Real Estate Law & Regulations Flashcards

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

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

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.

A cloud on title refers to:

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

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.

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

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

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.

A lis pendens is a recorded notice that:

Answer: Provides public notice that the property is subject to pending litigation

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.

A mechanic's lien can be filed by a:

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

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

A short sale occurs when the property sells for:

Answer: Less than the outstanding mortgage balance, with lender approval

In a short sale, the lender agrees to accept less than the full loan balance owed, allowing the owner to sell and avoid foreclosure.