Question 1

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 when a person has direct knowledge of a fact, such as hearing about a prior sale in a conversation. This is different from constructive notice, which is when information is available in the public record for anyone to find.

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 sellers to prove good title, as it only covers specified risks such as fire and theft, and does not address the issue of ownership of the property. The other options - title insurance, Torrens system, and abstract and title opinion - are all methods for sellers to demonstrate good title to potential buyers.

Question 3

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 property rights, which increases investor confidence and willingness to make long-term investments. It also allows lenders to have a clear understanding of property ownership and rights, making it less risky for them to take real estate as collateral for loans. However, the implementation and maintenance of title registration systems can also lead to greater transaction costs for real estate transactions.

Question 4

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 5

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

When Doris was a minor, she had the right to disaffirm the sale upon reaching the age of majority. Therefore, she can reclaim the property. Pete, having title insurance, can recover his loss from the insurance company.

Question 6

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 prevails. Alexis recorded her deed on November 1, before Bill recorded his on November 5. Therefore, Alexis' deed will prevail.

Question 7

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

This is because the insurance company needs to assess the risk involved in the new coverage arrangement and ensure that the new party taking on the insurance policy is eligible and suitable for coverage.

Question 8

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 usually have limits on the amount they will pay out for repair or replacement in the event of loss. If the cost of repair or replacement exceeds the policy limits, the policyholder would be responsible for covering the remaining amount.

Question 9

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

Accepted Answer

Race statutes are the least common among the states, as most states have adopted either notice or race-notice statutes.

Question 10

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

In many states, it is required that a grantor personally acknowledges the deed before a public official before the deed can be recorded. This public official is typically a notary public. This helps to ensure that the grantor is aware of and understands the contents of the deed and that they are acting freely and voluntarily in signing it.

Question 11

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 is true according to the information given.

Question 12

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 13

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 recover from the insurance company, which can then recover its loss from the owner. This is because the mortgagee loss clause allows the mortgagee to be named as a loss payee on the insurance policy, and therefore, the insurance company is obligated to pay the mortgagee for any losses covered under the policy. The insurance company can then seek reimbursement from the owner if the destruction was intentional.

Question 14

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 15

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.

Accepted Answer

This is true under the modern mortgagee loss clause, which requires the insurance company to pay the mortgagee-bank for damages or losses to the property covered under the policy, regardless of whether the destruction was caused intentionally or not by the mortgagor.

Question 16

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 17

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

Accepted Answer

The Comprehensive Form (HO-3) homeowners insurance does not cover floods and earthquakes, which require separate insurance policies.

Question 18

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 answer of Before recording statutes were enacted, the common...

Question 19

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 person who records their deed first in the public record prevails over any subsequent conveyances or liens, regardless of whether they had knowledge of the earlier conveyance. Therefore, Z's deed, even though they were aware of the earlier conveyance to Y, will prevail because they recorded it first.

Question 20

A person purchasing a home should, to protect his investment, purchase the following:

Accepted Answer

Title insurance protects against title defects, and homeowner's insurance protects against damage to the home, both of which are important for protecting a home investment.

Quiz 8: Title and Insurance