Public Records Notes

Question 1

Title Records Example. See Back.

Answer 1

Property owner A listed a house for sale. Buyer B purchased the property from seller A and received a deed. Buyer B did not record the deed but took possession of the property in June. In November, A sold the same property to buyer C who received a deed, which C promptly recorded. C never inspected the property to determine if someone was in possession of it. In this case, by taking possession of the property, B has the superior right to it even though B did not record the deed received from A.

Question 2

Chain of Title Forgery Title Example. See Back.

Answer 2

There may be a forged deed in the chain of title, which means that no subsequent grantee, even though innocent of the forgery, acquired legal title. In an action to quiet title brought by an individual currently living on the property and claiming title many years after the forgery, the individual may claim the right of ownership by virtue of adverse possession. Legal title could be acquired by adverse possession even in the case of an invalid document in the chain of title if there were the necessary years of property occupancy (typically, a higher requirement if a forgery has occurred) accompanied by the “color of title” provided by what appeared to each successive owner to be a valid deed.

Question 3

A client asks you to do a Title Search when you advise him not to do it himself. What should you tell your client?

A)
Suggest they perform the search together

B)
Say she’d be glad to help, as she knows what she’s looking for and he may not

C)
Say she is too busy to do it but knows her real estate assistant can do it

D)
Advise that a title company, attorney, or lender conduct the search

Answer 3

Explanation
The answer is advise that a title company, attorney, or lender conduct the search. Prospective buyers rarely search public records for evidence of title or encumbrances themselves. Instead, title companies, attorneys, and lenders conduct the searches. Real estate professionals should not perform title searches for their clients or customers, even if qualified to do so, because of conflict of interest concerns.

Question 4

Match the definitions with the the correct type of notice.

Took physical possession

Searched public records

Gave information personally

Recorded documents

Inspected the property

Answer 4

Constructive notice:
Took physical possession

Actual notice:
Searched public records

Actual notice:
Gave information personally

Constructive notice:
Recorded documents

Actual notice:
Inspected the property

Question 5

Public records are NOT maintained by the clerks of the court. T/F?

Answer 5

False.

Question 6

The legal presumption that information may be obtained by an individual through due diligence is called constructive notice. T/F?

Answer 6

True.

Question 7

Match the Following policies:

Standard
ALTA
Neither

A) Incompetent grantor

B) Rights of parties in possession of the property

C) Results of a survey

D) Unrecorded liens

E) Improperly delivered deeds

F) Incorrect marital statements

G) Information in public records

H) Defects known to the buyer

I) Zoning

J) Easements

K) Forged documents

Answer 7

Standard : A, E, F, G, K

ATLA : B, C, D,

Neither : H, I, J

Question 8

The title insurance policy generally identifies certain uninsurable losses called exclusions, including those resulting from issues such as zoning. T/F?

Answer 8

True

Question 9

A certificate of title provides a guarantee of ownership. T/F?

Answer 9

False. Not all certificates guarantee ownership.

Question 10

Mortgagee title policies protect which parties against loss?

A)
Buyers and lenders

B)
Lenders

C)
Buyers

D)
Sellers

Answer 10

Explanation
The answer is lenders. A mortgagee title policy protects the mortgagee—the lender. An owner’s policy protects the owner, heirs, and devisees.

Question 11

Constructive notice is a result of

A)
properly recording documents in the public record.

B)
giving someone information.

C)
unrecorded liens.

D)
real estate taxes and special liens.

Answer 11

Explanation
The answer is properly recording documents in the public record. Recording documents in the public record serves as constructive notice to the world of an individual’s rights or interest, as does the physical possession of the property.

Question 12

Who is usually responsible for providing marketable title to the property?

A)
The buyer

B)
The seller

C)
The title company

D)
The mortgage company

Answer 12

Explanation
The answer is the seller. Most contracts clearly state that the seller is responsible for pro viding marketable title to the property.

Question 13

Proof of ownership is

A)
necessary only if there is a cloud on the title.

B)
the deed from seller to buyer.

C)
evidence that title is marketable.

D)
subjective and depends on what the buyer requires.

