Mortgage Loan Originator (MLO) Licensing Practice Test

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Prepare for the Mortgage Loan Originator (MLO) Licensing Test. Study with flashcards and multiple-choice questions, each with hints and explanations. Get ready to succeed on your exam!

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What is a title defect?

A limitation preventing property sale
A temporary lien on the property
A contract stipulating terms of sale
A tax owed on the property

The correct answer is: A limitation preventing property sale

A title defect refers to an issue or limitation with the ownership of a property that can impede its sale or transfer. When a title defect is present, it can raise questions about the legal right to sell the property, potentially leading to disputes over ownership or claims against the property. This could include unresolved liens, improperly resolved estate issues, or discrepancies in property boundaries, all of which can hinder the ability to convey clear and marketable title. Such concerns directly affect the ability of the current owner to sell the property, making it a significant issue in real estate transactions. The other options relate to aspects of property ownership and finance but do not accurately describe a title defect. A temporary lien, for example, does affect the title but is not an overall defect in ownership; rather, it is a financial claim against the property. A contract stipulating terms of sale is a separate legal document enhancing the sale process rather than a defect, and a tax owed is a financial obligation but does not represent a flaw in the title itself. Each of these elements exists in the realm of real estate transactions but would not qualify as a title defect.