Transfer of Property Flashcards

Miguel recorded a grant deed to Tom. Miguel afterward changed his mind and attempted to cancel the delivery, saying there had been no delivery to Tom. Why did Miguel's attempt fail?

Answer: With recording, delivery and acceptance are assumed.

When a deed is recorded in public records, it creates a legal presumption that the deed has been delivered by the grantor and accepted by the grantee. This act provides constructive notice to the world of the transfer of ownership. Therefore, once recorded, Miguel cannot unilaterally claim there was no delivery to invalidate the transfer.

Bell got $950,000 for her home residence. She paid $750,000 for the house four years ago. During her ownership, she invested $300,000 in capital renovations. What may Bell deduct on her tax return?

Answer: None of the above

Bell's adjusted cost basis is her original purchase price plus capital renovations ($750,000 + $300,000 = $1,050,000). Since her selling price ($950,000) is less than her adjusted cost basis, she incurred a loss of $100,000. Under federal income tax laws, losses on the sale of a personal residence are not tax-deductible.

A deed is a ____

Answer: It is not necessary to record the transfer of title.

A deed is a legal instrument that transfers title to real property. While recording a deed provides constructive notice to the public and protects the grantee's interest against subsequent claims, it is not a legal requirement for the transfer of title itself to be valid between the grantor and grantee. The transfer of title occurs upon proper delivery and acceptance of the deed.

In the case of an owner-occupied single-family dwelling, which of the following is not tax deductible under federal income tax laws?

Answer: Expenses for landscaping.

Under federal income tax laws, certain expenses for an owner-occupied single-family dwelling are tax-deductible, such as mortgage interest payments, property taxes, and sometimes mortgage prepayment penalties. However, expenses for landscaping are considered personal maintenance or improvements and are generally not tax-deductible.

A written summary of the chain of title is known as a (n) ____ once the public records have been reviewed.

Answer: the title's abstract

An abstract of title is a condensed history of all recorded documents affecting a particular parcel of real estate. It is prepared by an abstractor after reviewing public records and summarizes the chain of ownership, liens, encumbrances, and other relevant legal instruments. This document helps determine the current status of the title.

A real estate licensee is prohibited from doing all of the following, except , unless otherwise/vise licensed.

Answer: real estate for sale

A real estate licensee's primary function is to facilitate transactions involving real estate, such as buying, selling, or leasing properties. Therefore, engaging in 'real estate for sale' is a core and permissible activity for a licensee. The other options (drafting building plans, providing tax advice, providing legal counsel) require separate professional licenses and fall outside the scope of a standard real estate license, making them prohibited unless the licensee holds those additional qualifications.

The word "recurring costs" is used in an escrow statement to refer to

Answer: Account items are impounded.

In an escrow statement, 'recurring costs' refer to expenses that are paid repeatedly over time, such as property taxes and insurance premiums. These funds are typically collected by the lender and held in an impound or escrow account. This ensures that these ongoing obligations are met, protecting both the homeowner and the lender's interest in the property.

Which of the following individuals or entities is prohibited from working in the escrow industry?

Answer: The transaction's principal

An escrow holder must maintain strict neutrality and impartiality in a real estate transaction. The principals (buyer and seller) are directly involved and have vested interests, which would compromise the unbiased role required of an escrow agent. Therefore, a principal in the transaction is prohibited from acting as the escrow holder for that specific transaction.

Sarah Collins, a single woman, holds the recorded title to a piece of real estate. She executes a transfer to the property exclusively in the name of Angel Castro, a married woman, after her marriage to James Castro. The following is a discrepancy in the grantor's name:

Answer: a cloud on the title.

A 'cloud on the title' refers to any outstanding claim, encumbrance, or discrepancy that impairs the owner's clear title to the property. In this scenario, the change in the grantor's name and marital status (from Sarah Collins, single, to Angel Castro, married) without clear documentation linking the two identities creates an inconsistency in the chain of title. This makes the ownership unclear and could hinder future transfers, thus constituting a cloud on the title.

Mr. Rodrigo's duplex had a $750,000 cost base when he bought it. According to the tax assessor, the value breakdown is 80 percent renovations and 20 percent land. Mr. Rodrigo depreciated the improvements at a rate of 2% per year for the first five years. Mr. Rodrigo then paid $50,000 to a licensed contractor to install a swimming pool. How much will the property's modified cost base be once the pool is finished?

Answer: 740,000

The modified cost base is calculated by taking the original cost, subtracting accumulated depreciation on the improvements, and then adding the cost of any new capital improvements. Mr. Rodrigo's initial cost base was $750,000, with $600,000 for improvements (80%) and $150,000 for land (20%). After 5 years of 2% depreciation on improvements ($12,000/year), total depreciation is $60,000. The adjusted basis for improvements is $600,000 - $60,000 = $540,000. Adding the land value ($150,000) and the new swimming pool ($50,000) results in a modified cost base of $540,000 + $150,000 + $50,000 = $740,000.