Answer 13

Explanation
The answer is evidence that title is marketable. The grantee needs assurance that ownership is actually being acquired and that the title is marketable, before accepting a deed.

Question 14

Which of the following would cause a cloud on title?

A)
A recorded lien that was paid off but not released

B)
Gap in the chain of title

C)
Missing the name of the grantor

D)
All of these

Answer 14

Explanation
The answer is all of these. In more serious cases, such as a missing name of the grantor or a gap in the chain of title, it may be necessary to file a suit to quiet title.

Question 15

Properly recording documents in the public record provides what type of notice to the world of an individual’s rights or interest?

A)
Legal

B)
Constructive

C)
Effective

D)
Actual

Answer 15

Explanation
The answer is constructive. Constructive notice is the legal presumption that information may be obtained by an individual through due diligence. Properly recording documents in the public record serves as constructive notice to the world of an individual’s rights or interest, as does the physical possession of a property. Because the information or evidence is readily available to the world, a prospective purchaser or lender is responsible for discovering the interest.

Question 16

Which of the following are traditionally covered by a standard title insurance policy?

A)
Unrecorded rights of persons in possession

B)
Improperly delivered deeds

C)
Changes in land use because of zoning ordinances

D)
Unrecorded liens not known to the policyholder

Answer 16

Explanation
The answer is improperly delivered deeds. The rights of persons in possession (prior to purchase) are not covered by the basic title insurance policy, but they are covered by extended coverage policies. Changes in land use related to zoning are not covered in any type of title insurance. Standard coverage will protect against improperly delivered deeds.

Question 17

A property with encumbrances that will outlast the closing

A)
can be sold if a buyer agrees to take it subject to the encumbrances.

B)
can be sold only if title insurance is provided.

C)
cannot be sold.

D)
cannot have a deed recorded without a survey.

Answer 17

Explanation
The answer is can be sold if a buyer agrees to take it subject to the encumbrances. A buyer can agree to purchase property with existing encumbrances, such as a lien that the purchaser will assume.

Question 18

Chain of title is MOST accurately defined as

A)
a report of the contents of the public record, including all legal proceedings, regarding a particular property.

B)
the examination of the record and hidden risks such as forgeries, undisclosed heirs, errors in the public records, and so on.

C)
the record of a property’s ownership.

D)
an instrument or document that protects the insured parties (subject to specific exceptions) against defects in the record of a property’s ownership.

Answer 18

Explanation
The answer is the record of a property’s ownership. Chain of title is the entire history, or record, of transactions affecting a property, while an abstract is a summary of relevant facts found when examining the history. Title insurance is used to protect against defects in the record of a property’s ownership and is issued only after a title examination, which evaluates the public records of the property.

Question 19

Which of the following would create a cloud on title?

A)
An incorrect date

B)
All of these

C)
Misspelling of a grantor’s name

D)
A slight error in the legal description

Answer 19

Explanation
The answer is all of these. A cloud on title can be created by a misspelling of a grantor’s name, an incorrect date, or a slight error in the legal description.

Question 20

When multiple persons claim ownership of property and each has a recorded deed, but no one occupies the property, the person who is awarded ownership is likely to be the one who

A)
has the earliest dated deed.

B)
brought a quiet title suit in court.

C)
has a receipt from the grantor of the deed.

D)
recorded the deed first.

Answer 20

Explanation
The answer is recorded the deed first. If there is no notice of ownership based on occupancy of the property, the person with the earliest recorded deed is likely to prevail.

Question 21

A mortgagee received a title insurance policy on the property a buyer is pledging as security for the mortgage loan. Which of the following is TRUE?

A)
The policy is issued for the benefit of the buyer.

B)
The amount of coverage is commensurate with the loan amount.

C)
The amount of coverage increases as the borrower grows older.

D)
The policy guarantees that the buyer’s equity will be protected.

Answer 21

Explanation
The answer is the amount of coverage is commensurate with the loan amount. A lender’s policy is used for the benefit of the mortgagee. The amount of coverage depends on the amount of the mortgage loan and is decreased as the loan balance is reduced.

Question 22

A title company will NOT cover against defects

A)
caused by incompetent grantors.

B)
resulting from an incorrect marital statement.

