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Ch. 5 Questions

Terms in this set (45)

Which of these persons or entities may NOT engage in the escrow business?
a principal in the transaction
*a principal in the transaction cannot perform as an ESCROW AGENT in the same transaction as they re not impartial or neutral
Escrow calculates protons based on ______ days in a year
360
*escrow works on a 30 day month multiplied by 12 months. thus for the purpose of calculating prorations, escrow considered there to be 360 days in a year.
which of the following would MOST likely result in the termination of a real estate sales escrow?
the mutual agreement of the buyer and the seller
*escrow can be CANCELLED BY MUTUAL AGREEMENT between both principals, not unilaterally by one party. the broker is not a party to the escrow, therefore, they cannot authorize termination. in the event of the death of either party, their estate is still responsible for performing.
which of the following will NOT terminate an escrow?
the broker's order to terminate escrow.
*the broker is not a principal to the escrow and therefore has no authority to cancel it. a mutual agreement between the parties or the failure of a contingency to occur will cancel the escrow, as will the destruction of the property during the escrow.
in an escrow statement, the term "recurring costs" is in reference to:
impound account items
*"recurring" means costs that will repeat. in this question only IMPOUNDS are recurring.
escrow closes on the 16th day of February (28 days). the seller receives $500 in rent for the month of February. the seller:
owes the buyer $250
*escrow calculates the month as 30 days disregard the reference to the literal number of days in the month. the 16th day of the month is the first day of the second half of the month an thus the seers owl the buyer precisely half of $500
which is NOT true of the tenancy in common?
a tenant in common may not will their interest in the property to others on their death.
*AC and D are true of the TENANCY IN COMMON as distinct from a community interest such as joint tenancy. however a tenant in common may will their interest in the periphery to others on their death.
a person holding title to rent property in severalty:
has sole ownership of the property
*the word "severalty" is similar to "sever" thus. person holding title to real property in severalty has sole ownership of a property.
unless otherwise lives,ed a real estate licensee is prohibited from doing all of the following, except:
sell real estate
*other answers are not covered under real estate licensure
Sara and Marshal are joint tenants. marshal obtained a loan from a lender secured by his interest in the property. when marshal dies:
Sara owns the property free and clear of the encumbrance
*JOINT TENANTS receive title clean of any obligations made by the deceased partner. further joint tenants do not need to be married and joint tenancy is not limited to only 2 people.
the words "time, title, interest and possession" are most closely related to which of the following concepts:
joint tenancy
*Time, tittle, interest and possession (TTIP) related to joint tenancy only
The California Land title Association (CLTA) standard policy and the American Land Title Association (ALTA) policy does NOT protect the insured against:
encumbrances which are created or become encumbrances after issuance of the policy
*both the California Land Title Association (CLTA) standard and American Land Title Association (ALTA) policies provide coverage for all answer selections except c
A standard policy of title insurance covers:
incompetence of any of the parties
*only ALTA policy will give additional coverage such s the encroachments and prescriptive easements. incompetence of any of the parties is covered by both standard and extended policies.
A standard policy of title insurance does NOT cover:
all of the above:
-unrecorded liens
-easements and liens on the property not revealed by the public records
- rights of parties in possession.
*only ALTA policy covered these items. recognize how info in this question can make it possible to answer other questions regarding alternative title insurance policies.
On April 1, 2020 an escort agent opened a preliminary title report order for the sale of a property. The seller purchased the one in 1998, financing it with the Federal Housing Administration (FHA) loan on which they are currently making payments. A preliminary title report dated April 5, 2020 will:
show a deed of trust with the seller as trustor
*on April 5th the seller will still be the owner and there rustier on the FHA loan thus answer b is the only correct answer.
An American Land Title Association (ALTA) policy of title insurance goes beyond the protection afforded by a California Land Title Association (CLTA) Policy in guarding against;
the location of property lines according to a formal survey
When the public record have been examined, a written summary of the chain of title is knowns as an:
abstract of title
*"chain of title"in the question which is something that may also be covered in another question. the recored of title is summarized in the ABSTRACT OF TITLE
A deed is recorded and indexed based on:
the grantor and grantee names alphabetically
*the names of both parties to the transfer are named and indexed accordingly.
Recording is not required for an:
grant deed
*grant deed is valid whether or not it is recorded
Which of these I most correct concerning delinquent tax and redemption rights?
the effect of a "sale to the state" by the tax collector is to start the redemption period running.
*the REDEMPTION PERIOD begins with the sale.
The annual property taxes an owner of a home needs to pay are determined by:
assessing the land and improvements separately, then multiplying the total by one tax rate
*the land and improvements are valued separately though the tax rate is the same.
Which of the following is an ad valorem tax?
Real estate tax
*AD VALORUM is the tax assessor's valuation for real estate
During a sales escrow, the escort officer received two structural pest control reports. the escrow office is to:
notify the buyer and seller of the discrepancy and obtain written instructions as to which report to sue.
*only the principals can make decisions about transaction terms to escrow.
The instrument used to transfer title to a personal property is is the:
bill of sale
*BILL OF SALE is used to transfer personal property
All of the following may be added to the original cost basis of real property to arrive at an adjusted basis for federal income tax purposes, except:
the monthly mortgage payments
*mortgage payments are the exception. the other answer section have similarities and may be added to the original cost basis of real property to arrive at an adjusted basis for federal income tax purpose.
