A preliminary title report is a document a title company prepares after escrow opens that shows who legally owns the property you’re buying, what debts or claims are attached to it, and what restrictions limit how you can use it. It is not title insurance. It is the title company’s offer to issue a policy once the problems it identifies are resolved, and the exceptions you accept in it define what your eventual policy will and will not cover. Most buyers receive the report within days of an accepted offer, and it deserves more attention than it usually gets.
What’s Inside the Report
The report has two sections. One describes the deal. The other lists the problems.
Schedule A: The Basic Facts
Schedule A sets out the straightforward details: the current legal owner, the type of ownership being transferred (almost always “fee simple” for a standard home purchase, meaning full ownership), a legal description of the property, the proposed buyer and lender, and the purchase price and loan amount. It is the title company confirming it understands who’s selling, who’s buying, and which piece of land is involved.
Schedule B: Requirements and Exceptions
Schedule B is where the report earns its keep, and it comes in two parts.
Part I lists the requirements that must be met before a policy will issue. These are action items for closing: paying off the existing mortgage, clearing tax liens, recording the new deed properly, and paying the title insurance premium.
Part II lists exceptions. These are issues the title company found in the public records that will stay attached to the property after closing and that your title insurance will not cover. Common exceptions include easements letting a utility company or neighbor cross your land, covenants and restrictions (CC&Rs) that govern what you can build or how you can use the property, homeowner association rules, and mineral rights that were separated from the surface ownership at some point in the property’s history.
This is the part that catches buyers off guard. Any exception listed in Schedule B Part II that you don’t object to before closing becomes something your title insurance explicitly does not protect you against. If an easement later disrupts an addition you planned, or a CC&R prevents you from renting the property, you have no claim under your policy. The title company disclosed it, and you accepted it by closing.
Problems a Title Search Can Surface
The title company searches public records, often going back decades through the property’s chain of ownership. The problems that turn up fall into a handful of categories:
- Liens from unpaid mortgages, property taxes, contractor bills (mechanic’s liens), court judgments, or HOA assessments. A lien lets a creditor force a sale to collect what’s owed.
- Recording errors in deeds or other filed documents, such as a misspelled name, a wrong legal description, or a missing notary signature.
- Boundary disputes, including a neighbor’s survey showing a different line or a structure encroaching onto adjacent land.
- Missing or defective signatures on prior deeds, including cases where a co-owner such as a spouse never signed.
- Unknown heirs or competing claims, where a previous owner died and an heir left out of probate later surfaces with a claim.
- Easements and use restrictions granting rights to utility companies, neighbors, or government agencies, or deed restrictions limiting what you can build or how you can use the land.
Some of these are fixable before closing. An unpaid tax lien gets resolved when the seller pays it off as a condition of the sale. Others, like an easement granted decades ago, are permanent features of the property that you need to understand and accept. Sorting what can be cleared from what you’ll live with is the main work of reviewing the report.
What to Do Once You Receive It
Most purchase contracts include a title contingency that gives you a window to review the report and raise objections. During that window you can negotiate with the seller, ask for problems to be fixed before closing, or walk away with your earnest money intact. The exact timeline varies by contract and is often tied to the broader due diligence or inspection period.
Focus your attention on Schedule B. Read every exception. For each one, ask whether you understand what it means and whether you can live with it for as long as you own the property. A utility easement for underground pipes is routine. An easement letting a neighbor drive across your backyard is a different story.
Mineral rights exceptions deserve a closer look in parts of the country where mineral rights were separated from surface ownership generations ago. If someone else owns the minerals beneath your property, they may have the legal right to access and extract them. For most residential buyers this never becomes an issue, but in areas with active oil, gas, or mining operations, it’s worth understanding what has been reserved.
Your real estate agent, attorney, or the title officer can help interpret anything that’s unclear. If you want an exception removed, raise it formally so the seller or title company can try to resolve it. Objections raised after the review period expires carry far less leverage, and objections raised after closing carry none at all.
How the Report Shapes Your Title Insurance
The preliminary report is essentially a draft of your policy. Every requirement in Part I must be satisfied before the policy issues, and every exception in Part II is excluded from coverage. The choices you make now set the limits of your protection later.
Owner’s Policy vs. Lender’s Policy
If you’re financing, your lender will require a lender’s title insurance policy. That policy protects the lender, not you. If a title defect surfaces after closing and someone successfully challenges your ownership, the lender’s policy covers the loan balance. You lose the property and whatever equity you’ve built.
An owner’s title insurance policy protects you. It is technically optional in most transactions, but skipping it is one of the more expensive gambles in real estate. The policy covers the purchase price of the home and pays for legal defense if someone challenges your title. If you lose the property to a valid prior claim, the policy compensates you for the loss. Both policies are one-time purchases paid at closing, not ongoing premiums.
Standard vs. Enhanced Coverage
Owner’s policies come in two tiers. A standard policy covers defects that appear in the public records: forged deeds, recording errors, and undisclosed liens. An enhanced (or “homeowner’s”) policy goes further, covering problems a records search would not catch, including unrecorded easements, encroachments only a survey would reveal, building permit violations by a prior owner, and certain zoning issues that prevent you from using the property as a residence. Enhanced policies also typically increase in value automatically over the first several years of ownership. Standard policies do not.
Enhanced coverage costs more. If you’re buying property where boundaries are ambiguous, construction history is unclear, or the neighborhood has aggressive CC&R enforcement, it’s worth a conversation with your title officer.
Your Right to Shop, and What It Costs
Federal law prohibits a seller from requiring you to buy title insurance from a specific company as a condition of the sale. A seller who violates this rule is liable to you for three times the charges you paid for the title insurance.1Office of the Law Revision Counsel. 12 U.S. Code 2608 – Title Companies; Liability of Seller Your lender will give you a list of title service providers you can use, and you are generally free to choose a company not on that list if your lender agrees to work with them.2Consumer Financial Protection Bureau. Shop for Title Insurance and Other Closing Services
Pricing varies more than most buyers realize. In some states, rates are set by state regulators and every company charges the same amount. In others, companies set their own rates and shopping around can save you hundreds of dollars. Ask for the total cost including both the title search fee and the insurance premium, since some companies quote one but not the other.
The cost of the preliminary report is typically bundled into the broader title and escrow fees you pay at closing. The title search fee generally runs between $75 and $250, though it can go higher for properties with complex ownership histories or in areas where county records are harder to access. Title insurance premiums, which are separate from the search fee, average roughly 0.5% of the home’s purchase price nationally. On a $350,000 home, that works out to around $1,750 for the owner’s policy.
Who pays depends on local custom and what the purchase contract says. In some regions the seller traditionally covers the owner’s policy. In others the buyer does. This is always negotiable, and in competitive markets buyers sometimes offer to absorb title costs as part of their bid. The lender’s policy is almost always a buyer expense, since the lender requires it as a condition of the loan.