What is a Title Report?
What Is a Title Report?
If you are purchasing a property, you will want to receive a title report. A preliminary title report is issued and provided after the buyer and the seller have entered into a Purchase and Sale Agreement, but prior to closing.
The title report will disclose all pertinent facts that relate to the property, including whether the seller has the legal right to sell the property.
A preliminary title report outlines a detailed report of the result of a title search. Sometimes known as a title commitment, it is a promise from the title company to issue a title insurance policy in the form and content of the preliminary report. This detailed report contains all the information that the purchaser, the title insurance company, and conventional or private lenders need to make a decision. The title report will include:
- The county parcel number of the land
- The owner of record
- The legal description of the parcel
- Any relevant defects or conditions that relate to the property
- A listing of all encumbrances, easements, liens and other information that may affect or limit the title to the property
Why Do You Need A Comprehensive Title Report?
Aside from ensuring that the seller can legally sell the property, a title report also outlines necessary information about the property, such as:
- Highlighting all vested interests in the land
- Identifying the details of any outstanding liens, judgments or delinquent taxes
- Detailing all easements, rights-of-ways and encroachments
- Affirming the title is free of defects
How to Read Your Title Report
There are three critical sections in a title report:
- Legal description – This will feature different descriptive methods, such as lot and block, metes and bounds, partition plats or sub-sections.
- Property taxes – This will normally include city or county zoning classifications and current tax information.
- Liens – Several different liens may be listed, including property taxes, mortgages, mechanic’s liens, judgments, and unpaid income taxes. This section is critical because when you purchase a property, you could become responsible for assuming certain outstanding obligations.
The title report contains two different sections – Schedule A and B.
What is in Schedule A?
Schedule A includes the details of the land and the current owner, which may include:
- The policy commitment date
- The types of policies that the title company will issue to the homeowner or the lender
- The type of land interest, such as leasehold or fee simple
- The full names of the current owners
- The legal description of the property parcel
What is in Schedule B?
Schedule B highlights what the title insurance policy does and does not cover. This schedule is divided into subsections. Schedule B-I includes an explanation of certain issues and the the steps necessary to remove them, and Schedule B-II will list all exceptions and exclusions.
Encumbrances, Endorsements, Exceptions, Exclusions, Reservations and Restrictions
An endorsement or an elimination waives an exception by requiring an affidavit, release, quitclaim deed, waiver or other legal document.
A reservation is an item that restricts the rights to certain minerals, such as gas or oil, on the underlying property.
A title exclusion is an exception that is not removable, even by an endorsement, as it is beyond the scope of the title insurance underwriters. Examples may include a conflict with certain government laws and regulations, including taxation, escheat, police power or environmental protection.
Anything that doesn’t fit in the categories above is an encumbrance. It refers to any other types of liabilities that you may be obligated to assume after closing from deeds to trusts, contractors’ liens, judgment liens and a pending lawsuit.
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