C)
caused by forged documents.

D)
that appear in a title search.

Answer 22

Explanation
The answer is that appear in a title search. A title company will not cover against defects that appear in a title search. Defects and liens listed in the title policy are included in the policy as exclusions.

Question 23

All of the following would be considered evidence of marketable title EXCEPT

A)
a certificate of title by a real estate broker.

B)
an abstract of title with a legal opinion.

C)
a certificate of title by a real estate attorney.

D)
a title commitment or title insurance policy.

Answer 23

Explanation
The answer is a certificate of title by a real estate broker. A certificate of title may be prepared by a title company, licensed abstractor, or attorney, but not a real estate broker.

Question 24

What is a marketable title?

A)
A title that is available to the entire market without any discrimination

B)
A title that is at market price

C)
A title for desirable property

D)
A title that has no defects that could carry over as a problem for the new owner at whatever time the new owner decides to sell the property.

Answer 24

Explanation
The answer is a title that has no defects that could carry over as a problem for the new owner at whatever time the new owner decides to sell the property. Most contracts clearly state that the seller is responsible for providing marketable title to the property. The term marketable means a title that has no defects that could carry over as a problem for the new owner at the time of a future sale.

Question 25

Defects and liens listed in the title policy are included in the policy as

A)
debits.

B)
credits.

C)
exclusions.

D)
coverages.

Answer 25

Explanation
The answer is exclusions. A title company will not cover against defects that appear in a title search. These are included in the policy as exclusions.

Question 26

In the states in which it has been adopted, the Marketable Title Act

A)
disqualifies use of an attorney’s opinion of title as acceptable evidence of title.

B)
limits the time beyond which title records must be searched.

C)
provides a certification system for qualifying title insurance companies.

D)
establishes standardized forms for abstracts of title.

Answer 26

Explanation
The answer is limits the time beyond which title records must be searched. The law extinguishes certain interests and cures certain defects arising before the root of the title.

Question 27

Evidence of marketable title includes which of the following?

A)
Trust deed

B)
Affidavit

C)
Title insurance policy

D)
Warranty deed

Answer 27

Explanation
The answer is title insurance policy. Proof of ownership is evidence the title is marketable, and title insurance provides the best defense of title.

Question 28

In many states, acceptable proof of good title to real estate is bolstered by the purchase of

A)
homeowners insurance.

B)
title insurance.

C)
deed insurance.

D)
personal liability insurance.

Answer 28

Explanation
The answer is title insurance. Title insurance is a contract under which the policyholder is protected from losses arising from defects in the title to the property.

Question 29

Standard coverage in an owner’s title insurance policy would cover all of the following EXCEPT

A)
incompetent grantors.

B)
changes in land use brought about by zoning ordinances.

C)
defects found in public records.

D)
forged documents.

Answer 29

Explanation
The answer is changes in land use brought about by zoning ordinances. Standard coverage in an owner’s title insurance policy would cover defects found in public records, forged documents, incompetent grantors, incorrect marital statements, and improperly delivered deeds. It would not include changes in land use brought about by zoning ordinances.

Question 30

The maximum loss for which the company may be liable is

A)
the face amount of the policy.

B)
the amount of the loan.

C)
the sale price of the property.

D)
none of these.

Answer 30

Explanation
The answer is the face amount of the policy. The policy’s face value is the maximum loss for which the company is liable unless the amount of coverage has been extended by use of an inflation rider.

Question 31

Which of the following is NOT covered by an extended title insurance policy?

A)
Defects that may be discovered by an inspection

B)
Rights of parties in possession

C)
Certain unrecorded liens

D)
Defects and liens listed in the policy

Answer 31

Explanation
The answer is defects and liens listed in the policy. A title company will not cover against defects that appear in a title search. These are included in the policy as exclusions.

Question 32

What does a suit to quiet title do?

A)
Resolves clouds on title

B)
Forecloses on behalf of a lender

C)
Determines damages

D)
Divides property among the owners

Answer 32

Explanation

The answer is resolves clouds on title. Clouds are removed from title in a suit to quiet title.

Question 33

The date and time a document was recorded help establish which of the following?

