RE Chapter 2

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RE Chapter 2
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  1. The written instrument which, when properly executed, delivered, and accepted, conveys title to real property from one person to another
    Deed
  2. Deeds are recorded in ________, and indexed by the names of _______
    • The county where the property is located
    • The parties (grantor/grantee)
  3. Parties in a deed
    Grantor and grantee
  4. Essentials of a valid deed (GAGAPIG)
    • Grantor is competent to convey (must be legal adult or emancipated)
    • Adequate description of the property
    • Grantee is capable of receiving (not fictitious person)
    • Action clause (must say "grant," "transfer," or "convey"), aka granting clause
    • Proper description of the parties
    • In writing
    • Grantor's signature (makes the deed executed)
  5. A deed is deemed to be executed when _____
    It is signed by the grantor
  6. In deed delivery & acceptance, the following conditions are necessary: (3)
    • Intention (of grantor to pass title immediately)
    • Acceptance (by grantee)
    • Possession (of the deed by the grantee)
  7. A deed cannot be delivered upon _____
    Death
  8. While ______ a deed can be substituted for its possession, and it presumes a valid delivery and acceptance of a deed (and thus passes title), it will not hold up in court
    Recording
  9. Declaration before a notary by a person (grantor) who has executed a document stating that he did in fact sign the document
    Acknowledgment
  10. A deed must be _____ to be recorded
    Acknowledged
  11. Once acknowledged, a deed is accepted as "______" in court
    Prima Facie
  12. It is not legally required to _______ or _____ a deed for it to be valid or transfer title
    • Acknowledged
    • Recorded
  13. An employee of a corporation who is a notary may notarize a deed involving that cooperation, as long as ________
    She does not have a personal interest in the transaction
  14. Documents that must be recorded to be valid: (4)
    • Mechanic's liens
    • Homestead exemptions
    • Lis pendens
    • Abandonment of homestead
  15. Notice can be ____ or _____
    • Actual
    • Constructive
  16. Type of notice in which a person actually knows something
    Actual notice
  17. Type of notice in which events are assumed to be known to someone, whether or not they actually know them, because of legal circumstances
    Constructive (legal) notice
  18. Recording a document gives _______ notice
    Constructive
  19. The act of taking possession of land, while holding an unrecorded deed, gives ____ notice
    Constructive
  20. The _____ valid deed that is recorded determines the owner, unless that person had _____ prior to recording
    • First
    • Notice (actual or constructive) of the rights of others
  21. A deed signed, delivered, and accepted, but not recorded, is valid between _______, but invalid as to subsequent _________ without notice
    • The parties
    • Recorded interests
  22. Most commonly used deed
    Grant deed
  23. Grant deeds contain 2 implied warranties:
    • The grantor has not conveyed title to any other person
    • The estate is free from undisclosed encumbrances (not covered by title insurance)
  24. Deed that contains no warranties, and is usually used to quiet title or clear a cloud, merely conveys the rights of the grantor (if any)
    Quitclaim deed
  25. In CA, the warranty deed has been replaced by the use of ______
    Title insurance
  26. Trust deeds and reconveyance deeds are ________, not deeds
    Loan documents
  27. How property is owned, also called "tenancy"
    Title vesting
  28. A mode or method of holding title to real property by a lessee or owner
    Tenancy
  29. Ownership by one person, individual, or corporation; sole ownership
    Ownership in Severalty
  30. General term for ownership by 2 or more persons that hold title jointly and severally
    Concurrent estates
  31. Method of holding title (type of tenancy) that is created when 2 or more persons elect to take ONE title as joint tenants
    Joint tenancy
  32. Four unities required for Joint Tenancy (must be done together)
    • Time
    • Title
    • Interest
    • Possession
  33. 3 ways a joint tenancy can be created, all of which require the people to deed the property to themselves
    • By husband and wife
    • By existing joint tenants plus a new joint tenant
    • By existing tenants in common
  34. The most important characteristic of joint tenancy
    Right of survivorship
  35. Joint tenants can do almost anything with their interest except ______
    Will it
  36. When a joint tenant dies, the surviving joint tenant ___________
    Receives the deceased tenant's interest automatically, without any liability to creditors of unforeclosed liens
  37. A joint tenant may ________ without consent of other joint tenants
