How to Read a Preliminary Title Report (Agent-Friendly Guide)
As real estate agents, you juggle dozens of moving parts in every transaction. Preliminary title reports might not be the most exciting documents in your stack, but they're among the most important. Missing a critical detail in a prelim can derail a transaction and create headaches for everyone involved. At New Door Title, we want to help you understand exactly what you're looking at so you can guide your clients with confidence.
Understanding the Preliminary Title Report
A preliminary title report (often called a "prelim") provides a snapshot of property ownership and any encumbrances tied to the property. Think of it as comprehensive due diligence in document form. The title company researches public records and compiles everything that affects the property's title. It is recommended to review this information and identify anything that might impact your transaction for your clients.
The Parts That Actually Matter
The Opening Section: Property and Owner Details
The first page contains fundamental information: the property address, legal description, current owner's name, and vesting details. This might seem straightforward, but it's worth your careful attention. Verify that the address and parcel number match your listing exactly. An incorrect parcel number can lead to significant delays or even jeopardize the entire transaction.
Understanding Vesting
The vesting section reveals who legally owns the property and how they hold title. This matters because it determines whose signatures you'll need at closing. If the property is held as "John Smith and Jane Smith as joint tenants," both parties must sign. If one owner has passed away or if there's been a divorce, you'll need to address these circumstances before moving forward.
Section 1: Coverage Details
This section outlines what the title company will insure. Typically, this includes standard items like property taxes and common easements. If something seems to be missing from this coverage that you expected to see, reach out to your title officer for clarification.
Exceptions: Where You Earn Your Commission
The exceptions section lists items the title company discovered that they won't insure against. Some exceptions are routine and expected. Others require immediate attention and discussion with your clients.
Standard Exceptions:
Most properties have routine exceptions like property taxes that aren't yet due, CC&Rs (covenants, conditions, and restrictions), utility easements, and building restrictions. These are normal parts of property ownership and rarely create issues.
Exceptions That Require Action:
Liens present the most significant concern. Whether it's a tax lien, mechanic's lien, or judgment lien, these must be resolved before closing. If they're not, your buyer could inherit the previous owner's financial obligations.
Easements require careful evaluation. A standard utility easement allowing access for maintenance is typical. However, an easement granting a neighbor shared use of the driveway or other property features needs discussion with your clients.
Property use restrictions matter considerably if your buyer has specific plans for the property. We've seen situations where buyers planned major renovations, only to discover height restrictions or other limitations in the exceptions. Better to address these early in the transaction.
HOA Dues and Special Assessments
Outstanding HOA dues or special assessments should appear in the exceptions. However, it's worth verifying directly with the homeowner’s association. Occasionally, recent assessments or fees haven't yet been recorded in public records and might not show up in the preliminary report.
What's Not in the Report Can Matter Too
Sometimes the absence of information is just as important as what's included. If you're representing a seller who recently went through a divorce, refinanced their mortgage, or had a judgment filed against them, verify that these matters have been properly resolved and reflected (or removed) in the report.
If you notice a deed of trust that should have been satisfied but still appears on the report, someone needs to record a reconveyance deed. Don't assume this will happen automatically.
When to Contact Your Title Officer
Reach out to your New Door Title officer if you encounter:
Multiple or unexpected liens
Easements that could affect the buyer's intended use of the property
Vesting names that don't match your seller's information
Any gaps or irregularities in the chain of title
The notation "lis pendens," which indicates a pending lawsuit affecting the property
Restrictions that conflict with what your seller represented about the property
Your Role in the Process
You don't need to become a title expert, but you should review these reports thoroughly rather than simply forwarding them to your clients. Take time to read through the exceptions carefully. If something seems unusual or unclear, ask questions. Your New Door Title team would rather clarify a concern upfront than work through complications at closing.
The more familiar you become with preliminary title reports, the faster you'll spot potential issues. This expertise helps you guide your clients more effectively and keeps transactions moving smoothly toward successful closings.
We're Here to Help
At New Door Title, we understand that clear communication makes all the difference. If you have questions about a preliminary title report or need clarification on any title matter, our team is here to support you. Your success is our priority, and we're committed to making every transaction as smooth as possible.
Ready to review your next prelim with confidence? Reach out to New Door Title. We're here to help you and your clients close with confidence.
New Door Title
Your trusted real estate title partner