National Transfer of Title

Question 1

A buyer purchased a property but did not record the deed. Under these circumstances,

A)
the deed is void because recording is required to make it valid.
B)
the transfer of property between buyer and seller is invalid.
C)
the buyer’s interest is not fully protected against third parties.
D)
the deed is invalid after 90 days.

Answer 1

A buyer purchased a property but did not record the deed. Under these circumstances,

A)
the deed is void because recording is required to make it valid.
Incorrect Answer
B)
the transfer of property between buyer and seller is invalid.
Incorrect Answer
C)
the buyer’s interest is not fully protected against third parties.
Correct Answer
D)
the deed is invalid after 90 days.
Incorrect Answer
Explanation
Properly recording a deed in the public record serves as constructive notice to the world of the buyer’s rights or interests in the property. If a buyer does not record the deed, a third party may make a claim on the property. Not recording the deed does not affect the validity of the transfer or of the deed to the property because recording is not an essential element to create a valid deed.

Reference: Transfer of Title > Recording the Title

Question 2

A couple declined to purchase an owner’s title policy at closing, but the lender required them to purchase a mortgagee’s title policy. Six months after the closing, a man knocked on their door. He explained that he had an ownership interest in the property because his spouse sold the property while he was in another country. The man at the closing table, who said he was the spouse, was not. If the man’s claim is true, are the buyers covered under the lender’s policy?

A)
Yes, because the mortgagee’s policy protects the buyer against forgery.
B)
No, because the owner’s policy does not protect against forgery.
C)
No, because the buyers are not covered by the mortgagee’s policy.
D)
Yes, because the closing took place only six months ago.

Answer 2

A couple declined to purchase an owner’s title policy at closing, but the lender required them to purchase a mortgagee’s title policy. Six months after the closing, a man knocked on their door. He explained that he had an ownership interest in the property because his spouse sold the property while he was in another country. The man at the closing table, who said he was the spouse, was not. If the man’s claim is true, are the buyers covered under the lender’s policy?

A)
Yes, because the mortgagee’s policy protects the buyer against forgery.
Incorrect Answer
B)
No, because the owner’s policy does not protect against forgery.
Incorrect Answer
C)
No, because the buyers are not covered by the mortgagee’s policy.
Correct Answer
D)
Yes, because the closing took place only six months ago.
Incorrect Answer
Explanation
The couple decided not to purchase an owner’s title policy, which would have covered them in this situation. The mortgagee’s or lender’s title policy protects only the lender against the forgery.

Reference: Transfer of Title > Title Insurance

Question 3

At the closing, the responsibilities of the closing agent can include

A)
ordering the survey.
B)
ordering the home inspection.
C)
approving the loan.
D)
reviewing the survey.

Answer 3

At the closing, the responsibilities of the closing agent can include

A)
ordering the survey.
Incorrect Answer
B)
ordering the home inspection.
Incorrect Answer
C)
approving the loan.
Incorrect Answer
D)
reviewing the survey.
Correct Answer
Explanation
One of the responsibilities of the closing agent at the closing is to review the documents in escrow. One of the documents that can be included in the closing is the survey. The survey is typically ordered by the seller’s attorney.

Reference: Transfer of Title > Title Transfer

Question 4

A quiet title suit refers to

A)
a title insurance company’s search of the title.
B)
the removal of a cloud on a title by court action.
C)
a mortgagor relinquishing title after foreclosure.
D)
the deposit of a title with an escrow agent.

Answer 4

A quiet title suit refers to

A)
a title insurance company’s search of the title.
Incorrect Answer
B)
the removal of a cloud on a title by court action.
Correct Answer
C)
a mortgagor relinquishing title after foreclosure.
Incorrect Answer
D)
the deposit of a title with an escrow agent.
Incorrect Answer
Explanation
If ownership cannot be traced through an unbroken chain, a gap in the chain of title or cloud on the title is said to exist. Such a cloud in the chain requires a court action called a quiet title suit to establish title for a grantor who wants to convey the property.

Reference: Transfer of Title > Title Insurance

Question 5

Potential title problems should be resolved by

A)
the real estate licensee.
B)
the attorney.
C)
the lender.
D)
the escrow agent.

Answer 5

Potential title problems should be resolved by

A)
the real estate licensee.
Incorrect Answer
B)
the attorney.
Correct Answer
C)
the lender.
Incorrect Answer
D)
the escrow agent.
Incorrect Answer
Explanation
Potential title problems should be resolved by an attorney and not by the real estate licensee. Resolving title issues is not in the scope of the lender or the escrow agent.

Reference: Transfer of Title > Title Insurance

Question 6

Every deed must be signed by

A)
the grantee.
B)
the grantor and grantee.
C)
the devisee.
D)
the grantor.

Answer 6

Every deed must be signed by

A)
the grantee.
Incorrect Answer
B)
the grantor and grantee.
Incorrect Answer
C)
the devisee.
Incorrect Answer
D)
the grantor.
Correct Answer
Explanation
Either the grantor, or someone acting under the grantor’s authority, must execute (sign) every deed, and the grantor must have the legal capacity to do so. The grantee is not required to sign the deed. A devisee is the recipient of real property under a will and is not required to sign a deed.

Reference: Transfer of Title > Elements of a Valid Deed

Question 7

The primary purpose of a deed is to

A)
assign a lease.
B)
prevent adverse possession.
C)
transfer title rights.
D)
give constructive notice.

