Page 19 - Home Buyers and Sellers Guide - Hawaii

What should I look for when reading my preliminary report? Is a preliminary report the same thing as title insurance?

You will be interested, primarily, in the extent of your ownership rights. This means you will want to review the Definitely not. A preliminary report is an offer to insure; it is not a report of a complete history of recorded
ownership interest in the property you will be buying and the description of the property, as well as any claims, documents relating to the property. A preliminary report is a statement of terms and conditions of the offer to
restrictions or interests of other people involving the property. issue a title insurance policy, not a representation as to the condition of title.

The report will note in a statement of vesting the degree, quantity, nature and extent of the owner’s interest in These distinctions are important for the following reasons: first, no contract or liability exists until the title
the real property. The most common form of interest is “fee simple” or “fee” which is the highest type of interest insurance policy is issued; second, the title insurance policy is issued to a particular insured person and others
an owner can have in land. cannot claim the benefit of the policy.

Liens, restrictions and interests of others which are being excluded from coverage will be listed numerically as Can I be protected against title risks prior to the close of the real estate transaction?
“exceptions” in the preliminary report. These may be claims by creditors who have liens or liens for payment
of taxes or assessments. There may also be recorded restrictions which have been placed in a prior deed or Yes, you can. Title companies can protect your interest through the issuance of “binders” and “commitments.”
contained in what are termed “CC&Rs (covenants, conditions and restrictions).” Finally, interests of third parties
are not uncommon and may include easements given by a prior owner which limit your use of the property. A binder is an agreement to issue insurance giving temporary coverage until such time as a formal policy is
When you buy property, you may not wish to have these claims or restrictions on your property. Instead, you issued. A commitment is a title insurer’s contractual obligation to insure title to real property once its stated
may want to clear the unwanted items prior to purchase. requirements have been met.

In addition to the limitations noted above, a printed list of standard exceptions and exclusions listing items not Discuss with your title insurer the best means to protect your interests.
covered by your title insurance policy may be attached as an exhibit item to your report. Unlike the numbered
exclusions, which are specific to the property you are buying, these are standard exceptions and exclusions How do I go about clearing unwanted liens and encumbrances?
appearing in title insurance policies. The review of this section is important, as it sets forth matters which will
not be covered under your title insurance policy, but which you may wish to investigate, such as governmental You will wish to carefully review the preliminary report. Should the title to the property be clouded, you and your
laws or regulations governing building and zoning. agents will work with the seller and the seller’s agents to clear the unwanted liens and encumbrances prior to
taking title.
Will the preliminary report disclose the complete condition of the title to a property?

No. It is important to note that the preliminary report is not a written representation as to the condition of title
and may not list all liens, defects and encumbrances affecting title to the land, but merely report the current
ownership and matters that the title company will exclude from coverage if a title insurance policy should later
be issued.
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