Transfer of Property 8%

Question 1

Deed Restrictions

Answer 1

rules and regulations that govern one or more lots or parcels of land. Deed restrictions “bind” land. Typically, a deed restriction is created in a document that is recorded with the county register of deeds records where the property is located.

Question 2

How long are deed restrictions valid for?

Answer 2

Unless there’s a written expiration date, deed restrictions don’t expire automatically and continue in perpetuity.

Question 3

Marginal tax rate

Answer 3

The marginal tax rate is the ordinary rate of income tax charged on the last dollar of taxable income earned, often used when making calculations for investment decisions.

The marginal tax rate is the percentage of tax applied to your income for each tax bracket in which you qualify. In essence, the marginal tax rate is the percentage taken from your next dollar of taxable income above a pre-defined income threshold. (http://www.investopedia.com/video/play/marginal-tax-rate/)

Question 4

Property tax installment is due and delinquent when?

memorization tool?

Answer 4

You must know the fiscal tax year for the state exam!

Memorization Aid: No, Darn, Foolin, Around:

November 1st: First installment due;
December 10th: Delinquent date for 1st installment;
February 1st: Second installment due;
April 10th: Delinquent date for 2nd installment.

Question 5

granting clause

Answer 5

Words in a deed of conveyance that state the grantor’s intention to convey the property at the present time.

A valid deed must have a granting clause or some words to indicate that the grantor wishes to transfer the property to the grantee (“I hereby grant”).

Question 6

Deeds

Answer 6

A deed is the document a private landowner uses to transfer real property to someone else.

“The most common form of voluntary alienation is transfer by deed.”

“A written instrument that, when properly executed, delivered, and accepted, conveys title or ownership of real property from the grantor to the grantee”

A deed must:

1. be in writing and signed;
2. identify the parties;
3. have a competent grantor;
4. specify a living grantee;
5. contain words of conveyance; and
6. adequately describe the property
7. The deed must also be acknowledged, delivered, and accepted.

The deed must identify the parties—the grantor and the grantee. It isn’t absolutely necessary to state the grantee’s name in the deed, as long as it includes a description that makes it possible to identify him or her.

A valid deed must have an adequate property description. Although a complete legal description isn’t required, the deed must make clear what property is being conveyed.

A description is adequate if a surveyor could use it to locate the property. The description does not have to describe the buildings on the property.

Question 7

adjusted basis

Answer 7

The original cost basis of a property reduced by certain deductions and increased by certain improvement costs. The original basis determined at the time of acquisition is reduced by the amount of allowable depreciation or depletion allowances taken by the taxpayer, and by the amount of any uncompensated property losses suffered by the taxpayer.

In tax accounting, adjusted basis is the net cost of an asset after adjusting for various tax-related items.

Adjusted Basis or Adjusted Tax Basis refers to the original cost or other basis of property, reduced by depreciation deductions and increased by capital expenditures.

Question 8

Basis (or Cost basis)

Answer 8

Basis (or cost basis), as used in United States tax law, is the original cost of property, adjusted for factors such as depreciation. When property is sold, the taxpayer pays/(saves) taxes on a capital gain/(loss) that equals the amount realized on the sale minus the sold property’s basis.

The tax basis on a personal residence consists of the cost of the property plus capital improvements like the addition of a concrete patio.

*Basis is the value carried on the books of the owner. When the owner deducts $10,000 for depreciation, the book value/basis goes down by $10,000.

Question 9

Improvement

Answer 9

1) Any structure, usually privately owned, erected on a site to enhance the value of the property—for example, building a fence or a driveway.
2) A publicly owned structure added to or benefiting land, such as a curb, sidewalk, street or sewer.

Question 10

The adjusted basis of a taxpayer’s residence would be

Answer 10

The correct answer is b: Since you cannot depreciate your personal residence, the adjusted basis would be COST PLUS CAPITAL IMPROVEMENTS.

Question 11

Who pays for title insurance?

Answer 11

Who pays for title insurance is ultimately a negotiable item.

It is important to understand that this can change based on geographic region and custom.

Question 12

title insurance

Answer 12

A comprehensive indemnity contract under which a title insurance company warrants to make good a loss arising through defects in title to real estate or any liens or encumbrances thereon. Title insurance protects a policyholder against loss from some occurrence that has already happened. (See extended coverage policy, standard coverage policy)

Question 13

standard coverage policy

Answer 13

A standard coverage policy normally insures the title as it is known from the public records. In addition, the standard policy insures against such hidden defects as forged documents, conveyances by incompetent grantors, incorrect marital statements and improperly delivered deeds.

EXCLUSIONS:
ZONING IS EXCLUDED from the coverage of title insurance. The standard policy also does not protect the policyholder against defects in title known to the holder to exist at the date of the policy and not previously disclosed to the insurance company.

