Chapter 5 Concepts

Question 1

What is a title?

1) What does it mean in real estate?

Answer 1

to real estate means the right to or ownership of the land.

***a summation of all the things property owners possess to prove and protect their ownership interest in property

Question 2

What are the two functions of the title?

Answer 2

(1) it represents the bundle of legal rights the owner possesses in the real estate

(2) enable a person to recover or retain ownership or possession of a parcel of real estate.

Question 3

What is alienation?

Answer 3

The act of transferring property to another

Question 4

1) What is a deed?

2) Who needs to sign a deed?

Answer 4

1) is a written legal instrument by which an owner of real estate intentionally conveys right, title, or interest in the parcel of real estate to another. A deed is evidence of title.

2) A deed is executed (signed) only by the grantor(s). The grantee(s) does not sign the deed.

Question 5

1) What is consideration?

Answer 5

A) Consideration (something of value) of some form must be stated. Consideration is the price paid for the promises stated in the deed. While economic value (e.g., money) is the most common form of consideration, consideration does not have to involve money.

***To be legally binding, the deed must express adequate consideration

Question 6

What are words of conveyance/deed of conveyance?

Answer 6

A deed of conveyance transfers a present interest (freehold estate) in real estate, and it must contain words that state the grantor’s intention to convey the property at this time.

An expression of intent to convey at some future time is inadequate. Such words of conveyance are often called the granting clause.

Question 7

What is delivery of a deed?

Answer 7

Before a transfer of title by conveyance can take effect, there must be delivery and acceptance;

that is, actual delivery of the deed by the grantor and either actual or implied acceptance by the grantee.

Delivery may be made by the grantor to the grantee personally or to a third party who is authorized by the grantee to accept the deed (such as a lawyer).

Question 8

____________ is said to pass when a deed is delivered and voluntarily accepted. In North Carolina, recordation of the deed by the _______ or ________ is recognized as acceptance. The effective date of the transfer of title from the grantor to the grantee is the date of delivery of the deed itself.

Answer 8

Title

buyers or their agent

Question 9

What are the elements not required to convey a deed?

Answer 9

-Deeds do not have to be witnessed.

-Deeds do not have to be dated; although, for practical matters, it may be wise to do so.

-Deeds do not have to include a statement as to the exact amount of consideration (the amount of money that was paid for the property).

-Deeds do not have to be acknowledged (i.e., notarized).

-Deeds do not have to be recorded to be valid, but under the Connor Act, the grantees must record the valid deed to protect their interest as to third parties under the law.

-Effective in 1999, deeds do not have to be sealed in North Carolina to be valid. Standard deed forms may continue to have the word seal after the signature; however, it is no longer required to create a valid deed. Signing under seal does have certain legal advantages such as extending the statute of limitations protecting the parties’ rights from three years to 10 years.

Question 10

General Warranty Deed Covenants (5)

Answer 10

1. Covenant of Seisin
2. Covenant Against Encumbrances
3. Covenant of Quiet Enjoyment
4. Covenant of Warranty Forever
5. Covenant of Further Assurance

Question 11

Covenant of Seisin (General Warranty Deed Covenant)

Answer 11

The grantor warrants that he or she is the legal owner of the property and has the right to convey title to it. Delivery of seisin is the actual transfer of title.

Question 12

Covenant Against Encumbrances (General Warranty Deed Covenant)

Answer 12

The grantor warrants that the property is free from any liens or encumbrances except those of record. Encumbrances would generally include such items as mortgages, mechanics’ liens, real estate tax liens, protective covenants, and easements.

Question 13

Covenant of Quiet Enjoyment (General Warranty Deed Covenant)

Answer 13

The grantor guarantees that the grantee’s title will be good against third parties who might bring court actions to establish superior title to the property. If the grantee’s title is found to be inferior, the grantor is liable for damages.

Question 14

Covenant of Warranty Forever (General Warranty Deed Covenant)

Answer 14

The grantor promises to obtain and deliver any instrument needed to make the title good. For example, if an error in the deed is found, the grantor agrees to resign a new deed to correct the mistake.

Question 15

Covenant of Further Assurance (General Warranty Deed Covenant)

Answer 15

The grantor guarantees that if at any time in the future the title fails, he or she will compensate the grantee for the loss sustained.

However, it is in the best interest of the grantee to obtain title insurance because at the time of a later claim, the grantor may be dead or financially insolvent.

Question 16

Special Warranty Deed (Limited warranty deed)

Answer 16

The grantor warrants that he or she received title to the land and that the property was not encumbered during the time he or she held title except as noted in the deed.

Question 17

Bargain and Sale Deed

Answer 17

a deed that contains no covenants but does imply that the grantor owns the property being conveyed

Question 18

Quitclaim Deed (non-warranty deed)

Answer 18

used to correct a defects or errors. Also used to transfer property between family members.

Question 19

Correction Deed

Answer 19

A deed used to correct minor mistakes in an earlier deed, such as misspelled names or errors in the legal description of the property.

Question 20

Deed of Release

Answer 20

A deed used to release a parcel of property from a mortgage or deed of trust lien when the real estate loan has been paid in full.

