At the heart of most real estate transactions is the preliminary title report. A preliminary title sets forth various details about a piece of real estate, including:
The information in a preliminary title report, also known as a title search, is gathered from the property records in the county where the property is located. A preliminary title report does not require an exhaustive search of the property records. In most jurisdictions a title search which covers the history of the property for the 35 to 50 year period from the date the current owner acquired title to the property is considered a full title search.
A preliminary title report is the basis for the issuance of a title binder or title commitment. In short, a preliminary title report sets forth the conditions under which a title insurance company will issue a title insurance policy. The preliminary title report reveals title defects and other matters which must be dealt with in order for a seller to convey clear and marketable title and issuance of a title insurance policy.
Once escrow is opened with a title company or closing attorney, the preliminary title report will be ordered. Some title companies and closing attorneys have staff, usually attorneys, who “run” title. Others farm out title work to companies that specialize in reviewing real estate records and producing title reports.
If a preliminary title report reveals liens against prior owners or other clouds on the seller’s title, the closing attorney or title company will work to clear those liens. Those liens must be cleared or they will be listed as exclusions on the purchaser’s title insurance policy.
A preliminary title report is simply that – a report. It affords neither the lender nor the buyer any protections in the event of a challenge to either party’s interest in the property. Most residential mortgage lenders require borrowers to purchase lender’s title insurance coverage to protect the lenders’ interest in the property. Owner’s title insurance is optional, but is highly recommended because lender’s title insurance does not protect the buyer.
A title commitment is a commitment by the title insurance company to issue a title insurance policy upon satisfaction of the conditions set forth in the commitment. A title insurance policy insures a lender or a property owner against defects in title and/or challenges to their interest in the property.
If you have questions about preliminary title reports and title insurance, you should contact an experienced real estate attorney. A qualified real estate attorney can assist you in obtaining a preliminary title report and will review the report with you.