Explained: Preliminary Title Reports

A preliminary title report, often referred to as a PR or title report, is a document prepared by a title company about real property once escrow is opened. It provides information about the ownership of the property that is essential for a buyer to understand before closing. It generally shows how title is currently held, if there are any easements that cross through the property, if there are any liens or mortgages affecting ownership, or if there are other encumbrances that affect the property. For example, the PR may reveal that the property is within a special service district that has authority to levy and collect assessments to pay for special services. In Washington County, UT, in the cities of Hurricane, Toquerville, and La Verkin, the Ash Creek Special Service district provides sewer services, and in Leeds, the Leeds Area Special Service District provides fire protection services.

In virtually every real estate transaction, as part of a buyer’s due diligence, the buyer has the right to approve or object to the contents of the PR and may cancel the transaction in the event the seller cannot provide clean title to the property by removing objectionable items, or exceptions, prior to closing. For example, if a seller has a mortgage on the property, the mortgage must be paid in full prior to closing. Mortgages are usually easy to remove, as they are generally paid in full with the proceeds from the sale. In most cases, a buyer only has a short period of time to act on the PR. Therefore, it’s extremely important to obtain the PR quickly, to review it immediately, and to take any necessary action if the contents of the PR are unacceptable.The information in a PR is not always written in plain English and can be complicated by legalese. For example, if a property has an easement that runs through it, the PR might say:

Subject to Pipeline Easement in favor of XYZ Utility Company across said property as recorded in Book S-65, at Pages 493, Official Washington County Records, also subject to existing county road across said property as it exists on said property. (Affects NE¼SW¼) (General easement, exact location not disclosed)

A cursory glance at the above paragraph reveals that an easement runs through the property, but without doing further research, it is difficult to know the location of the easement. Does it run through the side yard, or does it run through the middle of the house?The preliminary title report can definitely be confusing. However, as a buyer, you have many advisors who can assist you in understanding the PR and how it pertains to the property you want to purchase. Please engage your real estate broker or agent, or title and escrow officer and ask for an explanation of the PR. Don’t be afraid to ask for help. It’s your agent’s job to make sure you understand what you are buying. Hiring good agents who understand the PR and other real estate documents can mean the difference between making a good or bad investment.