Preliminary Title Report Cost: Essential Document for Homeowners

Any action with real estate, whether it’s selling, renting, or starting the ADU construction, always has a close connection with document management. Each document plays a certain role, and ignoring at least one regulatory act or rule can lead to unnecessary worries or financial losses. One such document that protects the rights of owners is the preliminary title report.

In this review, we will take a detailed look at the essence of this document, reveal the key difference between a title report and a preliminary title report, reveal what title insurance has to do with it, what aspects lawyers include in this document and provide valuable information on how to get a preliminary title report.

Real Property Operations VS Basic Terminology

Before we move on to consider what a preliminary title report is and how it differs from a title report, it makes sense to define three terms that will be useful to us in the future:

1. Title company is a company that acts as an intermediary in real property transactions and protects the interests of two parties involved in the process. The range of responsibilities of title companies is extremely wide, from ensuring security during real estate transactions to the implementation of title searches.
2. Title search is the basic task of the title company, which consists of checking real estate for legal ownership, studying the history of ownership, and establishing the existence of various fines and debts on real estate.
3. Title insurance policy – the process of ensuring the interests of homeowners against any unforeseen situations, for example, accidental ownership claims. If you ask, what does the title insurance cover? Then we will respond; it protects you from any problems the title company did not specify in the title report. In addition, people can issue title insurance to get a mortgage from a bank.

This information will be helpful to all property owners without exception because if you want to sell or purchase real estate profitably, you need to know the basic terms of this business.

Preliminary Title Report VS Title Report: The Key Difference

Now that you are already a little savvy in the matter of real estate terminology, we can move on to a more detailed consideration of such concepts as title report and preliminary title report. In essence, this is a legal document that includes a comprehensive look at the results of the title search and allows you to evaluate all aspects of the property on which the craftsmen will build the ADU.

The only difference between these documents is that specialists insure title reports, while preliminary title reports perform only one function, namely, they carry information. Using the preliminary report, a potential buyer or homeowner can examine all title problems, ownership history, and other details that will help make the right decision about building an ADU on the site.

ADU Preliminary Title Report Core Components

Any document has a standard template with the necessary parts, which title companies always include in the final version.

In this matter, the preliminary title report is no exception, and it consists of the following five parts:

1. Description of the land plot.
2. Legal description of the entire property.
3. Information about the previous owner.
4. Existing property restrictions.
5. Data on property taxes, as well as any obstacles to transactions on property, including liens and debts.

In the next part of our review, we will talk in more detail about the essential role that the preliminary title report plays in any real estate transactions.

ADU Preliminary Title Report: Reasons for Issuing

Despite the apparent need to compile a preliminary title report, many homeowners still ask, why do they need to purchase this document?

The following five factors will dot the I’s:

• Basic building characteristics. In all preliminary reports, without exception, you can find a detailed description of the object, namely, the site size, property boundaries, setbacks, the degree of building fire resistance, a geological description, etc.
• Liens info. In order not to recoup financial losses that do not even belong to you, you can examine the property in the preliminary report for the presence of debts/liens. History knows of cases when the buyer or property owner discovered outstanding debts in preliminary title reports, which once again underlines the importance of this document.
• Property limitations. When compiling a report, title companies very often include this item because even at the stage of studying the property, it is necessary to understand whether you will have any restrictions on construction or financial operations with it or not.
• Unpaid taxes. In addition to information about outstanding liens and debts, preliminary reports contain information about tax records, including data on unpaid property taxes.
• Seizure of property. This item is scarce. However, it has a place to be. Some previous owners are making discounts on real estate because it is under arrest, but the preliminary title report discloses this information.

We have only talked about the key aspects that the preliminary report reveals. In fact, in a well-written report, you can find many more details, which means you will unlock even more potential issues that will help you make the right decision about building or buying an ADU.

ADU Preliminary Report & Registration Methods

Many homeowners sitting on the couch at home ask how to get a preliminary title report. Of course, you can make an effort and send a request to the archive to obtain public records to establish the fact of legal ownership or check the existence of existing liens. However, think about it: if you need to issue a title insurance policy, then you turn to a qualified title insurer, or if you need to build a high-tech ADU, then you hire construction crews; the same in the case of the report. If you need a full-fledged preliminary title report, then the correct solution is to contact a professional title company for this service.

Preliminary Title Report Costs

The average price tag on the preliminary report ranges from $800 to $1200. If this price seems excessive to you, then analyze how much money you can save when it comes to providing accurate information about the property. With this report, you will learn about all the home’s title issues, red flags, and hidden factors, e.g., unknown heirs or forgotten recorded documents. All this will save you from unplanned material, physical, and mental losses, and it will instantly pay off investments in the report.

ADU Preliminary Report Drawbacks

In legal jargon, after studying the preliminary report, you get a “clear title” and open the doors to any property operations, including ADU construction. However, the buyer or property owner should understand that, as in any other legal matter, there are pitfalls in the issue of compiling a preliminary report. 

In particular, if the former owner performed any actions with the property and did not register them, then the title company cannot display these actions in the report.

Frequently Asked Questions — FAQ

Why are preliminary title reports essential in the process of ADU building?

In addition to the fact that the report helps to determine ownership rights and find out about all common issues about debt and liens, this document may contain information, for example, about pre-existing sewer easement. This data directly affects the size of the ADU that you can build on the site.

What is the title insurance policy?

Title insurance policies are a way to protect the buyer or the property owner from any missteps on the part of the title company. If ownership claims suddenly arise or information appears about outstanding taxes that the previous owner did not pay, and this will not be in the report, then title insurance will cover all costs of settling these title issues.

How much does a full-fledged preliminary title report cost?

Considering that this report helps to confirm property’s ownership and get a full seller’s disclosure packet, its price is surprisingly not high. The cheapest report will have a price tag of $500-$750, while the most complete report will cost you $1200-$1500.

How do you get a preliminary title report?

You can find information about property taxes and liens from open sources; however, it is best to contact professionals from title firms. Specialists will collect all information about the company as soon as possible and provide you with a comprehensive report with the most detailed information.

Based on what data does the title company compile a preliminary report?

All information about the property’s title is most often available in public records. The tricky point is to carefully analyze the archives and extract from them the necessary info about the property you are interested in, in fact, this is what the title company is doing.