Preliminary Title Report
A preliminary report is a report prepared prior to issuing a policy of title insurance that shows the ownership of
a specific parcel of land, together with the liens and encumbrances thereon which will not be covered under a
subsequent title insurance policy.
The preliminary report lists, in advance of purchase, title defects, liens and encumbrances which would be
excluded from coverage if the requested title insurance policy were to be issued as of the date of the
preliminary report. The report may then be reviewed and discussed by the parties to a real estate transaction
and their agents. Things to look for when reviewing the report are:
- Verifying the ownership vesting by insuring that the names on the report are the same as the names on the purchase contract. Sometimes the name of an unexpected owner will appear (i.e. a previous spouse or relative who died), and corrective documents may be required.
- Verifying that the property address, the plat map, and legal description all match. An owner could own two properties adjacent to, or across the street from, each other, causing confusion in identifying the correct property.
- Reading the informational notes for pertinent items about the property, such as: transfer taxes, monument fees, homeowners' association fees, etc.
- Carefully reviewing the exceptions. Common exceptions include: current taxes, bonds, deeds of trust, Mello-Roos Assessment District items, CC&Rs, and easements. Be sure the CC&Rs or existing easements don't interfere with the buyer's future plans. For example, an easement across the backyard could have a profound effect on the buyer's ability to add a swimming pool at a later date.
- Always looking for surprises. If you can't locate an easement, or an unexpected deed of trust shows up, or you see an item you weren't aware of before, immediately call the escrow officer or title company to discuss the matter. The title company should be a problem solver, and top-notch escrow officers and title companies go out of their way to resolve quickly the majority of "red flag" items. However, the responsibility for early detection and resolution of problems falls on the entire escrow team, including the agents, the escrow and title company, and sometimes the buyers and sellers as well.
Extended owners' and lenders' policies of title insurance provide broader coverage and are available through the American Land Title Association (ALTA). Coverage is extended to certain matters that are "off-record", but which are generally discoverable by an inspection of the property or by questioning the parties in possession. These include:
ALTA policies are available for owners and lenders, and a "plain language" ALTA Residential Policy is also available for residential property containing one to four units.
- Unrecorded liens and encumbrances
- Unrecorded easements
- Unrecorded rights of parties in possession
- Encroachments, discrepancies, or conflicts in the boundary lines