Question 1

Most homeowners in California have which type of title insurance policy?&#10;(a) ALTA lender's&#10;(b) ALTA owner's&#10;(c) CLTA lender's&#10;(d) CLTA owner's

Accepted Answer

Most homeowners in California have CLTA owner's title insurance policy, which covers only known risks and defects in the title. This policy is less expensive compared to ALTA owner's policy, which provides broader coverage.

Question 2

An example of functional obsolescence would be&#10;(a) olive green kitchen appliances&#10;(b) a noisy street&#10;(c) a leaky roof&#10;(d) a broken oven

Accepted Answer

Olive green kitchen appliances may still function, but they are no longer in style and can negatively impact the value of a home. This is an example of functional obsolescence.

Question 3

In a real estate transaction, who decides which escrow company to use?&#10;(a) The seller&#10;(b) The buyer&#10;(c) It is negotiated between the buyer and the seller&#10;(d) The real estate agent

Accepted Answer

The choice of escrow company is typically negotiated between the buyer and the seller. Both parties may have a preferred company or may come to an agreement on which company to use based on factors such as location, fees, and reputation. The real estate agent may provide recommendations, but ultimately it is up to the buyer and seller to decide.

Question 4

There are certain requirements that must be met before a transaction can be placed in escrow. They are:
(a) a binding contract between buyer and seller
(b) a neutral third party is employed
(c) conditional delivery of all documents related to sale
(d) all of the above

Accepted Answer

All of the above requirements must be met before a transaction can be placed in escrow. A binding contract is necessary to establish the terms of the sale, a neutral third party is needed to handle the transaction impartially, and all documents related to the sale must be provided to ensure that both the buyer and seller fulfill their obligations.

Question 5

Which of the following is a physical force that influences value?&#10;(a) rate of changes in population&#10;(b) income levels&#10;(c) size and shape of the parcel&#10;(d) zoning changes

Accepted Answer

The size and shape of the parcel can influence value as it determines the potential use and development of the property. It can also affect factors such as accessibility and visibility. The other options listed are not physical forces, but rather economic or regulatory factors that influence value.

Question 6

For an escrow to be valid, there must be a:
(a) conditional delivery of transfer documents to a third party
(b) real estate agent in the transaction
(c) title insurance policy
(d) sixty-day limit on the closing date

Accepted Answer

A valid escrow requires a conditional delivery of transfer documents to a third party, typically an escrow agent or company, who holds onto the documents and distributes them in accordance with the terms of the escrow agreement. The other options are not necessarily required for a valid escrow.

Question 7

Sales price $295,000, buyer puts on new 80% loan and pays 1% loan fee, $45 tax service fee, $400 tax prorations, $175 structural pest control inspection fee, $20 credit report, $20 recording fees, $910 hazard insurance fee, and a $600 escrow fee. How much will the buyer need to close escrow?
(a) $4,530
(b) $37,740
(c) $63,530
(d) $68,360

Accepted Answer

To calculate the total amount the buyer would need to close escrow:

1. Calculate the loan amount: 
$295,000 x 80% = $236,000

2. Add the loan fee: 
$236,000 x 1% = $2,360

3. Add all the other fees: 
$45 + $400 + $175 + $20 + $20 + $910 + $600 = $2,170

4. Add the loan amount and all fees: 
$236,000 + $2,360 + $2,170 = $240,530

Therefore, the buyer would need to close escrow with $63,530 (subtracting the sales price from the total amount).

Question 8

Which of the following is not exempt from the escrow licensing law?
(a) trust companies
(b) escrow companies
(c) title insurance companies
(d) real estate brokers when acting as an agent in the transaction

Accepted Answer

Escrow companies are specifically regulated and licensed under escrow licensing laws, whereas trust companies, title insurance companies, and real estate brokers acting as agents in a transaction are typically exempt from these specific licensing requirements.

Question 9

Which insurance policy requires the title company to make a physical inspection of the property?&#10;(a) CLTA&#10;(b) standard&#10;(c) RESPA&#10;(d) ALTA

Accepted Answer

ALTA (American Land Title Association) policy requires a physical inspection of the property by the title insurance company. This type of policy offers more comprehensive coverage than other types of title insurance policies.

