Real Estate Real Estate Law & Regulations 2

Question 1

What distinguishes lender's title insurance from owner's title insurance?

Accepted Answer

Lender's policy covers only the loan amount and decreases as the loan is paid down; owner's policy covers the full property value

Answer

Lender's title insurance protects the lender's interest up to the loan amount and typically decreases as the loan balance falls, while owner's policy covers the full purchase price.

Question 2

A cloud on title refers to:

Accepted Answer

Any outstanding claim, lien, or encumbrance that may impair the owner's clear title

Answer

A cloud on title is any defect, claim, or encumbrance in the title records that casts doubt on the owner's right to the property and must be resolved before sale.

Question 3

Under a race-notice recording statute, a subsequent purchaser is protected if they:

Accepted Answer

Record first AND had no notice of prior unrecorded interests at the time of purchase

Answer

Under race-notice statutes (most common in the US), a subsequent bona fide purchaser who had no prior knowledge of an earlier claim and records first wins priority.

Question 4

A lis pendens is a recorded notice that:

Accepted Answer

Provides public notice that the property is subject to pending litigation

Answer

Lis pendens ('suit pending') is a notice recorded in the county records alerting potential buyers and lenders that the property is involved in active litigation.

Question 5

A mechanic's lien can be filed by a:

Accepted Answer

Contractor, subcontractor, or supplier who performed work or supplied materials for the property

Answer

Mechanic's liens give contractors, subcontractors, and material suppliers a security interest in the property when they are not paid for improvements.

Real Estate Practice Test

Real Estate Practice Test

Real Estate Real Estate Law & Regulations 2