Difficulty: Medium

Average Score: 50%

Standard title insurance would protect a buyer when

Rationale

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

Title insurance safeguards buyers from losses related to defects in the title, including fraudulent activities such as forgery. If a seller forges a signature, title insurance would cover any claims or losses arising from this fraudulent action, thereby protecting the buyer's investment.

A (the seller has forged an ex-partner’s signature on the deed) CORRECT

This situation directly involves a defect in the title due to fraud, which is precisely what title insurance is designed to protect against. If the deed is found to be invalid because of a forged signature, the title insurance policy would cover the buyer's loss, ensuring their ownership rights are upheld.

B (after closing the HOA places a lien for the previous owner’s unpaid dues) YOUR ANSWER

This scenario involves an issue that arises after the closing of the sale. Title insurance generally protects against defects that existed prior to the purchase, but once the sale is completed, any new liens or obligations incurred by the previous owner fall outside the scope of the title insurance coverage.

C (the buyer had knowledge of a shed violating setback requirements) YOUR ANSWER

Knowledge of the shed's violation by the buyer negates the protection of title insurance because the buyer is aware of the potential issue prior to the purchase. Title insurance does not cover problems that the buyer knowingly accepts as part of the transaction.

D (buying sight-unseen and discovering a tenant living on the property) YOUR ANSWER

This situation pertains to occupancy issues rather than title defects. Title insurance does not cover issues related to tenants or occupancy rights, as these are considered due diligence matters that should be resolved before finalizing the purchase.

Conclusion

Title insurance serves as a protective measure for buyers against title defects, particularly those stemming from fraud or forgery. In this case, the forgery of an ex-partner's signature is a clear defect that title insurance would address, while other options involve issues either arising after closing or involving buyer negligence. Understanding these protections is crucial for buyers to ensure their ownership rights are secure.

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