    Sell his share/interest
  38. If a joint tenant sells his share of the property, the new owner usually becomes a _______
    Tenant in common
  39. Recording a lien against a joint tenant's interest  does not sever that interest from the joint tenancy until ________
    The lien is foreclosed
  40. Type of tenancy in which each person has a right of possession and does not need to pay rent to their owners
    Tenancy in Common
  41. 1 unity required for Tenancy in common
    Unity of possession
  42. In a tenancy in common, ownership interests may be _____, and tenants may ______ their interests
    • Unequal
    • Will
  43. One tenant in common cannot grant _____
    Easements
  44. Type of tenancy in which each spouse owns 50%, assumed when husband and wife buy property
    Community property
  45. Under community property, the purchase of real property encumbered with a loan by one spouse is _______ within 1 year by the non consenting spouse
    Voidable
  46. Under community property, either spouse may _______ the property for _____ (how long), or ________ it
    • Lease, 1 year or less
    • List
  47. Under community property, a listing contract signed by only 1 spouse is _______
    Enforceable
  48. Under community property, both husband and wife must sign a _______, or ______. Only one signature creates _____, and that contract would be considered ______
    • Sale contract
    • Deposit receipt
    • A cloud on the title
    • Unenforceable/voidable
  49. Under community property, either husband or wife may _______ their 1/2 of the property
    Will
  50. When a married person dies intestate (without a will), the other spouse receives ______ in the community property, by way of _______
    • ALL interest
    • Intestate succession
  51. If a person dies without a will, and has NON-community property (separate), the property goes to _______ (2 possibilities)
    • 1/2 to spouse, 1/2 to only child
    • OR
    • 1/3 to spouse, 2/3 divided among children
  52. Separate property (non-community) is most commonly distributed according to the __________
    Statute of Succession (intestate succession)
  53. An insurance policy insuring that a policy holder (grantee) and his heirs have received marketable title
    Title insurance
  54. Title that is reasonably free from doubt in law, insured by title insurance
    Marketable title
  55. Where does the title company search records for its title insurance?
    • County recorder
    • County assessor
    • County clerk
    • Federal land office
  56. The record of prior transfers and encumbrances affecting the title of a parcel, usually searched by a title company employee
    Chain of title
  57. A recorded instrument that does not appear in the chain of title still gives _______ notice
    Constructive
  58. Items effecting title, which may prevent transfer
    Cloud on Title
  59. That which appears to be good title but isn't
    Color of Title
  60. Written summary of the chain of title
    Abstract of Title
  61. Titile policies insure title as of the date of ______, and do not insure against events which occur _______
    • Issuance of the title policy
    • After the policy is issued
  62. The seller of a home appears as ______ in a preliminary title report
    The trustor
  63. A buyer who discovers a mechanic's lien in a preliminary title report will insist that ______
    It be removed before close of escrow
  64. Fee schedules and cost of services of a title company are ______
    Set individually by company
  65. Records of recorded documents maintained by title insurance companies
    Title Plant
  66. Types of title insurance policies
    • Standard coverage policy
    • Extended coverage policy
    • ALTA policy
  67. The most commonly purchased title insurance policy
    Standard coverage policy (CLTA)
  68. Standard title insurance policy covers: (4)
    • Matters of record
    • Lack of capacity (someone involved was legally incompetent, etc.)
    • Forgery
    • Defective delivery of a deed
  69. Standard coverage title insurance policies do NOT include _________, and the title company does NOT check ______. It also does not protect against _________.
    • Site inspection, or survey
    • Boundary lines
    • Unrecorded events, such as encroachments
  70. Title insurance policy that covers everything in a standard policy PLUS the protection of a site survey, and also protects against most unrecorded events
    Extended Coverage Policy
  71. Title insurance policy that includes the protection of a survey and provides the lender with extended coverage protection
    American Land Title Association policy (ALTA)
  72. Things that are not covered by ANY title insurance policy (2)
    • Defects known to the buyer and seller that are not disclosed to the title company
    • Acts by government (zoning, eminent domain, etc.)
