Episode 7 - Preliminary Title Report

In this episode of Disclosures & Consequences, Jason Piske of House Owl breaks down one of the most overlooked documents in a California real estate transaction: the preliminary title report.

Most agents only skim the prelim for unpaid taxes, liens, or obvious title issues — but some of the biggest transaction risks are often buried in the old recorded items nobody takes time to read.

Jason walks through real-world examples of:

• outdated easements
• prior oil drilling use on residential property
• old recorded restrictions
•  and title items that can completely change how a property is understood, marketed, or disclosed 

This episode is a must-listen for California real estate agents, brokers, escrow professionals, and home buyers who want to better understand what a title report can reveal before closing.

If you’ve ever treated the prelim like “just another escrow document,” this episode will make you think twice.

Topics covered in this episode:

•  What a preliminary title report actually tells you 
•  Why agents often miss major red flags in title 
•  How easements, restrictions, and prior land use can affect a property 
•  Why “delivered” does not mean “understood” 
•  Common real estate disclosure and risk management mistakes
•  What California agents should pay attention to before a buyer closes 

House Owl helps California real estate agents and buyers better understand the documents that can create risk in a transaction.

🎙️ Disclosures & Consequences
Hosted by Jason Piske
Because it’s not the disclosures… it’s the consequences.

Transcript

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SPEAKER_00 0:01

Welcome back to Disclosures and Consequences, the podcast where we talk about what happens when the fine print gets ignored. I'm Jason Piskey with House Owl, and today I want to talk about a document that almost everybody receives, but almost nobody actually need reads all the juicy details. And that's the preliminary title report. Now, if you've been in real estate for a while, you already know what usually happens with the prelim. Most people open it up, scroll through a few pages, maybe look to see if there are any obvious liens, unpaid taxes, judgments, something weird that jumps off the page. And then, mentally, they move on. And don't get me wrong, those things absolutely matter. But in my experience, the stuff that causes the most confusion and the most buyer concern and sometimes the biggest problems later is usually not the obvious financial stuff. It's in those blue hyperlinks that connect to old handwritten documents, or blurry type written copy of a copy from 75 years ago, or parcel maps that make you think you're reading a treasure map written in ancient Greek. The things in the prelim that nobody really tries to understand. So everybody just kind of hopes it doesn't matter. And sometimes it doesn't. But sometimes this is what you need to pay attention to. It very much does. So today I want to talk about why the prelim is a lot more important than most agents treat it, what people usually miss, and why some of the biggest issues are hiding in the things that seem old, random, or easy to ignore. Most agents only look for the wrong things. I think most agents have been conditioned to look at the prelim like it only exists for one purpose. Is there anything here that's going to stop us from closing? That's basically the lens. And because of that, most of the attention goes to things like tax issues, liens, judgments, ownership problems, maybe something obvious investing. And yes, those things matter. But that's also a very narrow way to look at a document that can tell you a whole lot more than just whether title can transfer. Because the prelim is often one of the only places in the file where the property's actual history starts showing up. Not the MLS version, not the cleaned up seller version, not the everything's been fine for years version, the actual recorded history. And sometimes that history can completely change how a buyer looks at the property. Not always because it kills the deal, but because it changes what the buyer thought they were buying. And that's where I think agents get into trouble. Because if you only use the prelim as a deal stopper checklist, you can miss the exact things that matter most to your buyer. The stuff people skip is usually the stuff that matters. This is where I think agents get lulled to sleep by title reports because they're not exciting. They're not written in a way that makes people want to keep reading. Especially when they click on a hyperlink and it's old legal paperwork with legalese and coordinates. And once you get into all the recorded exceptions and old references and document numbers, people mentally check out fast. But ironically, that's usually where the interesting stuff is. That's where you'll find old easements, utility rights, access issues, prior restrictions, recorded agreements, odd historical uses, and things that may or may not still affect the property today. And this is where I think people make a really bad assumption. If it's old, it probably doesn't matter. That is such a dangerous mindset in real estate, because old does not automatically mean irrelevant. Old does not automatically mean expired, and old definitely does not mean your