Complete Guide to a Preliminary Title Report

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Complete Guide to a Preliminary Title Report

Selling a property requires signing and submitting several crucial documents. Each of these is necessary for a successful transaction.

Before the official closing of escrow, you and your buyer must review the preliminary title report to ensure all you and the buyer have agreed to the terms. Despite the added effort in an already laborious mission, getting a preliminary title report will safeguard everyone involved in any real estate transaction.

From the numerous documents that deliver vital information to buyers about a property, the preliminary title report establishes ownership and vesting records and outlines any matters recorded against the real property.

The title search and title report will uncover any liens, encroachments, and easements registered against the property.

Everything You Need to Know About Preliminary Reports

Once you and the buyer initiate escrow, you should request a preliminary report promptly. It’s beneficial to have the results in hand within 48 hours or less.

All preliminary reports contain the property’s complete sixty-year history. Once you order a report, the title company will carefully examine who owned the property in the last six decades.

The title company will guarantee that the conveyance of property rights is conducted with accuracy and precision. The company will also examine if the present owner has any encumbrances against the property, such as taxes, judgments, and liens, to guarantee a smooth transfer of ownership to the new owner.

Two young home sellers read through the preliminary title report of their property.

What a Preliminary Report Shows

The preliminary report shows the following:

  1. Legal description of the property
  2. Tax liens or outstanding debts
  3. Restrictions

Legal description of the property

The legal description is a detailed account of the property’s exact location concerning its bordering streets and intersections. Regarding condominiums or planned unit developments (PUDs), the legal description will provide information about any exclusive or non-exclusive rights of:

  • common areas
  • parking
  • storage 

Liens or outstanding debts

Property taxes always hold the highest priority regarding liens on a title report. Consequently, you must pay any outstanding property taxes owed to the city, county, or town before transferring ownership of said property. 

A title report will indicate whether these taxes are due or are settled in full and, as such, should take precedence over other forms of debt within this transaction process.

Mortgage liens are after property taxes. The biggest lien holder sits at the top, but there may be situations where a secondary lien holder takes precedence.

Closing a sale often requires the payment of liens in their order as listed on the title report. If there are not enough sales proceeds to satisfy all lien holders – referred to as a short sale – one or more lenders will receive less than what they’re due. For this transaction to close, any short-listed lender must consent to accept those terms before proceeding.

Restrictions or easements

Easements provide an individual, corporation, or government the right to use another’s real estate property for a particular purpose without granting them ownership rights. The kind of easement determines the use of the property.

Suppose a documented easement grants another owner access to the property. In that case, it will be present on the title report. Unless both parties consent to its removal from the record, this notation remains attached until otherwise agreed upon.

Covenants, Conditions, and Restrictions (CC&Rs) are the laws that preserve order in an association of owners. These restrictions are documented against the property title; hence any new homeowner must abide by them. Therefore, being aware of these regulations before buying is essential to avoid future problems.

Miscellaneous restrictions appear on the preliminary title report from time to time. If your house lies in a historic district, it will be subject to the regulations and limitations of that district, which would appear on its title. 

In such cases, home modifications must abide by specific statutes supervised by local government entities, including the planning department, which potential buyers should consider.

What a Preliminary Report Doesn’t Show

The preliminary report shows everything recorded in the public record.

The title company is responsible for preparing a report before issuing the title insurance policy. This includes examining public records and official documents, then noting all discrepancies found in what’s known as exceptions, which are excluded from coverage. The buyer, lender, and you (the previous owner) take responsibility for any losses resulting from these exclusions.

Two homebuyers review the preliminary title report for the property they want to buy.

The Importance of Preliminary Reports

The importance of preliminary reports is different for you and the potential buyer. As a seller, the report is essential because it builds trust with the buyer and avoids future lawsuits.