Question 14

extended coverage policy

Answer 14

A title insurance policy that covers risks normally excluded by most standard coverage policies. Extended coverage indemnifies the insured against such things as liens, encumbrances, easements, and encroachments, which may not be disclosed by the public records.

Question 15

lis pendens

Answer 15

*PENDING LEGAL ACTION, OR a FORMAL NOTICE OF THIS.

A lis pendens is recorded to warn anyone interested in the property, that it is subject to a lawsuit. The property can be sold with the lis pendens filed against it, but the sale may be set aside and the property may be used for execution depending on the results of the lawsuit.

*It may affect title to real property based on the results of the lawsuit

A lis pendens is a recorded legal document that gives constructive notice that an action affecting a particular piece of property has been filed in a state or federal court. Lis pendens is Latin for “ACTION PENDING.”

Question 16

The County Recorders Office must keep an adequate indexes records how

Answer 16

alphabetically by grantee and grantor names

Question 17

Owner bob owns an apartment complex which is managed by broker X. Owner bob wants to sell his apartments and broker X is the listing broker. Who distributes the security deposit?

Answer 17

Security deposits technically belong to the tenant. However, they are held by the owner until the tenant leaves and the owner inspects the unit. It is probably true that Broker X must hand the deposits to escrow, but escrow distributes everything at the close to the new buyer. This includes all proration of prepaid rent, taxes etc. The security deposits would be a credit to the buyer.

Question 18

bulk transfer of goods

Answer 18

Bulk transfer of goods is any transfer in bulk of a substantial part of the materials, supplies, merchandise, equipment or other inventory of an applicable enterprise (stock-in-trade) that is not in the ordinary course of the transferor’s business.

A “bulk transfer” is any transfer in bulk (not in the ordinary course of the seller’s business), of a major part of the materials, inventory, or supplies of the business. The main purpose of the bulk transfer law is to afford a merchant’s creditors an opportunity to satisfy their claims against a merchant who owes them money before the merchant can sell assets and vanish with the proceeds.

Question 19

holographic will

Answer 19

A will that is hand written, dated and signed in the testator’s handwriting, but need NOT BE WITNESSED.

Some states consider a holographic will to be valid even though it was not witnessed, presumably on the theory that the handwriting can be analyzed to verify authenticity and demonstrate competency.

Question 20

Valid Will

Answer 20

1. In writing
2. Signed by testator
3. Two competent witnesses

Question 21

escrow

Answer 21

The process by which money and/or documents are held by a disinterested third person until satisfaction of the terms and conditions of the escrow instructions. Once these terms have been satisfied, delivery and transfer of the escrowed funds and documents takes place. (See escrow instructions)

Question 22

escrow instructions

Answer 22

In a sales transaction, a document signed by buyer and seller detailing the procedures necessary to close a transaction and directs the escrow agent how to proceed. Sometimes the buyer and seller execute separate instructions and sometimes the contract of sale itself serves as the escrow instructions. (See escrow)

Question 23

close-of-escrow/closing

Answer 23

The consummation of a real estate transaction, when the seller delivers title to the buyer in exchange for payment of the purchase price. Closing in some areas may not occur until the documents are recorded; however, under general rules of real estate law, transfer of title takes place upon delivery of the deed to the grantee. (See escrow)

Question 24

interim occupancy agreement

Answer 24

Basically, buyer can ask the seller for permission to occupy the property before the closing of escrow and if the seller agrees, an interim occupancy agreement should be signed by the buyer and seller, and the buyer’s personal and liability insurance should be in effect as of the date of occupancy.

Interim Occupancy Agreement Law and Legal Definition. An interim-occupancy contract is a contract that governs an arrangement called a leaseback. In this type of contract, the seller rents back property from the buyer. A leaseback is the sale of property.

Question 25

When there is a substantial discrepancy between the dates for close of escrow and the new owners occupying the property, the agent must prepare a(n):

Answer 25

Closing delays can occur due to a number of reasons. For example, delays in obtaining a homeowner's insurance policy or if the funding check from the buyer's lender isn't issued in time. Sometimes work on the property needs to be completed before close of escrow. Another common reason for a delay is when two home sales are closing concurrently and a delay in one causes a delay in the other. Ideally, buyers shouldn't take possession of their new homes until the sale has closed. As a last resort, the buyer can ask the seller for permission to occupy the property before the closing and if the seller agrees, an INTERIM OCCUPANCY AGREEMENT should be signed by the buyer and seller, and the buyer's personal and liability insurance should be in effect as of the date of occupancy.

Question 26

arbitration

Answer 26

A NONJUDICIAL method of RESOLVING DISPUTED by selecting a NEUTRAL PARTY to make a final determination. This method was either previously agreed to by the disputing parties or stipulated by law. The decision made by the arbiter is binding.

Question 27

During escrow, if an unresolved dispute should arise between the seller and buyer preventing the close of escrow, the escrow holder may legally:

Answer 27

The escrow holder does not arbitrate arguments between buyer and seller. He/she would most likely file an INTERPLEADER ACTION in court. *By filing an interpleader action, the escrow agent is asking the court to accept any money or property he or she holds and distribute it to the rightful claimant.

