Escrow & TitleIntermediateArizona Exam

In Arizona, 'gap insurance' in a title insurance context covers the period between:

AThe appraisal effective date and the closing date, during which a change in market value could affect the loan-to-value ratio

BThe date of the title search and the date the deed is recorded, during which new liens or encumbrances could be recordedCorrect

CThe loan application date and the final loan approval, covering the risk that the borrower's credit profile changes before funding

DThe contract signing date and the expiration of the inspection period, protecting the buyer from defects found during due diligence

Why The date of the title search and the date the deed is recorded, during which new liens or encumbrances could be recorded Is Correct

Answer B: The date of the title search and the date the deed is recorded, during which new liens or encumbrances could be recorded

A gap in title coverage occurs between the date of the title search and the actual recording of the deed. New liens, judgments, or other encumbrances recorded during this period could affect title.

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

Appraisal

A professional estimate of a property's market value prepared by a licensed or certified appraiser.

Deed

A written legal instrument used to transfer ownership of real property from one party (grantor) to another (grantee).

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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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.