The Preliminary Title Report
The Preliminary Title Report
The preliminary title report is a report on the condition of title of the real property. The report contains information about the property that is important for the buyer to know such as how title currently vests, easements, loans and other liens against the property, and other items that may affect title.
The person who prepares the report is known as a title examiner. The title examiner issues the report based on findings that trace the chain of title back through every record available for the property. This search of the chain of title will determine if the person who is selling the property actually has legal ownership. The portion of the report detailing the history of ownership in the property is referred to as an abstract of title. The search for existing encumbrances in the report is called a title search.
Abstract of title is a detailed history of property ownership. Title search is a detailed listing of encumbrances. The abstract and search are compiled into and become the preliminary title report.
To perform a title search, a title company examiner searches the records of the county recorder, county assessor, and governmental taxing agencies that may impact title. Most title companies have their own department, known as a title plant, where they keep duplicates of recorded documents from offices and courts at the federal, state, county and municipal levels.
A title examiner has four primary objectives to discover:
- The exact description of the property
- The estate interest in the property
- The vesting of the estate interest
- The exceptions affecting the vested interest, such as liens, encumbrances and miscellaneous defects
The title search and subsequent preliminary title report will reveal the following to the various parties to the real estate transaction:
- The vested owner's name, as disclosed in the public records
- Current real estate property taxes, including whether they are paid or unpaid, and the date of the last property assessment
- Outstanding liens, encumbrances, covenants, conditions, restrictions, and easements
- A plat map of the subject property that shows the location and dimensions of the property
The preliminary title report also shows the items that need to be cleared (i.e., removed from the report) in order to transfer title to the buyer in accordance with the terms agreed
Exceptions to Title
The preliminary title report will list endorsements and exceptions.
Title insurance companies always include the following five standard exceptions to coverage in their preliminary title report. Some of these items can be insured against by the purchase of an extended coverage title policy. These five standard exceptions are removed in their entirety with an American Land Title Association (ALTA) Extended Coverage policy.
- Taxes or assessments not shown as existing liens by the records of any taxing authority that levies taxes or assessments on real property or by the public records.
- Any facts, rights, interests, or claims not shown by the public records, but which could be ascertained by an inspection of the land or by making inquiry of person(s) in possession of it.
- Easements, claims of easements, or encumbrances not shown by public records; unpatented mining claims; reservations or exceptions in patents or an act authorizing the issuance thereof; water rights or claims of title to water.
- Any lien, or right to a lien for taxes, worker's compensation, services, labor, equipment rental or material heretofore furnished, imposed by law and not shown by the public records. Perhaps the most common example of these types of liens are those that are possible under the construction lien law.
- Discrepancies, conflicts in boundary lines or encroachments, or other facts that a correct survey would disclose.
In addition to the five standard exceptions, other exceptions will appear on the report. An exception to coverage is any encumbrance the title insurance company discovers against the title that will not be cleared at closing by the buyer, seller, or third party (such as the seller's lender) while there is a mortgage lien filed against the property. Some other common types of exceptions are:
-
Covenants, conditions, and restrictions (CC&Rs)
-
Easements
-
Liens
-
Lis Pendens
Did you find this article useful?
Related Articles
-
Write an Offer
...
-
Pin Transactions
If you are working on specific projects everyday and you need to access them there is an option t...
-
Record an Expense
How to Record and Expense Ke...
-
The Final Closing Statement
The Final Closing Statement ...
-
Signing the Closing Documents
Signing the Closing Documents ...