The title chain refers to ____.

Answer: a complete record of all conveyances and encumbrances influencing a property's title

The 'chain of title' is a historical record that meticulously traces the ownership of a property from its original grant to the present day. It encompasses all transfers of ownership (conveyances) and any encumbrances, such as mortgages or liens, that have affected the property's title over time. This comprehensive record is essential for establishing clear ownership and identifying any potential defects.

A standard title insurance policy covers the ____

Answer: any of the parties' incompetence

A standard title insurance policy primarily protects against defects in the title that are discoverable through a thorough search of public records. This includes issues like forgery, fraud, or the legal incompetence of a party involved in a previous transaction, which would render a deed invalid. Other issues like encroachments, zoning regulations, or unrecorded easements by prescription typically require a physical inspection or survey and are usually not covered by a standard policy.

A probate property is valued at $960,000. The highest bid at auction is $900,000. Any other offer would have to be at least for the court to consider it.

Answer: 945,500

In California probate sales, if an initial bid is accepted, any subsequent overbid in court must meet specific statutory requirements. The first overbid must exceed the original accepted bid by at least 10% of the first $10,000, plus 5% of any amount over $10,000. For an initial bid of $900,000, this calculation is: $900,000 (original bid) + ($10,000 * 0.10) + (($900,000 - $10,000) * 0.05) = $900,000 + $1,000 + $44,500 = $945,500.

An ad valorem tax is defined as which of the following?

Answer: Tax on real estate.

The term 'ad valorem' is Latin for 'according to value.' An ad valorem tax is a tax whose amount is directly proportional to the assessed value of the item being taxed. Property taxes, which are levied on real estate based on its appraised value, are the most common example of an ad valorem tax.

Which of the following is the most likely reason for a real estate sales escrow to be terminated?

Answer: The buyer's and seller's mutual agreement.

An escrow for a real estate sale is essentially a contractual agreement between the buyer and seller, managed by a neutral third party. Like any contract, it can be terminated by the mutual consent and agreement of all parties involved. While other factors might lead to a termination, mutual agreement is the most straightforward and common way to legally conclude an escrow without dispute.

Which isn't true of a tenancy in common?

Answer: On their death, a tenant in common may not leave their interest in the property to others.

Tenancy in common is a form of co-ownership where each owner holds an undivided interest in the property, and these interests can be unequal. A defining characteristic is that there is no right of survivorship; upon the death of a tenant in common, their interest does not automatically pass to the other co-tenants but instead passes to their heirs or beneficiaries as specified in their will. Therefore, the statement that they cannot leave their interest to others is incorrect.

An escrow agent opened a preliminary title report order for the sale of a property on April 1, 2020. The seller bought the house in 1998 with the help of a Federal Housing Administration (FHA) loan, which they are still paying down. On April 5, 2020, a preliminary title report will ____.

Answer: show a trust deed with the seller as the trustor

A preliminary title report provides a snapshot of the current status of a property's title, including any existing liens or encumbrances. Since the seller purchased the house with an FHA loan in 1998 and is still making payments, there would be an active trust deed recorded against the property. In this arrangement, the seller (borrower) is identified as the trustor, indicating an outstanding loan secured by the property.

A ____ doesn't need to be recorded.

Answer: deed of grant

While recording a deed of grant is highly recommended to provide constructive notice of ownership and protect the grantee's interest against subsequent claims, it is not legally required for the deed to be valid and transfer title. A deed becomes effective upon proper delivery and acceptance. Other documents like a notice of completion, default notification, or declaration of homestead, however, must be recorded to be legally effective or to provide proper public notice.

Which of the following amounts for documented transfer tax stamps is incorrect?

Answer: 111.00

Documentary transfer tax is typically calculated based on a specific rate per increment of value (e.g., $0.55 per $500 or $1.10 per $1,000 in many jurisdictions). This means the total tax amount should always be an exact multiple of the base tax unit (e.g., $0.55). An amount like $111.00 is not an exact multiple of $0.55 or $1.10, making it an unlikely or incorrect total for documented transfer tax stamps under standard calculation methods.

An occupant must show ____ in order to establish adverse possession title.

Answer: They have paid all taxes due on the property during their occupancy.

To establish title through adverse possession, an occupant must meet several strict legal requirements, which vary by jurisdiction. In many states, including California, a crucial condition is that the adverse possessor must have paid all property taxes levied against the property during the entire statutory period of their continuous and uninterrupted occupancy. This demonstrates a clear claim of ownership and financial responsibility.