Answer 7

The primary purpose of a deed is to

A)
assign a lease.
Incorrect Answer
B)
prevent adverse possession.
Incorrect Answer
C)
transfer title rights.
Correct Answer
D)
give constructive notice.
Incorrect Answer
Explanation
Title is the right to or the ownership of land. A deed is the document by which the owner transfers the title to real property. If the lease allows assignment, a deed would not be used to establish the transfer. Recording the deed provides constructive notice of a transfer of the property. A deed does not prevent adverse possession, which occurs when a person acquires title through the open, continuous, exclusive, actual/visible and notorious/hostile (OCEAN) possession of another’s property without the owner’s permission.

Reference: Transfer of Title > Elements of a Valid Deed

Question 8

For a deed to be valid,

A)
the deed must be recorded.
B)
the grantor must be legally competent.
C)
the signature of the grantor must be witnessed by an attorney.
D)
the grantee must sign the deed and be legally competent.

Answer 8

For a deed to be valid,

A)
the deed must be recorded.
Incorrect Answer
B)
the grantor must be legally competent.
Correct Answer
C)
the signature of the grantor must be witnessed by an attorney.
Incorrect Answer
D)
the grantee must sign the deed and be legally competent.
Incorrect Answer
Explanation
The grantor must have the legal competency to sign a deed. An attorney or a notary is not required to witness a deed. Deeds do not have to be recorded to be valid. The grantor, not the grantee, is required to sign a deed in order for the deed to be valid. The grantee does not have to be legally competent.

Reference: Transfer of Title > Elements of a Valid Deed

Question 9

An unreleased mortgage lien for $25,000 was recorded in 2015. An unreleased mortgage lien for $450,000 was recorded five years later in 2020. Assuming both mortgage liens encumber the same parcel of real estate, could the lien for $450,000 be senior to the lien for $25,000?

A)
Yes, provided the lender of the $450,000 lien agreed to a mortgage subordination.
B)
No.
C)
Yes, provided the lender of the $25,000 lien agreed to a mortgage subordination.
D)
Yes, provided the borrower of the $25,000 lien agreed to a mortgage subordination.

Answer 9

An unreleased mortgage lien for $25,000 was recorded in 2015. An unreleased mortgage lien for $450,000 was recorded five years later in 2020. Assuming both mortgage liens encumber the same parcel of real estate, could the lien for $450,000 be senior to the lien for $25,000?

A)
Yes, provided the lender of the $450,000 lien agreed to a mortgage subordination.
Incorrect Answer
B)
No.
Incorrect Answer
C)
Yes, provided the lender of the $25,000 lien agreed to a mortgage subordination.
Correct Answer
D)
Yes, provided the borrower of the $25,000 lien agreed to a mortgage subordination.
Incorrect Answer
Explanation
The general rule for recording is first in time is first in right. This rule typically ensures that a document recorded in 2015 would be senior to a document recorded in 2020. However, a mortgage subordination is a way of artificially re-ordering the priority of recorded lien documents. Here, the lender of the older $25,000 lien would have to voluntarily agree to go into junior position behind the newer $450,000 lien. The borrower would not agree to the mortgage subordination because it is an agreement between two lenders.

Reference: Transfer of Title > Recording the Title

Question 10

A lender offers to take over the title of a property that is in foreclosure without going through the foreclosure process. This is called

A)
a subordination agreement.
B)
a deed in lieu of foreclosure.
C)
an assumption.
D)
a reconveyance deed.

Answer 10

A lender offers to take over the title of a property that is in foreclosure without going through the foreclosure process. This is called

A)
a subordination agreement.
Incorrect Answer
B)
a deed in lieu of foreclosure.
Correct Answer
C)
an assumption.
Incorrect Answer
D)
a reconveyance deed.
Incorrect Answer
Explanation
A deed in lieu of foreclosure is an alternative to foreclosure and is carried out by mutual agreement between the lender and the borrower rather than by a lawsuit. A reconveyance deed is used by a trustee under a deed of trust to return title to the trustor. In an assumption, a buyer purchases a property by assuming the seller’s debt and becoming personally obligated for the payment of the entire debt. A subordination agreement moves a first mortgage lien to a secondary position by mutual agreement of the two lenders.

Reference: Transfer of Title > Types of Deeds

Question 11

A property owner wants to give his property to his sister. The BEST way to transfer title to her would be

A)
using a quitclaim deed because it does not need to be recorded to transfer title.
B)
making and signing a will with a bequest to the sister.
C)
to execute and deliver a deed to the sister.
D)
taking title as joint tenants with the owner keeping a revisionary interest.

Answer 11

A property owner wants to give his property to his sister. The BEST way to transfer title to her would be

A)
using a quitclaim deed because it does not need to be recorded to transfer title.
Incorrect Answer
B)
making and signing a will with a bequest to the sister.
Incorrect Answer
C)
to execute and deliver a deed to the sister.
Correct Answer
D)
taking title as joint tenants with the owner keeping a revisionary interest.
Incorrect Answer
Explanation
A deed is the written instrument by which a property owner transfers property to another. Upon the grantor’s executing/signing the deed and then the delivery and acceptance by the grantee, title is passed. A will would transfer the property but only upon the death of the property owner; to transfer real property the owner would devise the property as a bequest transfer personal property. Taking title as joint tenants would not give the sister full ownership rights, and a reversionary interest is tied to a freehold life estate, not tenancy. All deeds transfer title without being recorded; recording gives constructive/legal notice of the ownership rights.