Question 10

Real estate loan payments and income tax depreciation deductions are not considered operating expenses.
(a) It depends if the property is held as an LLC
(b) False
(c) True
(d) Only on state income tax not federal income tax

Accepted Answer

Real estate loan payments are considered financing expenses, not operating expenses. Income tax depreciation deductions are accounting entries and not cash outflows, thus not considered operating expenses either.

Question 11

A loss in value because of a busy street is an example of:&#10;(a) economic obsolescence&#10;(b) accrual for depreciation&#10;(c) functional obsolescence&#10;(d) physical deterioration

Accepted Answer

The answer of A loss in value because of a...

Question 12

With a gross annual multiplier of 12, a duplex that rents one unit for $575 per month and the other for $625 should have an estimated value of:
(a) $137,200
(b) $146,000
(c) $150,000
(d) $172,800

Accepted Answer

The answer of With a gross annual multiplier of 12,...

Question 13

The appraisal principle that states that the value of a property is dynamic, not static:
(a) principle of supply and demand
(b) principle of highest and best use
(c) principle of substitution
(d) principle of change

Accepted Answer

The answer of The appraisal principle that states that the...

Question 14

The payment of closing cost is negotiated between the buyer and seller, but the seller frequently pays for the:
(a) recording fee for the deed
(b) documentary transfer tax
(c) buyer's credit report fee
(d) loan origination fee

Accepted Answer

The answer of The payment of closing cost is negotiated...

Question 15

Find the value by use of the income approach. (round to the nearest $100)
1) three-unit apartment rents for $1,000 per month per unit
2) vacancy factor of 5%
3) annual operating expenses $10,000
4) capitalization rate of 8%
(a) $302,500
(b) $288,000
(c) $276,500
(d) $275,000

Accepted Answer

The answer of Find the value by use of the...

Question 16

The market approach would be given the most weight if appraising a:&#10;(a) new home&#10;(b) new apartment&#10;(c) five-year-old home&#10;(d) special purpose property

Accepted Answer

The answer of The market approach would be given the...

Question 17

The most important consideration in an appraisal is the:&#10;(a) methods used&#10;(b) experience, license, and integrity of the appraiser&#10;(c) data gathered&#10;(d) inspection of the title records

Accepted Answer

The answer of The most important consideration in an appraisal...

Question 18

In Northern California, most escrows are handled by:&#10;(a) escrow companies.&#10;(b) real estate agents.&#10;(c) title companies.&#10;(d) all of the above.

Accepted Answer

The answer of In Northern California, most escrows are handled...

Question 19

A history of title transfers for a particular parcel of land is a/an:&#10;(a) preliminary report&#10;(b) title insurance policy&#10;(c) abstracter index&#10;(d) chain of title

Accepted Answer

The answer of A history of title transfers for a...

Question 20

An appraisal is good for what amount of time&#10;(a) six months&#10;(b) three months&#10;(c) the day it is signed by the appraiser&#10;(d) it depends on the lender

Accepted Answer

The answer of An appraisal is good for what amount...

Question 21

Which law requires the escrow officer to prepare HUD-1 closing statements?&#10;(a) Truth in Lending&#10;(b) RESPA&#10;(c) Regulation Z&#10;(d) ECOA

Accepted Answer

The answer of Which law requires the escrow officer to...

Question 22

Which of the following must be licensed to be an escrow holder?&#10;(a) a bank&#10;(b) an attorney&#10;(c) a trust company&#10;(d) an independent corporation

Accepted Answer

The answer of Which of the following must be licensed...

Question 23

Title insurance rates are set by:&#10;(a) title companies&#10;(b) insurance commissioner&#10;(c) real estate commissioner&#10;(d) corporation commissioner

Accepted Answer

The answer of Title insurance rates are set by:&#10;(a) title...

Question 24

On behalf of the buyer and seller, the escrow officer acts as:&#10;(a) an employee&#10;(b) an independent contractor&#10;(c) an agent&#10;(d) a licensee

Accepted Answer

The answer of On behalf of the buyer and seller,...

Question 25

The most extensive title coverage would be:&#10;(a) abstract of title&#10;(b) certificate of title&#10;(c) guarantee of title&#10;(d) insurance of title

Accepted Answer

The answer of The most extensive title coverage would be:&#10;(a)...