Question 28

Valid Escrow

Answer 28

The two essential elements for a valid sale escrow are: 1) BINDING CONTRACT/AGREEMENT between BUYER and SELLER 2) the CONDITIONAL DELIVERY to a NEUTRAL THIRD PARTY of something of value which typically includes written instruments of conveyance (grant deed) or encumbrance (deed of trust) and related documents. The binding contract/agreement can appear in any legal form, including a deposit receipt (a residential purchase agreement), other forms of agreements of sale, exchange agreements, option agreements, or jointly executed bilateral or individually executed unilateral escrow instructions evidencing a mutual agreement of the buyer and the seller.

Question 29

2 essential elements of a valid escrow:

Answer 29

Binding contract and conditional delivery A valid escrow cannot exist without a binding contract between buyer and seller and the conditional delivery of transfer documents to a third party.

Question 30

preliminary report

Answer 30

A TITLE REPORT that is made before a TITLE INSURANCE POLICY is issued or when escrow is opened. A preliminary report or policy of title insurance reports only on those documents having an affect on the title and SHOULD NOT BE RELIED ON AS BEING AN ABSTRACT. (See abstract of title) The preliminary report DESCRIBES THE PROPERTY and CURRENT OWNER OF RECORD, as well as any RECORDED LIENS or OTHER ENCUMBRANCES. - The ESCROW HOLDER reads the report to verify the LEGAL DESCRIPTION and to determine if there are any child support liens, taxes, or judgments for which a release will be required prior to the close of escrow. - The buyer is required to review and sign acceptance of the preliminary report.

Question 31

abstract of title

Answer 31

A FULL SUMMARY of all consecutive grants, conveyances, wills, records and judicial proceedings affecting title to a specific parcel of real estate, together with a statement of all recorded liens and encumbrances affecting the property and their present status.

Question 32

encumbrance

Answer 32

Any claim, lien, charge or liability attached to and binding on real property that may lessen its value or burden, obstruct or impair the use of a property but not necessarily prevent transfer of title. (See lien)

Question 33

lien

Answer 33

A charge or claim that one person (lienor) has on the property of another (lienee) as security for a debt or obligation. (See general lien, involuntary lien, mechanics' lien, statutory lien, tax lien, voluntary lien)

Question 34

legal description

Answer 34

A description of a specific parcel of real estate complete enough for an independent surveyor to locate and identify it. (See government survey system, lot and block system, metes and bounds system)

Question 35

government survey system

Answer 35

The government survey system is a system of LAND DESCRIPTION that applies to much of the land in the United States, particularly in the western states; also called the RECTANGULAR SURVEY SYSTEM. It is based on pairs of principal meridians and base lines, with each pair governing the surveys in a designated area.

Question 36

baselines and meridians

Answer 36

- Baselines are one of a set of imaginary lines running east and west. - Meridians run north to south. - In a government survey system land description methon

Question 37

lot-and-block (recorded plat) system

Answer 37

A method of describing real property that identifies a parcel of land by REFERENCE TO LOT AND BLOCK NUMBERS within a subdivision, as specified on a recorded subdivision plat map.

Question 38

metes-and-bounds description

Answer 38

Metes-and-bounds is a legal description of a parcel of land that begins at a well marked point and follows the boundaries, using directions and distances around the tract, back to the point of beginning. In the metes-and-bounds system, MARKERS are used to clearly mark the point of beginning and the boundaries of a tract of land.

Question 39

special assessment

Answer 39

A tax or levy customarily imposed against only those specific parcels of realty that will benefit from a proposed public improvement, as opposed to a general tax on the entire community. Common examples of special assessments are water, sidewalk and sewer assessments. *A special assessment is a tax imposed against only those SPECIFIC PARCELS of realtyTHAT WILL BENEFIT from a proposed PUBLIC IMPROVEMENT (as opposed to a GENERAL TAX on the entire community.)

Question 40

levy

Answer 40

To assess, seize or collect. To levy a tax is to assess a property and set the rate of taxation. To levy an execution is to officially seize the property of a person in order to satisfy an obligation.

Question 41

Without being licensed as an escrow, handle the escrow on transactions where he or she:

Answer 41

1) a principal to the transaction 2) representing the buyer 3) representing the seller

Question 42

Intestate

Answer 42

Intestate means dying WITHOUT A WILL or leaving a DEFECTIVE WILL. The intestate DECEDENT's (DEAD PERSON'S) property passes to his/her heirs according to the laws of descent in the state where such real property is located.

Question 43

Who is the escrow agent an agent of?

Answer 43

The escrow agent is the agent of both the BUYER AND the SELLER, and SHOULD RECEIVE INSTRUCTIONS FROM BOTH if EVER A CONFLICT ARISES.