Question 12

A married couple lives in a community property state. One spouse owns a single-family residence, purchased prior to the marriage, and it is still legally her sole and separate property. Title is held as “Aimee Nguyen, a married woman, as her sole and separate property.” The owner is refinancing a loan on this parcel of real estate. To ensure that Nguyen’s spouse has no community property interest in the single-family residence, the lender is requiring him to sign

A)
a warranty deed
B)
a reconveyance deed
C)
a grant deed
D)
a quitclaim deed

Answer 12

A married couple lives in a community property state. One spouse owns a single-family residence, purchased prior to the marriage, and it is still legally her sole and separate property. Title is held as “Aimee Nguyen, a married woman, as her sole and separate property.” The owner is refinancing a loan on this parcel of real estate. To ensure that Nguyen’s spouse has no community property interest in the single-family residence, the lender is requiring him to sign

A)
a warranty deed
Incorrect Answer
B)
a reconveyance deed
Incorrect Answer
C)
a grant deed
Incorrect Answer
D)
a quitclaim deed
Correct Answer
Explanation
The lender would typically require a quitclaim deed signed by the spouse conveying any interest the spouse has in the property to the spouse who owns the property. A quitclaim deed contains no grantor warranties or promises. For the grantor, using a quitclaim deed is basically stating, “Whatever I currently own in the property, if anything, I hereby convey to you.” A warranty deed contains multiple promises or warranties that the grantor is making regarding title to the property. A reconveyance deed is given by the trustee on a trust deed to the borrower (a.k.a. the trustor) when the loan is paid in full and bare legal title must be returned to the borrower. A grant deed (a.k.a. a special warranty deed) would typically be used in certain states to convey title from a seller to a buyer.

Reference: Transfer of Title > Types of Deeds

Question 13

A property is held in a life estate. Ann is a life tenant and the measuring life. Bodhi is the remainderman. Ann dies. Bodhi does not record an affidavit of death until four years after Ann’s death. When does fee title pass to Bodhi?

A)
Title passes to Bodhi when the affidavit of death is recorded.
B)
A remainderman can never hold title in fee after the measuring life dies.
C)
Fee title passes immediately upon Ann’s death.
D)
It depends upon whether Ann executed a will or not.

Answer 13

A property is held in a life estate. Ann is a life tenant and the measuring life. Bodhi is the remainderman. Ann dies. Bodhi does not record an affidavit of death until four years after Ann’s death. When does fee title pass to Bodhi?

A)
Title passes to Bodhi when the affidavit of death is recorded.
Incorrect Answer
B)
A remainderman can never hold title in fee after the measuring life dies.
Incorrect Answer
C)
Fee title passes immediately upon Ann’s death.
Correct Answer
D)
It depends upon whether Ann executed a will or not.
Incorrect Answer
Explanation
Because Ann is the measuring life, her death terminates the life estate and fee title passes immediately—through operation of law—to the remainderman. The recordation of the affidavit of death clears the cloud on title by showing that the life estate has ended. However, fee title passed to Bodhi at the moment of Ann’s death. A remainderman typically holds title in fee after the death of the measuring life. Ann’s execution of a will is irrelevant to this scenario.

Reference: Transfer of Title > Recording the Title

Question 14

A title search is an examination of

A)
all the public records to determine whether any defects exist in the chain of title.
B)
state records to determine that the listing broker is properly licensed.
C)
title company policies and procedures in granting title insurance.
D)
mortgage lender files to ensure that a proper title is documented for any new loan.

Answer 14

A title search is an examination of

A)
all the public records to determine whether any defects exist in the chain of title.
Correct Answer
B)
state records to determine that the listing broker is properly licensed.
Incorrect Answer
C)
title company policies and procedures in granting title insurance.
Incorrect Answer
D)
mortgage lender files to ensure that a proper title is documented for any new loan.
Incorrect Answer
Explanation
Based on the title search, an abstract of title or title insurance commitment is prepared and includes all liens and encumbrances to the property and lists all records searched. The abstract or title commitment does not indicate forgeries and interests in property that are unrecorded or that could be discovered by inspection of the property itself.

Reference: Transfer of Title > Title Insurance

Question 15

Which of these warranties are LEAST likely to be used to insure against title defects?

A)
Home warranty
B)
Warranty deed
C)
Abstract of title
D)
Title insurance

Answer 15

Which of these warranties are LEAST likely to be used to insure against title defects?

A)
Home warranty
Correct Answer
B)
Warranty deed
Incorrect Answer
C)
Abstract of title
Incorrect Answer
D)
Title insurance
Incorrect Answer
Explanation
The home warranty provides coverage for mechanical defects of the property and is not associated with the coverage of title defects. Title insurance provides coverage against title defects.

Reference: Transfer of Title > Title Insurance

Question 16

The buyer and the seller are under contract when the title work is delivered. The buyer discovers that the seller does not have clear title to the property. The buyer sends the seller notice to clear the title. The BEST way for the seller to clear the defective or clouded title is

A)
through a quiet title suit.
B)
to have both an owner’s and mortgagee’s title policy.
C)
by paying cash for the property at the closing.
D)
having title conveyed with a quitclaim deed.

Answer 16

The buyer and the seller are under contract when the title work is delivered. The buyer discovers that the seller does not have clear title to the property. The buyer sends the seller notice to clear the title. The BEST way for the seller to clear the defective or clouded title is

A)
through a quiet title suit.
Correct Answer
B)
to have both an owner’s and mortgagee’s title policy.
Incorrect Answer
C)
by paying cash for the property at the closing.
Incorrect Answer
D)
having title conveyed with a quitclaim deed.
Incorrect Answer
Explanation
A quiet title suit removes all clouds on title and then allows the seller to convey the property to the buyer. The disadvantage is it may take months to go through the court system. Title insurance does not cover defects found before closing. Paying cash for the property or using a quitclaim deed would not clear title.

