Preliminary Title Report: How To Get One

Preliminary Title Report
Preliminary Title Report

You’re probably wondering, “What is a preliminary report, and how to get one?” In a nutshell, it’s a document that officially establishes legal ownership of a property. You might say it’s one of the most important pieces of documentation involved in selling a home. Read on to get full detail on the preliminary title report, and what it cost to get one.

A title company puts these reports together to issue title insurance to the buyer. They can be obtained by contacting the county assessor or ordering them from a title company for $75-$250.

Preliminary Title Report

A preliminary title report is a legal document obtained after the lawyer clears up any potential issues with ownership of your home and deems it OK to be sold.

You can think of the preliminary title report as a detailed list of all the costs related to buying or selling property. It includes things like settlement fees, title commitments, and insurance policies. It will sometimes be called a settlement statement.

With this document, both buyer and seller are protected. The property is free of any liens that have to be paid at settlement, while the individual acquiring it can buy with peace of mind knowing they’re getting what they pay for.

Lawyers and real estate agents alike can benefit from this document, as it will give a clear insight into the property up for sale.

Title compiles the report by completing a detailed review of recorded documents about both the parcel of land and both parties involved in the transaction. Any subsequent issues that are uncovered during this process are listed in the preliminary report in numerical order as “exceptions.” If an exception is listed on the preliminary title report it is not set in stone, as there is a period where the lender can request that items be removed from the title before closing.

What is Preliminary Title Report

A preliminary title report is a report prepared before issuing a policy of title insurance that shows the ownership of a specific parcel of land, together with the liens and encumbrances. The report describes the property in question and outlines exclusions that would not be covered under the title insurance policy once it is instated.

The report’s exclusions section is important because it informs you of problems with the title before you buy. Some exclusions are standard. However, things like unpaid taxes and liens imposed on the property due to unpaid consumer debt are classified as “clouds on the title” that may need to be resolved before ownership can be transferred.

Finding a cloud on the title can bring the entire process to a halt. This is because the buyer will likely have trouble getting approved for a mortgage on a house that has liens or questionable ownership.

How To Get a Preliminary Title Report

The preliminary title report is typically generated after entering escrow so the buyer does not need to do anything special to get this. If you are the seller, you could request a copy as soon as you put the property on the market. It is best to avoid issues or know about them early. Any cloud on the title that is discovered at the last minute could be costly.

If your seller’s agent does not give you the report automatically, you can request it. Or you can do a bit of preliminary title research on your own before even listing using sites online.

Any of the big four title companies (Fidelity, First American, Stewart & Old Republic) can also run a preliminary title report for you, they typically charge a few hundred dollars.

You can also get one for free, or deferred payment only if the home sells at the close of escrow, by choosing a title company in advance to be the title insurer and opening escrow with them. To do this either look up a local office of one of the companies listed above and call or email the salesperson.

Why Get a Preliminary Title Report?

A preliminary title report will confirm who owns the property, thus confirming to prospective buyers that you own the property. It will also tell you the major items that you need to deal with to sell the property. For instance, if there are outstanding liens or unpaid property taxes. It’s also common in many areas to include it with your disclosures so including it just meets the buyer’s expectations.

How is a Preliminary Title Report Created?

The preliminary title request can be initiated in several ways depending on the type of real estate transaction. If the property is being financed, the lender will contact the title company shortly after an escrow account is opened to begin the process.

Investors who are shopping for bank foreclosures often request a preliminary title report before making a bid on a property that interests them.

Sellers may also request a preliminary title report to identify any issues that need to be addressed before the property is listed. In some areas, a preliminary title report is routinely included in the disclosures.

Once the title company receives the request, they begin to collect and review records such as liens, and unpaid taxes.

Any issues with the property will be listed as exceptions in the preliminary report. Any exceptions will not be covered in the title insurance policy unless they are cleared before the title transfer.

