Module 7: Sample Test Questions
The Decision to Acquire or Transfer the Property
Chapter 16
Part 1a
1.
A mortgagee's title insurance policy pays:
a.
the lender
b.
the owner
c.
the seller
d.
both a and b
2.
Which of the following statements about title insurance is true?
a.
the mortgagee's policy is usually in an amount less than the owner's
policy
b.
premiums are paid annually
c.
the policy protects against future events
d.
title insurance is illegal in most states
3.
Which of the following is not an item that is covered by title insurance?
a.
forged documents
b.
errors in indexing of the documents
c.
undisclosed heirs
d.
guarantee of fair market value
4.
Which of the following is a title defect not covered by a title insurance policy?
a.
errors in tax records
b.
deeds by minors
c.
unrecorded documents
d.
deeds by persons reported to be single but are actually married
5.
Insurance against the risk of loss due to defects in the property's past title can
be obtained by:
a.
the liability portion of a standard homeowner's insurance policy
b.
title insurance which is purchased annually
c.
the homeowner's warranty (HOW) insurance
d.
none of the above
6.
The premium for the homeowner's title insurance policy is usually based upon:
a.
the value of the property
b.
the age of the property
c.
d.
7.
the amount of the mortgage
the time involved in preparing the abstract
A title insurance policy:
a.
protects all future owners of the insured property
b.
is purchased annually by the homeowner
c.
can protect the seller of the property
d.
all of the above
8.
Sally Smith purchased title insurance when she bought her home. One year after
purchasing the home a defect in the title is noticed when someone claims they
have an interest in the property. Who should pay for defending the claim?
a.
whoever sold the property to Sally Smith
b.
Sally Smith, since she is now the owner and has the most to lose
c.
the title insurance company
d.
no one, since a claim cannot be pursued once title insurance is
purchased
9.
A homeowner's standard property insurance policy would not cover which of the
following perils?
a.
theft
b.
smoke damage
c.
flooding
d.
personal liability
10.
While attending your party, a guest slips on the rug and breaks a leg. The
resulting law
suit is covered under a:
a.
title insurance policy
b.
homeowner's warranty policy (HOW)
c.
homeowner's property insurance policy
d.
private mortgage insurance (PMI) policy
11.
Most homeowner's warranty programs (HOW) provide:
a.
coverage for a limited time period
b.
that annual payments or premiums be paid
c.
protection against loss due to windstorms
d.
coverage for personal liability
SOLUTIONS
1.
2.
a
a
6.
7.
a
c
11.
a
3.
4.
5.
d
c
d
8
9.
10.
c
c
c
Part 2b
1.
You have just purchased a home and the seller provided you with a termite inspection report
indicating the property was free from termites on the day of closing. A week later the property is
infested with termites. Which of the following is true?
a.
you have a legitimate claim against the seller
b.
your real estate agent should have foreseen this problem and provided you with better
advice
c.
you have a claim against the termite inspection company
d.
none of the above
2.
Real estate taxes are:
a.
ad valorem taxes which means that they are calculated on the assessed value of the
property
b.
always calculated on the purchase price
c.
always paid in advance
d.
are paid with the federal income taxes
3.
RESPA applies to:
a.
first liens on residential property
b.
home improvement loans
c.
refinancing residential loans
d.
all of the above
4.
RESPA provides for all of the following except:
a.
kickbacks are illegal
b.
a good faith estimate of closing costs
c.
a maximum amount for closing costs
d.
completion of a HUD closing statement
5.
A third party besides the seller and buyer who completes the sales transaction is called the:
a.
escrow agent
b.
abstractor
c.
county clerk
d.
grantor
6.
Marketable title:
a.
means the property should sell easily
b.
is title free of defects
c.
is the same as covenant of seizin
d.
means the same as the habendum clause
7.
Which of the following is usually not the responsibility of the escrow agent?
a.
order a new deed
b.
prepare a settlement statement
c.
inspect the property the day of the closing
d.
check the status of property taxes and special assessments
8.
The closing is conducted according to the terms of the:
a.
deed
b.
listing agreement
c.
title insurance policy
d.
sales contract
9.
The Real Estate Settlement Procedures Act (RESPA) applies to:
a.
an escrow agent
b.
all real estate brokers
c.
a commercial bank lending funds for commercial use
d.
residential lenders
10.
Which of the following would not prove the seller's evidence of good title?
a.
an abstract and an attorney's opinion
b.
a certificate of title
c.
a Torrens certificate
d.
a quitclaim bond
11.
Title insurance usually will not cover which of the following items?
a.
boundary disputes, that are resolved by a survey
b.
encroachments
c.
unrecorded documents
d.
all of the above
12.
Which of the following is not required in a deed?
a.
description
b.
Consideration
c.
Identification of the parties
d.
all of the above are requirements of a deed
13.
