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A preliminary report is a form of a report that checks the title of a property. Typically the seller provides this report to the buyer during the closing of a property sale. It provides all of the details regarding any property easements, existing liens, and the property’s ownership history.
Additionally, it will contain a detailed description of the property including its lot size, boundaries, and any restrictions regarding the use of the property.
This information is compiled by a title company. Generally, it costs between $75-$250 and can be purchased either from a title company or a county assessor.
The preliminary report is a required document to obtain title insurance for a property. Most mortgage lenders require title insurance in order to be eligible for a mortgage. That way the lender is protected from any ownership dispute that can arise from previous owners.
Preliminary reports are important for several reasons. If the property is managed by a Homeowners’ Association, then there are usually restrictions and regulations. This may limit the buyers’ options when it comes to renovations and/or extensions. For example, the preliminary report may restrict extensions, so the buyer will not be able to build a swimming pool in their yard.
In cases where unpaid taxes are owed or there is a lien on the property, a preliminary report can resolve the issue. The buyer can notify the seller regarding the lien and request that it gets resolved as a condition of the sale. Afterward, the buyer can request another preliminary report as proof.