Morgan's (VIII) Flashcards
What does it mean when there is cloud on the title?
Some sort of defect in the title
This type of insurance insures the policyholder against the future discovery of certain past problems with title
Title insurance
What are two ways to resolve cloud on the title?
- Quiet title action - judge decides
2. Quitclaim deed - the newly discovered party gives up the title
Testate refers to having a ___.
Will
____ refers to a situation where a person dies without a valid will
Intestate
The public, legal process of executing the terms outlined in a will, or determining how to settle the estate if there is no will
Probtae
The term for a personal representative appointed by the testator in the will
Executor
A personal representative appointed by probate when someone died intestate, or when there is a will and the court sees a reason to appoint one
Administrator
The distribution of an estate that is not governed by a will and follows state laws of descent and distribution
Intestate succession
Real property disposed of in a will is known as a ___. Personal property disposed of in a will is known as a ___ or a ___.
Devise
Legacy; bequest
A written instrument by which land is conveyed
Deed
The terminology for parties to a deed includes knowing that the one who is granting ownership is referred to as the ___, and the new owner is known as the ___.
GrantOR; grantEE
List the legal elements of validity for a deed.
- In writing
- Grantor must have legal capacity
- Identification of the parties
- Statement of consideration (what is being paid/exchanged for the property)
- Words of conveyance (“I do hereby grant and convey)
- Legal description of the property
- Signature of the grantor
This type of clause defines the extent and limitations of the interest conveyed
Habendum clause (aka to-have-and-to-hold clause)
Recording a document provides what is referred to as ___ notice, which means that a due diligence review of the public record would make the existence of the document known to the reviewer.
Constructive (aka legal). notice
____ notice means that a party has personally received the notice, as when a process server delivers a subpoena to appear in court.
Actual
This type of deed offers the greatest protection for the grantee of all deeds
General warranty deed
Type of deed which warrant the title against title defects that arose only during the grantor’s ownership
Special warranty
Type of deed which contain no guarantee from the grantor about the validity of title but implies that the grantor has an interest that is being sold to the grantee
Bargain and sale deeds
Type of deed that has no covenants or warranties, but simply relinquish any and all interest the grantor may ahve in a property
Quitclaim deeds
Deeds may include a variety of covenants and warranties. What’s the difference?
Covenants - formal agreements or promises
Warranties - guarantees
List the 5 most common covenants.
- Covenant of seisin (grantor claims to be the owner and is legally entitled to convey it)
- Covenant of quiet enjoyment (grantor promises that no one will disturb the new owner with claims against the property)
- Covenant of further assurance (means the grantor assumes responsibility for any additional documentation necessary to ensure the grantee’s title)
- Covenant against encumbrances (grantor promises that any and all easements or liens have been properly disclosed and is liable for damages if others are discovered after the transfer)
- Covenant of warranty forever (or warranty of title) - grantor promises to bear the cost of defending the title against undiscovered or undisclosed flaws existing at the time of transfer
General legal term used to refer to both 1 - an account; and 2 - to the “signed-contract to delivered-deed” period of a real estate transaction
Escrow
What is the purpose of settlement (or closing)?
Consummate the transaction by fulfilling the contract conditions, disbursing required funds, and transferring title
List the priority of liens (paid first to last).
- Property taxes
- Special assessments
- First mortgage
- Other liens, generally by date of recordation
- Other closing/settlement feeds
- Balance to the seller
The document that provides the transaction’s final, detailed accounting summary
Settlement statement
What is a default settlement statement used nationwide for residential loans governed by RESPA
Uniform Settlement Statement (HUD-1)
List the critical documents commonly included in the closing process for the sale of a residential property secured by a loan.
- RESPA loan documents (HUD-1, initial escrow statement)
- Deed for the real property
- Bill of sale for all personal property included
- Title insurance policies
- Property insurance
- Reduction certificate (loan document that shows the remaining principal, interest rate, and date of maturity)
- Satisfaction piece
- Estoppel certificate (statement from a tenant or mortgagee attesting to relevant conditions, such as security deposit)
- IRS from 1099-S
List common closing costs.
Buyer’s:
- Refunds of prepaid utility/property expenses
- Deed and new mortgage recording fees
- Appraisal fees for loan funding
- Home inspection fees
- New loan or assumption feeds
Seller’s:
- Cost of clearing title
- Loan payoff
- Termite inspection
- Broker’s commission
The legal proceeding initiated by certain property creditors to force the sale of a property in default on a loan or in arrears for taxes in order to repay the debt.
Foreclosure
An alternative by which the creditor refrains from taking legal action against a borrower in default after being satisfied that the borrower is taking acceptable measures to satisfy the debt
Forbearance
A situation in which the owner gives a lender the deed rather than going through a foreclosure proceeding
Deed in lieu (of foreclosure) aka friendly foreclosure
The right to pay off a debt, even after mortgage default, and reclaim the property
Redemption
An alternative to foreclosure on certain “distressed properties” that have a ready, qualified buyer; it involves the sale of the property with a lender-approved reduction of the outstanding mortgage balance and can involve new-owner assumption of the reduced mortgage
Short sale
How are IRS capital gains on a property computed?
Subtract the actual sales price a seller gets from the amount the seller bought the property for earlier
According to the Taxpayer Relief Act of 1997, on the sale of a primary residence that has been owner-occupied for 2 of the past 5 years, the owners are allowed to exempt capital gains of what amounts?
Single seller: $250,000
Married couple filing jointly: $500,000
When are interest payments on mortgage loans deductible?
If the owner itemizes deductions; note that real estate taxes are also deductible, as are certain costs of financing and refinancing
