After months of searching, you’ve finally found it – your perfect dream home. But is it perfect? 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 Title Report is researched and provided by the title company. This report is often generated even before a home hits the active market just to be sure there are no snags during the escrow process. Most of the time everything checks out ok, but, there is the occasional suprise. Here’s a good list of some items to check for -
Vesting – If title does not include a name or names that should be on title, look for a real estate contract as an exception in the preliminary title report. Sometimes the name of an unexpected owner will appear (i.e. a previous spouse or relative who died), and corrective documents may be required.
Taxes and Assessments – Look for an exemption or classification designation that would change the tax amount as a result of the sale.
Deed of Trust – Make sure all Deeds of Trust that are paid off and are reconveyed. Any that are not, require a reconveyance from the trustee or a court order to remove it from the record. Upon proof of payment and/or an indemnity, the title company may insure around the encumbrance.
Identity Matters – Judgments and Liens may be eliminated with an identity affidavit or an SI, commonly known as STATEMENT OF INFORMATION, if they do not affect the party in question. If they do affect the party but have been paid and not satisfied, a release or satisfaction must be obtained and recorded or filed to eliminate these matters.
Pending Actions – A civil action affecting real property will generally have to be dismissed or withdrawn before title to the land can be insured. A pending divorce may not need to be finalized for a sale or loan to close, however there may be special requirements. A probate may also have specific requirements.
Joint Use Matters – Driveways, party walls and access easements may prompt lenders to require a joint maintenance agreement. The title report will show such agreements if they are of record.
Extended Coverage Matters – Common exceptions include: current taxes, bonds, deeds of trust, Mello-Roos Assessment District items, CC&Rs, and easements. Be sure the CC&Rs or existing easements don’t interfere with the buyer’s future plans. For example, an easement across the backyard could have a profound effect on the buyer’s ability to add a swimming pool at a later date. An extended coverage owner’s policy may be requested and an ALTA/ACSM (American Congress on Surveying & Mapping) survey of the property will be required.
Legal Description – An owner could own two properties adjacent to, or across the street from, each other, causing confusion in identifying the correct property. Carefully check the legal description to make sure the property described in the preliminary title report is the same as that shown in the purchase and sale agreement to be sure that all the property being conveyed has been included in the preliminary title report.
The home buying process is, by its very nature, a complex transaction. And Title Insurance is an important part of the real estate transaction since it provides you with an opportunity to review any impediments that would prevent clear title from passing to you.