Reference: Transfer of Title > Title Insurance

Question 17

The title to real estate passes when a valid deed is

A)
signed and recorded.
B)
delivered and accepted.
C)
filed and microfilmed.
D)
executed and mailed.

Answer 17

The title to real estate passes when a valid deed is

A)
signed and recorded.
Incorrect Answer
B)
delivered and accepted.
Correct Answer
C)
filed and microfilmed.
Incorrect Answer
D)
executed and mailed.
Incorrect Answer
Explanation
Title is not considered transferred until the deed is actually delivered to and accepted by the grantee. The grantor may deliver the deed to the grantee either personally or through a third party.

Reference: Transfer of Title > Elements of a Valid Deed

Question 18

In order for a deed to be valid,

A)
the grantee must sign the deed.
B)
the grantee must be legally competent.
C)
the deed must be recorded.
D)
the grantor must be legally competent.

Answer 18

In order for a deed to be valid,

A)
the grantee must sign the deed.
Incorrect Answer
B)
the grantee must be legally competent.
Incorrect Answer
C)
the deed must be recorded.
Incorrect Answer
D)
the grantor must be legally competent.
Correct Answer
Explanation
Competency of the grantor, not the grantee, is one of the requirements for a valid deed. The grantor must be of lawful age and sound mind. Only the grantor, not the grantee, is required to sign the deed. Recording a deed is not required for the validity of the deed.

Reference: Transfer of Title > Elements of a Valid Deed

Question 19

A title insurance policy protects against title defects

A)
found after closing.
B)
which have been cleared by a quiet title suit.
C)
that occurred before closing.
D)
no matter when they are discovered.

Answer 19

A title insurance policy protects against title defects

A)
found after closing.
Correct Answer
B)
which have been cleared by a quiet title suit.
Incorrect Answer
C)
that occurred before closing.
Incorrect Answer
D)
no matter when they are discovered.
Incorrect Answer
Explanation
The title commitment would list any defects found before closing and would exclude them from coverage, so only defects arising after closing are covered. A defect cleared by a quiet title suit is no longer a defect.

Reference: Transfer of Title > Title Insurance

Question 20

All of these are required for a deed to be valid EXCEPT

A)
the consideration.
B)
the signature of the grantee.
C)
the execution of the grantor.
D)
the legal description.

Answer 20

All of these are required for a deed to be valid EXCEPT

A)
the consideration.
Incorrect Answer
B)
the signature of the grantee.
Correct Answer
C)
the execution of the grantor.
Incorrect Answer
D)
the legal description.
Incorrect Answer
Explanation
A valid deed does not require the signature of the grantee but does require that the deed be executed or signed by the grantor. A legal description and consideration are among the essential elements required for a valid deed.

Reference: Transfer of Title > Elements of a Valid Deed

Question 21

The clause in the deed that conveys the rights and privileges of ownership is called

A)
the exception clause.
B)
the seisin clause.
C)
the acknowledgment.
D)
the granting clause.

Answer 21

The clause in the deed that conveys the rights and privileges of ownership is called

A)
the exception clause.
Incorrect Answer
B)
the seisin clause.
Incorrect Answer
C)
the acknowledgment.
Incorrect Answer
D)
the granting clause.
Correct Answer
Explanation
The granting clause states the grantor’s intention to convey the property at the present time. An exception and reservations clause notes any encumbrances, reservations, or limitations affecting the title. The covenant of seisin is the grantor’s promise of ownership and ability to convey title in a general warranty deed. The acknowledgment is a formal declaration under oath that the person signing the deed does so voluntarily and that the signature is genuine. The signature is not required to make a deed valid but is often required to record the deed.

Reference: Transfer of Title > Elements of a Valid Deed

Question 22

A homeowner conveys property to her nephew with a deed. The nephew then recorded the deed. When did title to the property actually transfer or pass to the nephew?

A)
Upon recording of the deed
B)
Upon delivery and acceptance of the deed
C)
Upon delivery and acceptance of the contract
D)
Upon the delivery of consideration

Answer 22

A homeowner conveys property to her nephew with a deed. The nephew then recorded the deed. When did title to the property actually transfer or pass to the nephew?

A)
Upon recording of the deed
Incorrect Answer
B)
Upon delivery and acceptance of the deed
Correct Answer
C)
Upon delivery and acceptance of the contract
Incorrect Answer
D)
Upon the delivery of consideration
Incorrect Answer
Explanation
Title is transferred upon delivery and acceptance of the deed. At that moment, the deed is binding between the parties. When the nephew later records the deed, he is then protected against claims of third parties. Contracts do not transfer title. A valid deed must contain a clause acknowledging that the grantor has received consideration, but the consideration in itself does not transfer the title to the property.

Reference: Transfer of Title > Elements of a Valid Deed

Question 23

A deed must be signed by

A)
the grantor and grantee.
B)
the grantee.
C)
the grantee and two witnesses.
D)
the grantor.

Answer 23

A deed must be signed by

A)
the grantor and grantee.
Incorrect Answer
B)
the grantee.
Incorrect Answer
C)
the grantee and two witnesses.
Incorrect Answer
D)
the grantor.
Correct Answer
Explanation
A deed must be signed by all grantors named in the deed. The grantee must be named but does not sign the deed. Some states may require witnesses to sign a deed in order for it to be recorded, but the grantee does not sign.

Reference: Transfer of Title > Elements of a Valid Deed

Question 24

A document that protects against hidden risks such as forgeries and loss due to defects in the title, subject to specific exclusions, is called

A)
a certificate of title.
B)
a title insurance policy.
C)
a chain of title.
D)
an abstract of title.

