What is the Preliminary Title Report?

It can also be called a PTR, Prelim, Title Commitment and just plain Commitment.  All of these terms describe one of the least read (or understood) documents in a typical real estate transaction.

The official definition is “an offer to issue a policy of title insurance covering a particular estate or interest in land subject to stated exceptions.” Translation: If certain criteria are met, then a title insurance policy will be issued.

Since the definition refers to “stated exceptions” that will not be covered, this is an important document for buyers to read and understand about that new home they have under contract.  Lines 94-99 of the AAR Residential Real Estate Purchase Contract direct the escrow company to order and deliver the title report.

The items shown in a Preliminary Title report are:

• The estate of interest covered
• The owner of the estate of interest
• The parcel of land involved (legal description)
• The exceptions, liens, encumbrances and other risks which will not be insured against if a title policy is issued.

A common lien which will not be insured against (this is one of those stated exceptions) is an existing Deed of Trust (loan) securing the property for the current owner’s lender.  The Escrow Officer will obtain a payoff demand statement from the lien holder and payoff the lien in escrow.  The lien holder will then record with the county recorder a release of that lien, clearing the title of the stated exception.  This process is repeated for all liens and encumbrances that require payoff demand statements.  These could be 2nd mortgages, tax liens, child support liens, etc.

The title report is basically a road map for the Escrow Officer as she works to clear requirements for the buyer and seller so that a title insurance policy can be issued upon close of escrow.

Hopefully this  helps next time you purchase a home…

Remember to read the title report, and if you need help, call your Escrow Officer.

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