What in the world is a preliminary report?
A report showing the condition of title before a sale or loan transaction. After completion of the transaction, a title insurance policy is issued. Or in other words, it let’s you know whether the home has a lien-free and encumbrance free chain of ownership. The title companies insure that the deed to your home is done accordingly and that no title issues will reside later. This is probably the most important variable while selling your home and this is where it gets complicated. We get it. This is why this part of the transaction is handled by an escrow company sanctioned and licensed by the insurance and securities division.
What kind of issues could arise?
In no order, we put together a quick list with the most common we’ve seen:
- Illegal Deed
- Examples could include illegitimate marriages, minors signing or even non-legal residents signing as legal citizens. Another common one in Vegas is an “unsound mind” which could include intoxication.
- Unfortunately, we don’t live in a completely honest world. Sometimes forged or fabricated documents that affect property ownership are filed within public records, obscuring the rightful ownership of the property. Once these forgeries come to light, your rights to your home may be in jeopardy.
- Encumbrances or “Cloud(s) on Title
- When it comes to owning a home, three can be a crowd. At the time of purchase, you may not know that a third party holds a claim to all or part of your property — due to a former mortgage or lien, or non-financial claims, like restrictions or covenants limiting the use of your property.
- You may own your new home and its surrounding land, but an unknown easement may prohibit you from using it as you’d like, or could allow government agencies, businesses, or other parties to access all or portions of your property. While usually non-financial issues, easements can still affect your right to enjoy your property.
- Will and Heirs That Were Not Known
- When a property owner dies with no apparent will or heir, the state may sell his or her assets, including the home. When you purchase such a home, you assume your rights as owner. However, even years later, the deceased owner’s will may come to light and your rights to the property may be seriously jeopardized.
- This is riskier for buyers but generally the banks and agents will coach them and believe it or not are instructed to avoid For Sale By Owners because of identity theft and falsifying ownership.