If the grantor wants to convey only the rights, interest or title held at the time of transfer then she
should use a ______ deed.
a.
grant
b.
warranty
c.
quitclaim
d.
bargain and sale
14.
Which of the following deeds would allow the buyer recourse against the
seller if after the
closing it is found that the property has a title defect in the form of an individual stating he has
a claim to the property?
a.
quitclaim deed
b.
sheriff's deed
c.
bargain and sale deed
d.
none of the above
15.
In the sales contract between Smith the seller and Jones the buyer, a clause was included that
stated Smith would repaint the kitchen area. The day of the closing has arrived and after
inspecting the house Jones notices the kitchen has not been repainted. It is estimated the paint
job would cost $400. The best way to handle this situation would be:
a.
cancel the sales contract since a breach of contract has occurred
b.
postpone the closing until the seller can have the kitchen repainted
c.
go ahead and close title but deduct $400 from the funds paid to the seller
d.
the buyer should pay an additional $400 to the seller and then go ahead and close title
16.
Which of the following is true if the buyer agrees to allow the seller to remain in possession after
the closing date under a rental arrangement?
a.
the rent is nontaxable, since this is part of the closing arrangement
b.
the buyer is providing equity funds for the seller's convenience
c.
the buyer is assuming no additional risk since the seller will be paying rent
d.
both b and c
17.
Which of the following guidelines must the residential lender abide by?
a.
RESPA
b.
Regulation Z
c.
both a and b
d.
neither a nor b
18.
By means of which of the following covenants in a deed does the grantor warrant that he has
ownership interest in the property that the deed conveys?
a.
covenant of further assurance
b.
covenant of seizin
c.
covenant of quiet enjoyment
d.
covenant against encumbrances
19.
Which of the following instruments conveys ownership from the
seller to the buyer?
a.
title policy
b.
deed
c.
settlement statement
d.
sales contract
20.
In the Civil Rights Act of 1866:
a.
all types of discrimination on the basis of race were prohibited
b.
discrimination in housing on the basis of race was prohibited
c.
all minority classes were given freedom in employment
d.
minorities were allowed to enter the real estate business
21.
The Federal Fair Housing Act of 1968:
a.
prohibited discrimination on the basis of race when selling or leasing residential
property
b.
prohibited discrimination on the basis of race on all types of property
c.
gave minorities the right to purchase property in the suburbs
d.
added persons with handicaps and families with children
22.
The Equal Credit Opportunity Act:
a.
prohibited discrimination when granting credit
b.
gave minorities lower interest rates on loans
c.
established favored status for American Indians
d.
subsidized interest rates for construction in the central cities
23.
The terms "blockbusting," "steering," and "panic-peddling" are:
a.
acceptable listing techniques
b.
procedures used to market foreclosed properties
c.
prohibited under fair housing
d.
accepted techniques if approved by the seller
SOLUTIONS
1.
2.
3.
7.
8.
9.
10.
11.
12.
13.
14.
15.
d
a
a
c
d
d
d
d
d
c
d
c
4.
5.
6.
16.
17.
18.
19.
20.
21.
22.
23.
c
a
b
b
c.
b
b
a
a
A
c
Part 3c
1.
At the closing, the seller typically pays:
a.
for all utilities through closing
b.
the fee of the listing sales agent
c.
for all property taxes prior to the closing
d.
all of the above
2.
The buyer's earnest money deposit is shown on the closing statement as a:
a.
credit to the seller only
b.
credit only
c.
debit only
d.
both a debit and credit
3.
Which of the following usually is not paid in arrears?
a.
property taxes
b.
insurance payments
c.
mortgage interest
d.
all of the above are paid in arrears
4.
Which of the following typically is not the buyer's expense at closing?
a.
property taxes owed prior to closing
b.
fee of the buyer's agent
c.
downpayment on the loan
d.
premium on a new property hazard insurance
5.
Which of the following typically is paid by the buyer at closing?
a.
premium for a new hazard insurance policy
b.
recording fees for the deed
c.
origination fee for the new loan
d.
all of the above typically are paid by the buyer
6.
Which of the following normally would be prorated?
a.
attorney fees
b.
termite inspection fee
c.
property taxes
d.
all of the above
7.
Which of the following could be a prorated?
a.
property taxes
b.
prepaid insurance premiums
c.
rental payments
d.
all of the above
8.
The seller gives the buyer a $4,500 second mortgage as part of the purchase price. How would
this be shown in the closing statement(s)?
a.
debit buyer
b.
debit seller
c.
debit both parties
d.
credit both parties
9.
Which of the following would not be necessary for a deed to logically transfer ownership?
a.
delivery to the grantee
b.
accepted by the grantee
c.
recorded in the county records office
d.
signed by the grantor
10.
On the settlement or closing statement, the seller's fee owed to the listing agent normally
appears as a:
a.
debit to the seller
b.
credit to the buyer
c.
credit to the seller
d.
both a and b
SOLUTIONS
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
d
b
b
a
d
c
d
a
c
a