Real Estate Sales Transfer of Title Questions and Answers — Questions and Answers
Question 1: A seller is conveying property to a buyer and wants to guarantee the title is clear only for the duration of their own ownership, not against any prior defects. Which type of deed would accomplish this?
- General Warranty Deed
- Special Warranty Deed (Correct answer)
- Quitclaim Deed
- Bargain and Sale Deed
Correct answer: Special Warranty Deed
A special warranty deed warrants the title only against defects that arose during the grantor's (seller's) period of ownership. A general warranty deed provides the broadest protection, covering the property's entire history. A quitclaim deed offers no warranties at all. A bargain and sale deed implies the grantor holds title but offers no express warranties against encumbrances.
Question 2: The process by which a government entity can acquire privately owned real estate for public use, after providing just compensation to the owner, is known as:
- Escheat
- Adverse Possession
- Foreclosure
- Condemnation (Correct answer)
Correct answer: Condemnation
Condemnation is the legal process of exercising the power of eminent domain to take private property for public use. Escheat is the reversion of property to the state when an owner dies without heirs. Adverse possession is acquiring title through open and notorious use. Foreclosure is the seizure of property for non-payment of a mortgage debt.
Question 3: For a deed to be valid and effectively transfer title, several elements are essential. Which of the following is NOT a requirement for a valid deed?
- Signature of the grantee (Correct answer)
- Words of conveyance (granting clause)
- An adequate legal description of the property
- Signature of the grantor
Correct answer: Signature of the grantee
A valid deed must be signed by the grantor (the one giving the property), but it does not need to be signed by the grantee (the one receiving it). Acceptance by the grantee is required, but this is typically presumed upon delivery and does not necessitate a signature on the deed itself.
Question 4: A property owner sells their house to Buyer A, who pays in full but fails to record the deed. A week later, the owner fraudulently sells the same house to Buyer B, who is unaware of the prior sale. Buyer B immediately records their deed. In a 'notice' jurisdiction, who generally has superior title to the property?
- Buyer A, because they were the first to purchase.
- The original owner, because the sales were fraudulent.
- Buyer B, because they were an innocent purchaser for value without notice. (Correct answer)
- The title will be split between Buyer A and Buyer B.
Correct answer: Buyer B, because they were an innocent purchaser for value without notice.
Recording acts are designed to protect innocent parties. In a 'notice' jurisdiction, a subsequent bona fide purchaser (one who pays value without notice of a prior unrecorded interest) has superior title over a prior unrecorded claim. Because Buyer B was unaware of the sale to Buyer A and recorded their deed, they are protected.
Question 5: A homebuyer purchases an owner's title insurance policy at closing. What is the primary function of this policy?
- To guarantee the buyer will not suffer any future physical damage to the property.
- To protect the buyer from financial loss due to title defects that existed prior to the purchase. (Correct answer)
- To ensure the property will appreciate in value over time.
- To cover the lender's interest in the property in case of the buyer's default.
Correct answer: To protect the buyer from financial loss due to title defects that existed prior to the purchase.
An owner's title insurance policy is a contract that protects the new owner against financial losses from past events, such as forged deeds, undisclosed heirs, or recording errors that could cloud the title. It looks backward in time to protect against pre-existing defects. It does not cover physical condition or future appreciation. The lender's interest is protected by a separate lender's policy.
Question 6: An individual dies intestate and has no identifiable heirs. What is the legal process by which the ownership of their real property transfers to the state?
- Probate
- Devise
- Foreclosure
- Escheat (Correct answer)
Correct answer: Escheat
Escheat is the government's right to take ownership of property left by a person who died intestate (without a will) and without any known heirs. This process ensures property does not become ownerless. Probate is the court process of validating a will, while devise is the act of leaving real property in a will.
Real Estate Sales Transfer of Title Questions and Answers
A seller is conveying property to a buyer and wants to guarantee the title is clear only for the duration of their own ownership, not against any prior defects.
Which type of deed would accomplish this?