Question 44

The most important element of proper and effective delivery of a deed is:

Answer 44

INTENT OF THE GRANTOR The grantor must intend for a deed to be delivered or the deed is not effective. Recording and acknowledgment are not required for the effectiveness of a deed.

Question 45

A deed must be _____ to be effective | But need not be ______ to be effective.

Answer 45

It is logical to presume that the grantor intended to deliver the deed if his/her signature has been acknowledged by a notary public, which is required for the recording of a deed. A DEED MUST BE DELIVERED TO BE EFFECTIVE, but DOES NOT HAVE TO BE RECORDED. RECORDING ESTABLISHES PRESUMPTION OF DELIVERY.

Question 46

How long does a broker have after close of escrow to cause a deed of trust to be recorded?

Answer 46

WITHIN ONE WEEK OF CLOSING of a transaction, the broker must cause a deed of trust to be recorded with the county recorder or cause it to be delivered to the beneficiary with a written recommendation that it be recorded forthwith, unless written instructions not to record are received from the beneficiary. If the transaction is closed through escrow and the deed of trust is delivered to the escrow holder within one week, that shall be deemed compliance on the part of the broker.

Question 47

The deed with a provision regarding racial and religious discrimination may be changed:

Answer 47

Effective January, 2000, a county recorder, title insurance company, escrow company, or real estate licensee who provides a declaration, governing documents or deed to any person MUST PROVIDE a STATEMENT ABOUT ILLEGALITY OF DISCRIMINATORY RESTRICTIONS and the right of the homeowners to have such language removed. The statement must be contained in either a cover page placed over the document or a stamp on the first page.

Question 48

An Escrow said to be "In Perfection" means:

Answer 48

all escrow instructions detailing the procedures necessary to close the transaction have been FULLY COMPLIED WITH AND CAN CLOSE. When all the title and financial requirements are met, and instructions from all parties can be fully complied with, the escrow is said to be "in perfection" and can close. Then the financial settlement takes place, the documents are recorded and the title insurance policies are issued.

Question 49

In the absence of an agreement, when will possession be given to buyer?

Answer 49

In the absence of an agreement, possession would be given when all escrow instructions have been met (close of escrow).

Question 50

How often should a trust fund account be reconciled?

Answer 50

ONCE A MOTH Similar to balancing your checkbook, reconciliation is the process of comparing two or more sets of records to determine whether their balances agree. This should reveal if the records are completed accurately. To assure the accuracy of the records, they must be reconciled at least once-a-month.

Question 51

constructive notice

Answer 51

DELIVERY presumes AKNOWLEDGEMENT and gives CONSTRUCTIVE NOTICE. Notice given to the world by recorded documents. All people are charged with knowledge of such documents and their contents, whether or not they have actually examined them. Possession of property is also considered constructive notice that the person in possession has an interest in the property. Constructive notice is knowledge the law presumes a person has about a paritcular fact regardless of whether the person knows about the fact or not. Examples of constructive notice would include the proper recording of a deed in the public records or the physical possession of property by an owner or tenant.

Question 52

recording

Answer 52

RECORDING establishes presumption of delivery. The act of entering into the book of public records the written instruments affecting the title to real property, such as deeds, mortgages, contracts for sale, options and assignments. (See public records)

Question 53

How often are property taxes are assessed?

Answer 53

**PROPERTY TAXES ARE "ASSESSED" ANNUALLY with a property tax bill mailed to the homeowner in early OCTOBER of each year. The bill is payable in two installments.

Question 54

Alienation:

Answer 54

The act of conveying ownership, title or an interest or estate in real property from one person to another. Property is usually sold or conveyed by VOLUNTARY ALIENATION as with a deed or an assignment of lease. INVOLUNTARY ALIENATION takes place when property is sold against the owner's will as in a foreclosure sale or a tax sale.

Question 55

Where are Probate Proceedings Held?

Answer 55

The probate proceedings are held IN THE STATE WHERE PROPERTY IS LOCATED.

Question 56

Probate

Answer 56

The formal judicial proceeding to prove or confirm the validity of a will, to collect the assets of the decedent's estate, to pay the debts and taxes and to determine the persons to whom the remainder of the estate will pass. (See decedent, will)

Question 57

Gift Deed

Answer 57

A gift deed is a formal written legal document which gives legal ownership in property from one person (commonly referred to as the "donor") to another person. Since the transfer of ownership is based upon a gift, there is no money, or consideration (something of value) exchanged for the transaction.

Question 58

impound account

Answer 58

Impound accounts usually contain money prepaid by the trustor (buyer). A trust account established to set aside funds for future needs relating to a parcel of real property. Many mortgage lenders require an impound account to cover future payments for taxes, assessments, private mortgage insurance and insurance in order to protect their security from defaults and tax liens. Money in the impound account belongs to the trustor

Question 59

closing statement

Answer 59

A detailed cash accounting of a real estate transaction showing all cash received, all charges and credits made and all cash paid out in the transaction.

