Page 10 - California Home Sellers Handbook

04 Preliminary Report

Preliminary Reports- Some Basics
After months of searching, you’ve finally found it, your perfect dream home. But is it per-
fect? 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, prior to purchase, to review
matters affecting your property which will be excluded from coverage under your title insur-
ance policy unless removed or eliminated before your purchase.

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

What is a Preliminary Report?

A preliminary report is a report prepared prior to issuing a policy of title insurance that
shows the ownership of a specific parcel of land, together with the liens and encumbranc-
es 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 par-
ticular 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 dis-
cussed 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 which are objectionable to the buyer prior to 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.

These recorded matters are listed numerically as “exceptions” in the preliminary report.
They will remain exceptions from title insurance coverage unless eliminated or released
prior to the transfer of title.

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