Title Transfer

Question 1

Which of the following is an instrument used to transfer legal title in real estate?

A. Deed of trust
B. Land contract
C. Grant deed
D. Purchase contract

Answer 1

C. Grant deed – Conveys legal title

• Most used deed to transfer real property in California
• Seller = Grantor
  
  • Giving property to Buyer “OR”
• Buyer = Grantee
  
  • Receiving property from Seller “EE”

• Title – Ownership

Deed of trust
– Used in a lien theory state (for example: California) to get a loan

Land contracts and purchase contracts – Used to convey equitable title

Question 2

Which of the following would be true about
recording a deed?

A. The deed must be recorded to be valid
B. The deed is recorded at the discretion of the grantor
C. The deed should be recorded for the grantee’s legal protection
D. The grantee must acknowledge the deed prior to recording

Answer 2

C. The deed should be recorded for the grantee’s legal protection

• “Grantor” is Givor; “grantee” is receiving party
• Elements of a valid deed
– Signed by grantor
– Name a grantee
– Words of conveyance
– Legal description
– Consideration
– Acknowledged by grantor in front of notary
• Delivery and acceptance are necessary for the transfer of title

• Recordation is not required, but you should record to put the world on constructive notice of your claim of receipt of a deed and into the “chain of title”

Question 3

How can a buyer get the greatest protection for clear title?

A. Title insurance
B. Affidavit from the seller
C. Certificate of title
D. Abstract of title

Answer 3

C. Certificate of title – Issued by an attorney after he writes his opinion
• Over time, abstracts were accumulated along with references to the recorded information.
• Information regarding the property was organized in lot books and information affecting titles was
organized in general indices.
• In time, these records became known as TITLE PLANTS. The abstract company used title plants to supply interested parties with a certificate of title

• Abstract of title – Complete history of all recorded documents that pertain to the title
• Affidavit from seller – Not relevant – what if the seller is lying?
• Title insurance – Insurance that indemnifies against losses resulting from undiscovered title defects and encumbrances

Question 4

Who acknowledges documents at the typical real estate closing where financing is involved?

A. The title company representative
B. The lender
C. The buyer and seller
D. The notary public

Answer 4

C. The buyer and seller

• “Grantor” is Givor; “grantee” is receiving party
• Elements of a valid deed
– Signed by grantor
– Name a grantee
– Words of conveyance
– Legal description
– Consideration
– Acknowledged by grantor in front of notary
• Delivery and acceptance are necessary for the transfer of title

Question 5

A borrower obtains title insurance in conjunction with the purchase of a property.

The title insurance would be paid how?
A. Monthly with the mortgage payment
B. Annually with the property taxes
C. Quarterly
D. Once on the issuance of the policy

Answer 5

D. Once on the issuance of the policy

• Title insurance premium is paid once at the time of closing
• Homeowners’ insurance is paid yearly or each month as part of a PITI payment
• Mortgage insurance premiums are paid each month in addition to the PITI mortgage payments

Question 6

The grantor includes two implied warranties of title in a grant deed:

1. Promises has not conveyed the property to anyone other than the grantee
2. Free from any encumbrances, other than those identified by the grantor at the time of the conveyance
3. Grantor has maintained title insurance
4. Both 1 and 2 above

Answer 6

4. Both 1 and 2 above

Grantor includes two implied warranties of title.

1. Promises has not conveyed the property to anyone other than the grantee
2. Free from any encumbrances, other than those identified by the grantor at the time of the conveyance

Conveys whatever title the grantor has at the time of the conveyance

Question 7

The purpose of title insurance is to:

1. ensure clear, marketable title
2. produce title information, reports, and title insurance policies
3. Sell the interest in the property prior to receiving the property
4. Both 1 and 2 above

Answer 7

4. Both 1 and 2 above

Title Insurance - In California for buyers, sellers, lenders, and real estate brokers, to rely on title insurance companies for:
• Title information
• Title reports
• Title insurance policies

The purpose of title insurance companies is to ensure the clear, marketable title of property.
• Marketable title is one that a reasonable person would accept as clear and free from likely challenge.
• Marketable title is guaranteed because of title insurance
• New owner is protected against recorded and unrecorded matters.
• If someone challenges the title, the title insurance company will defend the title and will pay losses that are covered under the policy.

• The title insurance premiums are a one-time fee and are not prorated in escrow.
• Title insurance remains in effect until the property is sold.
• If a property owner dies, the policy continues to protect the owner’s heirs.

Question 8

A written summary of all the useful documents discovered in a title search is:

1. Title insurance
2. Abstract of Title
3. Chain of Title
4. Title Plants

Answer 8

2. Abstract of Title

An abstract of title is a written summary of all useful documents discovered in a title search.

• investigated the status of title to property.
• They searched available records and pertinent documents and prepared an abstract of title

Chain of title is the public record of prior transfers and encumbrances affecting the title of a parcel of land.
- Is the history of the property’s ownership.
• When a property is sold, the title is transferred, and these transfers form the chain.
• If there is a missing connection in a property’s history or ownership
• If a deed was recorded in error or is incomplete, it clouds the title.

Question 9

When escrow is opened, the escrow officer requests a preliminary report from a title company. This preliminary report provides:

1. an offer to issue a policy of title insurance in the future
2. shows encumbrances, both physical or liens or any other items of record that might affect ownership.
3. Is used as the basis for the final title insurance policy.
4. All of the above

Answer 9

4. All of the above

Preliminary Title Report
• When escrow is opened, the escrow officer requests a preliminary report from a title company.
• Preliminary report is not a policy of title insurance but is an offer to issue a policy of title insurance in the future for a specific fee.
• It shows encumbrances, both physical or liens or any other items of record that might affect ownership.
• Is used as the basis for the final title insurance policy.
• Lists any existing liens affecting the property.
• Show the existing seller’s current loan or loans against the property.
• Seller would appear as the trustor (borrower) on the existing loan shown in the preliminary title report.
• All title insurance policies require legal descriptions
• Is the best source for the property’s legal description.
• The title company must determine insurability of the title as part of the search process.
• Leads to issuance of a title policy.

Question 10

Standard title insurance policies does NOT cover:

1. Easements and liens that are not shown by public records
2. Rights or claims of persons not shown by the public records
3. Defects in the title known to the holder but not previously disclosed
4. All of the above

Answer 10

4. All of the above

Standard Policy of Title Insurance – NOT covered
• Defects in the title known to the holder to exist at the date of the policy but not previously disclosed.
• Easements and liens that are not shown by public records
• Rights or claims of persons in physical possession of the land but whose claims are not shown by the public records
• Rights or claims not shown by public records but which can be discovered by physical inspection of the land
• Mining claims
• Reservations in patents or water rights
• Zoning ordinances

Question 11

Title insurance companies are controlled by:

1. California Land Title Association (CLTA)
2. American Land Title Association (ALTA)
3. National Title Insurance Industry
4. California Insurance Commissioner.

Answer 11

4. California Insurance Commissioner

Title insurance companies are controlled by the California Insurance Commissioner.
• Insurance rates are set by each company, not the state.
• Every title insurer must adopt a schedule of fees and charges for title policies and make it available to the public.
• Each title insurance company must have a guarantee fund for the protection of title insurance policy holders on deposit with the Insurance Commissioner.

Commonly used standardized policies of title insurance are commonly used throughout California
• California Land Title Association (CLTA)
• Standard Policy – Owner’s Policy
• American Land Title Association (ALTA).
• Extended Coverage Policy