Answer 24

A document that protects against hidden risks such as forgeries and loss due to defects in the title, subject to specific exclusions, is called

A)
a certificate of title.
Incorrect Answer
B)
a title insurance policy.
Correct Answer
C)
a chain of title.
Incorrect Answer
D)
an abstract of title.
Incorrect Answer
Explanation
A title insurance policy is a contract under which the policyholder is protected from losses arising from defects in the title. An abstract of title is a historical summary report of what the title search found in the public record. A certificate of title is based on a title search and certifies the condition of the title on the date the certificate is issued. A chain of title is the record of a property’s ownership. Although a certificate of title is used as evidence of ownership, it is not perfect against unrecorded liens or hidden defects. A title insurance policy protects the policyholder from title defects.

Reference: Transfer of Title > Title Insurance

Question 25

Under the covenant of quiet enjoyment, the grantor

A)
warrants that the grantor is the owner and has the right to convey title to the property.
B)
promises to obtain and deliver any instrument needed to make the title good.
C)
guarantees that if the title fails in the future, it will compensate the grantee.
D)
ensures that the title will be good against the title claims of third parties.

Answer 25

Under the covenant of quiet enjoyment, the grantor

A)
warrants that the grantor is the owner and has the right to convey title to the property.
Incorrect Answer
B)
promises to obtain and deliver any instrument needed to make the title good.
Incorrect Answer
C)
guarantees that if the title fails in the future, it will compensate the grantee.
Incorrect Answer
D)
ensures that the title will be good against the title claims of third parties.
Correct Answer
Explanation
Quiet enjoyment means freedom from any claims to the title by third parties, persons other than the grantor and the grantee. The other guarantees and promises are warranted through the covenants of warranty forever, seisin, and further assurance. A general warranty deed provides all of these covenants.

Reference: Transfer of Title > Elements of a Valid Deed

Question 26

A property owner executes a deed to a purchaser, has it acknowledged, and receives payment from the purchaser. However, the owner holds the deed and arranges to meet the purchaser the next morning at the courthouse to present the deed to the purchaser. At this point,

A)
the purchaser will own the property when he signs the deed the next morning.
B)
legal property will not pass to the purchaser until he has received the deed from the owner and recorded it in the public record.
C)
the purchaser owns the property because he has paid for it.
D)
legal title to the property will not pass to the purchaser until the owner gives the deed to him the next morning.

Answer 26

A property owner executes a deed to a purchaser, has it acknowledged, and receives payment from the purchaser. However, the owner holds the deed and arranges to meet the purchaser the next morning at the courthouse to present the deed to the purchaser. At this point,

A)
the purchaser will own the property when he signs the deed the next morning.
Incorrect Answer
B)
legal property will not pass to the purchaser until he has received the deed from the owner and recorded it in the public record.
Incorrect Answer
C)
the purchaser owns the property because he has paid for it.
Incorrect Answer
D)
legal title to the property will not pass to the purchaser until the owner gives the deed to him the next morning.
Correct Answer
Explanation
A title is not considered transferred until the deed is actually delivered to and accepted by the grantee. Title is said to pass only when a deed is delivered and accepted, and the effective date of the transfer is the date of delivery of the deed itself. The deed must be recorded in the county in which the land is located in order for the purchaser’s interest in the property to be protected.

Reference: Transfer of Title > Title Transfer

Question 27

Mortgagee title insurance policies protect

A)
buyers.
B)
lenders.
C)
sellers.
D)
buyers and lenders.

Answer 27

Mortgagee title insurance policies protect

A)
buyers.
Incorrect Answer
B)
lenders.
Correct Answer
C)
sellers.
Incorrect Answer
D)
buyers and lenders.
Incorrect Answer
Explanation
A mortgagee title insurance policy protects the mortgagee—the lender. An owner’s policy protects the owner, heirs, and devisees.

Reference: Transfer of Title > Title Insurance

Question 28

Involuntary alienation occurs when

A)
a property owner’s land is sold for delinquent taxes.
B)
a property owner grants a neighbor the right to use a well on his land.
C)
a property owner sells a property to pay off debts.
D)
a property owner sells a parcel of land to the zoo.

Answer 28

Involuntary alienation occurs when

A)
a property owner’s land is sold for delinquent taxes.
Correct Answer
B)
a property owner grants a neighbor the right to use a well on his land.
Incorrect Answer
C)
a property owner sells a property to pay off debts.
Incorrect Answer
D)
a property owner sells a parcel of land to the zoo.
Incorrect Answer
Explanation
Involuntary alienation occurs when title to property is transferred without the owner’s consent. Involuntary transfers of property are usually carried out by an operation of law and can include having the property sold to satisfy delinquent taxes. Voluntary alienation is the legal term for a voluntary transfer of title when an owner sells property or gives the property to another. The property owner who grants a neighbor access and use of a well has granted a license to the neighbor, which is the revocable right to use the land for a specific purpose for a limited time period.

Reference: Transfer of Title > Title Transfer

Question 29

A deed of trust differs from a mortgage in

A)
the redemption rights allowed after foreclosure.
B)
the obligation of the borrower to repay the funds.
C)
the time period permitted to cure a default.
D)
the number of parties involved in the loan.

Answer 29

A deed of trust differs from a mortgage in

A)
the redemption rights allowed after foreclosure.
Incorrect Answer
B)
the obligation of the borrower to repay the funds.
Incorrect Answer
C)
the time period permitted to cure a default.
Incorrect Answer
D)
the number of parties involved in the loan.
Correct Answer
Explanation
A deed of trust is a three-party instrument that conveys naked title to a third party, the trustee, who holds the title on behalf of the lender, also known as the beneficiary. The borrower is the trustor. A mortgage is a two-part instrument between the mortgagor and the mortgagee.

