Chapter 21

Question 1

This transfer of title to real estate, also called _______________, occurs voluntarily and involuntarily.

Answer 1

Alienation

Question 2

When the transfer of title to real estate uses a written instrument, the transfer is called a _______________.

Answer 2

Conveyance

Question 3

_____________is an unforced transfer of title by sale or gift from an owner to another party.

Answer 3

Voluntary alienation

Question 4

If the transferor of title to real estate is a government entity and the recipient is a private party, the conveyance is a _________________.

Answer 4

Public grant

Question 5

If the transferor of title to real estate is a private party, the conveyance is a ______________.

Answer 5

Private grant

Question 6

A living owner makes a private grant by means of a _________________.

Answer 6

Deed of conveyance, or deed

Question 7

A private grant that occurs when the owner dies is a ____________________.

Answer 7

Transfer by will

Question 8

A _________ is a legal instrument used by an owner to transfer title to real estate voluntarily to another party.

Answer 8

Deed

Question 9

In Texas, the minimum requirements for a valid deed include:

Answer 9

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

Question 10

A number of deeds are used to convey real estate. They include the following:

Answer 10

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

Question 11

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.

Answer 11

full covenant and warranty deed

Question 12

True or false: A warranty deed warrants the title, not the construction of the real property.

Answer 12

True

Question 13

A full covenant and warranty deed usually has five covenants.

Answer 13

1) Covenant of seizen
2) Covenant against encumbrances
3) Covenant of quiet enjoyment
4) Covenant of further assurance
5) Covenant of warranty forever

Question 14

This covenant assures that the grantor owns the estate to be conveyed and has the right to do so.

Answer 14

Covenant of seizen

Question 15

This covenant assures that there are no encumbrances on the property except those specifically named in the deed.

Answer 15

Covenant against encumbrances

Question 16

This covenant assures that the grantee will not be disturbed by third party title disputes.

Answer 16

Covenant of quiet enjoyment

Question 17

This covenant assures that the grantor will assist in clearing any title problems discovered later.

Answer 17

Covenant of further assurance

Question 18

This covenant assures that the grantee will receive good title, and that grantor will assist in defending any claims to the contrary.

Answer 18

Covenant of warranty forever

Question 19

The two warranties found in Texas, if there would be language in the deed to imply a warranty, are:

Answer 19

1) the covenant of seisin

2) covenant against encumbrances

Question 20

The overall general warranty covenant is:

Answer 20

“I own and I will defend.”

Question 21

The overall special warranty covenant is:

Answer 21

“I own and will defend against my acts only.”

Question 22

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.

Answer 22

Special warranty deed

Question 23

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.

Answer 23

bargain and sale deed without covenants

Question 24

The overall bargain and sale covenant is:

Answer 24

“I own, but won’t defend.”

Question 25

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.

Answer 25

Quit claim deed

Question 26

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.

Answer 26

Quit claim deed

Question 27

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.

Answer 27

Quiet title suit

Question 28

The overall quit claim covenant is:

Answer 28

“I may or may not own, and I won’t defend.”

Question 29

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.

Answer 29

Dedication or dedication by deed

Question 30

A _________________ deed is one tailored to the requirements of specific parties, properties, and purposes.

Answer 30

Special purpose deed

Question 31

A ______________________ deed is used by an executor to convey a decedent’s estate; also called an executor’s deed.

Answer 31

Personal representative’s deed

Question 32

A ______________ deed is used in bankruptcies and foreclosures.

Answer 32

Referee’s deed

Question 33

A ________________ deed is used by a court-appointed guardian to transfer property of minors or mentally incompetent persons.

Answer 33

Guardian’s deed

Question 34

A _____________________ deed is used to convey foreclosed property sold at public auction.

Answer 34

Sheriff’s deed

Question 35

A ____________________ is used to convey property to a third party trustee as collateral for a loa

Answer 35

Deed of trust

Question 36

A ________________ is used to convey property to the trustee of a land trust - not to be confused with deed of trust.

Answer 36

Deed in trust

Question 37

A __________________ deed is used to convey land to a condominium developer; it is accompanied by the condominium declaration when recorded.

Answer 37

Master deed

Question 38

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.

Answer 38

Partition deed

Question 39

A _______________ deed is used to transfer government property to private parties. This transfer is called a public grant.

Answer 39

Land patent

Question 40

A ___________________ deed is used to convey property sold at a tax sale.

Answer 40

Tax deed

Question 41

What is the negative aspect of a bargain and sale deed with covenants?

Answer 41

The deed does not protect the grantee against claims that predate the owner’s period of ownership.

