NALA Real Estate Law & Transactions 3 — Questions and Answers
Question 1: What distinguishes a joint tenancy from a tenancy in common?
- Joint tenants cannot sell their interest without consent of all co-owners
- Joint tenancy includes the right of survivorship; tenancy in common does not (Correct answer)
- Tenancy in common requires equal shares among all co-owners
- Joint tenancy is only available to married couples
Correct answer: Joint tenancy includes the right of survivorship; tenancy in common does not
The defining feature of joint tenancy is the right of survivorship, meaning a deceased joint tenant's share passes automatically to the surviving joint tenants, bypassing probate.
Question 2: A deed must be delivered and accepted to be effective. Which scenario best illustrates a valid delivery?
- Grantor places a signed deed in a safe deposit box with instructions to give it to the grantee after death
- Grantor hands the signed deed to the grantee, who accepts it (Correct answer)
- Grantor mails an unsigned deed to the grantee
- Grantor records the deed without the grantee's knowledge or consent
Correct answer: Grantor hands the signed deed to the grantee, who accepts it
Valid delivery requires the grantor to intend to transfer title presently and the grantee to accept; handing the deed directly to an accepting grantee satisfies both requirements.
Question 3: Under RESPA, which fee is a lender permitted to charge before providing the Loan Estimate?
- Origination fee
- Appraisal fee
- Credit report fee (Correct answer)
- Title search fee
Correct answer: Credit report fee
RESPA/TRID rules prohibit collecting any fee before the consumer receives the Loan Estimate, with the sole exception of a bona fide and reasonable credit report fee.
Question 4: What is the primary purpose of a subordination agreement in a real estate transaction?
- To release a lien from the property
- To make a senior lien subordinate to a later-recorded lien (Correct answer)
- To allow the borrower to defer mortgage payments
- To transfer the borrower's obligations to a new owner
Correct answer: To make a senior lien subordinate to a later-recorded lien
A subordination agreement is a contract in which a lienholder agrees to allow its lien to have lower priority than a subsequently recorded lien, often required when refinancing.
Question 5: Which doctrine allows a buyer to rescind a real estate contract when the seller knew of a material defect and deliberately concealed it?
- Caveat emptor
- Merger doctrine
- Active fraud or fraudulent concealment (Correct answer)
- Parol evidence rule
Correct answer: Active fraud or fraudulent concealment
While caveat emptor historically placed the risk on buyers, active fraud or fraudulent concealment of a known material defect by the seller gives the buyer grounds to rescind the contract.
Question 6: In a mortgage foreclosure proceeding, what is the 'equity of redemption'?
- The lender's right to collect any deficiency after foreclosure sale
- The borrower's right to redeem the property by paying the full debt before the foreclosure sale is completed (Correct answer)
- The mortgagee's right to receive the proceeds of the foreclosure sale first
- The court's power to reduce the outstanding loan balance
Correct answer: The borrower's right to redeem the property by paying the full debt before the foreclosure sale is completed
Equity of redemption is the common-law right of the mortgagor to reclaim the property from foreclosure by paying the entire outstanding debt and costs before the sale is finalized.
Question 7: A seller refuses to complete the sale of a unique parcel of land. Which remedy is MOST appropriate for the buyer?
- Compensatory damages equal to the difference in market value
- Specific performance (Correct answer)
- Liquidated damages from the earnest money deposit
- Rescission and restitution of the purchase price
Correct answer: Specific performance
Because every parcel of real property is considered legally unique, money damages are deemed inadequate and courts will grant specific performance to compel the seller to convey.
NALA Real Estate Law & Transactions 3
What distinguishes a joint tenancy from a tenancy in common?