Question 60

Property tax exemption for California War Veteran; | How Much?

Answer 60

The California Constitution and Revenue and Taxation Code section 205.5 provide a property tax exemption for the home of a disabled veteran or an unmarried spouse of a deceased disabled veteran. There is a basic $100,000 exemption or a LOW-INCOME $150,000 EXEMPTION available to a disabled veteran who, because of an injury incurred in military service: 1) is blind in both eyes, or has lost the use of two or more limbs, or 2) is totally disabled as determined by the United States Department of Veterans Affairs (USDVA) or by the military service from which the veteran was discharged.

Question 61

Documentary Transfer Tax

Answer 61

Documentary Transfer Tax is a TAX imposed ON EACH recorded document in which REAL PROPERTY IS SOLD. It is calculated at a rate of 55 cents for each $500 of consideration or fraction thereof. A portion of the total price paid for the property may be exempt because a lien remains on the property. EXAMPLE: A property sold for a total of $100,000. An existing loan of $60,000 was assumed. What would the Documentary Transfer Tax be? $100,000 - $60,000 (assumed loan) = $40,000 $40,000 ÷ $500 = 80 80 x .55 = $44.00

Question 62

Pest control reports which contain information concerning wood destroying insects are kept on file with the:

Answer 62

You may search the STRUCTURAL PEST CONTROL BOARD's Wood Destroying Organism System to see if a specific property has been inspected within the last two years.

Question 63

boot

Answer 63

Money or other property that is NOT LIKE-KIND, which is given to MAKE UP ANY DIFFERENCE IN VALUE or equity between EXCHANGED PROPERTIES. Boot may be in the form of cash, notes, gems, the market value of an asset such as a mortgage, land contract, personal property, goodwill, a service or a patent offered in an exchange. (See exchange, like-kind) Boot is money or other property that is not like-kind, which is given to make up any difference between exchanged properties. In an EXCHANGE, it is rare to find two properties of equal value and equity; therefore, to balance the equities, one party usually also pays some money or assumes a larger amount of underlying debt. This mortgage relief would be treated as boot and will be taxed to the extent of the boot received.

Question 64

like kind

Answer 64

A term relating to the nature of a property rather than its quality or quantity. Only like kind properties qualify for a real estate exchange and the resulting tax benefit. (See exchange)

Question 65

exchange

Answer 65

A transaction in which all or part of the consideration for the purchase of real property is the transfer of property of "like kind" (i.e., real estate for real estate). (See like kind, realized capital gains) In an exchange, it is rare to find two properties of equal value and equity; therefore, to balance the equities, one party usually also pays some money or assumes a larger amount of underlying debt. This mortgage relief would be treated as BOOT and will be taxed to the extent of the boot received.

Question 66

Homeowner's Exemption

Answer 66

An OWNER-OCCUPIED residence, including a condominium or duplex unit, qualifies for a HOMEOWNER'S EXEMPTION of the first $7,000 of full cash value. The California Constitution provides a $7,000 reduction in the taxable value for a qualifying owner-occupied home. The home must have been the principal place of residence of the owner on the lien date, January 1st. To claim the exemption, the homeowner must make a one-time filing of a simple form with the county assessor where the property is located. A person filing for the first time on a property may file anytime after the property or claimant becomes eligible, but no later than February 15 to receive the full exemption for that year. Homeowners' Exemption claimants are responsible for notifying the assessor when they are no longer eligible for the exemption. December 10th is the last day to terminate the Homeowners' Exemption without penalty; the assessor should receive notice of ineligibility by that date.

Question 67

When does a broker get paid vs earn commission?

Answer 67

On the state exam you may see two very similar questions, one asking when the broker's commission is paid and another asking when the broker has earned his/her commission. The broker's commission is PAID AT CLOSE OF ESCROW. The broker has EARNED his/her commission when the BUYER'S OFFER IF ACCEPTED.

Question 68

quitclaim deed

Answer 68

A quitclaim deed is often used to cure an imperfection or defect (a "cloud on the title") in the recorded history of a real estate title. Title defects include items such as issues with wording (for example, a document does not comply with state standards), a missing signature (such as that of a spouse) or failure to properly record real estate documents. For example, if the name of a grantee is misspelled on a warranty deed placed in the public record, a quitclaim deed with the correct spelling can be executed to the grantee to perfect the title.

Question 69

When using a grant deed, title transfers at the time of

Answer 69

Technically, delivery is the legal act of transferring ownership.

Question 70

credit

Answer 70

1. Obligations that are due or are to become due to a person. 2. In closing statements, that which is due and payable to either the buyer or seller—the opposite of a charge or debit. The credit appears in the right-hand column of the accounting statement.

Question 71

debit

Answer 71

A charge on an accounting statement or balance sheet (appearing on the left-hand column); the opposite of a credit. Used in bookkeeping and in preparing the closing statement in a real estate transaction.