Question 42

_____________________ is a transfer of title to real property without the owner’s consent.

Answer 42

Involuntary alienation

Question 43

Involuntary alienation occurs primarily by the processes of _____________________________.

Answer 43

descent and distribution, escheat, foreclosure, eminent domain, adverse possession, and estoppel

Question 44

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.

Answer 44

Will

Question 45

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.

Answer 45

True

Question 46

A property owner who fails to fulfill loan obligations or pay taxes may lose an estate through ______________. This is an example of involuntary alienation.

Answer 46

Foreclosure

Question 47

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.

Answer 47

Power of eminent domain

Question 48

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.

Answer 48

Adverse possessor

Question 49

To claim legal title, the adverse possessor must:

Answer 49

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

Question 50

A _______________ is based on the adverse possessor’s occupying and maintaining the property as if he or she were the legal owner.

Answer 50

Claim of right

Question 51

_______________ 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.

Answer 51

Color of title

Question 52

_________________________ 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

Answer 52

Notorious possession and hostile possession

Question 53

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.

Answer 53

True

Question 54

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.

Answer 54

True

Question 55

An owner can avert the danger of involuntary alienation by adverse possession by ____________________.

Answer 55

Inspecting the property within statutory deadlines and evicting any trespassers found.

Question 56

____________ prevents a person from claiming a right or interest that is inconsistent with the person’s previous statements or acts.

Answer 56

Estoppel

Question 57

________________ can prevent an owner from re-claiming a property that was transferred under false pretenses.

Answer 57

Estoppel

Question 58

What is an example of estoppel?

Answer 58

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.

Question 59

An example of estoppel:

Answer 59

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.

Question 60

______________ 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.

Answer 60

Escheat

Question 61

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.

Answer 61

True

Question 62

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.

Answer 62

Adverse possession

Question 63

Someone who possesses all ownership interests owns _______________ to the property.

Answer 63

Legal title

Question 64

__________________ 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.

Answer 64

Equitable title

Question 65

An example of legal title vs. equitable title:

Answer 65

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.

Question 66

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.

Answer 66

Will or last will and testament

Question 67

A beneficiary of a will is called an _______________.

Answer 67

Heir or devisee

Question 68

The property transferred by the will is the __________.

Answer 68

Devise

Question 69

A will is an ____________________, meaning it can be changed any time during the maker’s lifetime

Answer 69

Amendatory instrument

Question 70

A ________________ will is in writing and witnessed by two disinterested people.

Answer 70

Witnessed will

Question 71

A __________________ will is in the testator’s handwriting, dated and signed.

Answer 71

Holographic will

Question 72

An _________________ will is on pre-printed forms meeting the requirements of state law.

Answer 72

Approved will

Question 73

A __________________ will is made orally, and written down by a witness; generally not valid for the transfer of real property.

Answer 73

Nuncupative will

Question 74

State law establishes requirements for a valid will. The law generally requires that:

Answer 74

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

Question 75

A court proceeding called _____________ generally settles a decedent’s estate

Answer 75

Probate

Question 76

When a person dies having left a valid will it is called ________________.

Answer 76

Testate

Question 77

When a person dies and has failed to leave a valid will, it is called ____________.

Answer 77

Intestate

Question 78

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.

Answer 78

True

Question 79

A probate court’s objectives are to:

Answer 79

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

Question 80

If a will does not name an executor, the court will appoint an __________________ to fulfill this role.

Answer 80

Administrator

Question 81

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.

Answer 81

True

Question 82

___________________ occurs when a title-holder dies without a valid will.

Answer 82

Involuntary alienation

Question 83

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.

Answer 83

True

Question 84

The _____________________ declares that separate property (as opposed to community property) is distributed in different ways.

Answer 84

Texas Law of Descent and Distribution

Question 85

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.

Answer 85

Escheats

Question 86

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 _____________.

Answer 86

Intestate

Question 87

The __________________ requires certain documents to be in writing to be enforceable.

Answer 87

Statute of Frauds

Question 88

Texas requires that all documents relating to any interest in land must be recorded in ____________________________.

Answer 88

The office of the county clerk in the county in which the property is located.

Question 89

True or false: An original signature is not required on a document that will be electronically submitted for recording.

Answer 89

True

Question 90

___________________, or legal notice, is knowledge of a fact that a person could have or should have obtained.

Answer 90

Constructive notice

Question 91

The foremost method of imparting constructive notice is by _____________________________.

