Escrow & TitleIntermediateArizona Exam

In Arizona, a 'preliminary title report' issued before closing:

AIs a binding insurance commitment that automatically converts to the final owner's title policy upon the buyer's payment of the premium at or before closing

BIs an informational report showing the current state of title—encumbrances, exceptions, and conditions—that will apply to any title insurance policy issued, but is not itself an insurance commitmentCorrect

CCertifies that the title is marketable and completely free of all recorded defects, unpaid property taxes, and unreleased encumbrances as of the date of the report

DIs required only for refinance transactions in Arizona; residential purchase transactions instead rely on the escrow officer's verbal title clearance provided at the closing table

Why Is an informational report showing the current state of title—encumbrances, exceptions, and conditions—that will apply to any title insurance policy issued, but is not itself an insurance commitment Is Correct

Answer B: Is an informational report showing the current state of title—encumbrances, exceptions, and conditions—that will apply to any title insurance policy issued, but is not itself an insurance commitment

A preliminary title report shows what the title company found in searching the public records—liens, easements, CC&Rs, taxes, and other encumbrances. It identifies what will be included as exceptions in the title policy.

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

Easement

A non-possessory right to use another person's land for a specific purpose.

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.

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