Preliminary Title Report
A Preliminary Title Report is a document issued by a title insurance company that provides an overview of the legal status of a property’s title before a real estate transaction is finalized. It is a critical tool in real estate transactions, as it helps identify any potential issues that might affect ownership rights.
The Preliminary Title Report outlines various elements related to the property, such as:
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Ownership Information: It lists the current owner(s) of the property and may include past ownership history.
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Legal Description: A precise description of the property boundaries, often referencing maps or surveys.
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Liens and Encumbrances: The report identifies any existing liens (such as mortgages or tax liens) or encumbrances (like easements) that may affect the property. For instance, if there is a lien on the property, the title insurance may not cover claims related to that lien.
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Exceptions to Coverage: The report will specify any exceptions to coverage under the title insurance policy, meaning issues that the policy will not cover after the transaction is completed.
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Pending Litigation: Information regarding any ongoing legal disputes involving the property can also be included.
Understanding the Preliminary Title Report is vital for buyers, sellers, and lenders, as it serves as a warning system for potential issues that need to be resolved before closing a sale. For example, if the report reveals that a property is subject to an easement allowing a neighbor to access part of the land, the buyer may wish to negotiate the terms of the sale or reconsider the purchase entirely.
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