Answer 91

Recordation of ownership documents in public records

Question 92

An example of constructive notice of ownership:

Answer 92

John Doe records the deed of conveyance, he has given constructive notice of ownership.

Question 93

__________ is actual knowledge of something.

Answer 93

Actual notice

Question 94

Receiving ________________ means learning of something through direct experience or communication.

Answer 94

Actual notice

Question 95

An example of actual notice:

Answer 95

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.

Question 96

True or false: A Torrens certificate is not merely a record but is the title itself.

Answer 96

True

Question 97

True or false: Torrens-registered property is not subject to a general judgment lien, nor can title be lost through adverse possession.

Answer 97

True

Question 98

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.

Answer 98

True

Question 99

To enter a property in the Torrens system:

Answer 99

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.

Question 100

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.

Answer 100

Marketable title

Question 101

In order to deliver a marketable title, the seller must have proof of ownership of the property, also known as ___________________.

Answer 101

Evidence of title

Question 102

____________________ refers to the succession of property owners of record dating back to the original grant of title from the state to a private party.

Answer 102

Chain of title

Question 103

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.

Answer 103

Clouded title

Question 104

To remove a cloud from a title, an owner may need to initiate a ______________________, which clears the title record of any unrecorded claims.

Answer 104

Suit to quiet title

Question 105

The two forms of evidence most used in a suit to quiet title are the _________________________.

Answer 105

Abstract of title with attorney’s opinion and the title insurance policy

Question 106

Before a lender will agree to lend money on a property, the lender will order a _______________ on the property.

Answer 106

Title search

Question 107

The title search on a property will reveal:

Answer 107

1) The legal description of the property
2) The owners of record
3) Any outstanding liens or encumbrances on the property

Question 108

A ____________ is an indication of debt secured by the property.

• Outstanding property tax bills
• Mortgage loans
• Court-ordered judgments

Answer 108

Lien

Question 109

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

Answer 109

Encumbrance

Question 110

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.

Answer 110

Abstract and opinion

Question 111

The person who prepares an abstract and opinion is called an _________________.

Answer 111

Abstractor

Question 112

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.

Answer 112

Abstractor

Question 113

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.

Answer 113

True

Question 114

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.

Answer 114

True

Question 115

A ______________________ is commonly accepted as the best evidence of marketable title.

Answer 115

Title insurance policy

Question 116

What does a title insurance policy do?

Answer 116

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

Question 117

The title insurance company:

Answer 117

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.

Question 118

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.

Answer 118

Binder

Question 119

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.

Answer 119

True

Question 120

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.

Answer 120

Loan policy

Question 121

________________ insure property owners against the specific kinds of claims listed in the policy.

Answer 121

Owner policies

Question 122

When a person buys a house and purchases a mortgagee policy, a title company will automatically issue an owner policy unless the owner ____________________.

Answer 122

Rejects the owner policy in writing

Question 123

An owner policy only covers the policy holder up to ____________________.

Answer 123

the value of the property at the time the owner purchased the policy.

Question 124

An owner policy does not cover any increase in value of the property, unless the owner purchases an ______________________.

Answer 124

Increased value endorsement

Question 125

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.

Answer 125

True

Question 126

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

Answer 126

True

Question 127

Who needs title insurance and why?

Answer 127

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.

Question 128

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.

Answer 128

Adverse possessor

Question 129

An _________________ is an historical summary of all consecutive grants, conveyances, wills, records and judicial proceedings that affect the title to a particular property.

Answer 129

Abstract and opinion

Question 130

In the special warranty deed, the grantor warrants that he will __________________________.

Answer 130

Defend the title against defects arising under and through him, but no others

Question 131

Which authority regulates Involuntary Title Transfers?

Answer 131

State law

Question 132

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.

Answer 132

True

Question 133

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.

Answer 133

True

Question 134

____________________ 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.

Answer 134

Cooperative commission splits

Question 135

The listing broker is responsible for the accuracy of what for closing?

Answer 135

The settlement statements and making sure that all parties get signed copies of the settlement statements

Question 136

The brokers that earn a split of the commission are known as what?

Answer 136

Cooperating brokers

Question 137

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

Answer 137

True

Question 138

When a property goes under contract, that event then generates more checklists:

Answer 138

1) inspections to be ordered
2) disclosures to be made
3) title report to be inspected

Question 139

Explain what a checklist is and does.

Answer 139

They are quick and simple tools aimed to buttress the skills of expert professionals

Question 140

In a real estate closing company, a checklist will usually provide places for what important information?

