Unit 7 Quiz Questions

Question 1

Acceptable evidence of an owner’s title includes

a. a recorded deed.
b. an abstract of title and attorney’s opinion.
c. a homeowner’s insurance policy.
d. a deed.

Answer 1

An abstract of title and attorney’s opinion

A deed, even if recorded, is nothing more than that. A thorough examination of a property’s title history, a title insurance policy backed by such an examination, and an official title
document (Torrens certificate) can all serve as acceptable evidence of title.

Question 2

To serve as public notice, a deed is recorded in the

a. city where the owner lives.
b. county or, in some states, the town where the property is located.
c. state capital.
d. largest city in the state.

Answer 2

County or, in some states, the town where the property is located.

Because land is immobile, it makes sense to record all information about title to real property in the county where it is located. Some owners frequently relocate, and they would be hard to find.

Question 3

Five years ago, a lien was recorded against a parcel of property by a construction company. The property is in county A, but the lien was recorded in county B. Now, a former partner of
the construction company, who knew that a lien had been filed, is trying to buy the property. A title search in county A disclosed no liens against the property. Which of these is TRUE?

a. The former partner has constructive notice of the lien but not actual notice, because of the mistake in recording.
b. The former partner has actual notice of the lien but not constructive notice, because of the mistake in recording.
c. The former partner has both actual and constructive notice of the lien.
d. The former partner has no notice of the lien

Answer 3

The former partner has actual notice of the lien but not constructive notice, because of the mistake in recording.

The former partner is aware that a lien was filed, which is actual notice. Constructive notice is not given because the lien was not filed in the county where the property is located, which is
where it would be expected to be filed.

Question 4

Shortly after closing on a real estate purchase, the buyer discovered that there were serious
flaws in the title that made it unlikely that the property could be resold in the future. What can the buyer do now?

a. Because the title was flawed, the buyer can legally void the sale, and the seller must return
any consideration.
b. The buyer has no recourse.
c. Because the seller conveyed unmarketable title, the buyer is entitled to a new title report.
d. Because the buyer has accepted the deed, the only recourse is to sue the seller under any covenants contained in the deed.

Answer 4

Becausae the buyer has accepted the deed, the only recourse is to sue the seller under any covenants contained in the deed.

The buyer and the buyer’s representatives should look at the evidence of ownership before closing. There is more leverage to get problems corrected before closing than after closing.

Question 5

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

a. constructive notice.
b. actual notice.
c. direct notice.
d. nominal notice.

Answer 5

Constructive notice

The recorder’s office is a central place to deposit and discover information.

Question 6

A history of all recorded liens and encumbrances is revealed in the

a. title insurance policy.
b. unrecorded documents.
c. chain of title.
d. abstract.

Answer 6

Abstract

The title insurance policy lists coverage and exceptions to the policy. Unrecorded documents have not been examined. The chain of title traces ownership. The abstract is the most complete documentation of recorded liens and encumbrances.

Question 7

The person who prepares a certificate of title is the

a. broker.
b. abstractor.
c. buyer.
d. seller.

Answer 7

Abstractor

The abstractor searches all public records and then summarizes the various events that affected the title throughout its history.

Question 8

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

a. Defects discoverable by physical inspection
b. Unrecorded liens
c. Forged documents
d. Easements and restrictive covenants

Answer 8

Forged documents

Title insurance does not protect against claims of parties in possession because the grantee should have visited the property; nor does it cover unrecorded liens. Easements and
restrictive covenants are found in the deed and should be known to the grantee.

Question 9

A title insurance policy that protects the interests of a mortgagee is called

a. a leasehold policy.
b. a lender’s policy.
c. a certificate of sale policy.
d. an ALTA policy.

Answer 9

A lender’s policy

The mortgagee is the lender. The mortgagee’s policy is transferable.

Question 10

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

a. establishes standardized forms for abstracts of title.
b. disqualifies use of an attorney’s opinion of title as acceptable evidence of title.
c. limits the time beyond which title records must be searched.
d. provides a certification system for qualifying title insurance companies.

Answer 10

Limits the time beyond which title records must be searched.

The law extinguishes certain interests and cures certain defects arising before the earliest date that the title must be examined

Question 11

A title search in the public records may be conducted by

A. anyone.
B. attorneys and abstractors only.
C. attorneys, abstractors, and real estate professionals only.
D. anyone who obtains a court order under the Freedom of Information Act.

