Once a buyer and seller have reached an agreement but prior to escrow a preliminary title report should be reviewed. It’s not a very exciting document to read, but it is something that you should give your full attention to because it can be one of the most important documents a buyer will receive. There are three key areas that a buyer needs to pay close attention to when reading a preliminary title report.
The first thing in your title report that you should pay particularly close attention to is the legal description. The legal description is a description of where exactly the property is located and the boundaries of the property. If you have purchased a condo the legal description of the unit should the property’s interest in any common areas and any exclusive or non-exclusive easements. It should also provide you details about parking or any storage space that is included in the property.
The next important part of a title report is the section that pertains to property taxes. Property taxes are commonly referred to on a title report as the primary lien. If the previous owner owes any outstanding property taxes it cannot be transferred to a new owner until the outstanding taxes have been paid either to the city or county where the home is located. It is also required that any outstanding tax balance be paid before any other debt holder on the property receives their payment. In order to ensure that the transfer of property goes smoothly, you should ensure that according to the title report all taxes have been paid on the property.
The final area that should get thoroughly read is the section referring to mortgage liens. Information regarding mortgage liens can typically be found under the property tax section. Lien holders are commonly listed according to how much money is still owed. When the sale of a house closes all of the liens on the property must be paid in the order in which they appear on the title report. If the home was a short sale, there will not be enough money to satisfy all of the outstanding debt which will leave one or more lien holders shorted. For a short sale to close, the lenders who will be shorted must agree to the lesser amount that they will receive.
As the buyer of a home it is important that you thoroughly read the preliminary title report. In order for the closing to progress problem free it is important to discover any potential problems before it is too late. If you do not understand a section of the title report, you should ask your real estate agent for help or consult a real estate attorney.