Answer 140

The checklist will generally provide a place to check off the item received and the initials of the person responsible

Question 141

A number of forms must be filled out and signed during the loan application. These will include the following:

Answer 141

1) Permission to Request Credit Report
2) Uniform Residential Loan Application
3) Loan Estimate
4) Verification of Employment (VOE)
5) Verification of Deposit (VOD)

Question 142

The borrower signs a statement giving __________________ from credit reporting agencies.

Answer 142

permission to request a credit report

Question 143

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.

Answer 143

True

Question 144

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 _________________.

Answer 144

Loan Estimate Form

Question 145

The creditor is generally required to provide the Loan Estimate within ________________ of the receipt of the consumer’s loan application.

Answer 145

Three business days

Question 146

Criteria of a Loan Estimate:

Answer 146

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.

Question 147

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.

Answer 147

True

Question 148

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.

Answer 148

True

Question 149

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:

Answer 149

1) the borrower
2) the property
3) the title to the property

Question 150

Credit scores range from a high of 800+ to a low of 400 and one may roughly interpret them as follows:

Answer 150

• 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.

Question 151

Consumers may correct errors in their credit reports by writing to all three repositories. The credit agency should respond within ___________.

Answer 151

30 days

Question 152

Define Loan Estimate:

Answer 152

An itemized list of all costs related to obtaining and closing on a mortgage loan.

Question 153

The creditor/lender is generally responsible for insuring that the Closing Disclosure is delivered to the buyer no later than _______________ before consummation.

Answer 153

3 business days

Question 154

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.

Answer 154

True

Question 155

RESPA applies to what types of purchases?

Answer 155

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

Question 156

RESPA does not apply to what kinds of loans?

Answer 156

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).

Question 157

RESPA specifically prohibits what action?

Answer 157

RESPA specifically prohibits any payment or receiving of fees or kickbacks when a service has not been rendered

Question 158

Depending on where and with whom you practice, the business of real estate is a ____________________.

Answer 158

Checklist-driven activity

Question 159

Financed by a federally-related loans are loans ______________________________.

Answer 159

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

Question 160

What is the latest date that a “settlement agent” is allowed to provide the seller with the Closing Disclosure?

Answer 160

At consumption of the transaction

Question 161

TRID gives the buyer the right to review the completed Closing Disclosure form how long before closing?

Answer 161

Three business days

Question 162

TRID requires the lender to provide a Loan Estimate within how long of the borrower submitting a loan application?

Answer 162

3 days

Question 163

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.

Answer 163

Home inspection

Question 164

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.

Answer 164

Home inspection

Question 165

A ______________________ covers a home’s major mechanical systems — electrical, plumbing, heating, and cooling — and its construction from roof to foundation, exterior to interior.

Answer 165

Standard home inspection

Question 166

A ___________________ is a check for damage caused by wood-eating insects like termites, carpenter ants or beetles.

Answer 166

Pest inspection

Question 167

____________________ is the examination of the soil conditions on the property to determine if there is any settling or drainage problems.

Answer 167

Soil inspection

Question 168

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.

Answer 168

Structural inspection

Question 169

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.

Answer 169

Environmental inspection

Question 170

Explain what happens with every inspection ordered.

Answer 170

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.

Question 171

There are four kinds of evidence of title:

Answer 171

1) abstract and opinion
2) certificate of title
3) title insurance
4) Torrens certificate

Question 172

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.

Answer 172

True

Question 173

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.

Answer 173

Title search

Question 174

The ______________ is responsible for paying the fee for the title search.

Answer 174

Buyer

Question 175

A title search is performed primarily to answer three questions regarding a property on the market:

Answer 175

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.

Question 176

The contract states that the Title Company has __________ after receiving the contract; the Seller shall furnish to Buyers a commitment for title insurance.

Answer 176

20 days

Question 177

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.

Answer 177

20 days

Question 178

The _______________________ shows the condition of the title before the loan or sale transaction.

Answer 178

Preliminary title report

Question 179

Buyers must acknowledge receipt of the preliminary report which contains:

Answer 179

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

Question 180

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.

Answer 180

Preliminary title report

Question 181

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.

Answer 181

Land survey

Question 182

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.

Answer 182

Escrow

Question 183

In Texas, the escrow agent may be:

Answer 183

1) An attorney
2) A title company
3) A trust company
4) An escrow company
5) The escrow department of a lending institution

Question 184

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.

Answer 184

True

Question 185

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:

Answer 185

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

Question 186

During the escrow period, a number of activities will be taking place. Activities include:

Answer 186

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.

Question 187

What happens if any problem is found with either the physical layout of the property or in the title search results?

