As part of due diligence when purchasing a home a buyer will be provided a copy of the Preliminary Title Report (PTR).
What is a PTR? A PTR is a report prepared by a title company prior to issuing title insurance. It shows who owns the property and any liens or encumbrances that a new policy will not cover.
If there is any doubt make sure that any documents referred to in the PTR are available. An example would be a city sewer easement across your backyard. You might be able to build on it, but upon reading the supporting document it may say that you as the homeowner are responsible for any damages caused to the sewer line and may be asked to remove the improvements at your own cost, at the city’s whim.
Make sure the names of the owners on the title report match those on the purchase and sale agreement. There may be more owners or “actual” owners. There are more an more scams out there where people are accessing foreclosed and vacant homes and pretending to be the owners. You should do this with a lease also.
In the case of development make sure that the land being bought is free to build on. That there are no oil, mineral, gas rights reserved preventing development of the land. Reviewing the legal description of the land will reveal this.
Liens are often recorded against a property, such as junior mortgages, home equity lines of credit, and delinquent property taxes. There are other monetary issues that could be on the title: supplemental real property taxes, special assessments, judgment liens and mechanics’ liens. A mechanics’ lien is a guarantee of payment for contracted services on an improved piece of property. Some people don’t realize that these liens can occur before the recording of the grand deed or deed of trust. If there was any improvement done to the property the buyer should demand coverage as part of the title insurance policy.
Escrow follows up with the lien holders, but it is wise for the buyer’s agent to make sure that the demands are met and that escrow closes on time.
There is the escaped assessment, which is an assessment on real prope4rty taxes which are assessed after the close of escrow but are for the period before the change of ownership. An assessment can happen if ownership of a property has changed hands frequently over a period of time. The assessor’s office may not have caught up with this and the latest owner is hit with the assessment. The documentation should ensure that these assessments are the responsibilty of the seller unless otherwise negotiated.
Legal lots in California are created when property is subdivided under the California Subdivision Map Act (CSMA). Recorded parcel maps create four or fewer legal lots and recorded subdivision maps create five or more of these lots. An example of a legal lot would be: Parcel 3 of Parcel Map 13546 recorded on (date) in Maps of Los Angeles County California, or Tract10 of Tract Map 13546 recorded on (date) in Maps of Los Angeles County California.
If the description mentions a portion of Lot… or the north 10 feet of Parcel…, then you could have a CSMA violation.
Your broker can request the title company to issue a subdivision map act endorsement to the title policy to ensure that the CSMA has not been violated by the transfer.
