A buyer who receives a title insurance policy discovers after closing that there is a judgment lien from the previous owner's unpaid debt. The title insurance company will:
Why Defend the buyer's title and pay the claim up to the policy amount Is Correct
Answer B: Defend the buyer's title and pay the claim up to the policy amount
Exam Tip: Escrow & Title
Escrow questions test the neutral third-party role and the sequence of closing events. Remember that the escrow agent acts as a dual agent for both buyer and seller and cannot advocate for either side.
Key Escrow & Title Terms in This Question
A financial claim against a property that serves as security for a debt or obligation, giving the creditor the right to foreclose if unpaid.
Title InsuranceInsurance protecting against financial loss from defects in a property's title that existed before closing but were unknown at the time of purchase.
People Also Study
Related Alabama Questions
- A title search reveals a mechanic's lien on the property from an unpaid contractor. At closing, this lien is typically:Escrow & Title
- A buyer who receives a title report showing an unresolved mechanic's lien from the previous owner should:Escrow & Title
- An Alabama title insurance company that discovers a previously unknown prior deed would:Escrow & Title
- An Alabama title insurance policy protects the insured against:Escrow & Title
- Under RESPA, a lender may not require a buyer to purchase title insurance from a specific company affiliated with the lender unless:Finance
Key Terms to Know
A financial claim against a property that serves as security for a debt or obligation, giving the creditor the right to foreclose if unpaid.
Title InsuranceInsurance protecting against financial loss from defects in a property's title that existed before closing but were unknown at the time of purchase.
EncumbranceAny claim, lien, charge, or liability attached to real property that affects its value or limits its use.
Chain of TitleThe sequential record of all transfers of ownership for a piece of property from the original patent holder to the present owner.
Study This Topic
Practice More Alabama Real Estate Questions
1,500+ questions covering all exam topics. Start free — no signup required.
Take the Free Alabama Quiz →