CHCP Title Insurance & Escrow Procedures

Question 1

What is the primary purpose of title insurance?

Accepted Answer

Protect against title defects

Answer

Title insurance protects both the buyer and the lender from financial loss due to defects in the property's title that were not discovered during the title search. These defects could include errors in public records, forged documents, undisclosed heirs, or outstanding liens. It provides peace of mind by ensuring clear ownership and defending against future claims.

Question 2

What is escrow in real estate?

Accepted Answer

Neutral third party holding funds

Answer

Escrow in real estate refers to the process where a neutral third party holds funds and documents related to a transaction until all conditions of the sale are met. This ensures that both the buyer and seller fulfill their obligations before the property and money change hands. The escrow agent acts as a safeguard, providing security and impartiality to the closing process.

Question 3

Who typically pays for title insurance in a real estate transaction?

Accepted Answer

Buyer usually pays lender’s policy

Answer

In most real estate transactions, the buyer typically pays for the lender's title insurance policy, which protects the lender's investment in the property. The buyer may also choose to purchase an owner's title insurance policy, which protects their own equity. While practices can vary by region and negotiation, the lender's policy is almost always a buyer's cost.

Question 4

What is a title search?

Accepted Answer

Examination of ownership records

Answer

A title search involves a detailed examination of public records, including deeds, mortgages, liens, and judgments, to establish the legal ownership of a property. Its purpose is to uncover any defects, encumbrances, or claims against the title that could affect the buyer's clear ownership. This process is essential to ensure a smooth transfer of property rights.

Question 5

What happens during the escrow closing process?

Accepted Answer

Funds and documents exchanged

Answer

During the escrow closing process, all conditions of the purchase agreement are finalized, and the transfer of ownership officially occurs. This involves the exchange of funds from the buyer to the seller, the recording of the deed, and the distribution of all necessary closing documents. The escrow agent ensures that all parties have met their obligations before releasing funds and documents.

(CHCP) Certified Home Closing Professional Practice Test

(CHCP) Certified Home Closing Professional Practice Test

CHCP Title Insurance & Escrow Procedures