A)
Abstract of title

B)
Priority

C)
Marketable title

D)
Subrogation

Answer 33

Explanation
The answer is priority. Time of recordation is an important consideration in establishing the priority of claims in the event of a sale.

Question 34

A buyer who wants to know whether the title for a property is in good standing would order

A)
an abstract.

B)
a deed.

C)
a deed of trust.

D)
a suit to quiet title.

Answer 34

Explanation
The answer is an abstract. An abstract, or title policy, will tell the state of the title and whether any title defects have been found.

Question 35

Where are the encumbrances and defects that will NOT be insured against under a title insurance policy stated?

A)
Citation clause

B)
Schedule of defects

C)
Nonexclusionary clause

D)
List of exclusions

Answer 35

Explanation
The answer is list of exclusions. Title insurance does not offer guaranteed protection against all defects. The policy names uninsurable losses called exclusions.

Question 36

Which of these would be covered in a standard title insurance policy?

A)
Easements and restrictive covenants

B)
Forged documents

C)
Unrecorded liens

D)
Defects discoverable by physical inspection

Answer 36

Explanation
The answer is forged documents. Title insurance protects against forged documents, but does not protect against claims of parties in possession because the grantee should have visited the property; nor does it cover unrecorded liens. Easements and restrictive covenants are found in the deed and should be known to the grantee.

Question 37

The legal presumption that information may be obtained by an individual through due diligence is

A)
none of these.

B)
constructive notice.

C)
actual notice.

D)
priority.

Answer 37

Explanation
The answer is constructive notice. Because the information or evidence is readily available to the world, a prospective purchaser or lender is responsible for discovering the interest.

Question 38

An owner decides to sell property and discovers that there is a lien on the title for a swimming pool that the owner paid off 10 years ago. The pool company is out of business. What is the owner to do?

A)
The owner will not be able to sell the property.

B)
The seller could bring a suit to quiet title.

C)
The buyer will have to pay off the lien.

D)
None of these are possible.

Answer 38

Explanation
The answer is the seller could bring a suit to quiet title. A suit to quiet title can eliminate a cloud on title through court action.

Question 39

The reason that deeds and liens and other claims are recorded is to give

A)
actual notice.

B)
constructive notice.

C)
direct notice.

D)
nominal notice.

Answer 39

Explanation
The answer is constructive notice. The recorder’s office is a central place to deposit and discover information. If a document is recorded, a buyer or other interested party cannot claim ignorance of it; its presence would have been revealed by a search of the records.

Question 40

A buyer took delivery of the deed to a new house but neither recorded the deed nor took possession of the property. Under these circumstances,

A)
the buyer’s interest is not fully protected against third parties.

B)
the deed is invalid after six months.

C)
the deed is invalid after 90 days.

D)
the transfer of the property from the seller is ineffective.

Answer 40

Explanation
The answer is the buyer’s interest is not fully protected against third parties. Constructive notice to the public of interest in a parcel of real estate is served when the deed is recorded and physical possession of the property is taken. Without this, an owner’s interests could be jeopardized.

Question 41

Which of the following are traditionally covered by a standard title insurance policy?

A)
Unrecorded rights of persons in possession

B)
Unrecorded liens not known to the policyholder

C)
Changes in land use because of zoning ordinances

D)
Improperly delivered deeds

Answer 41

Explanation
The answer is improperly delivered deeds. The rights of persons in possession (prior to purchase) are not covered by the basic title insurance policy, but they are covered by extended coverage policies. Changes in land use related to zoning are not covered in any type of title insurance. Standard coverage will protect against improperly delivered deeds.

Question 42

How many title policies are typically issued at a closing?

A)
Two

B)
Three

C)
One

D)
None of these

Answer 42

Explanation
The answer is two. The owner’s policy is for the benefit of the owner (buyer), and the lender’s policy is for the benefit of the mortgage company.

Question 43

All of the following would be revealed by a title search EXCEPT

A)
mortgage.

B)
property taxes.

C)
encroachments.

D)
mechanic’s lien.

Answer 43

Explanation
The answer is encroachments. A title search will find items recorded in the public record. Encroachments are only able to be discovered through a physical inspection of the land.