Real Estate Sales Exam Transfer of Title 3 — Questions and Answers
Question 1: Title that is free from reasonable doubt and marketable to a reasonably prudent buyer is called:
- Insured title
- Merchantable title (Correct answer)
- Abstract title
- Equitable title
Correct answer: Merchantable title
Merchantable (or marketable) title is title that a reasonable, informed buyer would accept and that a court would compel a buyer to accept.
Question 2: An abstract of title is BEST described as:
- A title insurance policy issued by a licensed insurer
- A condensed history of all recorded documents affecting a parcel (Correct answer)
- A survey showing property boundaries and improvements
- A deed that conveys bare legal title
Correct answer: A condensed history of all recorded documents affecting a parcel
An abstract of title is a chronological summary of all public records relating to a property, used by an attorney to render a title opinion.
Question 3: Which of the following BEST describes 'constructive notice'?
- Actual knowledge of a fact communicated personally to a party
- Knowledge the law presumes a person has because records are publicly available (Correct answer)
- Notice given by certified mail prior to a foreclosure sale
- A notice posted on the property itself
Correct answer: Knowledge the law presumes a person has because records are publicly available
Constructive notice is the legal presumption that a person knows information available in public records, regardless of actual knowledge.
Question 4: Title insurance that protects a lender's security interest in a mortgaged property is called a:
- Owner's policy
- Lender's (mortgagee's) policy (Correct answer)
- Gap coverage endorsement
- Extended coverage binder
Correct answer: Lender's (mortgagee's) policy
A lender's title insurance policy (mortgagee policy) protects the lender's mortgage lien up to the loan amount and is typically required by the lender.
Question 5: Under a 'race-notice' recording statute, a subsequent purchaser is protected only if they:
- Record before the prior grantee, regardless of knowledge
- Record first AND had no notice of the prior conveyance at the time of purchase (Correct answer)
- Took title for valuable consideration with actual notice
- Filed a lis pendens before the prior grantee recorded
Correct answer: Record first AND had no notice of the prior conveyance at the time of purchase
A race-notice statute protects a subsequent purchaser who records first AND purchased without notice of a prior unrecorded conveyance.
Question 6: The process by which title to real property passes from a deceased person who died without a will is called:
- Devise
- Bequest
- Intestate succession (Correct answer)
- Testamentary transfer
Correct answer: Intestate succession
Intestate succession is the statutory process determining how property passes when the owner dies without a valid will.
Question 7: When property is transferred by a court order rather than a voluntary act of the owner, it is known as:
- Voluntary alienation
- Involuntary alienation (Correct answer)
- Testamentary conveyance
- Donative transfer
Correct answer: Involuntary alienation
Involuntary alienation occurs when title passes without the owner's consent, such as through eminent domain, foreclosure, or adverse possession.
Real Estate Sales Exam Transfer of Title 3
Title that is free from reasonable doubt and marketable to a reasonably prudent buyer is called: