Question 58

Standard title insurance would protect a buyer when the seller has forged an ex-partner's signature on the deed.

Title insurance protects buyers from issues related to claims against the property, including fraud. If a seller forges an ex-partner's signature on the deed, this would constitute a significant legal issue that title insurance is designed to address.

A) when the seller has forged an ex-partner's signature on the deed.

This option is correct because title insurance specifically covers defects in title, including fraudulent signatures. If a seller has forged a signature, the buyer may face legal challenges and potential loss of ownership, which title insurance would help mitigate by covering related legal costs and losses.

B) if after closing, the HOA placed a lien on the property for the previous owners' unpaid dues.

This option is incorrect because title insurance typically does not cover liens that arise after the sale has closed. Liens related to previous owners' debts are usually not the responsibility of the new buyer, and such issues are generally disclosed during the title search process.

C) in a purchase where the buyer had knowledge of a shed violating setback requirements.

This option is incorrect as well. Title insurance does not protect against issues that the buyer is aware of prior to closing, such as a shed that violates zoning laws. Such knowledge would typically negate claims for insurance coverage on these specific matters.

D) for the purchase of a property bought sight unseen where the buyer discovers a tenant living at the property.

This option is also incorrect. Title insurance does not cover issues related to property occupancy or tenant rights that the buyer did not investigate prior to purchasing the property. The buyer's responsibility includes due diligence before closing.

Conclusion

The correct answer, option A, highlights the protective nature of title insurance against fraudulent actions that can affect property ownership. Other options fail to recognize the limits of title insurance, which does not cover issues arising from buyer negligence or subsequent claims. Thus, option A stands out as the only choice that aligns with the core purpose of title insurance.