CHCP Real Estate Transactions & Documentation 4

Question 1

Which type of title insurance policy protects the lender's interest in the mortgaged property?

Accepted Answer

Lender's (mortgagee's) policy

Answer

A lender's (mortgagee's) title insurance policy protects the lender up to the loan amount against title defects.

Question 2

What is 'earnest money,' and what happens to it if the buyer defaults without a valid contingency?

Accepted Answer

A good-faith deposit; the seller may be entitled to keep it as liquidated damages

Answer

Earnest money is a good-faith deposit that the seller may retain as liquidated damages if the buyer defaults without a contractual excuse.

Question 3

What does a 'survey' provide in a real estate transaction?

Accepted Answer

A legal description and physical boundaries, showing encroachments or easements

Answer

A survey maps the property's legal boundaries and identifies encroachments, easements, and improvements that affect the parcel.

Question 4

A 'mechanic's lien' can cloud title to a property because:

Accepted Answer

It secures payment owed to contractors or suppliers who improved the property

Answer

A mechanic's lien gives unpaid contractors, subcontractors, or material suppliers a legal claim against the property for work or materials provided.

Question 5

In a 1031 exchange, the replacement property must be identified within how many calendar days of the relinquished property's closing?

Accepted Answer

45 days

Answer

IRS rules require the exchanger to identify potential replacement properties within 45 calendar days of selling the relinquished property.

(CHCP) Certified Home Closing Professional Practice Test