Answer 11

Anyone

The answer is anyone. Real estate records are public records, open to all members of the public

Question 12

Which statement BESTexplains why instruments affecting real estate are recorded?

A. Recording gives constructive notice to the world of the rights and interests claimed in the identified parcel of real estate.
B. Failing to record will void the transfer.
C. The instruments must be recorded to comply with the terms of the statute of frauds.
D. Recording proves the execution of the instrumen

Answer 12

Recording gives constructive notice to the world of the rights and interests claimed in the identified parcel of real estate.

The answer is recording gives constructive notice to the world of the rights and interests claimed by a party in a particular parcel of real estate. The recording of an instrument affecting real estate puts the transaction into the public record so that anyone interested in the title of a parcel will know where to look. Constructive notice means that everyone is charged with knowledge of such documents.

Question 13

A purchaser went to the county building to check the recorder’s records, which showed that the seller was the grantee in the last recorded deed and that no mortgage was on record against the property. The purchaser may assume which of the following?

A. All taxes are paid and no judgments are outstanding.
B. The seller has good title.
C. The seller did not mortgage the property.
D. No one else is occupying the property.

Answer 13

Seller did not mortgage the property.

The answer is the seller did not mortgage the property. The fact that no mortgage is on record against the property indicates, with a reasonable degree of certainty, that the seller did not mortgage the property

Question 14

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

A. Priority
B. Abstract of title
C. Subrogation
D. Marketable title

Answer 14

Priority

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

Question 15

A buyer bought a house, received a deed, and moved into the residence but neglected to record the document. One week later, the seller died and the heirs in another city, unaware that the property had been sold, conveyed title to a relative, who recorded the deed. Who owns the property?

A. The buyer
B. The relative
C. The seller’s heirs
D. Both the buyer and the relative

Answer 15

The Buyer

The answer is the buyer. Constructive notice can be given in either or both of two ways: taking possession and/or recording one’s deed. The buyer took possession. The relative who purchased the property from the seller’s heirs was responsible for both checking the public records (which still showed the seller as owner because the buyer had not yet recorded the purchase) and visiting the property to inquire into the rights of any parties in possession. The relative-purchaser’s investigation would have revealed that the seller’s heirs did not have the right to sell the property in question.

Question 16

A property with encumbrances that will outlast the closing

A. cannot be sold.
B. can be sold only if title insurance is provided.
C. cannot have a deed recorded without a survey.
D. can be sold if a buyer agrees to take it subject to the encumbrances.

Answer 16

Can be sold if a buyer agrees to take it subject to the encumbrances

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

Question 17

Which of the following would be acceptable evidence of ownership?

A. Broker’s opinion
B. Deed to the current owner signed by the last seller
C. Land survey
D. Title insurance policy

Answer 17

Title insurance policy

The answer is title insurance policy. The existence of a deed to the current owner is not evidence that the owner actually received title. A favorable attorney’s opinion based on examination of an abstract (the report of a title search) and a policy of title insurance are strong evidence of title held by the owner.

Question 18

Chain of title is MOST accurately defined as

A. the record of a property’s ownership.
B. a report of the contents of the public record, including all legal proceedings, regarding a particular property.
C. an instrument or document that protects the insured parties (subject to specific exceptions) against defects in the record of a property’s ownership.
D. the examination of the record and hidden risks such as forgeries, undisclosed heirs, errors in the public records, and so on.

Answer 18

The record of a property’s ownership

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

Question 19

A seller delivered title to a buyer at closing. A title search had disclosed no serious defects, and the title did not appear to be based on doubtful questions of law or fact or to expose the buyer to possible litigation. The seller’s title did not appear to present a threat to the buyer’s quiet enjoyment, and the title insurance policy provided was sufficient to convince a reasonably well-informed person that the property could be resold. The title conveyed would commonly be referred to as

A. a certificate of title.
B. an abstract of title.
C. a marketable title.
D. an attorney’s opinion of title.

Answer 19

A marketable title

The answer is a marketable title. Title that is good enough that a reasonably well-informed person would accept it is called marketable title.

Question 20

The person who prepares an abstract of title for a parcel of real estate

A. searches the public records and then summarizes the events and proceedings that affect title.
B. insures the condition of the title.
C. inspects the property.
D. issues title insurance.

Answer 20

Searches the public records and then summarizes the events and proceedings that affect title

The answer is searches the public records and then summarizes the events and proceedings that affect title. Abstractors search public records concerning property and prepare a relatively brief, written summary of their findings. This report is the abstract of title. Title insurance companies and attorneys who are asked to give an opinion of title rely on these abstracts.

