Why Is the Preliminary Title Report So Important When Buying?

Los Angeles and South Bay Real Estate Video Blog with Lenny LaRocca

When you start the process of buying a home and enter escrow, it's important to be aware of the preliminary title report and its contents. Here's why.

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When you buy a home and you're in the escrow process, the preliminary title report has three key aspects to it. Dozens of records come into the play about the home you're thinking of buying, and it all has to be disclosed to you as the buyer. The title report is one is one the most important reports in this process because it documents the ownership of the home as well as any liens, easements, or encroachments against the property. A title company compiles all this information and puts into a report that goes to you and your agent. The information in this report is critically important, and you should be aware of the three most important aspects:

1. The status of the property: Property taxes always show up on the preliminary title report and show how much is owed and how much has been paid. As a buyer in escrow, the important part is making sure any property taxes have been paid before closing escrow; it's actually a condition of closing escrow. If by chance the seller hasn't paid property tax, it will be paid out of the proceeds they'd receive from the sale. Property tax is a top lien item on any preliminary title report.
2. The legal description: You won't see this is any of the agent's marketing information. It's a written description of the property's location and boundaries relative to nearby streets and intersections.
3. Mortgage liens: These are generally listed right below property taxes and are listed in order. If a home has two loans on it, the mortgagor in the first position would be noted first and the mortgagor in the second position would be noted second. In all property transfers in escrow between a buyer and seller, the mortgage liens must be paid off prior to the title transfer. When the sales close, the liens must be paid off in the order that they appear on the title report. The seller is left with the net proceeds based on that.

Understanding the preliminary title report is a crucial aspect of buying a home.

Now, this list isn't all-inclusive and there are a variety of other items that could show up on a title report. That why it's so important to understand what's included in that preliminary title report when you're in escrow as a homebuyer. You also want to be clear on what title insurance protects you from. If you have any questions about this step in the home buying process or you're thinking of selling property in the area, give us a call or send us an email soon. We're here to help.