Reference: Transfer of Title > Types of Deeds

Question 30

A cloud on the title can BEST be corrected by

A)
a certificate of title.
B)
an abstract of title.
C)
title insurance.
D)
an action to quiet title.

Answer 30

A cloud on the title can BEST be corrected by

A)
a certificate of title.
Incorrect Answer
B)
an abstract of title.
Incorrect Answer
C)
title insurance.
Incorrect Answer
D)
an action to quiet title.
Correct Answer
Explanation
A cloud on the title is a title defect that requires correction. A suit to quiet title is a court procedure used to clear title disputes and ambiguities.

Reference: Transfer of Title > Title Insurance

Question 31

A deed that contains no express warranties is

A)
a deed of trust.
B)
a warranty deed.
C)
a bargain and sale deed.
D)
a quitclaim deed.

Answer 31

A deed that contains no express warranties is

A)
a deed of trust.
Incorrect Answer
B)
a warranty deed.
Incorrect Answer
C)
a bargain and sale deed.
Incorrect Answer
D)
a quitclaim deed.
Correct Answer
Explanation
A quitclaim deed provides the grantee with the least protection of any deed because it carries no covenants or warranties. The bargain and sale deed contains no express warranties against encumbrances but does imply that the grantor holds title and possession. A warranty deed fully warrants good clear title to a property. A deed of trust is used to create a lien for a loan.

Reference: Transfer of Title > Types of Deeds

Question 32

A single-family residence was sold. The deed the seller signed had only two implied warranties. What was that deed?

A)
An easement deed
B)
A quitclaim deed
C)
A warranty deed
D)
A grant deed

Answer 32

A single-family residence was sold. The deed the seller signed had only two implied warranties. What was that deed?

A)
An easement deed
Incorrect Answer
B)
A quitclaim deed
Incorrect Answer
C)
A warranty deed
Incorrect Answer
D)
A grant deed
Correct Answer
Explanation
A grant deed (a.k.a. a special warranty deed) contains two implied warranties. The two implied warranties are 1) that the seller hasn’t conveyed the property to anyone else, and 2) that the seller has revealed all encumbrances on the property to the grantee. A quitclaim deed contains no implied warranties. A warranty deed contains more than two implied warranties. An easement deed conveys a nonpossessory right to use the land of the grantor for a specific purpose; it would not be used as a conveyancing instrument when a seller is conveying title to the property to a buyer. Note: On a deed, the seller is called the grantor and the buyer is called the grantee.

Reference: Transfer of Title > Types of Deeds

Question 33

All of these are true regarding public records EXCEPT

A)
that they guarantee marketable title.
B)
that they establish priority of liens.
C)
that they provide constructive notice about interests in the property.
D)
that they give notice of encumbrances.

Answer 33

All of these are true regarding public records EXCEPT

A)
that they guarantee marketable title.
Correct Answer
B)
that they establish priority of liens.
Incorrect Answer
C)
that they provide constructive notice about interests in the property.
Incorrect Answer
D)
that they give notice of encumbrances.
Incorrect Answer
Explanation
Nothing guarantees marketable title. An abstract with a title opinion or a title commitment show if the seller currently appears to have marketable title and offers protection to the buyer if title issues arise after closing. The recording of public records establishes the priority of liens, gives notice of encumbrances, and provides constructive notice of interests in real property.

Reference: Transfer of Title > Recording the Title

Question 34

Which of the following choices would NOT be used to transfer a parcel of real estate into a revocable living trust?

A)
A warranty deed
B)
A grant deed
C)
A quitclaim deed
D)
A trust deed

Answer 34

Which of the following choices would NOT be used to transfer a parcel of real estate into a revocable living trust?

A)
A warranty deed
Incorrect Answer
B)
A grant deed
Incorrect Answer
C)
A quitclaim deed
Incorrect Answer
D)
A trust deed
Correct Answer
Explanation
A trust deed (a.k.a. a deed of trust) is a loan document—and only a loan document—signed by a borrower putting up a parcel of real estate as collateral for a loan. The only conveyancing in a trust deed is a narrow sliver of title being conveyed by the borrower to the trustee. This small sliver of title is called bare legal naked title. If an owner wants to put a parcel of real estate into a revocable living trust, a trust deed would never be the appropriate document. These other answer choices are conveyancing documents that might transfer the title to a parcel of real estate into a revocable living trust.

Reference: Transfer of Title > Types of Deeds

Question 35

While notarizing is NOT required to create a valid deed, the primary purpose of acknowledgment in this use is to

A)
guarantee a marketable title.
B)
convey title to the grantee.
C)
verify that the deed was signed without duress.
D)
ensure the identity of the grantee.

Answer 35

While notarizing is NOT required to create a valid deed, the primary purpose of acknowledgment in this use is to

A)
guarantee a marketable title.
Incorrect Answer
B)
convey title to the grantee.
Incorrect Answer
C)
verify that the deed was signed without duress.
Correct Answer
D)
ensure the identity of the grantee.
Incorrect Answer
Explanation
An acknowledgment is a formal declaration before a notary public or another authorized public officer that the person who signs a deed does so voluntarily and that the signature is genuine. The primary purpose of acknowledgment is to verify that the document was executed without duress, which would make the deed voidable. The secondary purpose is to ensure the identity of the party signing the document, which is only the grantor.

