when the buyer completes his or her financing arrangements
Closing the loan
The ________________ usually specifies where the closing will be held. It can be at any one of a number of office locations:
- Title company
- Lender
- Attorney
- Closing agent
- County recorder
Sales contract
True or false: Using just a street address is NEVER correct as a legal description.
True
True or false: When completing a sales contract, if the parties want to say what will happen if a particular act is not done, that moves from “factual” to a “legal right or remedy.”
Licensees are prohibited from including legal rights and remedies in paragraph 11. However, the parties and their attorneys are not. So if the parties to a contract ask a licensee to write in language that would address legal rights or remedies, the licensee should advise the parties to seek out a competent attorney.
True
True or false: EVERY addendum attached to the contract is part of the contract and as such needs all the appropriate signatures.
True
True or false: The Electronic Signatures in Global and National Commerce Act (ESIGN) and the Uniform Electronic Transactions Act (UETA) say that all signatures made through electronic means are just as binding as those written by hand. In Texas, electronic signatures are allowed only if both parties agree to it in an electronic consent form.
True
On the last page of the sales contract near the signature block is a space to write in the effective date of the contract. This is the date of ______________ of the contract and must be filled in by the broker.
Final acceptance
How should a party’s name be listed on the sale contract?
Using the person’s full legal name
What is true about using the street address in the property description paragraph?
The street address is never enough. The property paragraph must contain the full legal description of the property.
What can happen if a licensee forgets to check some of the check boxes on a contract?
It can cause delays in the transaction or bad feelings between the parties. In addition, the licensee could be viewed as careless or incompetent.
What are the two common mistakes licensees make when dealing with addenda?
Check off an addendum in the paragraph and then not attach it.
Attach an addendum to the contract without indicating in paragraph 22 that it is being attached.
__________________ is ownership of real estate and the bundle of rights associated with owning the real estate.
Real property
_____________________ is ownership of anything that is not real estate, and the rights associated with owning the personal property item.
Personal property
_______________ property is physical, visible, and material.
Tangible
_________________ property is abstract, having no physical existence in itself, other than as evidence of one’s ownership interest.
Intangible
The primary criterion for distinguishing real from personal property is ________________________________.
Whether the item is permanently attached to the land or to structures attached to the land.
______________ is the conversion of real property to personal property by detaching it from the real estate, such as by cutting down a tree, detaching a door from a shed, or removing an antenna from a roof.
Severance
_______________, or attachment, is the act of converting personal property to real property by attaching it to the real estate, such as by assembling a pile of bricks into a barbecue pit, or constructing a boat dock from wood planks.
Affixing
When do issues regarding real and personal property usually come into focus?
During the final walkthrough of the property right before closing.
What is a cloud on title?
Any irregularity in the chain of title of property that would give a reasonable person pause before accepting a conveyance of title.
In what sale contract paragraph do you indicate an attached addendum?
Paragraph 22
True or false: In Texas, electronic signatures are allowed only if both parties agree to it in an electronic consent form.
True
What is prohibited from being entered into the Special Provisions paragraph?
Legal rights and remedies
