REI 4413 1st EditionExam # 3 Study Guide • Title and InsuranceDuring the interval between the signing of a real estate contract and the closing, three important activities usually take place:1. The seller must prove that she has title to the real estate under the contractually established standard. →• Title and InsuranceDuring the interval between the signing…2. The buyer makes arrangements for property and liability insurance.3. The buyer borrows money to finance the purchase.• Title• Title: The right to possess real estate as evidenced by a historical record.• A buyer can acquire such rights to real estate only as the seller has the power to convey.• Title• Recording Statutes:• Recording Defined:• Recording: The act of placing in the public record documents that give the world notice of the information therein.• Constructive Notice: Notice imputed to a person by law due to its existence in the public records whether the person has actually inspected the public records or not.• Title• Recording Statutes (cont’d):• Recording Defined (cont’d):• Actual Notice: Title information that is acquired personally by someone.• Inquiry Notice: Notice of facts that create a duty to inquire further whether unrecorded interests exist.• TitleThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.• Recording Statutes (cont’d):• The Common Law Approach:• Recording Statutes: State statutes that govern the manner in which documents are recorded in the public record and the effect such recording has on subsequent purchasers, creditors, mortgagees, and other parties who may have an interest in the property.• Title• Recording Statutes (cont’d):• The Common Law Approach (cont’d):• Before recording statutes were enacted, the common law rule was simple and easy to apply: the first deed prevails over later deeds.• Title• Recording Statutes (cont’d):• Types of Statutes: Three types of recording statutes have been acted by various states. The first two, Notice and Race-Notice statutes protect the bona fide purchaser:• Bona Fide Purchaser: A good faith purchaser who pays value and is without notice, either actual or constructive, of a prior adverse claim. • Title• Recording Statutes (cont’d):• The Notice Statute: Under a “notice” recording statute, an unrecorded conveyance is not valid against later bona fide purchasers.• The Race-Notice Statute: Under a race-notice statute, a later purchaser not only must be bona fide but also must record the deed before other purchasers.• Title• Recording Statutes (cont’d):• The Race Statute: Under the 3rd kind of notice, a pure race statute, the first to record wins. The purchaser need not be bona fide or without notice.• Electronic Recording: With the widespread prevalence of computers and electronic transactions, it is only a matter of time before real estate conveyancesalso will be recorded electronically.• Recording Statute Requirements• Title• Recording Statutes (cont’d):• Chain of Title: A record of successive conveyances (or other forms of alienation) affecting a particular parcel of land that are arranged consecutively from the government or original source of title down to the present holder.• Title• Recording Statutes (cont’d):• Chain of Title (cont’d):• Grantor-Grantee Index: A land records system in which conveyances of interestsin real property are indexed in two separate indices, first alphabetically according to the grantor’s surname and then alphabetically according to the grantee’s surname.• Deed Outside the Chain of Title• Grantor and Grantee Indexes• Grantor and Grantee Indexes (cont’d)• Title• Recording Statutes (cont’d):• Chain of Title (cont’d):• Tract Index: A land records system in which conveyances of interests in real property are indexed geographically by tracts.• Title• Proof of Title: It is common practice to obtain a professional determination of whether the sellers have good title. Three methods used to make this determination: →• Title• Proof of Title (cont’d):• Abstract and Opinion: The first method combines the use of an abstract of title and a legal opinion.• Abstract of Title: A compilation of the chain of title, usually prepared by a title company or an attorney, providing copies or summaries of all recorded instruments including deeds, mortgages, mortgage discharges, and tax liens.• Title• Proof of Title (cont’d):• Abstract and Opinion (cont’d):• Title Opinion: A written statement from an attorney which gives an analysis of the title search regarding the current ownership rights in the property. It states whether there is any kind of lien or cloud in the title to the property.• Title• Proof of Title (cont’d):• Abstract and Opinion (cont’d):• Certificate of Title: A statement of opinion by an attorney that describes the state of the title to a parcel of land.• Slander of Title: Occurs when one publishes information which is untrue and disparaging to another’s property interests in land that can result in the impairment of its marketability.• Title Examination Information Generally Not Found in the Grantor-Grantee Index• Title• Proof of Title (cont’d):• Title Insurance: Insurance designed to indemnify a landowner for losses from defects in the title or liens against the land.• Mortgage Title Insurance Policy: Insurance that protects the lender against loss or damage resulting from defects in the title or the enforcement of liens against the land.• Title• Proof of Title (cont’d):• Title Insurance (cont’d):• Owner’s Title Insurance Policy: Insurance that protects the purchaser borrower’s equity against loss or damage resulting from defects in the title or from the enforcement of liens against the land.• Title• Proof of Title (cont’d):• Title Insurance (cont’d):• Simultaneous Issue Discount: Discount in the premium price paid by the purchaser borrow for buying both a mortgagee and an owner’s title insurance policy.• Title• Proof of Title (cont’d):• Title Insurance (cont’d):• Title Commitment: A letter from a title insurance company in which it commits to issuing a title insurance policy on the insured subject to certain conditions and requirements.• Action to Quiet