Question 72

Credit/Debit example

Answer 72

On an escrow closing statement, an existing mortgage that is to be assumed by the buyer is treated as: A loan being assumed by the buyer is listed as a CREDIT TO THE BUYER and a DEBIT TO THE SELLER.

Question 73

assumption/assumed

Answer 73

The act of acquiring title to property that has an existing loan and security document (mortgage or deed of trust) and agreeing to be personally liable for the terms and conditions of the promissory note, including payments.

Question 74

When does the seller have to give a termite report?

Answer 74

A termite report is only required when it is part of the purchase agreement.

Question 75

When a valid grant deed is prepared, title passes when:

Answer 75

A deed must always be SIGNED BY THE PARTY OR PARTIES making the conveyance or grant of the premises, and it MUST BE DELIVERED to the party to whom the property rights are to be transferred. A DEED IS NOT EFFECTIVE UNLESS DELIVERED

Question 76

When is a property reassessed after improvements?

Answer 76

The assessor does not wait for a new tax year to reassess the improved property. AS SOON AS THE IMPROVEMENTS ARE COMPLETED, the property is reassessed and the supplemental tax bill is issued that year.

Question 77

(49) If Johnson's intent is to accomplish a "tax-free" exchange of his apartment building, he should exchange for:

Answer 77

an apartment building of greater value with boot paid to balance the trade.

Question 78

Mr. Kwan has a $30,000 loss on the operation of his rental property. This is his only rental investment. With respect to his income tax, he may do which of the following?

Answer 78

Offset this loss against capital gains The $30,000 may be used to offset capital gains for income tax purposes. If he has no capital gains, the maximum loss that may be deducted would be $25,000 with the remaining as a "carryover" loss against future gains.

Question 79

capital gain

Answer 79

Profit earned from the sale of an asset, where the sales price was greater than the adjusted basis. (See adjusted basis, deferred capital gain, excluded capital gain, realized capital gain (loss), recognized capital gain)

Question 80

adjusted basis

Answer 80

The original cost basis of a property reduced by certain deductions and increased by certain improvement costs. The original basis determined at the time of acquisition is reduced by the amount of allowable depreciation or depletion allowances taken by the taxpayer, and by the amount of any uncompensated property losses suffered by the taxpayer.

Question 81

realized capital gain

Answer 81

When a property is sold, a capital gain or loss is realized. (See capital gains, excluded capital gains, deferred capital gains, recognized capital gains)

Question 82

recognized capital gains

Answer 82

The recognized capital gain from the sale of an asset subject to income taxes. (See capital gains, deferred capital gain, excluded capital gain, realized capital gain)

Question 83

supplemental tax bill

Answer 83

Supplemental assessments result in tax bills that are "in addition to" (that is, supplemental to) the annual property tax bill sent to property owners in October. Changes in ownership or completed new construction that trigger supplemental assessments are referred to as "supplemental events." The supplemental tax bill would adjust for an increase in tax liability for the balance of the tax year. Since few people take possession of real estate on July 1st, the first day of the tax year, supplemental assessments are made to adjust for any increase in tax liability.

Question 84

Once an offer has been made and accepted by the seller, the buyer would have:

Answer 84

Nothing, because TITLE REMAINS WITH THE OWNER (seller) UNTIL ALL CONTINGENCIES OF THE CONTRACT HAVE BEEN MET AND ESCROW CLOSES. When escrow closes, legal title would transfer from the seller to the buyer.

Question 85

When is title transfer from seller to buyer?

Answer 85

TITLE REMAINS WITH THE OWNER (seller) UNTIL ALL CONTINGENCIES OF THE CONTRACT HAVE BEEN MET AND ESCROW CLOSES. When escrow closes, legal title would transfer from the seller to the buyer.

Question 86

quitclaim deed

Answer 86

A conveyance by which the grantor transfers whatever interest he or she has in the real estate, without warranties or obligations. The quitclaim deed transfers only whatever right, title and interest the GRANTOR had in the property at the TIME of the EXECUTION of the deed and does not pass to the grantee any title or interest subsequently acquired by the grantor (after-acquired title).

Question 87

After acquired title

Answer 87

After acquired title refers to a title held by a person who bought property from a seller who acquired title only after purporting to sell the property to the buyer. ... As soon as the seller actually acquires title, title passes to the person to whom it was sold.

Question 88

Quit claim deed vs Quiet title action

Answer 88

A quit claim deed is a way to GIVE your interest to somebody else (or for someone else to GIVE his or her interest to you). ... May also be called: quitclaims, quit claim deeds, quickclaims, and quick claim deeds. A quiet title action is a way to REMOVE somebody else's interest from your property. This is a formal lawsuit.

Question 89

Doctrine of Relation-Back

Answer 89

Under something called the "Doctrine of Relation-Back," death of the grantor does not terminate the escrow or revoke the agent's authority to deliver an executed deed. Delivery of the deed to the grantee relates back to the date is was originally deposited with the escrow agent, and it is considered as if the grantor made delivery to the grantee before the grantor's death.

