A preliminary title insurance report is provided prior to the creation of a new title insurance policy to determine the status of title to the property, any liens recorded against the property as well as any items that need to be cleared in order to proceed with the sale. A preliminary title report will show what title considerations you will take with you when you buy the property (for example, an electric pole is on your property).
A preliminary title insurance report is also known as a Preliminary report, Prelim report, Prelim, PR or Commitment.
As you review this report with your real estate agent, look for the following and ensure they are correct:
- The type of title insurance offered (lenders vs. owners)
- Exclusions and exceptions from coverage
- The property address(es) and legal description
- Current title type held on the property
- Matters of record specifically affecting the subject property or its owners
- Informational notes
Tips and Tricks for reading a Preliminary Title Insurance Report
Below are the types of information you will find within the report, and what to keep in mind when reviewing.
- The type of title insurance offered
- Lender’s, often called a loan policy, protects the bank or other lending institution for as long as they maintain an interest in the property (typically until your mortgage is paid off).
- Owner’s, the policy for you the home buyer, protects your investment and the ownership rights that come with it.
- Both title insurance policies pay valid claims and legal fees to defend against resurfaced and unaddressed past title issues.
- Exclusions and exceptions from coverage
- Common exceptions include current taxes, bonds, deeds of trust, unique state taxes (e.g. Mello-Roos tax assessment district items), covenants, conditions, and restrictions (CC&Rs) and easements.
- Be sure the CC&Rs or existing easements don’t interfere with your future plans. For example, an easement across the backyard could stop you from adding a swimming pool in the future.
- The property address(es)
- The plat map or assessors map and legal description should match the address.
- It is possible for an owner to own properties adjacent to or across the street from each other, which could be causing confusion in identifying the correct property.
- Current title type held on the property
- The type of title for the property should accurately reflect the current ownership structure, it can but doesn’t necessarily inform the future ownership approach that home buyer(s) choose for their property.
- Matters of record specifically affecting the subject property or its owners
- These important details should be identified and understood as to their implications on future owner(s).
- Informational notes
- Be sure to read the informational notes for pertinent items about the property (e.g., transfer taxes, monument fees, homeowners’ association fees, etc.).
If you’re buying a home in Texas, there’s some additional nomenclature that might be helpful for you to learn.
Always look for surprises. If you cannot locate an easement, if an unexpected deed of trust shows up, or if you see an item you were not aware of, discuss the matter with your real estate agent or call your escrow officer. Doma strives to be problem solvers and our team goes out of its way to resolve the majority of “red flag” areas. However, the responsibility for early detection and resolution of problems falls on the entire transaction team: the real estate agents, escrow and title companies, and the buyers and sellers.
Real estate agents, buyers and sellers should not assume that all title policies and title companies are the same. It is important to ask your title company questions to determine the type and cost of coverage best suited to you.
This article is part of the Home Buyer Guide and our Home Seller Guide.
