Chapter 5: Transfer of Property

Question 1

Escrow calculates prorations based on how many days in a year?

Answer 1

360 days.

Question 2

Escrow closes on the 16th day of February (28 days). The seller receives $500 in rent for the month of February. How much does the seller owe the buyer?

Answer 2

The seller owes the buyer $250.

Question 3

Which is not true of a tenancy in common?
A. Interest may be unequal
B. A tenant in common may not will their interest in the property to others on their death
C. An individual may not will their interest in the property to others on their death
D. The owner does not own a specific part of the property

Answer 3

B. A tenant in common may will their interest in the property to others on their death.

Question 4

Sara and Marshal are joint tenants. Marshal obtains a loan from a lender secured by his interest in the property. When Marshal dies:
A. Sara and the lender become tenants in common, each owning one-half interest in the property
B. Sara owns the property free and clear of the encumbrance
C. Sara owns the property subject to the loan
D. Sara and the beneficiary own the property as joint tenants, each with a one-half interest

Answer 4

B. Joint tenants receive title clean of any obligations made by the deceased partner. Further, joint tenants do not need to be married and joint tenancy is not limited to only two people.

Question 5

A standard policy of title insurance covers: 
A. Encroachments
B. Incompetence of any of the parties
C. Zoning restrictions
D. An easement by perscription

Answer 5

B. Incompetence by any of the parties is covered by both standard and extended policies. Only the American Land Title Association (ALTA) policy will give additional coverage, such as encroachments, prescriptive easements, unrecorded liens, and rights of parties in possession.

Question 6

On April 1, 2020, an escrow agent opened a preliminary title report order for the sale of a property. The seller purchased the home in 1998, financing it with a Federal Housing Administration (FHA) loan on which they are currently making payments. A preliminary title report dated April 5, 2020, will:

Answer 6

show a deed of trust with the seller as trustor, as the seller will still be the owner and trustor on the FHA loan on April 5.

Question 7

A grant deed is recorded and indexed based on:

Answer 7

The grantor and grantee names alphabetically.

Question 8

True or false - A grant deed is valid whether or not it is recorded.

Answer 8

True.

Question 9

Regarding delinquent taxes and redemption rights, what is the effect of a “sale to the state” by the tax collector?

Answer 9

The redemption period begins with the sale.

Question 10

The annual property taxes an owner of a home needs to pay are determined by:

Answer 10

assessing the land and improvements separately, than multiplying the total by one tax rate.

Question 11

The instrument used to transfer title to personal property is the:

Answer 11

Bill of sale

Question 12

All of the following may be added to the original cost basis of real property to arrive at an adjusted basis for federal income tax purposes, except:
A. Miscellaneous sale expenses
B. The real estate brokerage commission earned on sale
C. The cost of improvements
D. Monthly mortgage payments

Answer 12

D. Monthly mortgage payments

Question 13

Which of the following are not tax deductible under federal income tax laws concerning an owner-occupied single family dwelling?
A. Mortgage interest payments
B. A mortgage prepayment penalty that was incurred
C. Property taxes
D. Landscaping expenses

Answer 13

D. Landscaping expenses are not tax deductible for owner-occupied residences.

Question 14

All of the following items contained in a closing statement are generally prorated, except:
A. Property insurance
B. Property taxes and assessments
C. Impounds
D. Delinquent interest

Answer 14

D. Delinquent interest is a seller expense and not prorated for the buyer.

Question 15

At a tax foreclosure sale, the winning bidder receives a:

Answer 15

Tax deed

Question 16

A grant deed has been executed once it has been:

Answer 16

Signed by the grantor. While a signature completes execution, the transfer process requires delivery and acceptance to be complete.

Question 17

An inconsistency in the names of the title holder and grantor on the deed requires clarification and creates:

Answer 17

A cloud on the title until this has been accomplished.

Question 18

A land contract, when compared to a grant deed transfer, is different in the:
A. Interest conveyed
B. Signatures of the principal parties
C. Designation of the purchase price
D. All of the above

Answer 18

D. All of these will differ between a contract and a deed.

Question 19

A property in probate is appraised at $960,000. At auction, the highest bid is $900,000. For the court to consider any other offer, it would have to be at least:

Answer 19

A probate court will only consider a subsequent bid that is raised by an amount equal to 10% of the first $10,000 ($1,000) plus 5% of the remaining balance ($45,500), totaling $945,500.

