Transfer of Property Flashcards
A qualified California war veteran who is totally disabled is entitled to a veteran’s exemption of:
A) - $4,000.
B) - $5,000.
C) - $7,000.
D) - $150,000.
D) - $150,000.
Answer: D—The principal residence of a veteran who is totally disabled is exempt up to $150,000.
A man appointed by the court to settle the estate of a person who died intestate is called a(n):
A) - devisee.
B) - testator.
C) - executor.
D) - administrator.
D) - administrator.
Answer: D—An administrator (male, administratix-female) is appointed by the court when the deceased died without leaving a will (intestate). A devisee is one who receives a gift or real property by will. A testator (male, testatrix-female) is one who makes a will. An executor (male, executrix-female) is the one appointed by the deceased to execute (carry out the terms of) a will.
Which of the following would be true about a lis pendens:
A) - It can only be removed by court action
B) - It can be recorded no matter what type of lawsuit it is
C) - It may affect title to real property based on the results of the lawsuit
D) - None of the above
C) - It may affect title to real property based on the results of the lawsuit
Answer: C—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.
A valid deed must contain:
A) - evidence of recordation.
B) - a date.
C) - a granting clause.
D) - the signature of the grantee.
C) - a granting clause.
Answer: C—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”).
Mr. Johnson deeds a parcel of land to Mr. Smith, but the deed is never recorded. How can Mr. Smith transfer title back to Mr. Johnson?
A) - tear up the deed.
B) - simply hand the deed back to Mr. Johnson.
C) - write “void” across the deed, have it notarized, then give it back to Mr. Johnson.
D) - None of the above
D) - None of the above
Answer: D—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.
How much of a broker’s personal funds may be contributed to a client’s trust fund bank account to offset any bank service charges?
A) - $25.00
B) - $100.00
C) - $200.00
D) - Nothing
C) - $200.00
Answer: C—Since banks sometimes have service charges; out of necesssity, the broker is allowed to maintain up to $200 of personal funds in a trust account to cover these type of bank charges.
An ALTA policy of title insurance protects the:
A) - buyer.
B) - seller.
C) - lender.
D) - All of the above
C) - lender.
Answer: C—The ALTA policy is used to protect lenders and usually requires a survey. It expands the standard policy to include:
Rights of parties in possession; Unrecorded liens; Easements; Claims that a correct survey or inspection would show; Mining claims and water rights.
An exception in a grant deed:
A) - makes the deed invalid to future grantees.
B) - gives the grantee special privileges.
C) - has no effect on the property value.
D) - withdraws a portion of the property from the grant.
D) - withdraws a portion of the property from the grant.
Answer: D—An exception in a grant deed means the grantor is holding back part of the estate being granted. This would withdraw part of the property from the grant deed and reduce the property or rights given to the grantee.
An escrow prorates based on a:
A) - 300 day year.
B) - 360 day year.
C) - 365 day year.
D) - None of the above
B) - 360 day year.
Answer: B—Escrow prorates using a 360 day year and a 30 day month.
A title officer of a title insurance company is familiar with an “Abstract of Title” and would know that it is:
A) - where the legal description of the property is found in the title policy.
B) - a written summary of the various recorded documents relating to the title of the subject property.
C) - a standard form of title insurance that is used by most title companies.
D) - an opinion of the title officer as to the condition of the title.
B) - a written summary of the various recorded documents relating to the title of the subject property.
Answer: B—An abstract of title is a written summary of the recorded documents relating to a particular property. It is no longer used today in favor of a policy of title insurance.
A lender uses an impound account to protect against non-payment of all of the following EXCEPT:
A) - assessments.
B) - property taxes.
C) - insurance premiums.
D) - mortgage interest payments.
D) - mortgage interest payments.
Answer: D—Mortgage interest is part of the loan payment. The others are held by the lender in a reserve account called impounds. Lender pays these bills as they become due.
Which of the following can a property owner expect after sewer lines are installed in front of his/her property?