  73. 3 common methods used to create legal descriptions of property
    • Metes & bounds method
    • Recorded tract map method (or Lot and Block System)
    • Township and section method
  74. Method of creating legal land description using a survey and describing boundaries, not by measuring land. It starts at a fixed point of beginning
    Metes & Bounds method
  75. Description of land method that starts with "Beginning at a point…"
    Metes & bounds method
  76. Metes are measures of ____, bounds are measures of ______
    • Length
    • Boundaries
  77. The use of monuments in legal descriptions of property are usually less desirable because they can be _______
    Moved or destroyed
  78. Method of land description that references a recorded tract map
    Recorded tract map method
  79. Method of legal land description used to describe very large pieces of land using the intersection of the "base line" and "meridian line" as the starting point
    Township and Section Method
  80. Township and Section Method is also known as the
    US Government Rectangular Survey System
  81. The Base Line in the township method runs ________
    East/West
  82. The Meridian Line in the township survey method runs
    North/South
  83. All of CA is divided into 6 mile squares (containing 36 square miles) called ____
    Townships
  84. A 36 mile square contains ______ townships
    36
  85. Townships are divided into 36 one mile squares called ______
    Sections
  86. Each section is ____ mile(s) square and contains _____ square mile(s)
    • 1
    • 1
  87. Each section contains ____ acres
    640
  88. A quarter section is ____ by _____ and contains _____ acres
    • 1/2 mile, 1/2 mile
    • 160
  89. There are ____ sections in 1/2 of a township, and ____ square miles
    • 18
    • 18
  90. An easement along one side of a section which covers an area of 3 acres would be approximately ____ feet wide
    25
  91. The deposit of instruments and/or funds with a neutral third party who has been instructed to carry out the provisions of an agreement or contract
    Escrow
  92. The purpose of escrow is to make sure that __________
    The conditions of transfer are met prior to closing
  93. Escrow officers act as agents for the _____, and are ____ agents until the close of escrow
    • Principals
    • Dual
  94. After a transaction has closed, escrow officers may become the _____ agent of either party
    Separate
  95. A real estate broker can escrow a transaction and charge a fee for doing so ONLY IF:
    He is an agent for a seller or buyer in the transaction being escrowed
  96. If a broker wants to do escrows for transactions that aren't his, he must _______, and will be regulated by ________
    Be incorporated and licensed as an escrow company by the Dept of Business Oversight

    Dept of Business Oversight
  97. When should the seller order a termite inspection?
    BEFORE the property is listed
  98. A buyer should receive a copy of the termite report as soon as practicable before ______
    The close of escrow
  99. When a termite report recommends preventative work, the _____ usually pays for it
    Buyer
  100. Escrow instructions can be changed with ______, and do not need _____ approval
    • Written mutual consent of buyer & seller
    • The broker's
  101. If escrow instructions contain terms in conflict with the original contract, which one usually prevails?
    The escrow instructions
  102. Escrow instructions (are, are not) usually notarized or recorded
    Are NOT
  103. Escrow instructions may be carried out (executed) by ________
    Buyers, sellers, and/or third parties
  104. Escrow officers ____ (are, are not) usually authorized to call for the funding of the buyer's loan
    Are
  105. Only the ______ can give the buyer permission of move in or make repairs prior to close of escrow
    Seller
  106. When a seller gives a buyer permission to move in before the close of escrow, the real estate agent should have them sign ______, making them _____ and _____
    • Interim occupancy agreement
    • Landlord & tenant
  107. Who is responsible for reporting a home sale to the IRS?
    Escrow
  108. Escrow completes when ______
    All of the terms of the escrow instructions have been met
  109. Escrow should not act as a mediator in a dispute, but can file ______ in court to settle anything unresolved that is preventing the close of escrow
