When you purchase real estate, confirming the seller’s legal right to sell and ensuring the property is free from hidden claims is critical. A preliminary title report serves as a comprehensive background check on the property, similar to a vehicle history report. It is prepared by a title company after a thorough examination of public records including deeds, court filings, tax records, and property indexes.
How Does the Preliminary Title Report Work?
Once your offer is accepted and escrow is opened, your lender or escrow officer orders this report. The title company then conducts a title search to uncover any liens, claims, or restrictions affecting the property. They compile their findings into a report sent to you, your agent, and your lender.
This report is a snapshot of the property’s legal status at that time. It lists issues that must be cleared before closing to ensure you receive a clean title.
Key Sections of a Preliminary Title Report
- Legal Description & Ownership: Confirms the property’s address, parcel ID, and legal owner. A mismatch here indicates a serious problem.
- Liens & Encumbrances: Includes mortgages, tax liens, mechanic’s liens, or judgments. The seller must resolve these to prevent you from inheriting debt.
- Easements & Restrictions: Details others’ rights to use the property (like utility easements) and any rules limiting use (such as homeowner association covenants).
- Exceptions: Lists issues that title insurance will not cover, helping you understand potential risks.
Why Is This Report Critical?
For buyers, it safeguards against purchasing property with legal disputes or hidden debts. For lenders, it confirms their loan is secured by clear ownership, a requirement to approve your mortgage.
Common Red Flags to Watch
- Unpaid property taxes that could lead to tax liens
- Contractor liens for unpaid work
- Court judgments
- Unresolved ownership claims
- Boundary inconsistencies
From Preliminary Report to Title Insurance
Identifying issues is the first step; the seller typically clears these before closing. Upon resolution, the title company issues a final title insurance policy protecting you against future claims related to past title defects. Learn more about title insurance to understand your coverage.
Frequently Asked Questions
Is it the same as title insurance? No, the preliminary report identifies existing issues before closing. Title insurance protects you post-closing.
Who pays for the report and insurance? Costs vary by location and contract terms, but often the seller pays for the owner’s policy and the buyer for the lender’s policy.
Can I skip it? No. Your lender requires it, and skipping puts you at serious financial risk.
For reliable consumer guidance, see the Consumer Financial Protection Bureau’s advice on title searches.
By understanding your preliminary title report, you can navigate your home purchase with confidence and avoid unexpected legal complications.