A) - supplemental assessment
B) - general assessment
C) - special assessment
D) - All of the above
C) - special assessment
Answer: C—A special assessment is a tax 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.
Which of the following is considered an ad valorem tax?
A) - real property tax
B) - sales tax
C) - use tax
D) - death tax
A) - real property tax
Answer: A—Real estate taxes are assessed according to value.
Which of the following would protect a buyer against a right of a party in possession?
A) - Extended-coverage policy
B) - Standard policy
C) - either (a) or (b)
D) - neither (a) nor (b)
A) - Extended-coverage policy
Answer: A—An extended-coverage policy insures the title against matters that might be discovered by an inspection of the premises. Its coverage includes mechanics’ liens, tax liens, miscellaneous liens, encumbrances, easements, rights of parties in possession and encroachments which may not be disclosed by the public records.
A deed is recorded and indexed:
A) - by location.
B) - by recording day and time.
C) - by grantor and grantee names alphabetically.
D) - All of the above
C) - by grantor and grantee names alphabetically.
Answer: C—The County Recorders Office must keep an adequate index system by grantee and grantor names alphabetically.
When using a grant deed, title transfers at the time of:
A) - signing.
B) - acknowledgment.
C) - recording.
D) - delivery.
D) - delivery.
Answer: D—Technically, delivery is the legal act of transferring ownership.
A deed would contain all of the following EXCEPT:
A) - a description of the property.
B) - a date.
C) - the signature of the grantee.
D) - a granting clause.
C) - the signature of the grantee.
Answer: C—A valid grant deed requires the signature of the grantor, not the grantee.
When a real estate broker speaks of “tax shelter”, he/she is referring to:
A) - principal payments.
B) - net income.
C) - income tax.
D) - real property taxes.
C) - income tax.
Answer: C—”Tax Shelter” refers to income tax shelter.
When a real estate licensee accepts trust funds from his/her client in connection with the purchase of real property, the licensee must place these funds in: 1) a neutral escrow depository; 2) the hands of the offeree or owner; or 3) a trust account. The licensee must place these funds into one of these three authorized places:
A) - by the next working day following receipt.
B) - within three business days following receipt.
C) - by midnight of the current day.
D) - by midnight of the second business day following receipt.
B) - within three business days following receipt.
Answer: B—If the broker or broker’s salesperson fails to place the funds into one of these three authorized places within three business days following receipt, he/she is liable for commingling the funds.
Mr. and Mrs. Homeowner realized a $600,000 profit by selling the home they had lived in for three years. What amount is subject to taxes?
A) - $600,000
B) - $100,000
C) - $20,000
D) - Nothing
B) - $100,000
Answer: B—Universal Exclusion (two year rule): In 1997, the old 24 month trade up and 55 year old rules changed. The new law states that there will be no tax on gains up to $250,000 for single people and $500,000 for married people who file joint returns. To qualify, the home must have been your principal residence for at least 2 years during the preceding 5 years prior to sale. Both spouses must have lived there for the 2 year period to get the maximum exemption of $500,000 with joint filing. The full exclusion can only be used once every 2 years.
Solution: $600,000 - 500,000 exclusion = $100,000 taxable amount.
Street assessments are distributed to those that benefit by which method?
A) - equally distributed
B) - by front foot
C) - by square foot
D) - according to benefits received
B) - by front foot
Answer: B—Street assessments are levied according to the front footage of the lot benefited.
When a person dies intestate and no heirs claim his/her property, it reverts to the state by:
A) - patent.
B) - escheat.
C) - deed.
D) - will.
B) - escheat.
Answer: B—In cases where a decedent dies intestate and there are no heirs capable of inheriting, the property escheats to the state.
When the first party agrees to pay for a financial loss arising from a specific event, and the second party agrees to make periodic payments to the first party, the agreement is known as:
A) - A fidelity bond
B) - A surety bond
C) - An insurance policy
D) - A mortgage
C) - An insurance policy
Answer: C—This is a good definition of an insurance policy.
Holographic wills cannot be:
A) - written with colored ink.
B) - signed with an “X.”
C) - written in anything other than ink.