    An interpleader action
  110. A broker can file an interpleader action if he is holding a deposit and ____
    There are conflicting instructions from buyer & seller
  111. The funds held by escrow may be released at any time by ______ or _______
    • Mutual consent of the parties
    • Court order
  112. Can escrow legally prepare a grant deed?
    Yes
  113. In an escrow closing statement, the purchase price appears as a _____ on the _______
    • Debit
    • Buyer's closing statement
  114. These appear as a credit on the seller's closing statement
    Prepaid taxes
  115. In the escrow closing statement, the interest on a loan assumed by a buyer appears as a _____ on the _______'s statement, and a _______ on the ________'s statement
    • Debit
    • Seller
    • Credit
    • Buyer
  116. Recurring costs are mentioned in the closing statement, and include _____
    Impounds
  117. Debits and credits on a seller's closing statement and buyer's closing statement are usually ______
    Different
  118. Escrow usually prorates expenses like taxes, insurance, interest on an assumed loan, and rent, at _____
    The close of escrow
  119. Most proration problems can be answered in 2 steps:
    • 1) Establish who is going to pay
    • 2) Calculate the money using a 30-day month and a 360-day year (banker's year)
  120. 2 types of fees that are not prorated in escrow
    • Title insurance fees
    • Non-recurring fees
  121. When a home is sold and the fire insurance is canceled, the receives a _______ which is less than received by proration
    Short Rate Refund
  122. When one party agrees to indemnify (compensate) another for a named loss in return for periodic payments, it is called ______
    Insurance
  123. A property owner who carries the proper amount of fire insurance coverage should ________ in the event of a claim
    Neither gain nor lose
  124. Tax collected when a deed is recorded
    Documentary transfer tax
  125. Selling price minus any existing loans assumed by a buyer; the NEW money created in a transaction
    Consideration
  126. Documentary transfer tax is based on _____
    Consideration
  127. When a deed is recorded, the tax rate is $_______
    55 cents for each $500 of consideration
  128. An "ad valorem" (according to value) tax that applies to real, tangible personal property
    Property tax
  129. Person who assesses the value of all taxable property in the county every year
    County tax assessor
  130. Annual property tax assessments are published in the ______, with the purpose of establishing a ______
    • Assessment roll
    • Tax base
  131. Property is assessed by the county tax assessor at ______ of taxable value
    100%
  132. Board that sets the tax rate, which is limited by Proposition 13 to _____ of the purchase price, plus an amount to cover existing bond debt
    • County Board of Supervisors
    • 1%
  133. Person who calculates the amount of tax each property owner must pay, then prepares the tax bill
    County Tax Assessor
  134. Tax bills assess __ and ___ separately, but they are taxed at one rate
    • Land
    • Improvements
  135. Hears appeals from property owners who believe they have been over-assessed in property taxes
    Assessment Appeals Board
  136. When it comes to taxation, existing loans being assumed by a buyer are considered ____, and thus have been _____
    • Old money
    • Already taxed
  137. The property tax fiscal year runs ____ THROUGH _____
    • July 1st 
    • June 30th
  138. Lien date
    January 1st
  139. ______ is the first installment date for property taxes, with _____ being the delinquent date
    • November 1st
    • December 10th
  140. Second installment date for property taxes is ____, with ____ being the delinquent date
    • Feb 1st
    • April 10th
  141. Property tax date that starts the running of the 5 year redemption period
    June 30th
  142. Time period in which an owner who has defaulted on his property taxes has 5 years to pay it back and redeem himself
    5 Year Redemption Period
  143. When property is sold (and thus reassessed), what portions of property taxes do the seller pay, and what does the buyer pay?
    • Seller pays prorated taxes until closing date
    • Buyer pays from closing date on, AND supplemental taxes triggered by the sale
  144. Property tax bills do not contain a _____ of the property, but instead use ______ to reference it
    • Legal description
    • Assessor's parcel number
  145. In property taxes, a homeowner's exemption refers to the first $_____ of assessed value applied to each residential property that is owner occupied
    7,000
  146. Does recording a declaration of homestead affect property taxes?
    No
  147. Senior citizens should contact the _____ for info about a program to defer property taxes
    State Controller's Office
  148. Under the _______, cities, counties, and even developers may use special assessments against property to pay for specific local improvements, such as streets, walks, curbs, etc.