Question 26

A joint protection title policy insures:&#10;(a) buyer and seller&#10;(b) buyer and lender&#10;(c) buyer and broker&#10;(d) two unrelated owners

Accepted Answer

The answer of A joint protection title policy insures:&#10;(a) buyer...

Question 27

Prepaid property taxes would appear as a prorated:&#10;(a) credit to buyer&#10;(b) debit to buyer&#10;(c) debit to seller&#10;(d) charge to lender

Accepted Answer

The answer of Prepaid property taxes would appear as a...

Question 28

With the approval of all parties, real estate brokers can act as escrow holders in transactions in which they have the:&#10;(a) listing&#10;(b) buyer&#10;(c) ownership&#10;(d) all of the above

Accepted Answer

The answer of With the approval of all parties, real...

Question 29

The tax service fee is usually paid by the:&#10;(a) buyer&#10;(b) seller&#10;(c) lender&#10;(d) broker

Accepted Answer

The answer of The tax service fee is usually paid...

Question 30

The sales price is $800,000. The buyer is to put $200,000 down and to obtain a new first loan for $500,000, and the seller is to carry back a second loan for $100,000. The documentary transfer tax is:
(a) $880
(b) $770
(c) $550
(d) $220

Accepted Answer

The answer of The sales price is $800,000. The buyer...

Question 31

Escrow is a process whereby a neutral third party acts on behalf of the:
(a) buyer, seller, buyer's agent, and seller's agent
(b) title company
(c) selling agent and listing agent
(d) buyer and seller only

Accepted Answer

The answer of Escrow is a process whereby a neutral...

Question 32

Title insurance does not cover publicly disclosed:&#10;(a) easements&#10;(b) zoning ordinances&#10;(c) deeds of trust&#10;(d) deeds

Accepted Answer

The answer of Title insurance does not cover publicly disclosed:&#10;(a)...

Question 33

Which of the following is normally paid by the seller?&#10;(a) prepayment penalty&#10;(b) credit report fee&#10;(c) recording fee for the trust deed&#10;(d) loan origination fee

Accepted Answer

The answer of Which of the following is normally paid...

Question 34

Termination of an escrow can occur:&#10;(a) when the escrow officer completes the paperwork&#10;(b) when the listing agent says it is okay&#10;(c) upon completion of the sale&#10;(d) none of the above

Accepted Answer

The answer of Termination of an escrow can occur:&#10;(a) when...

Question 35

Who decides what title company to use? a. The seller&#10;B) The buyer&#10;C) The listing agent&#10;D) This is negotiable between the buyer and the seller

Accepted Answer

The answer of Who decides what title company to use?...

Question 36

Extended coverage title policies are usually requested by:&#10;(a) institutional lenders&#10;(b) private lenders&#10;(c) buyers&#10;(d) sellers

Accepted Answer

The answer of Extended coverage title policies are usually requested...

Question 37

Title insurance covers recorded &#34;deeds and patents.&#34; A patent is a:&#10;(a) private conveyance&#10;(b) government conveyance&#10;(c) foreclosure transfer&#10;(d) subdivision deed

Accepted Answer

The answer of Title insurance covers recorded &#34;deeds and patents.&#34;...

Question 38

The buyer's closing costs are divided into categories. They are:
(a) recurring and seller's costs.
(b) buyer's costs and seller's costs.
(c) recurring and nonrecurring costs.
(d) nonrecurring costs only because the buyer does not pay recurring costs.

Accepted Answer

The answer of The buyer's closing costs are divided into...

Question 39

A standard title insurance policy insures against:&#10;(a) encroachments&#10;(b) incompetent parties on record&#10;(c) unrecorded easements&#10;(d) mining claims

Accepted Answer

The answer of A standard title insurance policy insures against:&#10;(a)...

Question 40

Which of the following is a recurring closing cost?&#10;(a) Fire insurance&#10;(b) Recording fees&#10;(c) Notary fees&#10;(d) Appraisal fee

Accepted Answer

The answer of Which of the following is a recurring...

Deck 10: The Role of Escrow and Title Insurance Companies