Reference: Transfer of Title > Elements of a Valid Deed

Question 36

A farmer bought acreage in a distant county but never went to see the acreage and did not use the land. After the purchase, a woman moved her mobile home onto the land, drilled a well, and lived on the property for 20 years. The woman may become the owner of the land if she has complied with the law regarding

A)
quitclaim deeds.
B)
voluntary alienation.
C)
adverse possession.
D)
prescriptive easements.

Answer 36

A farmer bought acreage in a distant county but never went to see the acreage and did not use the land. After the purchase, a woman moved her mobile home onto the land, drilled a well, and lived on the property for 20 years. The woman may become the owner of the land if she has complied with the law regarding

A)
quitclaim deeds.
Incorrect Answer
B)
voluntary alienation.
Incorrect Answer
C)
adverse possession.
Correct Answer
D)
prescriptive easements.
Incorrect Answer
Explanation
The woman may file an action in court to receive title to the property if she has complied with state laws. Her possession must have been open, notorious, continuous and uninterrupted, and hostile and adverse. Adverse possession is a form of involuntary alienation. A quitclaim deed is frequently used to correct an error in a deed or to release an interest in a property. Prescriptive easements, while similar to adverse possession, are used to gain permanent access to the property, not title.

Reference: Transfer of Title > Title Insurance

Question 37

Title insurance covers defects found after closing and not listed on the title commitment. Hidden defects found after closing are covered by title insurance. This would include all of these EXCEPT

A)
a wrong name on a recorded deed.
B)
a claim to ownership by the spouse of a former owner.
C)
a recorded mortgage satisfaction document.
D)
an incorrect legal description.

Answer 37

Title insurance covers defects found after closing and not listed on the title commitment. Hidden defects found after closing are covered by title insurance. This would include all of these EXCEPT

A)
a wrong name on a recorded deed.
Incorrect Answer
B)
a claim to ownership by the spouse of a former owner.
Incorrect Answer
C)
a recorded mortgage satisfaction document.
Correct Answer
D)
an incorrect legal description.
Incorrect Answer
Explanation
A recorded mortgage satisfaction document is a public notice, not a hidden defect. Title problems occur when there is a hidden mistake in a prior deed, will, mortgage, or other document that may give someone else a valid legal claim against a property. An incorrect legal description, wrong name on a recorded deed, or a claim to ownership by the spouse of a former owner could be hidden defects in title to a property.

Reference: Transfer of Title > Title Insurance

Question 38

When a grantor signs a deed, the basic purpose of acknowledgment before a notary public is to

A)
ensure that the grantee is properly identified.
B)
ensure that the title is valid.
C)
prove that the property has not been encumbered.
D)
show the grantor’s signature was given voluntarily, without duress.

Answer 38

When a grantor signs a deed, the basic purpose of acknowledgment before a notary public is to

A)
ensure that the grantee is properly identified.
Incorrect Answer
B)
ensure that the title is valid.
Incorrect Answer
C)
prove that the property has not been encumbered.
Incorrect Answer
D)
show the grantor’s signature was given voluntarily, without duress.
Correct Answer
Explanation
An acknowledgment is a formal declaration that the person who signs a written document does so voluntarily and that the signature is genuine. The acknowledgment will not ensure the validity of the title, the identity of the grantee, or the lack of encumbrances.

Reference: Transfer of Title > Elements of a Valid Deed

Question 39

The historical records of all owners and encumbrances of a specific parcel of real estate is known as

A)
the abstract of title.
B)
the title search.
C)
the title commitment.
D)
the chain of title.

Answer 39

The historical records of all owners and encumbrances of a specific parcel of real estate is known as

A)
the abstract of title.
Incorrect Answer
B)
the title search.
Incorrect Answer
C)
the title commitment.
Incorrect Answer
D)
the chain of title.
Correct Answer
Explanation
A chain of title is the historical record of a property’s ownership and encumbrances. Each owner is linked to the next so that a chain is formed. A title search is the process of examining the chain of title for defects or errors. A title commitment lists current encumbrances and any defects found in the title upon completing the search. An abstract of title is a historical summary report of what the title search found in the public record; only when coupled with a title opinion can the buyer know if there are title issues.

Reference: Transfer of Title > Title Insurance

Question 40

An example of a voluntary alienation of a property is

A)
adverse possession.
B)
condemnation.
C)
an owner selling the property.
D)
foreclosure.

Answer 40

An example of a voluntary alienation of a property is

A)
adverse possession.
Incorrect Answer
B)
condemnation.
Incorrect Answer
C)
an owner selling the property.
Correct Answer
D)
foreclosure.
Incorrect Answer
Explanation
Voluntary alienation is the legal term for the voluntary transfer of title, such as when the owner sells the property. Condemnation, foreclosure, and adverse possession are examples of involuntary alienation. Involuntary alienation takes place when property is transferred against the owner’s will.

Reference: Transfer of Title > Title Transfer

Question 41

Acceptable evidence of marketable title is

A)
a title insurance policy.
B)
a copy of the seller’s current deed.
C)
a seller signing a general warranty deed.
D)
a deed of trust.

Answer 41

Acceptable evidence of marketable title is

A)
a title insurance policy.
Correct Answer
B)
a copy of the seller’s current deed.
Incorrect Answer
C)
a seller signing a general warranty deed.
Incorrect Answer
D)
a deed of trust.
Incorrect Answer
Explanation
Nothing can guarantee ownership or marketable title. An abstract with a title opinion or a title insurance policy show the title was researched and offer protection against future defects in the title. A deed by itself is not considered evidence of marketability.