D) - All of the above
B) - signed with an “X.”
Answer: B—Since a holographic will is handwritten, it is assumed that the person is capable of signing his/her full name.
The second property tax installment is due and delinquent on:
A) - February 1st - April 10th
B) - November 1st - December 10th
C) - December 31st - June 30th
D) - March 1st - July 1st
A) - February 1st - April 10th
Answer: A—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
A home was purchased on February 1st with the understanding that property taxes had been paid for the fiscal tax year. The buyer received a tax bill anyway known as a:
A) - new homeowner tax bill.
B) - delinquent tax bill.
C) - reassessment tax bill.
D) - supplemental tax bill.
D) - supplemental tax bill.
Answer: D—The supplemental tax bill would adjust for an increase in tax liability for the balance of the tax year.
Tax delinquent real property not redeemed by the owner during the five year statutory redemption period is deeded to the:
A) - city.
B) - county.
C) - state.
D) - school district.
C) - state.
Answer: C—If the property is not redeemed by the owner during this statutory redemption period, the property is deeded to the state.
An exception in a grant deed:
A) - cancels the deed.
B) - is identical to a reservation.
C) - excludes part of the property from the grant.
D) - prevents the transfer.
C) - excludes part of the property from the grant.
Answer: C—An exception in a grant deed excludes some part of the property granted. The title to that withdrawn part remains in the grantor by virtue of the original title rights. For example, a conveyance by Grant Park to Bob Lee of a 10-acre parcel “exception of a strip of land 10 feet wide running along the northerly boundary” constitutes a legal exception.
The California sales tax is a(n):
A) - ad valorem tax.
B) - tax paid on real estate.
C) - tax paid on tangible personal property.
D) - tax paid on all personal property.
C) - tax paid on tangible personal property.
Answer: C—The California State Sales Tax is imposed on retailers for the privilege of selling tangible personal property at retail.
How would a taxpayer adjust the tax basis of his/her personal residence for Federal tax purposes?
A) - property taxes
B) - accrued depreciation
C) - addition of a concrete patio
D) - None of the above
C) - addition of a concrete patio
Answer: C—The tax basis on a personal residence consists of the cost of the property plus capital improvements like the addition of a concrete patio.
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:
A) - County Board of Supervisors.
B) - Assessment Appeals Board.
C) - Tax Collector.
D) - State Board of Equalization.
B) - Assessment Appeals Board.
Answer: B—Each county has an Assessment Appeals Board to which an individual can question their property’s value set by the assessor.
In the sale of a business, bulk transfer laws pertain to:
A) - fixtures.
B) - good will.
C) - stock-in-trade.
D) - All of the above
C) - stock-in-trade.
Answer: C—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.
Boot refers:
A) - leases.
B) - foreclosure.
C) - exchanges.
D) - business sales.
C) - exchanges.
Answer: C—Boot is money or other property that is not like-kind, which is given to make up any difference between exchanged properties.
Which of the following may NOT engage in the escrow business?
A) - An individual who is not a real estate broker or attorney
B) - Bank
C) - Domestic corporation
D) - Foreign corporation
A) - An individual who is not a real estate broker or attorney
Answer: A—An individual who is NOT an attorney may not engage in the escrow business.
The unadjusted basis of a taxpayer’s residence would be:
A) - cost.
B) - cost minus improvements.
C) - cost plus improvements.
D) - cost plus improvements minus depreciation.
A) - cost.
Answer: A—For federal income tax purposes in determining gain or loss on real property, the term “unadjusted basis” most nearly means “original cost.”
The adjusted basis of a taxpayer’s residence would be:
A) - cost plus improvements minus depreciation.
B) - cost plus improvements.
C) - cost.
D) - cost minus improvements.
B) - cost plus improvements.
Answer: B—Since you cannot depreciate your personal residence, the adjusted basis would be cost plus capital improvements.
A standard policy of title insurance covers all of the following EXCEPT:
A) - unrecorded liens.
B) - incorrectly given marital status.
C) - incompetent grantor.
D) - forged deed.
