Reading a Preliminary Title Report (Prelim) is a critical skill for real estate agents, buyers, and sellers in California — it reveals ownership, liens, easements, and any potential issues that could affect title transfer. Here’s a complete breakdown of how to read and understand it step by step:

🏠 1. What Is a Preliminary Title Report?

A Preliminary Title Report is prepared by a title company during escrow.
It shows the current state of ownership (title) for a property before closing.
It’s not insurance yet — it’s a preview of what the title insurance will cover (and exclude).

📑 2. Main Sections of the Prelim & How to Read Them

  1. Title Page (Introductory Page)
  • Lists:
    • Title company name
    • Report number
    • Date of report (effective date)
    • Order number
    • Property address
    • Assessor’s Parcel Number (APN)
  • Check that the address and APN match your purchase contract.

📘 Tip: Always verify this first — errors here can delay closing.

  1. Ownership Information (Vesting)
  • Shows who the current owner(s) are and how they hold title, e.g.:
    • John and Jane Doe, husband and wife as joint tenants
    • ABC Trust dated January 1, 2010
  • Important for verifying:
    • The seller is actually the legal owner.
    • If a trust, corporation, or estate is involved, additional documents may be needed (like trust certification or court approval).

📘 Tip: Title can’t transfer until ownership is clear and valid.

  1. Legal Description
  • Provides the official description of the property from county records, not just the street address.
  • Includes lot number, subdivision name, map reference, and metes and bounds (if rural property).

📘 Tip: Verify that this description matches the purchase agreement and the parcel map.

  1. Exceptions / Schedule B

This is the most important section.
It lists everything that could limit ownership rights — things not covered by the future title insurance policy.

Common Items:

  1. Taxes and Assessments:
    • Shows unpaid property taxes, bonds, or special district fees.
    • These must be cleared before or during closing.
  2. Deeds of Trust / Mortgages:
    • Lists existing loans that must be paid off at closing.
  3. Easements:
    • Grants others the right to use part of the property (utility lines, shared driveways).
    • Review the map or description — easements can affect fencing, building, or parking.
  4. Covenants, Conditions, and Restrictions (CC&Rs):
    • Rules governing use of the property (especially for HOAs).
    • Review for restrictions on building, rentals, or landscaping.
  5. Liens or Judgments:
    • Mechanic’s liens, child support liens, unpaid taxes, or court judgments.
    • These must be cleared before closing or title insurance won’t cover them.
  6. Recorded Agreements:
    • Any shared well agreements, road maintenance, or boundary line agreements.

📘 Tip: Every “exception” is something your client won’t be insured against — so these are the red flags.

  1. Notes and Requirements

Lists what must be done before title insurance can be issued (Schedule B Section I).
Examples:

  • Provide Statement of Information (SOI)
  • Pay off existing liens
  • Record a new deed or release
  • Verify trust documents

📘 Tip: Review this early in escrow — these are action items to close on time.

  1. Plat Map / Exhibit
  • Attached pages show parcel layout, easements, and boundaries.
  • Check for access, shared driveways, and irregular lot shapes.

📘 Tip: If there’s no road access or a disputed boundary, address it immediately with the title officer.

⚖️ 3. How to Use the Prelim as an Agent

Task Why It Matters
Review ownership (vesting) Ensures the right seller signs the contract and escrow documents.
Check liens and loans Confirms what must be paid off before closing.
Review easements and CC&Rs Avoid surprises that affect property use.
Verify legal description Confirms correct property is being sold.
Forward to lender & escrow They’ll need it for loan and closing documents.

🧾 4. Red Flags to Watch For

  • Old or unreleased Deeds of Trust (a paid-off loan not removed from record).
  • Easements that cut through driveways or yard areas.
  • Liens or judgments against sellers (can delay closing).
  • Incorrect vesting (ownership by someone not in contract).
  • Undisclosed HOAs or restrictions.

💡 5. Tips for Reviewing With Clients

  • Use simple language when explaining (“This means someone else has the right to use that part of the land”).
  • Always read the “Requirements” section carefully — that’s your to-do list for closing.
  • If anything looks off, call the title officer for clarification — they’ll explain what’s curable and what’s not.

✅ Summary

A Preliminary Title Report is like an X-ray of the property’s legal history.
Understanding it helps you:

  • Protect your client,
  • Prevent closing delays,
  • And ensure clear title transfer.

Disclaimer:
The questions and answers provided are for general guidance only and may not cover all details or apply to every situation. If anything is unclear or you need further clarification, please visit car.org for official resources and the most up-to-date information from the California Association of REALTORS®.