ACP Title Search & Real Estate Closings 3 — Questions and Answers
Question 1: In a deed of trust arrangement, who holds legal title during the loan repayment period?
- The trustee (Correct answer)
- The beneficiary (lender)
- The trustor (borrower)
- The title company
Correct answer: The trustee
In a deed of trust, the trustee holds bare legal title as security until the loan is paid; the borrower holds equitable title and possession.
Question 2: What does a paralegal typically verify when reviewing a survey at a real estate closing?
- Boundary lines, encroachments, easements, and the legal description match the deed (Correct answer)
- The seller's credit score and debt-to-income ratio
- The county's zoning ordinance compliance certificate
- The buyer's homeowner's insurance premium
Correct answer: Boundary lines, encroachments, easements, and the legal description match the deed
The survey is reviewed to confirm the property's boundaries, identify encroachments onto or from adjacent parcels, and verify easements shown match the title commitment.
Question 3: Which closing cost is typically prorated between buyer and seller at closing?
- Real property taxes (Correct answer)
- Loan origination fees
- Title insurance premium
- Home inspection fee
Correct answer: Real property taxes
Real property taxes are prorated so the seller pays for the portion of the tax year they owned the property and the buyer pays for their portion.
Question 4: A lis pendens recorded against a property notifies potential purchasers that:
- Litigation is pending that may affect title to the property (Correct answer)
- A new lien has been placed on the property by a contractor
- The property is in the foreclosure redemption period
- The seller has filed for bankruptcy protection
Correct answer: Litigation is pending that may affect title to the property
Lis pendens (Latin: 'suit pending') is a recorded notice that a lawsuit has been filed that could affect ownership of the described real property.
Question 5: What is an 'abstract of title'?
- A condensed history of all recorded instruments and encumbrances affecting a parcel of land (Correct answer)
- A title insurance policy issued at closing
- A court order confirming clear title
- A government-issued certificate of title
Correct answer: A condensed history of all recorded instruments and encumbrances affecting a parcel of land
An abstract of title is a chronological summary prepared by an abstractor that compiles all relevant recorded documents affecting the property's title.
Question 6: Which of the following is an example of an involuntary lien?
- A judgment lien arising from a court verdict (Correct answer)
- A mortgage taken out by the owner voluntarily
- A deed of trust executed at loan closing
- A homeowners association lien for assessments
Correct answer: A judgment lien arising from a court verdict
A judgment lien is imposed by operation of law after a court enters a money judgment, without the property owner's consent.
Question 7: In a standard real estate closing, what does 'title insurance Schedule B' exclusions refer to?
- Specific risks and encumbrances that the policy does NOT cover (Correct answer)
- The list of prior owners in the chain of title
- The premium calculation table for the policy
- The legal description of the insured property
Correct answer: Specific risks and encumbrances that the policy does NOT cover
Schedule B lists specific exceptions to coverage, such as easements, restrictions, and encroachments found during the title search that the insurer excludes from the policy.
ACP Title Search & Real Estate Closings 3
In a deed of trust arrangement, who holds legal title during the loan repayment period?