Question 21

Timber or mineral deed

Answer 21

Ownership rights can be severed from the land and transferred by deed, such as harvesting of timber or minerals located on the property.

Question 22

Escheat

Answer 22

The state takes property upon an owners death if there is no will & no heirs exist

Question 23

eminent domain

Answer 23

Power of a government to take private property for public use.

“eminent domain may only be used to take a blighted parcel”

Question 24

Condemnation

Answer 24

Condemnation is the process by which the government exercises this right, by either judicial or administrative proceedings.

Question 25

Lien foreclosure

Answer 25

Land also may be transferred without an owner’s consent to satisfy debts contracted by the owner that have become liens against the real property. In such cases, the liens are foreclosed, the property is sold, and the proceeds of the sale are applied to pay off the debts. Debts that could be foreclosed include mortgage loans, real estate taxes, mechanics’ liens, and general judgments against the property owner

Question 26

Adverse possession (OCEAN)

Answer 26

A person takes possession & use of a property belonging to another. Possession must be open, notorious, hostile & uninterrupted for a certain period of time.

O- Open (well known to others)

C- Continuous (uninterrupted for the required period)

E- Exclusive (not shared with another)

A- Adverse to the true owner’s possession (the adverse possessor must intend to claim that the land occupied is his or her own)

N- Notorious/hostile (without the permission of the owner)

Question 27

Time Period for Adverse possession (OCEAN)

Color of title time period

No color of title time period

Answer 27

1) In North Carolina, the required period of continuous possession varies widely, depending on the circumstances.

2) If the adverse possessor is trying to acquire privately owned property and has color of title (a faulty document that purports to give the adverse possessor title), the period of possession is 7 years.

3) If there is no color of title, the period of possession is 20 years. Property owned by the government is not subject to acquisition by adverse possession.

Question 28

Action to Quiet Title

Answer 28

A court action that establishes ownership when ownership cannot be traced through an unbroken chain of title.

Question 29

Will

1) What is a will?

2) When does it take place?

Answer 29

is an instrument made by a mentally competent owner to convey title to real and personal property on the owner’s death.

A will takes effect only after death; until that time, any property covered by the will can be conveyed by the owner and thus removed from the owner’s estate

Question 30

In North Carolina, if spouses own property as tenants by the entirety, that property ________ pass by will. Neither spouse can disinherit the other spouse by will.

Answer 30

that property cannot pass by will. Neither spouse can disinherit the other spouse by will.

Question 30

In North Carolina, if spouses own property as tenants by the entirety, that property ________ pass by will. Neither spouse can disinherit the other spouse by will.

Answer 30

that property cannot pass by will. Neither spouse can disinherit the other spouse by will.

Question 31

North Carolina Intestate Succession Act

1) What is it?

2) How is property divided upon heirs?

Answer 31

provides for the distribution of the property of an intestate person (one who dies without a valid will).

This statute allows for the equal division of property among eligible heirs, or, in the event of no heirs, having the property escheat to the North Carolina State Educational Assistance Authority. This statute does not override an active survivorship clause in a deed.

Question 32

title records

Answer 32

Public records of real property documenting the history of ownership, claims, ownership, conveyances, legal descriptions, and surveys

Question 33

What is a Marketable Title?

Answer 33

Good or clear title, reasonably free from the risk of litigation over possible defects

Question 34

What are the 5 elements of a marketable title?

Answer 34

(1) be free from any significant liens and encumbrances

(2) disclose no serious defects

(3) be free of doubtful questions of law or fact to prove its validity

(4) protect a purchaser from the hazard of litigation or any threat to quiet enjoyment of the property

(5) convince a reasonably well-informed and prudent person, acting on business principles and willful knowledge of the facts and their legal significance, that the property could in turn be sold or mortgaged at a fair market value.

Question 35

title search

Answer 35

The examination of public records relating to real estate to determine the current state of the ownership

Question 36

Abstract of Title

Answer 36

The condensed history of a title to a particular parcel of real estate, consisting of a summary of the original grant and all subsequent conveyances and encumbrances affecting the property and a certification by the abstractor that the history is complete and accurate

Question 37

Marketable Title Act

Answer 37

Provides that if a chain of title can be traced back for 30 years and no other claim has been recorded during that time the title becomes a marketable title.

Question 38

Title Insurance

Answer 38

a type of insurance that protects the buyer if problems with the title are found later

Question 39

Insurable Title

Answer 39

Ownership with some known defects that a title insurance company agrees to cover

Question 40

Constructive Notice

Answer 40

Notice given to the world by recorded documents. All people are charged with knowledge of such documents and their contents, whether or not they have actually examined them. Possession of property is also considered constructive notice that the person in possession has an interest in the property.

Question 41

Connor Act

Answer 41

NC law that requires many types of real estate documents to be recorded for protection against claims from third parties.

Question 42

excise tax

1) What is it?

2) How do you calculate it?

Answer 42

a tax on the production or sale of a good

if the sales price is not an even $500 amount, round the sales price up to the nearest $500, divide by 500, and multiply by $1. For example, suppose the purchase price is $89,250. Round up the price to $89,500, and divide by 500, which equals 179. Multiply 179 by $1 and you have determined that the seller will need to pay $179 in excise tax.