Preliminary Title Reports

A preliminary title report will provide you with the opportunity, prior to purchase, to review matters affecting a property which will be excluded from coverage under a title insurance policy unless removed or eliminated before the purchase.

A preliminary title report is a written report prepared prior to a title insurance company issuing a policy of title insurance that shows the ownership of a specific parcel of property, together with the liens and encumbrances on the property that will not be covered under a subsequent policy of title insurance.

A preliminary report contains all of the conditions under which the title company will issue a policy of title insurance policy.

The preliminary report lists, in advance of purchase, any title defects, liens and encumbrances that would be excluded from coverage, if the requested title insurance policy were to be issued as of the date of the preliminary title report. The report may then be reviewed and di1scussed by the parties to a real estate transaction and their advisors.

A preliminary report provides the opportunity to seek the removal of items referenced in the report which are objectionable to the buyer prior to purchase.

After escrow is opened, an order will be placed with the title company which will then begin the process involved in producing the title report.

The process calls for the assembly and review of recorded matters relative to both the property and the parties to the transaction. Examples of recorded documents include any deed of trust recorded against the property or any a lien recorded against the buyer or seller for an unpaid court judgment or any unpaid taxes.

These recorded items are listed numerically as "exceptions" in the preliminary title report. They will remain exceptions from title insurance coverage unless eliminated or released prior to the transfer of title.

As a buyer, you will, l want to know the extent of your ownership rights. This means you will want to review the ownership interest in the property you will be buying and the description of the property, as well as any claims, restrictions or interests of others involving the property.

The report will not in a statement of vesting, the degree, quantity, nature and extent of the owner's interest in the property. The most common form of interest is "fee simple" which is the highest type of interest an owner can have in land.

Liens, restrictions and interests of others which are being excluded from coverage will be listed numerically as "exceptions" in the preliminary title report. These may be claims by creditors who have; liens or liens for payment of taxes or assessments. There may also be recorded restrictions which have been placed in covenants, conditions and restrictions (CC&Rs Interests of third parties may include easements given by a prior owner which limit u1se of the property. A buyer may not want to have these claims or restrictions on the property. Instead, he or she may want to clear, if possible, the unwanted items prior to purchase.

In addition to the limitations noted above, a printed list of standard exceptions and exclusions listing items not covered by a title insurance policy may be attached as an exhibit item to the report. Unlike the numbered exclusions, which are specific to the property being acquired, these are standard exceptions and exclusions appearing in title insurance policies. The review of this section is important. It sets forth matters that will not be covered under the title insurance policy, but which a buyer may want to investigate, such as laws or regulations governing building and zoning.

The preliminary report is not a written representation as to the condition of title and may not list all liens, defects, and encumbrances affecting title to the land, but merely report the current ownership and matters that the title company will exclude from coverage if a title insurance policy is later issued.

A preliminary report is an offer to insure, it is not a report of a complete history of recorded documents relating to the property. A preliminary title report is a statement of terms and conditions of the offer to issue a title insurance policy, not a representation as to the condition of the title.

These distinctions are important for the following reasons: first, no contract or liability exists until the title insurance policy is issued; second, the title insurance policy is issued to a specific insured person and others cannot claim the benefit of the policy.

Title insurance companies can protect your interest through the issuance of "binders" and "commitments."

A binder is an agreement to issue insurance giving temporary coverage until such time as a formal policy is issued. A commitment is a title insurer's contractual obligation to insure title to real property once its stated requirements have been met.

Your real estate agent with and your attorney, can explain the preliminary title report to you. Your escrow and title company can also answer questions.