Final answer:
Title companies are often involved in preparing legal documents like deeds and are generally responsible for any mistakes made in those documents, not the brokers. The correct choice to the student's question is that 'all of the above are true except (2)', as it is generally permissible for title companies to prepare these documents as part of their service offerings.
Step-by-step explanation:
The question regards the role and legal responsibilities of title companies in the context of real estate transactions. In many jurisdictions, title companies are indeed involved in preparing legal documents such as deeds, although preparing legal documents could sometimes be construed as the unauthorized practice of law if the company is not properly authorized or supervised by a licensed attorney. Nonetheless, it's usually not considered a violation for a title company to prepare documents as part of their services, as long as they comply with local laws.
With respect to errors, typically the brokers are not held responsible for mistakes made by a title company while preparing a deed; this liability would generally rest with the title company. Therefore, the correct answer to the question presented would be that statements (1) and (3) are true, and the choice (4) 'all of the above are true except (2)' is the correct option.