Question 90

Reserves in escrow (impound accounts)

Answer 90

Reserves in escrow (impound accounts) are there for the benefit of both the trustor (borrower) and the beneficiary (lender). By impounding taxes and insurance, the lender is certain that these debts will be paid. The borrower is also certain that the payment will be made.

Question 91

impound account

Answer 91

A trust account established to set aside funds for future needs relating to a parcel of real property. Many mortgage lenders require an impound account to cover future payments for taxes, assessments, private mortgage insurance and insurance in order to protect their security from defaults and tax liens.

Question 92

Standard policy (CLTA) of title insurance covers:

Answer 92

Generally, a standard policy of title insurance will protect the insured against losses arising from such title defects as: 1) Forged documents such as deeds, releases of dower, mortgages; 2) Undisclosed heirs; lack of capacity (minors); 3) Mistaken legal interpretation of wills; 4) Misfiled documents, unauthorized acknowledgments; 5) Confusion arising from similarity of names; 6) Incorrectly given marital status; mental incompetence. EXCLUSIONS ARE: 1) ZONING is excluded from the coverage of title insurance. The standard policy also does not protect the policyholder against 2) DEFECTS IN THE TITLE KNOWN to the holder to exist at the date of the policy and NOT PREVIOUSLY DISCLOSED to the insurance company.

Question 93

standard coverage policy vs extended coverage policy

Answer 93

Standard coverage policy (CLTA) A standard coverage policy normally insures the title as it is known from the public records. In addition, the standard policy insures against such hidden defects as forged documents, conveyances by incompetent grantors, incorrect marital statements and improperly delivered deeds. Extended coverage policy (ALTA) A title insurance policy that covers risks normally excluded by most standard coverage policies. Extended coverage indemnifies the insured against such things as liens, encumbrances, easements, and encroachments, which may not be disclosed by the public records.

Question 94

Extended coverage policy (ALTA) of title insurance covers

Answer 94

To get an ALTA extended policy, you will probably have to have a professional surveyor come out and map the land that you are buying. Once he does that, you get coverage against other parties or buildings 1) ENCROACHING on your land. 2) You also get protected against UNRECORDED MECHANIC'S LIENS from workmen, 3) UNRECORDED TAX LIENS and 4) other IMPERFECTIONS IN TITLE (clouds on title).

Question 95

The California sales tax is a(n):

Answer 95

The California State Sales Tax is imposed on retailers for the privilege of selling TANGIBLE PERSONAL PROPERTY at retail.

Question 96

Street Improvements Act of 1911 Under the Street Improvements Act of 1911, how long does an owner have to pay the bill?

Answer 96

funds maintenance of improvements Street improvements assessments must be paid off within 30 days after receipt.

Question 97

On an escrow closing statement, due and unpaid taxes are listed as debit and credit to who:

Answer 97

Either a debit or credit to the buyer or seller depending on the situation. Due and unpaid taxes are prorated and can either be debits or credits for the buyer or seller since the buyer must pay the seller's tax obligation.

Question 98

escrow instructions

Answer 98

In a sales transaction, a document signed (ALWAYS MUST BE EXECUTED BY BOTH PARTIES) by buyer and seller detailing the procedures necessary to close a transaction and directs the escrow agent how to proceed. Sometimes the buyer and seller execute separate instructions and sometimes the contract of sale itself serves as the escrow instructions.

Question 99

Impounds

Answer 99

Impounds are monies set aside (reserves) to cover future payments of recurring costs such as taxes and insurance.

Question 100

What is the final date the property owner may file for the State Homeowner's Property Tax Exemption?

Answer 100

A timely filing for the Homeowner's Property Tax Exemption is FEBRUARY 15th. However, if the homeowner does not file before February 15th, he/she may make a late filing up until DECEMBER 10th.

Question 101

A deed is presumed to be delivered when:

Answer 101

WHEN IT IS ACCEPTED BY THE GRANTEE As long as it is given to the grantee and accepted, it will be considered delivered. A deed need not be recorded to be considered delivered.

Question 102

supplemental assessments

Answer 102

Since few people take possession of real estate on July 1st, the first day of the tax year, supplemental assessments are made to adjust for any increase in tax liability.

Question 103

installment sale

Answer 103

An income tax method of reporting gain received from the sale of real estate when the sales price is paid in installments, i.e., where at least one payment is to be received after the close of the taxable year in which the sale occurs. No down payment is required in an installment sale. An installment sale is an option for someone selling property, for a gain, where at least one payment is scheduled to be received after the tax year in which the sale occurs. An installment sale allows the taxpayer to postpone the receipt and reporting of income tax to future years when his/her other income may be lower. Thus, a taxpayer can avoid paying the entire tax on the gain in the year of sale.