Question 20

A writ of execution is issued for a:

Answer 20

Sheriff’s sale

Question 21

When an eligible veteran purchases a home under the CalVet program, the grant deed is in favor of:
A. The veteran
B. The California Department of Veterans Affairs
C. The lender that made the CalVet loan
D. The title company

Answer 21

B. The CalVet sale is a land sales contract with the California Department of Veterans Affairs as the seller (vendor).

Question 22

Chain of tile refers to:

Answer 22

An exact history of conveyances and encumbrances affecting title to a property.

Question 23

Mike executed a grant deed to Trevor and recorded it. Later, Mike changed his mind and sought to set the conveyance aside, claiming there had been no delivery to Trevor. Why was Mike unsuccessful in his effort?

Answer 23

A. Delivery and acceptance is presumed with recording.

Question 24

All of the following may be impound requirements for a borrower, except:
A. Property insurance
B. Bond payments
C. Property taxes
D. Mortgage interest

Answer 24

D. Mortgage interest

Question 25

Mr. Black purchased a home for $650,000. The terms of the sale stated Mr. Black will make a down payment of $200,000 and assume an existing first trust deed for the balance of the purchase price. At a basic rate of $0.55 per $500, how much will the transfer tax be?

Answer 25

Transfer taxes are charges against new money only. Since the transaction included the assumption of a $450,000 existing mortgage, the only tax charged is against the $200,000 down payment ($200,000/$500*$.055)

Question 26

How does the California Land Title Association (CLTA) differ from the American Land Title Association (ALTA)?

Answer 26

CLTA offers standard title coverage policy purchased solely by buyers, carryback sellers, and private lenders while ALTA offers owner’s extended title coverage policy without pre-printed exceptions, only the typewritten exceptions listing encumbrances.

Question 27

What makes CLTA policy a standard policy?

Answer 27

The pre-printed boilerplate exceptions. Any encumbrance not recorded, whether or not observable by inspection or survey, is not covered due to CTLA policy exclusions and standard exceptions.

Question 28

Which policy provides greater protection, ALTA or CLTA?

Answer 28

ALTA.

Question 29

What is a preliminary title report versus an abstract of title?

Answer 29

A preliminary title report (prelim) is a report constituting a revocable offer by a title insurer to issue a policy of title insurance used by a buyer and escrow to initially establish the current vesting and encumbrances attached to title of a property as reflected by public record. An abstract of title is a summary or digest of all transfers, conveyances, legal proceedings, and any other facts relied on a as evidence of title, showing continuity of ownership, together with any other elements of record which may impair title.

Question 30

Which of the following are voluntary deeds versus involuntary deeds?
A. Creditor's judgment
B. Tax lien 
C. Foreclosure on a trust deed
D. Assessment bond

Answer 30

Foreclosure on a trust deed and an assessment bond are voluntary deeds while creditor’s judgment and tax lien are involuntary deeds.

Question 31

What is a quitclaim deed?

Answer 31

A document used to convey whatever interest, if any, the grantor may hold in the real estate; does not convey implied covenant/warranties like a grant deed. Commonly used in the event of divorces and inheritances.

Question 32

Documents that need to be recorded include:

Answer 32

Homestead exemptions; abandonment of homesteads; lis pendens (notices of pending legal actions); mechanic’s liens; trust deeds.

Question 33

Can a loss be reported on a personal residence?

Answer 33

No loss can be reported on a personal residence, and any gain on a personal residence can be offset up to $250,000 for an individual or $500,000 for a couple filing jointly when reporting the sale to the IRS.

Question 34

What is a mortgage interest deduction (MID)?

Answer 34

An itemized deduction for income tax reporting allowing homeowners to deduct interest and related charges they pay on a mortgage encumbering their primary or secondary homes.

Question 35

What are the four unities of joint tenancy?

Answer 35

T - Unity of title, meaning the joint tenants take title to the real estate through the same instrument, such as a single grant deed or court order
T - Unity of time, meaning the joint tenants receive their interest in title at the same time
I - Unity of interest, meaning the joint tenants own equal shares in the ownership of property
P - Unity of possession, meaning each joint tenant has the right to possess the entire property.

Question 36

What are key traits of tenants in common?

Answer 36

Tenants in common may have varying percentages of ownership in a property, may take title at different times, and have centralized rights of possession. If a joint tenant conveys their interest in the property to another person, that person takes title as a tenant in common. A tenant in common may will their interest in the property to others on their death since a tenancy in common interest carries no right of survivorship with it.