As a seller, build trust with your buyer

Sharing a preliminary title report with your disclosure packet is the best way to build trust and confidence in buyers. As soon as the buyer trusts you, closing the deal becomes much more streamlined. Then, it’s simply a matter of negotiating any potential issues surrounding titles or encumbrances on the property so everyone can move forward together.

Performing comprehensive background checks on properties can be a time-consuming process without utilizing preliminary title reports. These documents provide an expeditious way to detect potential title defects, enabling you to complete the deal on time.

As a seller, avoid lawsuits

A preliminary title report will benefit you, as it can uncover any existing encumbrances on your property that could lead the buyer to sue for failure in disclosure. 

This way, both parties can rest assured knowing that all is accounted for before signing an agreement.

It could also uncover any limits or conditions set by a prior owner or local housing regulatory bodies that you were unaware of. This will ensure that the buyer is fully informed about every factor which may affect them if they choose to purchase the house. 

By doing your due diligence and conveying this information, you are aiding both parties in making a well-informed decision on their real estate investment.

As a buyer, confirm the current owner

Obtaining a preliminary title report is the first step in ensuring that the property sold has valid ownership and all proper selling rights.

With a preliminary title report, you can easily establish property ownership and avoid any disputes or issues with co-owners or heirs.

As a buyer, discover liens

It is important to review the preliminary title report and ensure there are no liens on the property. A lien is a legal notice from a creditor letting them know the debtor will repay them for any money loaned out to borrowers.

Unpaid taxes, mortgages, and repairs can all lead to the imposition of a lien on your property. Unfortunately, if left unresolved, this could result in foreclosure – where your creditor takes ownership of the premises as compensation for their dues. The buyer can avoid potential headaches or surprises by checking ahead of time.

As a buyer, find restrictions, easements, and CC&Rs

A preliminary title report will reveal any restrictions, regulations, and rules that apply to the property. The buyer cannot negotiate these Covenants, Conditions & Restrictions (CC&Rs), and zoning laws.

A homebuyer signs the title insurance of a property they are purchasing.

Title Insurance Coverage

Title insurance provides superior protection to lenders and homebuyers from the financial losses that may arise due to any issues or defects in the title of a property. It is an efficient form of indemnity insurance, safeguarding all involved parties against potential risk.

Two forms of title insurance exist, each providing protection to the lender or buyer. Lender’s title insurance safeguards the lender’s interest in a property and is usually acquired by borrowers. Conversely, owner’s title insurance offers security for buyers’ equity investments and often comes out of your pocket.

Ensuring that titles are clear is essential to any real estate transaction. To ensure the title’s validity, title companies must assess and verify its legitimacy by searching for any existing claim or lien against it before issuing it.

Title insurance safeguards lenders and homebuyers from any losses or damage caused by property title issues, encumbrances, and flaws. Common cases against a title involve unpaid taxes and liens that may arise due to conflicting wills. In contrast with traditional insurance, which provides coverage for potential occurrences in the future – title insurance assures protection against past claims.

The cost of owner’s title insurance ranges from $500 to $3,500 and depends on the state where the transaction occurs. 

Lender’s vs. Owner’s title insurance

Title insurance is available in two forms: lender’s title insurance and owner’s title insurance, with the latter including extended policies.

A lender’s policy safeguards the lending institution against any risk of loss due to an illegal transfer of ownership rights from the seller. This type of policy provides protection only for lenders – not property owners.

An owner’s policy offers a degree of security in the form of an owner’s title insurance policy. This protection is not mandatory, but sellers frequently purchase it to safeguard buyers against any issues with the title. Owner’s title insurance provides peace of mind for both parties and can help avoid costly disputes.


When selling your home, you want the title delivered with clarity and transparency. 

Suppose any potential special items or matters about your ownership of the property. In that case, it is crucial for you to know about them and understand them thoroughly before finalizing anything.

Selling a home can be incredibly stressful, but you don’t have to go through it alone. Title insurance is an invaluable tool that will help protect you during this process and provide much-needed peace of mind. 

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