How to read a preliminary title report

Title insurance is a basic and necessary part of real estate purchases. It is one of the first things obtained in the due diligence process. It is not insurance itself, but it shows what the title insurance company intends to exclude from the policy of title insurance if they were to issue insurance on the property at that moment. The practical translation of a title insurance exception is that the title insurer will not defend you against any claim relating to the excepted item (often a recorded document). This can be a devastating loss. A preliminary title report usually costs somewhere in the order of $500, but this is typically not billed until the escrow closes. If the escrow closes and a title policy is purchased, the "prelim" is typically not charged. The exceptions are typically numbered, and in future posts I will give specific examples of common exceptions and how they are typically evaluated. Another topic for future posts will be the "requirements" section of the preliminary title report which is often ignored until right before close of escrow causing delays, failed deals or even law suits. I have a "user's" knowledge of the title insurance products, and I won't attempt to make an exhaustive presentation on this subject on which entire books have been published. Also as time goes on, I plan on giving references to resources available to the public which will remove some of the mystery of real estate law. This blog targets California real estate, although some of the comments may be applicable to other states. Please feel free to comment on or ask questions.

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