ALP ALP Real Estate & Property Law 2 — Questions and Answers
Question 1: What is the purpose of a 'title search' in a real estate transaction?
- To examine public records and verify clear ownership and identify any encumbrances (Correct answer)
- To assess the physical condition and structural integrity of the property
- To determine the property's current assessed value for tax purposes
- To calculate the applicable mortgage interest rate
Correct answer: To examine public records and verify clear ownership and identify any encumbrances
A title search reviews recorded public documents to identify liens, easements, judgments, or other defects that could affect the seller's ability to convey clear title.
Question 2: A 'lis pendens' recorded against real property gives notice that:
- There is pending litigation involving the property (Correct answer)
- A foreclosure sale has already been completed
- A federal tax lien has been assessed by the IRS
- A boundary dispute has been resolved by the courts
Correct answer: There is pending litigation involving the property
A lis pendens is a recorded notice that serves as constructive notice to the public that the described property is subject to pending litigation.
Question 3: In a 'joint tenancy' ownership arrangement, what occurs when one co-owner dies?
- The surviving co-owner(s) automatically receive the deceased's share by right of survivorship (Correct answer)
- The deceased co-owner's heirs inherit their proportionate share
- The property reverts to the state under the doctrine of escheat
- The property must be sold and proceeds distributed among all claimants
Correct answer: The surviving co-owner(s) automatically receive the deceased's share by right of survivorship
Joint tenancy includes the right of survivorship, meaning a deceased joint tenant's interest automatically vests in the surviving joint tenant(s) by operation of law.
Question 4: What is 'adverse possession' in U.S. property law?
- Acquiring legal title to land by openly and continuously occupying it for a statutory period (Correct answer)
- Forcibly removing a trespasser from one's property through legal proceedings
- A government taking of private property without just compensation
- A hostile mortgage foreclosure initiated by the lender
Correct answer: Acquiring legal title to land by openly and continuously occupying it for a statutory period
Adverse possession enables a person who has openly, continuously, exclusively, and hostilely occupied another's land for the statutory period to claim legal title.
Question 5: In real estate financing, a 'mortgage' is best described as:
- A security interest in real property given to a lender to secure repayment of a loan (Correct answer)
- An outright sale of the property to the lending institution
- A lease agreement between the borrower and the bank
- A type of property casualty insurance policy
Correct answer: A security interest in real property given to a lender to secure repayment of a loan
A mortgage creates a lien on real property as collateral for a loan, giving the lender foreclosure rights if the borrower defaults on repayment.
Question 6: What is 'escrow' in the context of a real estate closing?
- A neutral third party holding funds and documents until all closing conditions are satisfied (Correct answer)
- A type of annual property tax installment payment arrangement
- A third-party home inspection and appraisal service
- A government recording fee charged at deed recordation
Correct answer: A neutral third party holding funds and documents until all closing conditions are satisfied
An escrow arrangement involves a neutral third party holding money, signed documents, and instructions until all conditions of the transaction are fulfilled and closing can occur.
ALP ALP Real Estate & Property Law 2
What is the purpose of a 'title search' in a real estate transaction?