Escrow & TitleIntermediateCalifornia Exam

What does it mean for title to be 'marketable'?

AThe property is listed for sale on the open market, per customary closing procedure in California

BTitle that is free from reasonable doubt about its validity, allowing the property to be sold without legal challengeCorrect

CThe property is priced correctly for the current market, under standard California escrow and title practice

DTitle that has been guaranteed by a court, as typically handled by an escrow officer

Why Title that is free from reasonable doubt about its validity, allowing the property to be sold without legal challenge Is Correct

Answer B: Title that is free from reasonable doubt about its validity, allowing the property to be sold without legal challenge

Marketable title (merchantable title) is title that a reasonably prudent buyer would accept — it is free from undisclosed encumbrances, liens, or defects that would significantly affect value or allow legal challenge. Most purchase agreements require the seller to convey marketable 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

Purchase Agreement

A legally binding contract between a buyer and seller that outlines the terms and conditions of a real estate sale.

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.

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

Purchase Agreement

A legally binding contract between a buyer and seller that outlines the terms and conditions of a real estate sale.

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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