    Street Improvement Act of 1911
  149. Special assessments may be used to finance ______, but may not be used for financing construction of _______ or to buy _______
    • Off-site improvements
    • New homes
    • Land
  150. _______ liens have priority over all private liens such as trust deeds or mechanic's liens
    Assessment liens
  151. Special assessments pay for specific ______, and do not go into the general fund to pay for the general support of _____ (like property taxes do)
    • Local improvements
    • Government
  152. Assessment liens, if any, are usually paid for by the _____ in escrow
    Seller
  153. Assessments for street improvements do not not appear as a ____ against a property at close of escrow
    Lien
  154. The federal income tax is a "_______" tax, meaning the higher your income, the _______ you pay
    • Progressive
    • Higher percentage
  155. Determines the tax rate applied to the next dollar earned
    Marginal tax rate
  156. Provides for a wider variety of facilities and services than other improvement bond acts, and has no requirement that these improvements will benefit any individual properties
    Mello-Roos
  157. The seller of 1-4 unit dwellings subject to Mello-Roos must make a good faith effort to _________
    Obtain a disclosure notice of the tax and give it to prospective buyers
  158. Also called "basis" and "unadjusted basis"
    Cost basis
  159. The purchase price, for tax purposes
    Cost basis
  160. The cost of building a wall is a _______ improvement, and cannot be _______ as an expense
    • Capital
    • Deducted
  161. A capital improvement is added to the _____ of a property when calculating the adjusted cost basis
    Cost basis
  162. An investment that allows an investor to defer payment of taxes on current income at a later year
    Tax shelter
  163. Benefits of the ownership of real estate under the Federal Income Tax law include: (3)
    • Depreciation
    • 1031 Tax deferred exchanges
    • Installment sales
  164. The gain on the sale of real property owned by a corporation may be subject to _____, unless it is a(n) "____" corporation
    • Double taxation 
    • S
  165. An S Corporation is _____, and all gains and losses pass directly to the _________
    • Exempt from all corporate income taxes
    • Individual shareholders
  166. A taxpayer's principal residence
    Personal residence
  167. Property taxes, interest payments, and some uninsured casualty losses may be deducted as an expense
    Allowable expenses
  168. Cannot be used as tax deductions
    Losses
  169. Examples of "allowable expenses" (those that can be deducted on taxes)
    • Property taxes
    • Interest payments
    • Some uninsured casualty losses
    • Prepayment penalties
  170. Specific examples of expenses that cannot be deducted on taxes
    • Depreciation
    • Maintenance expenses
  171. Property which produces income for the owner
    Income property
  172. An owner of an income property may deduct _____ on his tax return (6, IDTIMM)
    • Interest
    • Depreciation
    • Taxes
    • Insurance
    • Management
    • Maintenance of utilities
  173. An owner of an income property may NOT deduct _____ on his income tax return
    Vacancy losses
  174. Loss on sale of income property, including residential income property, _____ (may/may not) be deducted from other income
    May (subject to certain limitations)
  175. Tax deduction allowed on improved income, trade, or business property, that is based on the cost of improvements (buildings)
    Deprectiation
  176. A disadvantage of taking depreciation is that every dollar taken as depreciation gets _______ from the cost basis and therefore recaptured as ______ when the property is sold
    • Subtracted
    • Gain
  177. ____ never depreciates
    Land
  178. Residential income property (apartment buildings) can be depreciated over a minimum of _____ years
    27.5
  179. Non-residential income property (commercial buildings) can be depreciated over a minimum of _____ years
    39
  180. Straight line depreciation is calculated by dividing the value of _____ by the ______ (27.5 or 39 years)
    • Improvements
    • Depreciable life
  181. Adding a capital improvement to income property ____ the annual depreciation
    Increases
  182. When a property is exchanged, the taxes may be ______ if properties are exchanged "________" and may be any combination of _______ (3)
    • Deferred
    • Like for like
    • Income, trade, or business
  183. Deference of taxes when property is exchanged
    1031 Exchange, or tax deferred exchange
  184. When the values of properties are not equal in a 1031 exchange, the party "trading up" will _________, and the party "trading down" may have _______. Only one party _____
    • Defer the tax
    • Tax liability
    • Defers the tax
  185. In a 1031 exchange, this is cash, other "unlike" property, or "debt relief" used to balance the equities of the properties for income tax purposes
    Boot
  186. Aka profit in a tax exchange, determined by subtracting the adjusted cost basis from the exchange value of the property
    Actual Gain
  187. In a tax exchange, the smaller of the actual gain or the boot. This is taxed in the year of the exchange, and the receiver of the boot will have a recognized gain
    Taxable (recognized) gain
  188. Situation in which a seller becomes a tenant of the property he just sold, allowing the seller to deduct all future rent payments as a business expense
    Sale-leaseback
  189. In a sale-leaseback, the seller retains ______ of the property, receives an infusion of _____, becomes a _____, but DOES NOT guarantee the ______
    • Possession
    • Cash
    • Tenant
    • Mortgage payments
  190. The buyer of a commercial building in a sale-leaseback would be least concerned with the sellers' ___________. The depreciation schedule for improvements starts _______
    • Depreciated book value of the improvements
    • Whenever the property is sold
  191. Describes when all the money, documents, and signed escrow instructions required to close the escrow have been delivered to the escrow agent
    Perfect escrow
  192. Escrow becomes a "________" when all properly prepared and signed escrow instructions become an enforceable contract and all the terms of the instructions have been fulfilled
    Complete escrow

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