Understanding Preliminary Reports

After months of searching, you’ve finally found it - your perfect dream home. But is it perfect?

Will you be purchasing more than just a beautiful home? Will you also be acquiring liens placed on the property by prior owners? Have documents been recorded that will restrict your use of the property?

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

To help you better understand this often bewildering subject, the Land Title Association has answered some of the questions most commonly asked about preliminary reports.

What is a Preliminary Report?

A preliminary 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 thereon, which will not be covered under a subsequent title insurance policy.

What Role Does a Preliminary Report Play in the Real Estate Process?

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

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

Thus, a preliminary report provides the opportunity to seek the removal of items referenced in the report that are objectionable to the buyer before purchase.

When and How is the Preliminary Report Produced?

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

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