Escrow & Title Insurance

Question 1

The escrow holder’s duties may include

(a) verification that all required documents and funds are on hand before the necessary transfers are made.
(b) preparation of the necessary documents.
(c) calculation of the prorations, adjustments, and charges to be assessed against each party are made.
(d) All of the above

Answer 1

(d)All of the above

Question 2

Which of the following is required for the existence of a valid escrow?

(a) A binding contract and conditional delivery of the necessary documents and funds
(b) The services of a licensed real estate broker
(c) A complete chain of title
(d) Complete escrow instructions

Answer 2

(a)A binding contract and conditional delivery of the necessary documents and funds

To create a valid escrow for a real estate sale, two requirements must be met: a binding contract and conditional delivery of the necessary documents and funds.

Question 3

Which of the following statements is correct regarding the agency relationship between the escrow holder and the principals?

(a) The escrow agent is the exclusive agent of the seller at all times.
(b) The escrow agent has no fiduciary responsibility to either party to the transaction.
(c) The escrow holder has a limited agency relationship with the principals to the transaction as set out in the escrow instructions.
(d) The escrow agent is a corporate entity and cannot have a traditional agency relationship with either party to the transaction.

Answer 3

(c)The escrow holder has a limited agency relationship with the principals to the transaction as set out in the escrow instructions.

A limited agency relationship is established between the escrow holder and the principals to the transaction, defined by the responsibilities set out in the escrow instructions. When escrow is first established, the escrow holder is the agent of both parties. As the conditions to the transaction are performed, the escrow holder acts as the agent of each party as necessary to complete the transaction.

Question 4

Which of the following may NOT engage in the escrow business?

(a) An individual who is not a real estate broker or attorney
(b) Bank
(c) Domestic corporation
(d) Foreign corporation

Answer 4

(a)An individual who is not a real estate broker or attorney

Question 5

A broker can, without being licensed as an escrow, handle the escrow on transactions where he or she

(a) acts as a principal.
(b) represents the buyer.
(c) represents the seller.
(d) Any of the above

Answer 5

(d)Any of the above

Question 6

If the escrow holder receives information that would be considered a material fact concerning the transaction, he/she should

(a) withhold that information from both parties until after close of escrow.
(b) disclose that information immediately to the relevant parties.
(c) inform the seller if the information represents a non-disclosure violation.
(d) inform the buyer if the material fact has the potential to cause the seller to panic.

Answer 6

(b)disclose that information immediately to the relevant parties.

Question 7

Which of the following is considered a responsibility of the buyer in escrow?

(a) Deposit the cash needed to cover down payment, closing costs, and other expenses
(b) Sign escrow instructions
(c) Obtain hazard insurance
(d) All of the above

Answer 7

(d)All of the above

Question 8

If the subject property is a rental, it is the seller’s responsibility to provide escrow with

(a) tenant names.
(b) rent and deposit information.
(c) proof that the tenants have been notified of the change of ownership.
(d) All of the above

Answer 8

(d)All of the above

Question 9

In general, the real estate agent’s responsibility in escrow is to

(a) contribute a portion of his/her commission if necessary to close the escrow.
(b) personally lend money to the buyer if conventional financing is not available.
(c) keep light pressure on both parties to the transaction so escrow closes on time.
(d) keep informed of the progress of the escrow and assist the escrow officer when necessary.

Answer 9

(d)keep informed of the progress of the escrow and assist the escrow officer when necessary.

Question 10

The final responsibility of the escrow holder in the overall escrow process is to

(a) accept the purchase contract and formulate escrow instructions.
(b) prepare and deliver settlement statements and transfer funds and documents of title.
(c) order a final title search.
(d) receive and review preliminary report.

Answer 10

(b)prepare and deliver settlement statements and transfer funds and documents of title.

Question 11

A document that describes the property and any existing encumbrances is called a

(a) preliminary report.
(b) abstract of title.
(c) title plant.
(d) binder.

Answer 11

(a)preliminary report.

The preliminary report describes the property and current owner of record, as well as any recorded liens or other encumbrances. The escrow holder reads the report to verify the legal description and to determine if there are any child support liens, taxes, or judgments for which a release will be required prior to the close of escrow. The buyer is required to review and sign acceptance of the preliminary report.

Question 12

On an escrow closing statement, property taxes are listed as

(a) a credit to the buyer only.
(b) a debit to the seller always.
(c) either a debit or credit to the buyer or seller depending on the situation.
(d) None of the above

Answer 12

(c)either a debit or credit to the buyer or seller depending on the situation.

Question 13

An escrow prorates based on a

(a) 300 day year.
(b) 360 day year.
(c) 365 day year.
(d) none of these.

Answer 13

(b)360 day year.

360 day year and a 30 day month

Question 14

When the escrow officer requests the appropriate party to deposit the required funds in the escrow account, it is referred to as

(a) appropriation.
(b) funding.
(c) procurement.
(d) allocation.

