How To Read The Preliminary Title Report
Are you buying a house? Always read the preliminary title report!
The preliminary title report is where you will find how much money the seller has borrowed on the property, what the title company won’t insure, and what easements go against (and with) the property. You can even see if anyone has done an Ellis Act Eviction on the property by reading the preliminary title report. These are all very important things to know and which can get swept under the rug in the chaos of buying a home. If you are in escrow right now and you are wondering if you should read the preliminary title report, yes, read it right now! And if you see anything that raises an eye brow, or two, speak with an attorney, it could save you from being stuck with a situation that can be quite unpleasant.
These are some things to look for:
1. Owner’s Name
Are all the sellers’ names and signatures on the purchase contract the same as in the title report? Every seller on title report must agree to the sale by signing any and all escrow documents including the purchase contract. Imagine a husband and wife are on the preliminary title report but only the husband’s name is on the purchase contract. Both signatures must be on the purchase contract in order to close escrow.
2. Type of Estate or Interest
Fee Title for instance. This is very important for understanding what property rights are actually being sold. You can find this information on the same page as the owner’s name.
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These are described as property taxes, current taxes, supplemental taxes, liens including a description of what has been borrowed against the property, delinquent taxes etc. The point is this is the section of the preliminary title report where you begin to get a sense of what is owed on the property.
This is where you will find any easements either to the benefit or against the subject property. For instance the subject property may have a driveway that crosses over a piece of the neighbors property allowing access to the street. Then again the neighbor might have an easement to walk along the side of the subject property to get to his/her backyard. The point is there are many types of easements, and this is where you can find them. If there is even a wisp of a question it is important to ask the title officer know what you are buying!
5. Plat Map
The plat map is a drawing showing the position of the lot, the lot size, possible location of easements etc.
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6. Legal Description
This is where the geographical location of a parcel of land is identified by lot and block number method or by the metes and bounds method.
In this case the Lot and Block method is used:
Tips When Reading a Preliminary Title Report
* Banks review the 24 months chain of title.
* Property which is resold in 90 days or less by the seller from the time of their acquisition is not eligible for FHA financing. Conventional loans are generally OK, but will be subject to scrutiny when reviewing the appraisal.
* Properties resold between 91-180 days are eligible for FHA, but will require a 2nd appraisal if the price is above 100% of the price paid by the seller. Invoices may also be required to justify the increase in value.
* Abatements should be reviewed cautiously as some may take time to clear. More often than not it will take much longer than a 30 day escrow would allow.
* Multiple sellers may hold up closing as some are not readily available, make sure escrow has all contact information for setting up signing appointments.
* If the seller is a corporation, partnership, or LLC then the authorized signers of these entities must be verified.
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