How to Read a Title Report

A preliminary title report is a document prepared by a title company that reveals the current state of a property's title — who owns it, what encumbrances exist, and whether clear title can be delivered to a buyer. Every investor should understand how to read and interpret this document.

The vesting section shows current ownership — who holds title and how. Common vesting types include sole ownership, joint tenancy (equal ownership with right of survivorship), tenancy in common (divided ownership without survivorship rights), community property (in community property states), and trust ownership. The vesting must match the seller on your purchase contract. If the property is in a trust, the trustee must sign. If it's in an LLC, the authorized member must sign.

The legal description defines the property's boundaries using metes and bounds, lot and block, or section/township/range descriptions. Verify the legal description matches the physical property you intend to buy. Errors in legal descriptions can cloud title and delay closing.

The exceptions section lists all encumbrances that will not be covered by title insurance. Common exceptions include property taxes and assessments (current and delinquent), easements (utility easements, access easements, drainage easements), CC&Rs (covenants, conditions, and restrictions from HOAs or subdivisions), liens (mortgages, tax liens, mechanic's liens, judgment liens), and lis pendens (pending lawsuits involving the property).

For investors, the critical review focuses on: Are there any liens beyond the existing mortgage that need to be cleared? Are there easements that restrict your renovation plans? Are there CC&Rs that limit your intended use? Is there a lis pendens that could delay or prevent closing?

Request the title report immediately after going under contract. Don't wait until the week before closing to discover a title issue that requires weeks to resolve.