Reference: Transfer of Title > Title Insurance

Question 42

Normally, a deed will be considered valid even if

A)
signed by the attorney-in-fact of the grantor.
B)
the grantor is a minor.
C)
the grantor is not a legal entity.
D)
the grantor did not deliver the deed.

Answer 42

Normally, a deed will be considered valid even if

A)
signed by the attorney-in-fact of the grantor.
Correct Answer
B)
the grantor is a minor.
Incorrect Answer
C)
the grantor is not a legal entity.
Incorrect Answer
D)
the grantor did not deliver the deed.
Incorrect Answer
Explanation
The attorney-in-fact must act under a power of attorney, the specific written authority to execute and sign for another person. A valid deed requires that the grantor be a legal entity and deliver the deed to the grantee. A minor is not considered legally competent to sign a deed as a grantor.

Reference: Transfer of Title > Elements of a Valid Deed

Question 43

A contract for deed provides for

A)
the sale of unimproved land only.

B)
the immediate transfer of legal title to the buyer at closing.

C)
the sale of real property under an option agreement.
Incorrect Answer
D)
the conveyance of legal title at a future date.

Answer 43

A contract for deed provides for

A)
the sale of unimproved land only.
Incorrect Answer
B)
the immediate transfer of legal title to the buyer at closing.
Incorrect Answer
C)
the sale of real property under an option agreement.
Incorrect Answer
D)
the conveyance of legal title at a future date.
Correct Answer
Explanation
In a contract for deed, the seller retains legal title to the property. When the buyer pays off the loan and all requirements under the land contract have been met, the buyer receives legal title to the property. A land contract may be used in the sale of improved and unimproved land. The buyer receives possession upon closing of the contract but will not get legal title until the final payment is made.

Reference: Transfer of Title > Types of Deeds

Question 44

The purchase contract calls for the seller to provide the buyer with an owner’s title policy. Additionally, the buyer is required to purchase a mortgagee’s standard title policy. This title insurance policy will

A)
protect the lender against some, but not all, of the possible defects in the title.
B)
protect the buyer from all defects in the title.
C)
indemnify the seller from a lawsuit if defects are found in the title.
D)
indemnify the buyer against some, but not all, of the possible defects in title.

Answer 44

The purchase contract calls for the seller to provide the buyer with an owner’s title policy. Additionally, the buyer is required to purchase a mortgagee’s standard title policy. This title insurance policy will

A)
protect the lender against some, but not all, of the possible defects in the title.
Correct Answer
B)
protect the buyer from all defects in the title.
Incorrect Answer
C)
indemnify the seller from a lawsuit if defects are found in the title.
Incorrect Answer
D)
indemnify the buyer against some, but not all, of the possible defects in title.
Incorrect Answer
Explanation
The mortgagee is the lender; the mortgagor is the buyer. A mortgagee’s standard title policy indemnifies the lender against some, but not all, of the possible defects in the title. The title insurance will not offer guaranteed protection against a bad title or defects that clearly appear in a title search. It generally names certain uninsurable exclusions. The exclusions may include zoning ordinances, restrictive covenants, certain water rights, current taxes, and special assessments.

Reference: Transfer of Title > Title Insurance

Question 45

Laws that determine how property may be foreclosed on are set

A)
by the deed.
B)
by the lender when the borrower defaults.
C)
at a state level.
D)
at the federal level.

Answer 45

Laws that determine how property may be foreclosed on are set

A)
by the deed.
Incorrect Answer
B)
by the lender when the borrower defaults.
Incorrect Answer
C)
at a state level.
Correct Answer
D)
at the federal level.
Incorrect Answer
Explanation
While the federal government may have some rules regarding foreclosure, each state sets the rules that the lender must then follow.

Reference: Transfer of Title > Title Transfer

Question 46

A buyer purchased a parcel of real estate in a rural area, receiving a deed from the seller upon payment of the cash purchase price. Both parties, longtime friends, agreed that an escrow was unnecessary for this particular all-cash transaction. Knowing that title transferred when a deed was delivered by the grantor and accepted by the grantee, the buyer did not record the deed and did not take possession. All of the following statements are incorrect, EXCEPT

A)
there was no constructive notice of the conveyance.
B)
because there was no mortgage, recording the deed was less advantageous.
C)
an accepted deed is knowledge to all the world that title has transferred.
D)
knowledge of the transfer is implied by law to everyone upon delivery of the deed.

Answer 46

A buyer purchased a parcel of real estate in a rural area, receiving a deed from the seller upon payment of the cash purchase price. Both parties, longtime friends, agreed that an escrow was unnecessary for this particular all-cash transaction. Knowing that title transferred when a deed was delivered by the grantor and accepted by the grantee, the buyer did not record the deed and did not take possession. All of the following statements are incorrect, EXCEPT

A)
there was no constructive notice of the conveyance.
Correct Answer
B)
because there was no mortgage, recording the deed was less advantageous.
Incorrect Answer
C)
an accepted deed is knowledge to all the world that title has transferred.
Incorrect Answer
D)
knowledge of the transfer is implied by law to everyone upon delivery of the deed.
Incorrect Answer
Explanation
Because the buyer did not record the deed, there was no constructive notice of the conveyance. When a document—like a deed—is properly recorded into the public record, the law presumes knowledge of the document. Constructive notice is “notice to the world.” Transfer of title occurs when a deed is delivered by the grantor and accepted by the grantee. However, these answer choices are testing your knowledge of when constructive notice is implied by law to all the world: Constructive notice is presumed when a document is properly recorded in the public records. Finally, having a deed properly recorded in the public records is advantageous for the buyer, whether there is a mortgage involved in the transaction or not.

Reference: Transfer of Title > Recording the Title