Question 1

Before recording statutes were enacted, the common law rule provided that the first purchaser to take possession had priority over other purchasers.

Accepted Answer

The common law rule provided that the first purchaser to receive a deed had priority, not necessarily the first to take possession.

Question 2

All of the following are methods for sellers of real estate to prove they have good title, except:

Accepted Answer

Basic Form homeowners insurance (HO-1) is not a method for proving good title. Title insurance, Torrens system, and abstract and title opinion are all common methods for sellers to prove they have good title.

Question 3

In order to be protected by a lender's title policy, a home purchaser must pay for the coverage.

Accepted Answer

A lender's title policy is typically paid for by the home seller to protect the lender's interest in the property, not the buyer's. The buyer may purchase an owner's title policy separately for their own protection.

Question 4

Which of the following recording statutes is used the least among the states.:

Accepted Answer

The Race statute requires that the first person to record an interest in a property will have priority over any subsequent recordings, regardless of notice or knowledge of the subsequent recorder. However, this type of statute is not commonly used in modern times, with only a few states still utilizing it. Most states use either the Race-Notice or Notice recording statutes.

Question 5

Although a vendor may assign his insurance coverage to a vendee, the assignment is not effective until the insurance company approves the assignment.

Accepted Answer

The insurance company must approve the assignment of coverage from the vendor to the vendee for it to be effective.

Question 6

With property insurance, an insurable interest need only exist at the time the coverage is purchased.

Accepted Answer

For property insurance, an insurable interest must exist both at the time the policy is purchased and at the time of the loss.

Question 7

Most homeowner policies provide for liability coverage, but only for damages resulting from accidents on the homeowner's property.

Accepted Answer

Homeowner policies typically provide liability coverage for damages or injuries that the policyholder (or covered family members) cause to others, not just for accidents that occur on the homeowner's property. This can include off-property incidents.

Question 8

Raven owns Blackacre.On October 10, she deeds the property to Alexis.Alexis records her deed on November 1.Raven also deeds Blackacre to Bill on October 20 and he records his deed on November 5.Assume that Bill is a bona fide purchaser.In a state that has a Race Statute whose deed will prevail?

Accepted Answer

In a Race Statute jurisdiction, the first party to record their deed has priority. Alexis recorded her deed on November 1, before Bill recorded his on November 5. Therefore, Alexis' deed will prevail.

Question 9

Title registration systems, such as the one introduced into Russia after the fall of the Soviet Union, creates the following effect(s):

Accepted Answer

Title registration systems provide greater security for real estate ownership, which can increase the willingness of investors and lenders to participate in real estate markets. This makes long-term investments and collateralized lending more appealing. However, title registration systems can also lead to higher transaction costs for real estate due to the need for legal and administrative procedures. Therefore, both options A and B are correct, but option C is not.

Question 10

Under the modern mortgagee loss clause, a mortgagee-bank will be covered by an owner's insurance policy even when the mortgagor intentionally destroys the property by arson.
(Answers in boldface are correct)

Accepted Answer

Under the modern mortgagee loss clause, a mortgagee-bank will be covered by an owner's insurance policy even when the mortgagor intentionally destroys the property by arson.

Question 11

An abstract of title lists and summarizes legal instruments, such as deeds and mortgages, and renders an opinion as to their legal validity.

Accepted Answer

An abstract of title lists and summarizes the legal instruments affecting the title to a property but does not render an opinion as to their legal validity; that is the role of a title opinion or title insurance.

Question 12

Pete purchases property from Marie, who purchased it from Doris, a minor.Pete obtains title insurance.Doris, shortly after reaching
The age of majority, wants to reclaim her property.Which of the
Following best describes the result?

Accepted Answer

Contracts entered into by minors are generally voidable at the minor's discretion. However, once Doris reaches the age of majority, she may choose to affirm or disaffirm the sale. If she disaffirms the sale, she may be entitled to reclaim the property. Pete, having obtained title insurance, would likely be protected and could seek recovery from the insurance company for the loss of the property.

Question 13

X deeds his property to Y on June 1 and to Z on June 3.Z is aware of the earlier conveyance made to Y, but records first in the public record.In a "Race Statute" state, Z's deed will prevail over Y's.

Accepted Answer

In a race statute state, the first person to record their deed in the public record wins the race and their deed prevails over any subsequent deeds, regardless of when they were executed or delivered. Therefore, Z's deed will prevail over Y's despite knowing about the earlier conveyance to Y.

Question 14

A person can acquire actual notice of a prior sale that is not recorded in the public record simply by hearing about it in a conversation.

Accepted Answer

Actual notice refers to knowledge of a fact or transaction gained from direct experience or observation, rather than from a public record or official document. Hearing about a prior sale in a conversation would qualify as acquiring actual notice.

Question 15

In many states, a grantor must acknowledge a deed before a public official such as a notary public before the deed can be recorded.

Accepted Answer

This is true in many states as part of the requirements for a validly recorded deed.

Question 16

Under a mortgagee loss clause, if a mortgagor-owner intentionally destroys mortgaged property:

Accepted Answer

Under a mortgagee loss clause, if the mortgagor-owner intentionally destroys mortgaged property, the mortgagee-bank can still recover from the insurance company. However, the insurance company can then seek recovery from the owner for intentionally destroying the property.

Question 17

Nearly all the states use a "Race-Notice Statute" since it combines both the attributes of fairness with efficiency.
11 A grantor-grantee index is much easier to use in tracing title than a tract index.

Accepted Answer

A tract index is generally easier to use for tracing title because it organizes records by parcel of land, whereas a grantor-grantee index requires searching through records by the names of parties involved in transactions.

Question 18

Insurance practices usually provide for the full cost of repair or replacement up to policy limits in the event of loss, regardless of the size of the limits.

Accepted Answer

Insurance policies typically have policy limits that cap the amount that the insurer will pay out in the event of a loss. If the cost of repair or replacement exceeds the policy limits, the policyholder may be responsible for covering the remaining costs.

Question 19

The Comprehensive Form (HO-3)homeowners insurance covers all possible risks, including floods and earthquakes.

Accepted Answer

The HO-3 homeowners insurance does not cover floods and earthquakes, which require separate insurance coverage.

Question 20

The Torrens System which was used in many states in the 19th century, is now used in only a few states and is considered to be too expensive and burdensome as a practical alternative to existing practices.

Accepted Answer

The statement accurately reflects the current status of the Torrens System.

Quiz 8: Title and Insurance