Morgan's (VIII)

Question 1

What does it mean when there is cloud on the title?

Answer 1

Some sort of defect in the title

Question 2

This type of insurance insures the policyholder against the future discovery of certain past problems with title

Answer 2

Title insurance

Question 3

What are two ways to resolve cloud on the title?

Answer 3

1. Quiet title action - judge decides

2. Quitclaim deed - the newly discovered party gives up the title

Question 4

Testate refers to having a ___.

Answer 4

Will

Question 5

____ refers to a situation where a person dies without a valid will

Answer 5

Intestate

Question 6

The public, legal process of executing the terms outlined in a will, or determining how to settle the estate if there is no will

Answer 6

Probtae

Question 7

The term for a personal representative appointed by the testator in the will

Answer 7

Executor

Question 8

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

Answer 8

Administrator

Question 9

The distribution of an estate that is not governed by a will and follows state laws of descent and distribution

Answer 9

Intestate succession

Question 10

Real property disposed of in a will is known as a ___. Personal property disposed of in a will is known as a ___ or a ___.

Answer 10

Devise

Legacy; bequest

Question 11

A written instrument by which land is conveyed

Answer 11

Deed

Question 12

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 ___.

Answer 12

GrantOR; grantEE

Question 13

List the legal elements of validity for a deed.

Answer 13

1. In writing
2. Grantor must have legal capacity
3. Identification of the parties
4. Statement of consideration (what is being paid/exchanged for the property)
5. Words of conveyance (“I do hereby grant and convey)
6. Legal description of the property
7. Signature of the grantor

Question 14

This type of clause defines the extent and limitations of the interest conveyed

Answer 14

Habendum clause (aka to-have-and-to-hold clause)

Question 15

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.

Answer 15

Constructive (aka legal). notice

Question 16

____ notice means that a party has personally received the notice, as when a process server delivers a subpoena to appear in court.

Answer 16

Actual

Question 17

This type of deed offers the greatest protection for the grantee of all deeds

Answer 17

General warranty deed

Question 18

Type of deed which warrant the title against title defects that arose only during the grantor’s ownership

Answer 18

Special warranty

Question 19

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

Answer 19

Bargain and sale deeds

Question 20

Type of deed that has no covenants or warranties, but simply relinquish any and all interest the grantor may ahve in a property

Answer 20

Quitclaim deeds

Question 21

Deeds may include a variety of covenants and warranties. What’s the difference?

Answer 21

Covenants - formal agreements or promises

Warranties - guarantees

Question 22

List the 5 most common covenants.

Answer 22

1. Covenant of seisin (grantor claims to be the owner and is legally entitled to convey it)
2. Covenant of quiet enjoyment (grantor promises that no one will disturb the new owner with claims against the property)
3. Covenant of further assurance (means the grantor assumes responsibility for any additional documentation necessary to ensure the grantee’s title)
4. 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)
5. 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

Question 23

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

Answer 23

Escrow

Question 24

What is the purpose of settlement (or closing)?

Answer 24

Consummate the transaction by fulfilling the contract conditions, disbursing required funds, and transferring title

Question 25

List the priority of liens (paid first to last).

Answer 25

1. Property taxes
2. Special assessments
3. First mortgage
4. Other liens, generally by date of recordation
5. Other closing/settlement feeds
6. Balance to the seller

Question 26

The document that provides the transaction’s final, detailed accounting summary

Answer 26

Settlement statement

Question 27

What is a default settlement statement used nationwide for residential loans governed by RESPA

Answer 27

Uniform Settlement Statement (HUD-1)

Question 28

List the critical documents commonly included in the closing process for the sale of a residential property secured by a loan.

Answer 28

1. RESPA loan documents (HUD-1, initial escrow statement)
2. Deed for the real property
3. Bill of sale for all personal property included
4. Title insurance policies
5. Property insurance
6. Reduction certificate (loan document that shows the remaining principal, interest rate, and date of maturity)
7. Satisfaction piece
8. Estoppel certificate (statement from a tenant or mortgagee attesting to relevant conditions, such as security deposit)
9. IRS from 1099-S

Question 29

List common closing costs.

Answer 29

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

Question 30

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.

Answer 30

Foreclosure

Question 31

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

Answer 31

Forbearance

Question 32

A situation in which the owner gives a lender the deed rather than going through a foreclosure proceeding

Answer 32

Deed in lieu (of foreclosure) aka friendly foreclosure

Question 33

The right to pay off a debt, even after mortgage default, and reclaim the property

Answer 33

Redemption

Question 34

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

Answer 34

Short sale

Question 35

How are IRS capital gains on a property computed?

Answer 35

Subtract the actual sales price a seller gets from the amount the seller bought the property for earlier

Question 36

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?

Answer 36

Single seller: $250,000

Married couple filing jointly: $500,000

Question 37

When are interest payments on mortgage loans deductible?

Answer 37

If the owner itemizes deductions; note that real estate taxes are also deductible, as are certain costs of financing and refinancing