Title & Escrow UPDATED Actual Exam
Questions and CORRECT Answers
Title & Escrow - CORRECT ANSWER- ✔✔Escrow and title insurance typically go hand-in-
hand together in real estate sales or financing types of transactions. Many times, a title
insurance company will offer escrow services as well, or escrow can be offered by a separate
company dedicated solely to escrow functions. Escrow is a designated and neutral third party
firm that collects money and paperwork from all sides in the real estate transaction prior to
making any necessary payoffs to the sellers and existing lenders concurrently at the closing
and clear title insurance coverage.
What is title insurance? - CORRECT ANSWER- ✔✔It is a contract obligation where one
party agrees to reimburse, indemnify, or protect against any potential financial losses or
damages to the subject property which may occur under the designated terms and provisions
included within the title insurance contract. differs from life or casualty insurance such as car
or health insurance, which usually insure against future events such as an automobile accident
or health problems in one's older years. Insures against past events or histories
Title insurance, in turn, typically insures against past events or histories such as problems
associated with the following issues: - CORRECT ANSWER- ✔✔"Chain of title" ownership
or transfer histories
Zoning and usage issues
Improper easements and encroachments such as a neighbor's fence being improperly built on
a person's yard
Mistakes such an incorrect property addresses
Forgery and fraud where a previous seller's signature was signed by someone else without his
or her permission
The two main types of title insurance options available to property owners nationwide: -
CORRECT ANSWER- ✔✔Standard Coverage Policy
Extended Coverage Policy
Standard Coverage Policy: - CORRECT ANSWER- ✔✔It is usually the less expensive title
insurance option primarily since it offers fewer insurance coverage benefits. The insurance
risks are usually limited to certain types of off-record risks such as fraud in the chain of title,
defective past recordings, and the competency issues of past owners. Mechanic's liens, tax
,liens, judgments, and other defects against the property that a basic search of public records
may uncover are generally covered by this policies.
Extended Coverage Policy: - CORRECT ANSWER- ✔✔This more expensive and extensive
type of title insurance policy provides the same insurance coverage benefits as a standard
policy while also offering protection against past events or histories that aren't as easy to
discover without physical inspections or detailed verbal inquiries such as unrecorded
mechanic's liens, leases, or seller-financed wraparound mortgages or land contracts that can
"cloud" up the clear title history with questionable ownership interests still in place.
insures against many of the items excluded in the standard policy. Lenders require their
mortgagee policies to be extended coverage policies.
Escrow - CORRECT ANSWER- ✔✔Escrow officers and firms can interact the most with
parties or businesses as compared with any other people involved in the transaction, including
the agents and principals.
some of the basic functions of an escrow officer involved in a residential or commercial real
estate sales transaction: - CORRECT ANSWER- ✔✔Work with all parties in the transactions
including buyer, seller, and agents
Collects the necessary earnest money deposits
Orders the preliminary title report and examination for the subject property
Orders the appropriate title insurance requested by the parties
Coordinates the hazard insurance coverage with the home insurance agent
Gathers the third party inspection reports (e.g., termite and pest, home inspection)
Orders the demands for payoff from the existing lender(s) and owners
Requests copies of the buyer's new vesting information to be placed onto title at the closing
(i.e., John Smith, a single man holds title 100%)
Creates one, two, or more updated versions of escrow instructions that are primarily based
upon the submitted and signed purchase agreements, counteroffers, and any subsequent
addendums
Gather all tentative closing cost information from the new lender, buyer, seller, listing agent,
buyer's agent, and any third parties with unpaid bills such as home inspectors, pest control,
and appraisers
Prepare all closing documents
,Complete the closing concurrently with the payoff of any existing debt on the subject
property, and assist with the transfer of title to the new buyers
Collect and disburse all monies owed
Complete all post-closing details
title closing - CORRECT ANSWER- ✔✔is the culmination of the real estate transaction.
At the title closing: - CORRECT ANSWER- ✔✔The buyer completes his or her financing
arrangements (referred to as closing the loan).
The seller transfers the title.
Both the buyer and seller pay the necessary taxes, fees and other charges.
Who Attends Title Closing - CORRECT ANSWER- ✔✔Buyer - Pays for the property and
receives clear title.
Seller - Conveys the property and receives payment.
Closing agent - Prepares all the documents that need to be signed at the closing, including the
actual settlement statements that show all the debits and credits assigned to the buyer and
seller in the transaction.
Others who may attend the closing are: - CORRECT ANSWER- ✔✔Attorneys for the parties
- Examine the documents to ensure that the best interests of the clients are being met
Lender representative - Examines documents and makes sure the property getting the loan
has clear title
Real estate agent - Collects commission
Title company representative - Reviews documents and answers questions about the title
Closing Documents - CORRECT ANSWER- ✔✔Deed
Survey
Other Documents
Deed - CORRECT ANSWER- ✔✔The deed is the most important document at closing, since
it transfers the property to the purchaser. The deed is usually prepared by the seller's attorney,
who uses the old deed as a template to prepare the new one.
, Survey - CORRECT ANSWER- ✔✔The purchaser, purchaser's lender, or title company may
require a survey to verify the location and size of the property. The survey also identifies any
easements, encroachments, or floodplain hazard.
Other Documents - CORRECT ANSWER- ✔✔Broker's commission statement
Certificate of occupancy
Flood insurance policy
Homeowner's insurance
Lead-based paint disclosure
Lease
Lien waivers
Mortgage documents
Property inspection
Settlement statement
Title insurance policy
Where Held - CORRECT ANSWER- ✔✔The sale contract usually specifies where the
closing will be held. It can be at any one of a number of office locations:
Title company
Lender
Attorney
Closing agent
County recorder
Broker's Role - CORRECT ANSWER- ✔✔Facilitate a closing during the period of the
agreement sale and closing date.
Involved in ordering inspections, surveys or appraisals.
Check the progress and activities
Do a walk through with buyers
