Title Reports Explained: What Borrowers Should Look For

A preliminary title report is a summary, prepared by a title company, of who owns a property and what claims are recorded against it. On a private loan it tells the lender whether it can take a clean first position, and it tells you whether the property you are buying or refinancing carries surprises.

Many borrowers see the report for the first time late in the process, and that is when delays happen. Reading it early, and knowing what the sections mean, is one of the simplest ways to keep a closing on track.

What is in a preliminary report

Reports vary in layout, but most contain the same elements:

• Vesting: how the current owner holds title, such as an individual, a married couple, a trust or a company.
• Legal description: the exact parcel, which should match the property you think you are dealing with.
• Liens and encumbrances: existing deeds of trust, tax liens, judgments, mechanics' liens and similar items.
• Exceptions: matters the title insurance would not cover, such as easements or recorded restrictions.
• Requirements: what the title company needs before it will issue a policy, such as payoffs, signatures or documents.

Liens: who is ahead of whom

Liens are claims against the property. Existing mortgages and deeds of trust, unpaid property taxes, judgments and contractor liens can all appear. Priority matters, because it determines who gets paid first. A private lender typically expects to be in first position, so earlier liens either have to be paid off at closing or, in some cases, may be handled in another way.

If you are refinancing, the existing loan will appear and the payoff gets built into the transaction. If you are buying, the seller's loans should be paid from the sale proceeds. Surprises, such as a lien you did not know about, are the issues to catch early.

Exceptions, easements and restrictions

An easement gives someone else a limited right to use part of the property, such as a utility line, a shared driveway or a path. Most easements are routine. Some matter, though, if they run through the area where you plan to build or add a unit. Recorded restrictions can limit what you can do with the land. Read the exceptions and ask your title officer or attorney what each one means for your plan.

The requirements section

This is the title company's to-do list. Typical items include paying off specific loans, recording a release, providing entity documents, or obtaining signatures from parties on title. If the borrower is a company, the title company may ask for formation documents and authorizations; see our article on borrowing through an LLC. Work through the requirements list item by item with the title officer, and share it with your lender.

How problems get cleared

Common solutions include:

• Payoff and reconveyance: a lien is paid at closing and released.
• Release or satisfaction: a lender or creditor records a document confirming a debt is paid.
• Corrective documents: fixing a name error, a missing signature or a legal description problem.
• Negotiation: settling a judgment or contractor claim.
• Legal action: for disputes about ownership, sometimes a court process is required.

The first few are routine. The last can take months, and may mean the deal does not work on the schedule you need. A title attorney can advise you on specifics; this article is general information, not legal advice.

Why to order early

Title work takes time, and issues found on day three are far easier to handle than issues found on day twenty. A prompt order lets you and the lender see problems, reduce delay and, if needed, renegotiate or walk away while you still have options. It also supports the timelines we discuss with borrowers. We can offer approval in as little as 24 hours and funding in as little as seven days, subject to a complete file, underwriting, title review and property valuation, and an unresolved title item is one of the most common reasons that does not happen. For more on what else slows files down, see why private loans get declined.

Have a preliminary report you would like us to look at with your loan request? Call (800) 943-1314 or start your application.