When you are buying a home, you will be provided a preliminary title report in the first week or so after opening escrow. While some people may glance at it and then forget about it, this report tells you several important things including:
Current Owner
The first, and possibly most important thing, the report tells you is who actually owns the property you are buying. Make sure the name matches up with person who signed the acceptance of your offer. If it is a legal entity (e.g. House-flipper Partners, Limited) make sure you have a form disclosing who is signing on behalf of the entity.
Tax Liens
This section will show you if taxes have been paid and for which period or if they are still outstanding and since which date.
Easements, CC&Rs and HOA
This section will tell you if there are Conditions, Convenants & Restrictions (rules you agree to live by) and the related Home Owners’ Association who will govern based on the CC&Rs. You are entitled to 5 days to review the CC&Rs (together with the financial statements and the minutes of the Board of Directors’ meetings) from whenever you receive the package. The title report simply puts you on notice that the property is governed by CC&Rs and if there are any easements (right of passage or use) that run through your property.
Other Liens
Unless paid for in cash, the property most likely has at least one lien from a lender. You need to add up the outstanding balance plus any outstanding tax liens plus any other lien listed and see if your purchase price will cover all these liens. If not, you need to ask how does the seller plan to pay the total balance to deliver clear title to you.
Legal Description and Plat Map
This section describes the property being purchased along with any easements that may exist. It will refer to an attached map where you can see a graphic representation of the description. There may be reference to reserved or deeded parking spaces if any. Any such reference should be explored and fully identified by the buyer.
Title Insurance Policy
Last but not least usually is a description of a CLTA title insurance policy specifying its exclusions. Unless you are buying a property on extensive land with poorly marked boundaries, a survey is not necessary. While fences are not always at the boundary, the chances are everything is fine as is. An ALTA policy will include a survey to ensure you are getting the land you expect, but the additional cost isn’t usually justified. As the seller normally pays for the title insurance, you are going to have an exceedingly difficult time getting your offer accepted if you ask for an ALTA policy when you are buying in an urban or sub-urban area..
Everything covered here should be reviewed by your title representative and your realtor, as well as yourself. It is easy to overlook something so many pairs of eyes reduces the possibility of missing anything. As the other pairs of eyes belong to people who do this routinely (or at least should), do not be afraid to ask when you don’t understand a paragraph or a term.
If you have questions, call me at 760 622 5087.
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