California Real Estate SalespersonTransfer of PropertyEasy
A buyer receives a preliminary title report from a title company before close of escrow. What is the correct legal significance of this document?
- AIt is merely an offer to issue title insurance subject to stated exceptions, not a representation of the actual condition of title.
- BIt eliminates the buyer's need to purchase an owner's title insurance policy at closing.
- CIt guarantees that the seller holds clear title free of all liens and encumbrances.
- DIt is a binding insurance policy that guarantees marketable title to the buyer.
Show answer & explanationAnswer & explanation
Correct answer: A. It is merely an offer to issue title insurance subject to stated exceptions, not a representation of the actual condition of title.
A preliminary title report is an offer by the title company to issue a policy of title insurance, listing the conditions and exceptions under which coverage would be provided; it is not itself a policy and does not warrant the actual state of title.
Why the other options are wrong
- B. The buyer must still purchase and receive an actual policy at closing for coverage to exist.
- C. The report may list liens and encumbrances; it does not guarantee clear title.
- D. A preliminary report is not a policy at all; it is only an offer to insure.
Preliminary Title Report
A report showing the current condition of title and stating the terms under which a title company is willing to issue insurance; it is not a policy or a warranty of title.
- Issued before closing to disclose liens, easements, and exceptions
- Not a contract or insurance policy itself
- Buyer/lender reviews it to clear objectionable items before closing
Memory trick: A preview, not a promise.