ACP Title Search & Real Estate Closings 2 — Questions and Answers
Question 1: What is a 'chain of title' in real estate?
- The chronological sequence of ownership transfers for a property (Correct answer)
- A lien securing a mortgage loan
- The legal description of a parcel's boundaries
- A court order transferring title
Correct answer: The chronological sequence of ownership transfers for a property
The chain of title is the historical sequence of all recorded ownership transfers from the original grant to the current owner.
Question 2: Which document is recorded to release a satisfied mortgage lien from the public record?
- Deed of reconveyance or satisfaction of mortgage (Correct answer)
- Quitclaim deed
- Lis pendens
- Abstract of title
Correct answer: Deed of reconveyance or satisfaction of mortgage
A satisfaction of mortgage (or deed of reconveyance in deed-of-trust states) is recorded to show the lien has been paid and released.
Question 3: A 'cloud on title' refers to:
- Any outstanding claim or encumbrance that impairs the marketability of title (Correct answer)
- A weather-related damage disclosure
- The survey description of air rights above the parcel
- A deed restriction limiting commercial use
Correct answer: Any outstanding claim or encumbrance that impairs the marketability of title
A cloud on title is any recorded or unresolved interest that casts doubt on the owner's clear ownership.
Question 4: At closing, the HUD-1 Settlement Statement was replaced by which form under TRID rules?
- Closing Disclosure (CD) (Correct answer)
- Loan Estimate (LE)
- Good Faith Estimate (GFE)
- Truth-in-Lending Disclosure
Correct answer: Closing Disclosure (CD)
TRID (TILA-RESPA Integrated Disclosure) replaced the HUD-1 with the Closing Disclosure for most residential mortgage transactions.
Question 5: Which type of deed provides the MOST protection to a buyer because the grantor warrants title against all prior claims?
- General warranty deed (Correct answer)
- Special warranty deed
- Quitclaim deed
- Bargain and sale deed
Correct answer: General warranty deed
A general warranty deed includes covenants that the grantor will defend the buyer's title against any and all claims, even those arising before the grantor's ownership.
Question 6: What is the purpose of a title commitment (binder) issued before closing?
- To identify conditions that must be satisfied before title insurance will be issued (Correct answer)
- To provide a final appraisal value of the property
- To confirm the buyer's mortgage approval
- To serve as the official transfer of title
Correct answer: To identify conditions that must be satisfied before title insurance will be issued
A title commitment outlines what the insurer found in the title search and lists requirements and exceptions before a policy will be issued.
Question 7: A mechanic's lien is typically filed by:
- Contractors or materialmen who have not been paid for work on the property (Correct answer)
- The county tax authority for unpaid property taxes
- A judgment creditor after winning a lawsuit
- A homeowners association for unpaid dues
Correct answer: Contractors or materialmen who have not been paid for work on the property
Mechanic's liens are statutory remedies allowing unpaid contractors, subcontractors, and suppliers to claim a security interest in the improved property.
ACP Title Search & Real Estate Closings 2
What is a 'chain of title' in real estate?