Preliminary Title Reports Are Really Helpful, Especially If You Read Them

I know I’ve said this before, but it bears repeating: when it comes to real estate documents, the large print giveth and the small print taketh away. When you decide to purchase a home, your preliminary title report will include many paragraphs full of boring (but important) information, and potentially a few paragraphs with information that could change your mind about buying the property. Be sure to read the whole thing.

Vesting

Much of the information in a preliminary title report is information your Realtor and the seller’s Realtor will take care of; it won’t require any action on your part. For example, if the title of the property is in the name of a corporation, the seller’s Realtor will have to obtain documents from a vested owner authorizing someone to sign on the dotted line. While it’s not something you, as a buyer, have to deal with, it’s important; because if the corporation is not in good standing with the state, the seller may have trouble transferring the title.

Taxes and Assessments

While you will not be responsible for paying outstanding balances of taxes and assessments, it’s good to see what they are to get a sense of what your future liabilities will be. A local example of an assessment you may start to see are those from Property Assessed Clean Energy (PACE) loans. Mendocino County recently approved these loans that help people finance energy efficiency upgrades or renewable energy installations. PACE assessments totaling many thousands of dollars will need to be paid by the seller or taken into consideration when determining the purchase price.

Deeds of Trust

Preliminary title reports also show any deeds of trust that have not been reconveyed (released). Normally, this deals with loans the current owner is obligated to pay. On occasion, an old deed of trust from decades ago appears, and it must be addressed to avoid future problems. Conceivably, a beneficiary of an old deed of trust that was never paid off could make a demand for the outstanding principal plus accrued interest. While compounding interest in your retirement account works in your favor, compounding interest from an old debt does not.

Identity

One of the critical elements of a preliminary title report is to see who exactly owns the property. If an owner’s deceased ex-wife passed her ownership stake to her children when she died, and those children refuse to speak with the owner, it may take some time to clean things up. Start right away. Also, something as simple as an incorrect middle initial can cause problems if not detected and dealt with early.

Pending Actions

Likewise, you’ll want to clean up any legal disputes. If the neighbor’s lawsuit over the encroachment of your shared fence remains unresolved, it can do more than delay the closing of an escrow, it can kill it altogether.

Maintenance Agreements

The most common maintenance agreements are road maintenance agreements. Be sure you understand both the scope of the agreement and your obligation to pay for it. Other maintenance agreements can cover common areas such as greenbelts or shared wells. Read the details.

Legal Description

In the vast majority of cases, the legal description is routine. After all, if you buy a house at 123 Main Street with a fence around the property’s perimeter, the property line is probably obvious. However, a vacant lot in Brooktrails is tougher to determine, and the boundary line on a 350-acre parcel at the end of Spy Rock Road is harder still.

Property in Default

If a notice of foreclosure exists because of the current owner’s default on a loan, your timeline may be affected. The process may be delayed or a pending public sale may rush the escrow.

No matter how boring you may find the details of your preliminary title report, I’m confident you’ll be glad you read it.

If you have questions about real estate or property management, please contact me at rselzer@selzerrealty.com or call (707) 462-4000. If you’d like to read previous articles, visit my blog at www.richardselzer.com. Dick Selzer is a real estate broker who has been in the business for more than 40 years.