PSI Exam Prep: Transfer of Title Flashcards
it protects buyers and lenders (through separate policies) against financial loss that might be incurred because of title defects discovered after closing.
Title insurance
The title policy will include a schedule of exceptions, which describes items the policy doesn’t cover, such as:
Any liens recorded after the effective date of the title policy
Any claims not shown in public records
Claims against a title by anyone who lives or lived on the property
it gives the title insurance company the right to pursue the party who caused the loss instead of the covered party
subrogation
it is a summary of the property’s title history. Attorneys and title companies who prepare abstracts research public records as well as other information to identify the title history.
A title abstract (abstract of title)
establishes the path of property ownership from its first owner to the current owner. The chain begins with the current owner and works backwards.
The chain of title
it establishes chain of title
The grantor-grantee index
this title has no defects or clouds to which a reasonable buyer would object. It’s not necessarily a perfect title. Sellers can convey this title if the title search reveals no doubt about property ownership and there aren’t any liens or encumbrances that won’t be cleared at closing.
A marketable title
it is one against which there may be known defects (such as easements), but the title company has notified the parties of the defect and has agreed. As the less rigid title standard, this title is still acceptable to most buyers. A key concern is that sellers who offer this title may not have to clear up title problems that come up before closing.
An insurable title
The most common title defect in a real estate transaction is the seller’s existing
mortgage lien.
it (also called a full covenant and warranty deed) offers the greatest warranty to buyers and is the preferred type of deed in most situations.
A general warranty deed
What are the six covenants (promises) a general warranty deed provides?
seisin, right to convey, against encumbrances, quiet enjoyment, further assurances and warranty forever
The grantor holds title to and possession of the property.
Covenant of seisin
The grantor has the right to convey both title to and possession of the property.
Covenant of right to convey
The grantor assures the grantee that there are no encumbrances against the title other than those identified in public records or the deed
Covenant against encumbrances
The grantor assures that the grantee’s use and enjoyment of the property will be unimpaired and unrestricted, subject to public police powers and private deed restrictions.
Covenant of quiet enjoyment
The grantor promises to take whatever actions necessary (within his power) to correct any title defects
Covenant of further assurances
n this most important covenant, the grantor promises to protect and defend the title against lawful claims made by others.
Covenant of warranty or warranty forever
this deed typically warrants only against title defects acquired during the grantor’s ownership of the property. It guarantees that the grantor owns and may convey the property, and warranties that the property is free of any debts or encumbrances not noted in the deed. This deed is most often used in conveying commercial properties.
A special warranty deed
it is most often used in tax or foreclosure sales. It generally has no expressed warranty against encumbrances but does typically imply a warranty that the grantor has title and the right to covey.
A bargain and sale deed
it carries with it no warranties to the grantee. It only releases any of the grantor’s property rights to the grantee. The quitclaim deed is typically used to clear up a simple cloud on
A quitclaim deed
conveys real estate to a trustee for the beneficiary named in the trust agreement. For example, in states that use a non-judicial foreclosure process, the deed is conveyed to a trustee who holds it until the mortgage loan is paid in full OR until the borrower defaults and the lender must foreclose.
A deed in trust (or deed of trust)
it defines the type of interest and rights the grantee will have
Habendum clause
What are the elements a deed must have?
- have to be in writing
- Names of the grantors and grantees
- Act of conveyance
- Consideration
- Legal description
- Any limitation Clause
- Grantor’s signature
- acceptance by the grantee
- Acknowledgment
it means that the parties have personal knowledge of a particular event.
actual notice
it means that the record is publicly available to anyone who does a records search
constructive notice
may be a broker, title representative, escrow officer, or attorney, though the most common is likely to be a title company representative. This individual is also called the closing agent
The escrow agent
these are shared expenses that either party owes at closing are prorated (divided between) the parties depending on when closing occurs
Prorations
these are items the seller owes on closing day but that will eventually be paid by the buyer (unpaid current property taxes, for example) and appear in the seller’s debit column and the buyer’s credit column.
Accrued expenses
these are those already paid by the seller but that the buyer should pay a portion of (such as prepaid real estate taxes, utilities paid in advance). These items are credited to the seller and debited to the buyer.
Prepaid expenses
are Closing Disclosure (CD) and loan estimate require for home equity lines of credit (HELOCs), seller financing, or reverse mortgages?
NO!
How many days are required to provide disclosure forms BEFORE loan application and BEFORE closing days?
3 days
Governments like property taxes as a revenue base because
they’re a stable, reliable revenue source
Transfer tax rates vary by location, but the rate is usually a percentage of the total sale price or a dollar amount per
$1,000 of the sale price.
There are property tax implications for real property owners at each stage of the property ownership lifecycle
acquisition, ownership, and sale (reversion).
When a non-U.S. resident (foreign person) sells real property in the U.S., the Foreign Investment in Real Property Tax Act (FIRPTA) requires that buyers withhold
15% of the gross sales price at closing.
it is a property that is being sold by the lender due to the buyer’s default. The lender will usually sell the property at auction after proper notice has been provided, and often after allowing the borrower the right to cure the default.
foreclosure
it is a property that the seller, with the lender’s permission, is selling for less than the seller owes against the property.
short sale
In this type of sale, ownership has reverted to the lender because of a failed foreclosure sale or because the borrower surrendered ownership of the property to the lender through a deed in lieu of foreclosure are called
real estate-owned (REO).
it may permit previous owners to buy the property back during a certain period of time after the foreclosure sale. This isn’t an issue with short sales.
Individual states’ redemption processes
construction warranties cover structural damage or major construction defects (such as foundation issues) for
10 years
Major systems (heating, air conditioning, electrical, etc.) may also be covered for a period of time, such as
two to five years.
Both the FHA and VA require new-home builders to provide a
Warranty of Completion of Construction
The first course of action for disputed home warranty claims is typically
mediation, then arbitration
A deed states, “For love and affection, the receipt and sufficiency of which is hereby acknowledged.” What does this statement represent in the deed?
Consideration
Few states require an abstract of title when conveying property. YES OR NO
YES~~~
Which of these would void a deed intended to convey property?
he grantor must be mentally competent and of legal age, though neither of these is essential for the grantee. The grantor is required to sign the deed, and the grantee must provide some sort of consideration.
Why does the closing agent review the purchase contract?
To gather closing-related information agreed to in the contract
The primary purpose of the Real Estate Settlement Procedures Act is to ensure that buyers ______.
Know all settlement costs up front
Meg is considering a move to a foreign country and wants to deed her property to her son, Christian, who’s 16. Which of these must occur to make this transfer legal?
Meg must sign the deed and have her signature acknowledged.
What’s the relationship between TILA, RESPA, and TRID?
The Dodd-Frank Act requires that lenders use the TILA-RESPA Integrated Disclosures (TRID).
Lynette purchased a property under a bargain and sale deed. Which statement best describes the covenants Lynette’s deed provides?
A bargain and sale deed may come with or without covenants of warranty. Generally, however, it’s known for not containing warranties.
Which of these statements about the homeowner’s right of redemption is true?
Because of the length of time it takes to process a property after the foreclosure sale, the homeowner’s redemption period may have expired before the lender puts the REO on the market.