Answer 187

It creates a cloud on the title that must be resolved prior to closing on the loan

Question 188

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.

Answer 188

Prorated

Question 189

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.

Answer 189

True

Question 190

True or false: Some items are those that were paid for in advance, so the buyer will owe the seller part of the payment.

Answer 190

True

Question 191

True or false: For items paid in advance, the buyer will receive a debit and the seller will receive a credit.

Answer 191

True

Question 192

Those expenses that the seller incurred but have not yet been billed for at the time of closing are items that are ___________________.

Answer 192

Paid in arrears

Question 193

True or false: The 12 month/30 day method calculates the amounts due based on a 360-day year and a 30-day month.

Answer 193

True

Question 194

True or false: The 365-day method calculates the amounts on the basis of a 365-day year.

Answer 194

True

Question 195

True or false: Interest is always paid in arrears.

Answer 195

True

Question 196

What does prorated mean?

Answer 196

Divided proportionately between the buyer and the seller

Question 197

Any item that is prorated is shown on the settlement statement how?

Answer 197

As a debit to one party and a credit to the other party for the same amount

Question 198

Closing agents and lenders typically use one of two methods when calculating items that need to be prorated. Name the two methods.

Answer 198

The 12-month/360 day method and the 365 day method

Question 199

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.

Answer 199

True

Question 200

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.

Answer 200

True

Question 201

After all the closing documents have been signed, the ____________________ arranges for the recording of the grant deed and security instrument.

Answer 201

Settlement statement

Question 202

True or false: Several weeks after the closing, the purchaser should receive the original deed and title insurance policy.

Answer 202

True

Question 203

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.

Answer 203

True

Question 204

The title to the property has transferred when _______________________. Delivery and acceptance must occur during the lifetime of the seller.

Answer 204

The deed is delivered and accepted by the buyer

Question 205

All real estate sales must be reported to the Internal Revenue Service after closing. The sale must be reported on a ___________.

Answer 205

Form-1099

Question 206

What can a lender require a borrower to do with regard to taxes and insurance and why would the lender make this requirement?

Answer 206

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.

Question 207

Also referred to as settlement, the ______________ is the culmination of the real estate transaction.

Answer 207

Title closing

Question 208

“__________________” is when the buyer completes his or her financing arrangements

Answer 208

Closing the loan

Question 209

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

Answer 209

Sales contract

Question 210

True or false: Using just a street address is NEVER correct as a legal description.

Answer 210

True

Question 211

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.

Answer 211

True

Question 212

True or false: EVERY addendum attached to the contract is part of the contract and as such needs all the appropriate signatures.

Answer 212

True

Question 213

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.

Answer 213

True

Question 214

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.

Answer 214

Final acceptance

Question 215

How should a party’s name be listed on the sale contract?

Answer 215

Using the person’s full legal name

Question 216

What is true about using the street address in the property description paragraph?

Answer 216

The street address is never enough. The property paragraph must contain the full legal description of the property.

Question 217

What can happen if a licensee forgets to check some of the check boxes on a contract?

Answer 217

It can cause delays in the transaction or bad feelings between the parties. In addition, the licensee could be viewed as careless or incompetent.

Question 218

What are the two common mistakes licensees make when dealing with addenda?

Answer 218

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.

Question 219

__________________ is ownership of real estate and the bundle of rights associated with owning the real estate.

Answer 219

Real property

Question 220

_____________________ is ownership of anything that is not real estate, and the rights associated with owning the personal property item.

Answer 220

Personal property

Question 221

_______________ property is physical, visible, and material.

Answer 221

Tangible

Question 222

_________________ property is abstract, having no physical existence in itself, other than as evidence of one’s ownership interest.

Answer 222

Intangible

Question 223

The primary criterion for distinguishing real from personal property is ________________________________.

Answer 223

Whether the item is permanently attached to the land or to structures attached to the land.

Question 224

______________ 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.

Answer 224

Severance

Question 225

_______________, 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.

Answer 225

Affixing

Question 226

When do issues regarding real and personal property usually come into focus?

Answer 226

During the final walkthrough of the property right before closing.

Question 227

What is a cloud on title?

Answer 227

Any irregularity in the chain of title of property that would give a reasonable person pause before accepting a conveyance of title.

Question 228

In what sale contract paragraph do you indicate an attached addendum?

Answer 228

Paragraph 22

Question 229

True or false: In Texas, electronic signatures are allowed only if both parties agree to it in an electronic consent form.

Answer 229

True

Question 230

What is prohibited from being entered into the Special Provisions paragraph?

Answer 230

Legal rights and remedies