Question 104

To determine property taxes on a residence:

Answer 104

Land and improvements are added separately and then multiplied by one tax rate. assess land and improvements separately, then multiply the total by one tax rate.

Question 105

Termination of an escrow

Answer 105

Death of the grantor does not terminate the escrow or revoke the agent's authority to deliver an executed deed.

Question 106

title plant

Answer 106

A title plant is an accumulation of title records in a specific county. A title plant is the storage facility of a title insurance company in which it has accumulated complete title records of properties in its area. Many of the larger title insurance companies maintain their own title plants containing copies of all recorded instruments.

Question 107

Proposition 13

Answer 107

By Proposition 13, the annual real estate tax on a parcel of property is limited to 1% of its assessed value. This "assessed value," may be increased only by a maximum of 2% per year, until and unless the property has a change of ownership. At the time of the change in ownership the low assessed value may be reassessed to complete current market value which will produce a new base year value for the property, but future assessments are likewise restricted to the 2% annual maximum increase of the new base year value.

Question 108

Short Rate:

Answer 108

PERTAINS TO HOMEOWNER'S INSURANCE A higher periodic rate charged for a shorter term than that originally contracted. The increased premium charged by an insurance company on early cancellation of a policy to compensate the insuror for the fact that the original rate charged was calculated on the full period of the policy. This increased charge enters into a buyer's decision whether to assume the seller's existing homeowner's hazard insurance policy or to cancel it and obtain a new policy.

Question 109

Buyers v Sellers closing statements

Answer 109

Separate closing statements are prepared for the buyer and seller showing debits and/or credits at closing. Buyers and sellers always have different closing statements.

Question 110

When should Tax consequences with respect to real estate should take place:

Answer 110

prior to acquisition ANY OTHER TIME COULD BE TOO LATE

Question 111

What does "unadjusted basis" most nearly mean?

Answer 111

For federal income tax purposes in determining gain or loss on real property, the term "unadjusted basis" most nearly means "original cost."

Question 112

Homeoowner's exemption

Answer 112

The California Constitution provides for the EXEMPTION OF $7,000 (maximum) in assessed value from the property tax assessment of any property owned and occupied as the owner's principal place of residence. To claim the Homeowner's exemption you must live in the house as of April 15th prior to the fiscal tax year.

Question 113

Assessment roll

Answer 113

Assessment roll is a record of taxable persons and property in a taxing jurisdiction. Such rolls are prepared by tax assessors. An assessment roll of a town, for example, includes each individual tract of land within its taxing jurisdiction and shows the assessed value of each. The purpose of the assessment roll, as compiled by the assessor's office is The establishment of the tax roll (The assessment roll serves as the tax base.)

Question 114

Licensees must place trust funds from a client in connection with the purchase of real property, the licensee must place these funds ____, ____, or ______ within ____________ following receipt.

Answer 114

1) a neutral escrow depository; 2) the hands of the offeree or owner; or 3) a trust account. within three business days following receipt

Question 115

California Withholding on the Sale of Real Property:

Answer 115

California Withholding on the Sale of Real Property: Effective January 1, 2003, the buyer must withhold and transmit a portion of the sales price to the Franchise Tax Board (FTB) regardless of whether the seller is a California resident, unless an exemption applies. Buyers must withold 3 1/3 percent of the gross sales price on sales of California real property interests when: 1) the seller is an individual (a "natural person") (Rev. & Tax Code 18662(e)(1); or, 2) the seller is not an individual and the funds will be transferred to a seller with a last known street address outside of California or to the seller's financial intermediary. (Rev. & Tax Code 18662(f)(1)). The exemptions for individuals selling real property include the sale of property for less than $100,000, the sale of a principal residence, an IRC 1031 exchange, an involuntary conversion under IRC 1033, and the sale of property at a loss for California income tax purposes.

Question 116

If a property owner believes that the assessed value on his or her property has been set too high, the owner could file a request to seek a reduction from the:

Answer 116

Each county has an Assessment Appeals Board to which an individual can question their property's value set by the assessor.

Question 117

How can a person put title back to the original grantor?

Answer 117

Once there is a valid delivery and acceptance, the act of the grantee in surrendering the property or destroying the deed will not put title back to the original grantor. To accomplish this, the grantee must execute a new deed back to the original grantor.

Question 118

Valid Deed

Answer 118

There are several different essentials to a valid deed, namely: 1) It must be in writing. 2) The parties must be properly described. 3) The parties must be competent to convey and be capable of receiving the grant. 4) The property conveyed must be adequately described. 5) There must be a granting clause, operative words or conveyance ("I hereby grant"). 6) The deed must be signed by the party or parties making the conveyance or grant. 7) Delivery and acceptance is required.

Question 119

escheat

Answer 119

The government's way of es-CHESTING their way to owning property The reversion of property to the state or county, as provided by state law, in cases where a decedent dies intestate and there are no heirs capable of inheriting or when the property is abandoned. In some states, bank accounts that are unused for more than seven years will escheat to the government.