Escrow & TitleIntermediateArizona Exam

An owner's title insurance policy in Arizona protects:

AThe lender who holds the mortgage against title defects that affect the priority or enforceability of the lender's security interest in the property

BThe buyer/owner against title defects that existed prior to the policy's issuanceCorrect

CThe seller against claims arising from undisclosed liens, encumbrances, or title defects that the seller failed to disclose before the closing of the transaction

DThe escrow company against errors, omissions, or negligent acts in the preparation and processing of closing documents that result in financial loss to the parties

Why The buyer/owner against title defects that existed prior to the policy's issuance Is Correct

Answer B: The buyer/owner against title defects that existed prior to the policy's issuance

An owner's title insurance policy protects the buyer/property owner against losses arising from title defects, liens, or encumbrances that existed prior to the policy's effective date and were not discovered in the title search.

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

Encumbrance

Any claim, lien, charge, or liability attached to real property that affects its value or limits its use.

Lien

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 Insurance

Insurance protecting against financial loss from defects in a property's title that existed before closing but were unknown at the time of purchase.

Escrow

A neutral third-party arrangement where funds, documents, and instructions are held until all conditions of a real estate transaction are satisfied.

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Key Terms to Know

Title Insurance

Insurance protecting against financial loss from defects in a property's title that existed before closing but were unknown at the time of purchase.

Escrow

A neutral third-party arrangement where funds, documents, and instructions are held until all conditions of a real estate transaction are satisfied.

Encumbrance

Any claim, lien, charge, or liability attached to real property that affects its value or limits its use.

Lien

A financial claim against a property that serves as security for a debt or obligation, giving the creditor the right to foreclose if unpaid.

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