What is a Preliminary Title Report?
A preliminary title report (also known as a "title commitment") is a report issued by a title company after conducting a thorough title search to verify the current property owner has a clear chain of title and that there are no outstanding liens or other encumbrances on the property.
Why do this? Well, the buyer wants to be 100% certain that the person SELLING the property actually owns 100% of the property, and that no other parties have a claim to it.
Essentially, a preliminary title report is a list of any findings or issues that currently appear in a property’s title work and it includes a list of any liens or encumbrances that will not be covered by title insurance. The report also shows if anyone other than the seller has a legal claim to the property.
In a sense, the preliminary title report is a checklist of items the title company needs to receive before they can finalize and close a real estate transaction and issue the corresponding title insurance policy. It also represents the list of outstanding issues that cannot be covered by the title insurance policy. Before a BUYER invests, it provides essential information such as the following.
- The legal description of the property.
- Whether the seller has the right to sell the property.
- The existence of any tax liens against the property.
- If the property is being used as collateral for a mortgage or other loan.
- Whether there are any other judgments or liens.
- Any CC&Rs (covenants, conditions, and restrictions) associated with the property.
- Any easements or rights-of-way associated with the property.
- Other unusual restrictions. Occasionally a property may be subject to special planning and zoning restrictions or subject to regulations (if it is located in a historic district, for example). These restrictions may affect how the buyer can use or develop the property.
