What’s a prelim?

When you buy a property, you want to be pretty damn sure that you’re getting clean title. In other words, you want to be sure that no one else has any claim to the property you are acquiring.

During the inspection period described in the purchase agreement, the buyer has the chance to review and approve title for the property. The title company that will be providing a title insurance policy creates a document called a preliminary title report (also called a “prelim”) which shows all claims that other people have on the property.

What kind of claims do I mean? Anything from mortgages, to liens for unpaid property taxes, to mechanics liens from contractors the owner didn’t pay, to easements for utility poles, etc. Anything that in any way restricts or impairs the owner’s claim to complete ownership and control of the property.

Before you remove your title contingency, you need to make sure that the seller and escrow have arranged to remove any and all of these claims or explained clearly to you why they don’t need to be removed. If anything is not clear, don’t remove your contingency!

Check out the following document for an example of a preliminary title report. In particular, you want to see Schedule B, where the title insurer has set out all the issues it sees with title on the property. Here’s a sample report: Prelim for Willow Brook REO