Preliminary Title Report Cost

The cost of a title search depends on the source you use. Most states require a title search to legally purchase a property. To most buyers, this is merely a formality and is most often left to an attorney used during the purchase. Titles can be confusing and sometimes extra paperwork is involved. The reality is that the cost depends on the purpose of your search. The smartest way to do this search is to use an authority like an attorney if this is a significant purpose. For less important informational needs, you can use an online service like HomeInfoMax or something like that. These basic information services can save you big. The bottom line is you need to use good judgment when deciding how deep to dig and why.

The searcher must consider several factors about the information the most important of which is the timeliness of the source. If you get a source that is out of date, the title information could be wrong. This is why a comprehensive source is best. For the purchaser, this could be extremely important. For the purchaser in a real estate deal, this is crucial. A bad title could invalidate your transaction and leave you in a terrible financial situation where you have paid for something you could never possess. Skimping on a title search when you are the purchaser is never in your favor. For a purchaser, you should spend the extra money. It will be well worth the extra cash. Online tools are great for figuring out who owns a property but timely updated information is required for legal purchase. Never forget this.

Preliminary Title Report Vs Title Report

This is a frequently asked question by clients! A preliminary title report, in general, shows ownership, liens/encumbrances, and any exceptions to the title. This data is derived from documents recorded against a specific property address or the assessor’s parcel number (APN). It is critical to understand that all preliminary title reports, whether acquired from U.S. Title Records or a local title firm or title agency, are not guaranteed or insured. To complete a transaction, a title policy must be obtained and issued.

The primary distinction between a Full Chain of Title Report and our Preliminary Title Report is that the records package includes the current vesting deed, whereas the full chain of title includes copies of all transfers as well as copies of source documents dating back up to 30 years.

Easements and restriction information will be included if they were recorded against that specific property address. Depending on the county and the property, certain easements are sometimes contained in the legal descriptions and in the survey. In other circumstances, easements and/or restrictions are statutory or can be found in documents that govern a specific subdivision. The county recorder indexes governing papers differently, therefore they must be retrieved independently using our Abstract Service. Because many clients are uninterested in easements that are not included in the legal description. They are not automatically included in our normal report, which helps to keep costs low.

What To Look For In A Title Report

Title reports are helpful because they can help you discover any issues that can impact the transfer of ownership. Here are some common title problems that come up:

Public record errors: Be sure to comb through the deed, as clerical or filing errors can occur. Administrative errors can affect the validity of the deed.

Liens on the property: An outstanding lien means that the property could be used as collateral for the outstanding debt of the previous owner. Find out how a warranty deed is a great tool to protect yourself in this possible scenario.

Encumbrances: An encumbrance won’t prevent the transfer of property ownership. This means that a third party has an interest or liability in the property. This can diminish the value of the property.

Falsified documentation: Believe it or not, some individuals will go to great lengths to falsify documents. This means that some public records may contain false documents, making it difficult to discover the rightful ownership of a property.

Estate plans: In some cases, an unknown heir or will can be discovered. A newly-discovered estate plan can jeopardize future property ownership.

Property disputes: Public survey plans might show different property boundaries from what was promised. This may cause disputes regarding property lines and value.

Falsified identity: Legal claims to a property can be at risk in the case that someone impersonated the true property owner to sell the home.

Violated building codes: Titles can sometimes be affected by unresolved building code violations

Conclusion

Whether you are a first-time homebuyer or a seasoned investor, knowing what you are getting into when purchasing a property is crucial. That’s exactly what makes a title report so important: it outlines everything you need to know about owning the property. Always mind your due diligence during the closing process and request a title report. Further, read through the above questions to make sure you know what you are looking for when you get one. By taking the extra step to learn how a title report works, you can help avoid potential problems.

FAQs

How important is preliminary title?

A preliminary title report is a document that offers information on a property’s title and history. It ensures that the house you’re about to buy is legally owned by the seller and not an unknown heir who may try to claim the property.

How long does a report on title take?

A title report will typically take 4 weeks to complete. However, the timeframe will be heavily influenced by the borrower’s attorneys and how quickly they can give the information sought by us.

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