A preliminary title report is a document prepared on real property once an escrow is opened, but prior to closing. It provides all kinds of information about the property that is essential for a buyer to see, such as how title is currently held and what kind of exceptions to title are currently of record (for example, easements, liens and encumbrances). The preliminary title report then becomes the final title report, on which title insurance is based. In addition to specific exceptions to title that will be listed on a title report, it will also list standard exclusions from coverage.
In virtually every real estate transaction, the buyer has the right to approve or object to the preliminary title report and back out of the deal unless the seller can provide clean title by eliminating certain exceptions to title prior to closing. But a buyer will only have a short period of time during which to act on the preliminary title report. So itís extremely important for a buyer to carefully review a preliminary title report immediately and to take appropriate action if there are any unacceptable exceptions to title.