Escrow & TitleIntermediateCalifornia Exam

An extended (ALTA) title insurance policy differs from a standard (CLTA) policy primarily by:

ACosting less than a standard policy, under standard California escrow and title practice

BCovering additional risks such as survey matters and encroachments not shown in public recordsCorrect

CProtecting only the lender's interest, as typically handled by an escrow officer

DCovering only recorded liens, consistent with standard title insurance practice

Why Covering additional risks such as survey matters and encroachments not shown in public records Is Correct

Answer B: Covering additional risks such as survey matters and encroachments not shown in public records

An ALTA (extended) policy covers all risks of the standard CLTA policy plus additional risks not discoverable from public records alone, such as boundary disputes, encroachments, survey issues, and off-record matters.

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

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.

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.

Private Mortgage Insurance (PMI)

Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.

Abstract of Title

A condensed history of a property's title, summarizing all recorded documents and encumbrances affecting it from the earliest record to the present.

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