Transfer of Property 8% Flashcards
Deed Restrictions
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.
How long are deed restrictions valid for?
Unless there’s a written expiration date, deed restrictions don’t expire automatically and continue in perpetuity.
Marginal tax rate
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/)
Property tax installment is due and delinquent when?
memorization tool?
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.
granting clause
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”).
Deeds
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:
- be in writing and signed;
- identify the parties;
- have a competent grantor;
- specify a living grantee;
- contain words of conveyance; and
- adequately describe the property
- 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.
adjusted basis
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.
Basis (or Cost basis)
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.
Improvement
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.
The adjusted basis of a taxpayer’s residence would be
The correct answer is b: Since you cannot depreciate your personal residence, the adjusted basis would be COST PLUS CAPITAL IMPROVEMENTS.
Who pays for title insurance?
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.
title insurance
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)
standard coverage policy
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.
extended coverage policy
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.
lis pendens
*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.”
The County Recorders Office must keep an adequate indexes records how
alphabetically by grantee and grantor names
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?
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.
bulk transfer of goods
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.
holographic will
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.
Valid Will
- In writing
- Signed by testator
- Two competent witnesses
escrow
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)
escrow instructions
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)
close-of-escrow/closing
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)
interim occupancy agreement
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.
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):
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.
arbitration
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.
During escrow, if an unresolved dispute should arise between the seller and buyer preventing the close of escrow, the escrow holder may legally:
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.
Valid Escrow
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.
2 essential elements of a valid escrow:
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.
preliminary report
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.
abstract of title
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.
encumbrance
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)
lien
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)
legal description
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)
government survey system
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.
baselines and meridians
- 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
lot-and-block (recorded plat) system
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.
metes-and-bounds description
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.
special assessment
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.)
levy
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.
Without being licensed as an escrow, handle the escrow on transactions where he or she:
1) a principal to the transaction
2) representing the buyer
3) representing the seller
Intestate
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.
Who is the escrow agent an agent of?
The escrow agent is the agent of both the BUYER AND the SELLER, and SHOULD RECEIVE INSTRUCTIONS FROM BOTH if EVER A CONFLICT ARISES.
The most important element of proper and effective delivery of a deed is:
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.
A deed must be _____ to be effective
But need not be ______ to be effective.
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.
How long does a broker have after close of escrow to cause a deed of trust to be recorded?
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.
The deed with a provision regarding racial and religious discrimination may be changed:
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.
An Escrow said to be “In Perfection” means:
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.
In the absence of an agreement, when will possession be given to buyer?
In the absence of an agreement, possession would be given when all escrow instructions have been met (close of escrow).
How often should a trust fund account be reconciled?
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.
constructive notice
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.
recording
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)
How often are property taxes are assessed?
**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.
Alienation:
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.
Where are Probate Proceedings Held?
The probate proceedings are held IN THE STATE WHERE PROPERTY IS LOCATED.
Probate
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)
Gift Deed
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.
impound account
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
closing statement
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.
Property tax exemption for California War Veteran;
How Much?
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.
Documentary Transfer Tax
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
Pest control reports which contain information concerning wood destroying insects are kept on file with the:
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.
boot
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.
like kind
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)
exchange
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.
Homeowner’s Exemption
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.
When does a broker get paid vs earn commission?
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.
quitclaim deed
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.
When using a grant deed, title transfers at the time of
Technically, delivery is the legal act of transferring ownership.
credit
- Obligations that are due or are to become due to a person.
- 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.
debit
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.
Credit/Debit example
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.
assumption/assumed
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.
When does the seller have to give a termite report?
A termite report is only required when it is part of the purchase agreement.
When a valid grant deed is prepared, title passes when:
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
When is a property reassessed after improvements?
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.
(49) If Johnson’s intent is to accomplish a “tax-free” exchange of his apartment building, he should exchange for:
an apartment building of greater value with boot paid to balance the trade.
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?
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.
capital gain
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)
adjusted basis
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.
realized capital gain
When a property is sold, a capital gain or loss is realized. (See capital gains, excluded capital gains, deferred capital gains, recognized capital gains)
recognized capital gains
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)
supplemental tax bill
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.
Once an offer has been made and accepted by the seller, the buyer would have:
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.
When is title transfer from seller to buyer?
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.
quitclaim deed
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).
After acquired title
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.
Quit claim deed vs Quiet title action
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.
Doctrine of Relation-Back
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.
Reserves in escrow (impound accounts)
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.
impound account
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.
Standard policy (CLTA) of title insurance covers:
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.
standard coverage policy vs extended coverage policy
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.
Extended coverage policy (ALTA) of title insurance covers
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).
The California sales tax is a(n):
The California State Sales Tax is imposed on retailers for the privilege of selling TANGIBLE PERSONAL PROPERTY at retail.
Street Improvements Act of 1911
Under the Street Improvements Act of 1911, how long does an owner have to pay the bill?
funds maintenance of improvements
Street improvements assessments must be paid off within 30 days after receipt.
On an escrow closing statement, due and unpaid taxes are listed as debit and credit to who:
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.
escrow instructions
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.
Impounds
Impounds are monies set aside (reserves) to cover future payments of recurring costs such as taxes and insurance.
What is the final date the property owner may file for the State Homeowner’s Property Tax Exemption?
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.
A deed is presumed to be delivered when:
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.
supplemental assessments
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.
installment sale
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.
To determine property taxes on a residence:
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.
Termination of an escrow
Death of the grantor does not terminate the escrow or revoke the agent’s authority to deliver an executed deed.
title plant
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.
Proposition 13
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.
Short Rate:
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.
Buyers v Sellers closing statements
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.
When should Tax consequences with respect to real estate should take place:
prior to acquisition
ANY OTHER TIME COULD BE TOO LATE
What does “unadjusted basis” most nearly mean?
For federal income tax purposes in determining gain or loss on real property, the term “unadjusted basis” most nearly means “original cost.”
Homeoowner’s exemption
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.
Assessment roll
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.)
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.
1) a neutral escrow depository;
2) the hands of the offeree or owner; or
3) a trust account.
within three business days following receipt
California Withholding on the Sale of Real Property:
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.
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:
Each county has an Assessment Appeals Board to which an individual can question their property’s value set by the assessor.
How can a person put title back to the original grantor?
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.
Valid Deed
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.
escheat
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.