a. miscellaneous sale expenses
b. the real estate brokerage commission earned on the sale
c. the cost of improvements
d. the monthly mortgage payments.
Which of the following are NOT tax deductible under federal income tax laws concerning an owner-occupied single family dwelling?
landscaping expenses
*only option that is not tax deductible for owner occupied residences
a. mortgage interest payments
b. a mortgage repayment penalty that was incurred
c. property taxes
d. landscaping expenses.
All of the following are items contained in a closing statement are generally prorated, except:
delinquent interest
*delinquent interest is a seller expense and not prorated for the buyer
Which of the following would be an incorrect amount for documentary transfer tax stamps?
$111.00
*transfer stampes come in pulpous of $0.55
At a tax foreclosure sale, the winning bidder receives an:
tax deed
*the answer in this question is contained in the language of the question itself.
A deed:
does not have to recorded to transfer title
*a deed does not need to be recorded to be vial, but must be recorded to give constructive notice(answer selection a)
a. gives constructive notice
b. when recoded, gives actual notice of its contents
c. request buyer occupancy
b. does not have to be redeemed to transfer title.
Implied warranties are NOT included in a:
quitclaim deed
*the quitclaim deed is the exception here. there are no guarantees or warranties with a quitclaim deed.
A grant deed has been excused once it has been:
signed by the grantor
*a signature completes the execution. the transfer process delivery and acceptance to be complete.
Recorded title to a parcel of real property is vested in the name of Jennifer Barker, a single woman. after her marriage to Colin Matthews, she executes a deed to the property only in the name of Jennifer Matthews, am married woman. the discrepancy in the grantor's name is:
a cloud on the title
*an inconsistency in the names of the title holder and grantor on the deed will require clarification, creating a cloud on title unit this has been accomplished.
A land contract, when compared to a grant deed transfer, is defer in the:
all of the above
a. interest conveyed
b. signatures of the principal parties
c. designation of purchase price
*all of these will differ between a contract and a deed.
A property in probate is appraised at $960,000. at action the highest bid is $900,000. for the court to consider any other offer, it owls have to be at least:
$945,500
*a probate court will only consider a subsequent bid that is raised by an amount equal to 10% of the first $10,000 ($1,000) plus 5% on the balance ($44,500)
A writ of execution is issued for an:
sheriff's sale
*a sheriff's sale will cause a wry of execution to be drawn and recorded
When an eligible veteran purchases a home under the CalVet program, the gran deed in in favor of:
the California Department of Veteran Affairs
*the CalVet sale is a LAND SALES CONTRACT with the CALIFORNIA DEPARTMENT VETERANS AFFAIRS as the seller (vendor)
To establish title by adverse possession, an occupant must show:
the have paid all taxes assess against the oreprty during their occupancy
*only this answer fits the requirements for adverse possession. the perish fo possession must be at least 5 years, not 2.
Chain o title refers to:
an exact history of conveyances and encumbrances affecting title to a property
*this is an expose of one question delivering the answer to different question. another question in the action defines the chain o title as a written summary of public records.
An offer based on a $300,000 loan assumption was made and accepted. During escrow, it was discovered the loan was for $290,000 not $300,000. What is the most probable outcome?
the buyer can void the contract
*this is an example of a contingency in an escrow. this contingency favored the buyer and allowed them to void the sale since the loan balance was not as previously stated.
Mike executed a grant deed to Trevor and recorded it. Later, mike changed his mind and sought to set the conveyance aside, claiming there hand been no delivery to Trevor. Why was Mike unsuccessful in his effort?
delivery and acceptance is presumed with recording
*the transfer process requires delivery and acceptance to be complete. recording presumes delivery and acceptance since the recorded deed is mailed to the grantee.
All of the following may be impound requirements for a borrower, except:
mortgage interest
*the exception here is MORTGAGE INTEREST. the other answer selection are related to that monies are accumulated in the amount account agains an annual or semi-annual payment
Anna sold her primary residence for $950,000. She originally paid $750,000 for the property four years ago. she spent $300,000 on capital improvements during her ownership. what can Anna write off when filling her tax returns?
none of the above
a. $715.00
b.$220.00
c. $495.00
*first, determine the amount of the capital gain or loss. $750,000 purchase + $300,000 improvements = $1,050,000 adjusted basis. a sale price of $950,000 create a $1,000 capital loss.however, capital losses are not permitted on a primary residence.
Mr Black purchased a home for $650,000. The terms of the sale stated Mr Black will make a down payment of $200,000 and assume an exiting first trust deed for the balance of purchase price. at a basic rate of 40.55 per $500, how much will the transfer tax be?
$375.50
*transfer taxes are charges against new money only. since the transaction included the assumption of $450,000 exiting mortgage, the only tax charge is agains the $200,00 down payment. the transfer tax rate int he country where the property is located is $0.55 per $500, with equals $1.10 per $1,000.
multiply $1.10 by 200 totally $220 in transfer taxes paid on the sale.
The original cost basis on a duplex purchased by Mr Brown was $750,000. The tax assessor stated the breakdown of values to be 80% improvements and 20% on land. over the 1st five years, mr brown deprecated the improvements act rate of 2% each year. mr town the hired a lives contractor to install a swimming pool at cost of $50,000. once the pool was completed, how much will the adjusted cost basis of the property be?
$792,000
*DEPRECATION can only be taken on the improvements (80%) portion of the purchase price.

in this example 80% x 750,000= 600,000 (improvement portion of the original basis).

600,000 x .02 (2%)= 12,000 x 5 years=$60,000 (accused deprecation).

subtract the accused depceaion from the original cost bases $750,000 (original cost basis) - $60,000 (accused deprecation)= 690,000 (deprecation cost basis) finally, add $50,000 for the new swimming pool improvement + 690,000 (depricaiotn cost basis) = 740,000 (adjusted cost basis).
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