Answer 14

(b)funding.

During the funding phase of the escrow process, the escrow officer requests the appropriate party to deposit the required funds in the escrow account. The lender provides the committed percentage of the purchase price. The buyer (borrower) will provide whatever amount is necessary to cover the remainder of the purchase price, taking into account any deposits already made as well as additional costs of closing, such as fees and prorations.

Question 15

All of the following will prevent an escrow from closing EXCEPT

(a) agreement of the parties.
(b) demand of the broker.
(c) inability to meet a contingency.
(d) None of the above

Answer 15

(b)demand of the broker.

Since a broker is not a party to the transaction, he/she cannot order an escrow terminated.

Question 16

A title officer of a title insurance company is familiar with an “Abstract of Title” and would know that it is

(a) where the legal description of the property is found in the title policy.
(b) a written summary of the various recorded documents relating to the title of the subject property.
(c) a standard form of title insurance that is used by most title companies.
(d) an opinion of the title officer as to the condition of the title.

Answer 16

(b)a written summary of the various recorded documents relating to the title of the subject property.

Question 17

A standard policy of title insurance covers all of the following EXCEPT

(a) easements and liens not shown in the public records.
(b) incompetent grantor.
(c) incorrectly given marital status.
(d) forged deed.

Answer 17

(a)easements and liens not shown in the public records.

The standard policy of title insurance specifically excludes easements and liens not shown in the public records. Generally, a standard policy of title insurance will protect the insured against losses arising from such title defects as:
• Forged documents such as deeds, releases of dower, mortgages;
• Undisclosed heirs;
• Mistaken legal interpretation of wills;
• Misfiled documents, unauthorized acknowledgments;
• Confusion arising from similarity of names;
Incorrectly given marital status.

Question 18

An ALTA policy of title insurance primarily protects the

(a) buyer.
(b) seller.
(c) lender.
(d) all of these.

Answer 18

(c)lender.

The ALTA policy is used to protect lenders and usually requires a survey. It expands the standard policy to include:
• Rights of parties in possession;
• Unrecorded liens;
• Easements;
• Claims that a correct survey or inspection would show;
• Mining claims and water rights.

Question 19

Even though the expense of title insurance is negotiable and can be paid by either buyer or seller, the policy fee for title insurance benefiting the lender typically is paid by the

(a) agent.
(b) buyer.
(c) seller.
(d) broker.

Answer 19

(b)buyer.

Title insurance is paid for in a single payment. The expense of title insurance is negotiable and can ultimately be paid by either buyer or seller, however, the policy fee for title insurance benefiting the lender typically is paid by the borrower (buyer).

Question 20

For a valid escrow, there must ba a binding agreement and conditional delivery of the:

	(a) instruments of transfer.
	(b) property insurance.
	(c) home warranty.
	(d) title insurance.

Answer 20

(a) instruments of transfer.

Question 21

The escrow officer acts for both the buyer and seller as:

	(a) a single agent.
	(b) a special agent.
	(c) an impartial third person.
	(d) a general agent.

Answer 21

(c) an impartial third person.

Question 22

Which of the following could NOT be an escrow holder?

	(a) Selling broker
	(b) Listing broker
	(c) Escrow corporation
	(d) Escrow partnership

Answer 22

(d) Escrow partnership

Question 23

A real estate broker can handle an escrow when the broker:

	(a) is the agent or a party to the transaction.
	(b) charges a fee.
	(c) is action for another broker.
	(d) is not party to the sale.

Answer 23

(a) is the agent or a party to the transaction.

Question 24

What does the escrow officer file when the buyer and seller are unable to resolve a dispute which prevents the closing of escrow?

	(a) An interpleader action
	(b) A writ of possession
	(c) A quiet title action
	(d) An estoppel agreement

Answer 24

(a) An interpleader action

Question 25

One of the main responsibilities of the seller is to:

	(a) order fire insurance.
	(b) obtain a new loan.
	(c) review the title report.
	(d) sign escrow instructions.

Answer 25

(d) sign escrow instructions.

Question 26

Escrow officers usually base their prorations on:

	(a) a full calendar year.
	(b) business days.
	(c) a 30-day month.
	(d) a monthly basis.

Answer 26

(c) a 30-day month.

Question 27

Which of the following provides the BEST protection?

	(a) Abstract of title
	(b) Guarantee of title
	(c) Certificate of title
	(d) Title insurance policy

Answer 27

(d) Title insurance policy

Question 28

With title insurance, the buyer ALWAYS receives:

	(a) a regular coverage policy.
	(b) an extended coverage policy.
	(c) an abstract of title.
	(d) a preliminary report.

Answer 28

(d) a preliminary report.

Question 29

In northern California, escrows are typically held by:

	(a) escrow companies.
	(b) title insurance companies.
	(c) real estate brokers.
	(d) banks.

Answer 29

(b) title insurance companies.