CSLB General Building (B) — All Questions

A California grant deed contains two implied warranties: that the grantor has not already conveyed the property to another, and that:

• a.The property is free of undisclosed encumbrances made by the grantor✓
• b.The property is worth the purchase price
• c.The buyer will receive title insurance
• d.There are no property taxes

A grant deed impliedly warrants that the grantor has not already conveyed title to someone else and that the estate is free from undisclosed encumbrances created by the grantor. These implied covenants give the grantee limited protection. It is the most common deed used in California sales.CA Civil Code

A deed that transfers whatever interest the grantor may have, without any warranties of title, is a:

• a.Grant deed
• b.Quitclaim deed✓
• c.Warranty deed
• d.Trustee's deed

A quitclaim deed conveys only whatever interest the grantor happens to hold, with no warranties. It is often used to clear clouds on title or to transfer interests between family members. If the grantor has no interest, the grantee receives nothing.CA Civil Code

Title insurance protects the insured against:

• a.Future physical damage to the property
• b.Declines in market value
• c.Defects in title existing at the time of the policy✓
• d.Failure to pay the mortgage

Title insurance indemnifies the insured against losses from title defects, liens, or encumbrances that existed but were undiscovered when the policy was issued. It is a one-time premium covering past title problems, not future events. Lenders typically require a lender's policy at closing.CA Insurance Code

An escrow holder in a California real estate transaction acts as a:

• a.Agent for the buyer only
• b.Agent for the seller only
• c.Real estate broker
• d.Neutral third party for both parties✓

The escrow holder is a neutral, disinterested third party that holds documents and funds and carries out the parties' mutual written instructions. It must follow the escrow instructions strictly and impartially. Escrow closes when all conditions are met.CA Financial Code

Recording a deed in the county where the property is located gives the public:

• a.Constructive notice of the interest✓
• b.Actual notice only to neighbors
• c.A guarantee of clear title
• d.Ownership of the property

Recording a document provides constructive notice, meaning the public is legally presumed to know of the recorded interest whether or not they actually see it. This protects the grantee's priority against later claims. California follows a race-notice recording system.CA Civil Code

California's documentary transfer tax is $0.55 per $500 of value. On a $600,000 sale with no assumed loan, the county transfer tax is:

• a.$330
• b.$660✓
• c.$1,100
• d.$3,300

Divide the price by $500 to get 1,200 increments, then multiply by $0.55, giving $660. The documentary transfer tax applies to the consideration paid, excluding any assumed liens. Cities may impose additional transfer taxes.CA Revenue and Taxation Code

A deed in which the grantor makes the fullest express warranties, defending title against all claims, is a:

• a.Quitclaim deed
• b.Grant deed
• c.Warranty deed✓
• d.Trustee's deed

A general warranty deed contains the broadest express covenants, with the grantor warranting and defending title against all claims, even those arising before the grantor owned the property. It offers the grantee the greatest protection. California more commonly uses grant deeds, which carry only limited implied warranties.CA Civil Code

The recorded history of successive owners and conveyances of a parcel is called the:

• a.Preliminary report
• b.Abstract of judgment
• c.Legal description
• d.Chain of title✓

The chain of title is the sequence of recorded transfers and documents tracing ownership from the earliest records to the present owner. A break or gap in the chain can create a cloud on title. Title companies examine the chain before insuring title.

A preliminary title report issued before closing primarily:

• a.Discloses the current condition of title, including liens and encumbrances✓
• b.Guarantees the property's value
• c.Transfers ownership to the buyer
• d.Sets the loan interest rate

A preliminary title report shows the current state of title, including recorded liens, easements, and other encumbrances, and states the conditions under which the title company will insure. It is an offer to issue a policy, not the policy itself, and is not a guarantee. Buyers review it during the contingency period.

A valid escrow generally requires a binding contract between the parties and:

• a.A recorded deed only
• b.Conditional delivery of transfer documents to the escrow holder✓
• c.Payment of the transfer tax first
• d.Approval by the DRE

A valid escrow requires an enforceable underlying contract and the conditional delivery of documents and funds to a neutral escrow holder. The escrow holder releases them only when the agreed conditions are satisfied. These two elements distinguish escrow from a simple exchange.CA Financial Code

Before a deed can be recorded, the grantor's signature usually must be:

• a.Witnessed by the buyer
• b.Approved by the lender
• c.Acknowledged before a notary public✓
• d.Published in a newspaper

To be recorded, a deed generally must be acknowledged, meaning the grantor appears before a notary public who verifies identity and voluntariness. The acknowledgment authenticates the signature for the public record. Recording without proper acknowledgment may be rejected.CA Civil Code

The documentary transfer tax in California is generally calculated on the:

• a.Assessed value
• b.Loan amount
• c.Appraised value
• d.Consideration paid, less any assumed liens✓

The documentary transfer tax is based on the consideration or value of the property conveyed, excluding the value of any liens the buyer assumes. Counties impose the base rate, and some cities add their own transfer tax. It is typically paid at closing through escrow.CA Revenue and Taxation Code