Page 19 - Homeowners Manual - San Luis Obispo County

Preliminary Report

PRELIMINARY REPORTS — SOME BASICS
After months of searching, you’ve finally found it: your perfect dream home. But is it perfect? Will you be
purchasing more than just a beautiful home? Will you also be acquiring liens placed on the property by prior
owners? Have documents been recorded that will restrict your use of the property?

The preliminary report will provide you with the opportunity, prior to purchase, to review matters affecting your
property which will be excluded from coverage under your title insurance policy unless removed or eliminated
before your purchase.

What is a preliminary report?

A preliminary report is a report prepared prior to issuing a policy of title insurance that shows the ownership of
a specific parcel of land, together with the liens and encumbrances thereon which will not be covered under a
subsequent title insurance policy.

What role does a preliminary report play in the real estate process?

A preliminary report contains the conditions under which the title company will issue a particular type of title
insurance policy.

The preliminary report lists, in advance of purchase, title defects, liens and encumbrances which would be
excluded from coverage if the requested title insurance policy were to be issued as of the date of the preliminary
report. The report may then be reviewed and discussed by the parties to a real estate transaction and their
agents.

Thus, a preliminary report provides the opportunity to seek the removal of items referenced in the report which
are objectionable to the buyer prior to purchase.

When and how is the preliminary report produced?

Shortly after escrow is opened, an order will be placed with the title company which will then begin the process
involved in producing the report.

This process calls for the assembly and review of certain recorded matters relative to both the property and the
parties to the transaction. Examples of recorded matters include a deed of trust recorded against the property or
a lien recorded against the buyer or seller for an unpaid court award or unpaid taxes.

These recorded matters are listed numerically as “exceptions” in the preliminary report. They will remain
exceptions from title insurance coverage unless eliminated or released prior to the transfer of title.

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