PETALUMA CALIFORNIA - PETALUMA Homes and Real Estate For Sale

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During the first week of your real estate transaction you can expect a report from the company that will issue policies of title insurance to the buyer and to any lender that will have a security interest in the property. Whether you are the buyer or the seller, the 'preliminary report' contains information that may be of great importance to you. Ask your Realtor to review the report with you to help find items that may require further investigation. It is often necessary to request additional documents and explanations from the skilled and helpful people at the title insurance company.

Look first for names of the owners of record. If you are the buyer, are you dealing with the right person(s)? Did everyone with an ownership interest accept your offer? If there's going to be a rude surprise, better to handle it right away. The report lists the exceptions to coverage offered by the title insurer, including everything affecting the property recorded with the county. As the buyer you must pay close attention, since you are being put on notice that these matters will not be covered by insurance. Your purchase contract should include a contingency for your approval of matters disclosed by an examination of title.

Some matters are adequately detailed in the report, such as the amount of the property tax bill and whether it has been paid. Easements for public utilities may look ordinary and benign, perhaps affecting only the 'southerly 5 feet' of the property. But an easement may not be fully described in the report, and it may be necessary to order a copy of the easement deed or subdivision parcel map that created the easement to be able to locate it. One of my associates reviewed a report that referenced a private sewer easement without indicating location. He alertly asked the title company for a copy of the easement deed. The legal description was sufficiently uncomplicated to allow the agent to determine that the sewer easement, benefiting the neighbor to the rear, ran directly through the fourth bedroom of the house on the subject property. That was the first indication that bedroom #4 might be an illegal addition, contrary to the seller's disclosures. Seems the seller had forgotten that little detail. The buyer, not relishing the idea of excavation for sewer pipe replacement through his daughter's bedroom, was able to terminate the purchase quickly.

The purchase contract should provide that the buyer will not take on the seller's financial obligations, but it is still important to pay attention to the liens listed in the report. If the total of the seller's voluntary liens, such as deeds of trust securing loans, and involuntary liens, such as taxes and judgments, will be more than the purchase price, then it wouldn't hurt to question how the seller will handle the shortfall. I once saw a report issued on a Petaluma home being purchased for $126,000 (you must know this was a few years ago) with abstracts of judgments totaling $65 million! Believe it or not, everything worked out satisfactorily, but only after some good questions were asked.

Sometimes we see reference to a deed of trust securing a loan we didn't know about. When we question the seller, we might learn that the loan was repaid years ago, and someone forgot to record a deed of reconveyance. The problem can be fixed, but it may be necessary to begin working on it immediately to avoid a costly delay in closing the sale transaction.

A careful reading of the preliminary report can save headaches and expense. Resist the temptation to dismiss it as another boring document, and don't be shy about asking your Realtor for help.