Escrow & TitleIntermediateCalifornia Exam

Under California's race-notice recording statute, a subsequent purchaser prevails over a prior unrecorded deed if the subsequent purchaser:

ARecords their deed before the prior purchaser, regardless of notice, consistent with standard title insurance practice

BRecords their deed first AND had no actual or constructive notice of the prior conveyance at the time of purchaseCorrect

CSimply paid a higher price for the property, per customary closing procedure in California

DPurchased the property from a licensed real estate broker, under standard California escrow and title practice

Why Records their deed first AND had no actual or constructive notice of the prior conveyance at the time of purchase Is Correct

Answer B: Records their deed first AND had no actual or constructive notice of the prior conveyance at the time of purchase

California follows a race-notice recording statute. A subsequent purchaser (or encumbrancer) prevails over a prior unrecorded interest only if they (1) take without actual or constructive notice of the prior interest, AND (2) record their interest before the prior claimant.

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

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.

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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