Question 21

Homeowners are frantic because they want to sell their property and the deed is missing. Which of the following is TRUE?

A. They may need to sue for quiet title.
B. They must buy title insurance.
C. They do not need the original deed if it has been recorded.
D. They should execute a replacement deed to themselves.

Answer 21

They do not need the original deed if it has been recorded

The answer is they do not need the original deed if it has been recorded. If the homeowners’ deed was copied into the public record after they received it, that copy is all that is needed to start a title search. The original is not needed

Question 22

Mortgagee title policies protect which parties against loss?

A. Buyers
B. Sellers
C. Lenders
D. Buyers and lenders

Answer 22

Lenders

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

Question 23

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

A. Improperly delivered deeds
B. Changes in land use because of zoning ordinances
C. Unrecorded liens not known to the policyholder
D. Unrecorded rights of persons in possession

Answer 23

Improperly delivered deeds

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

Question 24

A written summary of the history of all conveyances and legal proceedings affecting a specific parcel of real estate is called

A. an adjustment of title.
B. a certificate of title.
C. an abstract of title.
D. a title insurance policy.

Answer 24

An Abstract of title

The answer is an abstract of title. An abstract of title summarizes the various events and proceedings that affected the title throughout its history.

Question 25

Which of the following is only covered by an extended coverage title insurance policy?

A. Forged documents
B. Incorrect marital statements
C. Unrecorded rights of parties in possession
D. Incompetent grantors

Answer 25

Unrecorded rights of parties in possession

The answer is unrecorded rights of parties in possession. All of the items listed are covered in a standard title insurance policy except unrecorded rights of parties in possession. These are covered by an extended coverage policy

Question 26

Documents referred to as title evidence include

A. policies of title insurance.
B. general warranty deeds.
C. security agreements.
D. special warranty deeds.

Answer 26

Policies of title insurance

The answer is policies of title insurance. Deeds are never considered title evidence. Policies of title insurance provide the best title evidence.

Question 27

Public records are important because they

A. are national.
B.guarantee marketable title
C.establish priority of liens.
D. provide actual notice of interests in the identified property.

Answer 27

Establish priority of liens

The answer is establish priority of liens. Public records provide constructive notice of interests in property. Proof of ownership is evidence that title is marketable. Such proof, while it cannot be found in public records, can be assured through a certificate of title, title insurance, or a Torrens certificate.

Question 28

Property owner A sells a portion of the property to B. B promptly records the deed from A in the appropriate county office. If A tries to sell the same portion of property to C, which of the following statements is TRUE?

A. C has been given constructive notice of the prior sale because B promptly recorded the deed.
B. C has been given actual notice of the prior sale because B promptly recorded the deed
C. Because C’s purchase of the property is the more recent, it will have priority over B’s interest, regardless of when B recorded the deed.
D. Because C purchased the property from its rightful owner, C is presumed by law to be aware of B’s prior interest.

Answer 28

C has been given constructive notice of the prior sale because B promptly recorded the deed.

The answer is C has been given constructive notice of the prior sale because B promptly recorded the deed. C is presumed to know all these facts, even if C doesn’t examine the public record and therefore never gets actual notice of the sale to B. Actual notice to a buyer is not necessary if a deed has been recorded. The courts construe recording of a deed as notice to the world. C is construed (i.e., considered) to have notice. C has no claim to the property that B owns, even if C later “buys” it from B. Recording the deed to real estate gives constructive notice to the world (which includes C) of the grantee’s (B’s) claim of ownership.

Question 29

The BEST reason for a buyer to obtain title insurance is

A. that the mortgage lender requires it.
B. to ensure that the seller can deliver marketable title.
C. to ensure that the abstractor has prepared a complete summary of title.
D. to pay future liens that may be filed.

Answer 29

To ensure that the seller can deliver marketable title.

The answer is to ensure that the seller can deliver marketable title. Title insurance is considered the best defense of title and is assurance that the grantee is actually acquiring ownership and that the title is marketable.

Question 30

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

A. The policy is issued for the benefit of the buyer.
B. The policy guarantees that the buyer’s equity will be protected.
C. The amount of coverage is commensurate with the loan amount.
D. The amount of coverage increases as the borrower grows older.

Answer 30

The amount of coverage is commensurate with the loan amount.

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