A) - unrecorded liens.
Answer: A—Generally, a standard policy of title insurance will protect the insured against losses arising from such title defects as:
Forged documents such as deeds, releases of dower, mortgages;
Undisclosed heirs; lack of capacity (minors);
Mistaken legal interpretation of wills;
Misfiled documents, unauthorized acknowledgments;
Confusion arising from similarity of names;
Incorrectly given marital status; mental incompetence.
A quitclaim deed conveys only the present right, title and interest of the:
A) - grantor.
B) - servient tenement.
C) - grantee.
D) - property.
A) - grantor.
Answer: A—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).
The term impounds refers to:
A) - personal property.
B) - clarity of title.
C) - reserves.
D) - trust funds.
C) - reserves.
Answer: C—Impounds are monies set aside (reserves) to cover future payments of recurring costs such as taxes and insurance.
What type of title insurance policy covers all risks?
A) - extended policy
B) - ALTA policy
C) - standard policy
D) - no policy covers all risks
D) - no policy covers all risks
Answer: D—No title insurance policy covers all risks. It is a good idea to familiarize yourself with the various types of title insurance policies and their coverage.
Buyers’ and sellers’ closing statements are:
A) - always the same.
B) - always executed.
C) - always different.
D) - always equal.
C) - always different.
Answer: C—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.
On an escrow closing statement, due and unpaid taxes are listed as:
A) - a credit to the buyer only.
B) - a debit to the seller always.
C) - either a debit or credit to the buyer or seller depending on the situation.
D) - None of the above
C) - either a debit or credit to the buyer or seller depending on the situation.
Answer: C—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.
Under the Street Improvements Act of 1911, how long does an owner have to pay the bill?
A) - 90 days after completion
B) - 60 days after completion
C) - 30 days after receipt
D) - 60 days after receipt
C) - 30 days after receipt
Answer: C—Street improvements assessments must be paid off within 30 days after receipt.
Probate proceedings are conducted by:
A) - the probate referee.
B) - superior court.
C) - municipal court.
D) - federal court.
B) - superior court.
Answer: B—Most real estate matters including probate are handled by the superior court.
A resident of Nevada dies in Nevada but owns property in California. The probate proceedings for this property would be held in:
A) - California.
B) - Nevada.
C) - federal court.
D) - Nevada state court.
A) - California.
Answer: A—The probate proceedings are held in the state where the property is located.
An investor with an adjusted gross income of $125,000, suffered a passive real estate loss of $100,000. How much of his loss can be used to shelter active income?
A) - $125,000
B) - $100,000
C) - $25,000
D) - $12,500
D) - $12,500
Answer: D—For taxpayers having an adjusted gross income of $100,000 to $150,000, the $25,000 that can be sheltered is reduced by one dollar for every two dollars of income over $100,000.
Which of the following would constitute boot in an exchange transaction?
A) - decrease in the basis
B) - net mortgage relief
C) - cost compensation
D) - appraisal fee
B) - net mortgage relief
Answer: B—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.
The first person to make an acknowledgment on a deed is the:
A) - county recorder.
B) - maker.
C) - purchaser.
D) - notary public.
B) - maker.
Answer: B—The maker acknowledges the deed first by his/her signature before a notary public.
Who may obtain a copy of a termite report after it has been filed with the Structural Pest Control Board?
A) - Only the escrow agent involved in the transaction
B) - Only the buyer and seller
C) - Any agent or party involved in the transaction
D) - Anyone
D) - Anyone
Answer: D—Anyone may search the Structural Pest Control Board’s system to see if a specific property has been inspected within the last two years.
An exact history of conveyances and encumbrances affecting the title of property is called a(n):
A) - title search.
B) - abstraction.
C) - chain of title.
D) - abstract of title.
C) - chain of title.
Answer: C—A chain of title is the recorded history of matters that affect the title to a specific parcel of real property, such as ownership, encumbrances and liens, beginning with the original recorded source of the title. The chain of title shows the successive changes of ownership, each one linked to the next so that a “chain” is formed.
