What is a prelim? Why is it important?

What is a preliminary title report?

A preliminary title report, often called a prelim, is an offer to issue a title insurance policy. Its purpose is to offer a buyer and other pertinent parties, like escrow, a review of what might affect title. (Remember, title refers to legal ownership of a property.). A preliminary title report is not a title insurance policy.

Record of real estate ownership transfer, such as buying or selling a property, are stored in searchable archives. Records of other events affecting property ownership, such as liens or levies, are also archived as public records. A review of these records is called searching and examining and is an essential step in generating a preliminary title report.

A prelim will show the current vesting as well as any encumbrances. Some of the most common encumbrances disclosed on a prelim include general and special taxes, liens, easements, interests of others, and covenants, conditions, and restrictions (CC&Rs).

Why is a prelim important?

All parties in a real estate transaction should review the prelim as soon as possible for any items that may interfere with a timely closing. A prospective buyer and their real estate agent will look for any conditions on title that might affect how the buyer intends to use the property. Examples of red flags for a buyer could be certain easements or CC&R/ restrictions.

A seller, together with their real estate agent, will want to look for any encumbrances the seller has that will need to be addressed or eliminated before the transfer of title. Examples of red flags for sellers and their agents could be property taxes, trust deeds, liens, and assessment bonds.

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