buyer won't care. Sometimes those old recorded items turn out to be no big deal, but sometimes they change how a property should be understood, marketed, valued, or investigated. And if nobody slows down enough to ask the question, that's when a harmless-looking prelim turns into a future problem. If I had to pick one thing I see people mentally skip over all the time in prelims, it's probably easements. Because the second people see the word easement, a lot of them just kind of go, oh, okay, utility thing, moving on. And sometimes, yes, it is just a very normal utility easement. But sometimes it's not. Sometimes it's old, sometimes it's oddly placed, sometimes it references something that no longer seems to match the property. Sometimes it's tied to access, use, or a right that nobody in the transaction has ever actually thought about. And the danger is that most people often assume that if the property has existed this long without a problem, then whatever is in there must not matter. That's not a great approach to risk, because if your buyer wants to build something, expand something, add an ADU, fence something in, use a side yard differently, or just understand what affects the property, then that boring old easement may suddenly become very relevant. And I had one recently that was a perfect example of this. In Redlands, California, a buyer was buying a house in a nice suburban neighborhood built in the 1980s. There was the typical utility easements, first six feet of the front yard from the road, three feet from the sides. But there were also older easements from 1918 and 1937. These were put in when the neighborhood was still just dirt roads, farmland, and undeveloped space. The 1918 easement was for rights to put telephone and telegraph poles on the property. And the 1937 easement was for power lines. Neither one of these was valid anymore, having been replaced and modified when the developer built the neighborhood 50 years later. But the easements hadn't ever been released and were still there. In this case, it wasn't impacting on the value of the property or the ability to transfer title. But there was no need for them to remain. The house had been sold four times over 40 years and it had never been an issue. But because I saw it, I asked Title to verify if it was still valid and to have it removed if not. A few hours later, they confirmed it wasn't still in effect and had it cleared. That's exactly the kind of thing I'm talking about. Because even when something turns out to be outdated, replaced, or no longer the practical issue it once was, that does not mean it should have been ignored. It means it needed to be noticed and understood. That's the difference. You don't have to panic over every easement, but you also can't just pretend they're all meaningless because they're inconvenient to look into. Sometimes the prelim tells you the land has a past. This is the part of the prelims that I personally think is the most interesting, because sometimes the report doesn't just tell you what rights affect the property. Sometimes it starts hinting at what the property used to be. And that can get very interesting very fast, especially in California, because there are plenty of places where what is now a quiet neighborhood, a condo complex, a cute residential street, or a normal-looking lot used to be something completely different. Industrial use, agricultural use, rail use, pipeline access, oil-related use, things that are no longer obvious when you're just standing there looking at the current property. And that matters because buyers are not just buying the paint color in the floor plan. They're buying the property itself. And sometimes the recorded history attached to that property tells a story that nobody has brought up yet. That doesn't automatically mean there's a disaster. It doesn't automatically mean contamination. It doesn't automatically mean the seller did something wrong, but it absolutely can mean, hey, this deserves a closer look. And from a risk standpoint, that's huge. Because once a buyer finds out something after the fact that would have changed how they viewed the property, that's when people start asking, who should have raised the question sooner? And this is where one of the wildest examples I've seen come up. A buyer was buying a condo on the third floor of a four-story condo complex near the UCLA Medical Center. It was a great location. Walking distance to the park, easy access to the freeway, close to the university where they worked. But then clicking on a hyperlink, I found that in the 1940s, the owner of the vacant lot leased it out for oil drilling. This was extremely common in the Los Angeles area at the time. And the drilling continued for over 20 years. Then in the early 1980s, nearly 20 years after they stopped drilling, the land was sold to a developer who then built the condo complex. The natural hazard disclosure report didn't have it listed. The California Wellfinder page showed it to be a capped well with no issues. This is something I had to research on my own. There were no other disclosures. There were no issues or concerns with the property from the prior drilling, but the buyer, now aware of the property's past, decided to upgrade their carbon monoxide detector to one that would detect methane and other gases just to be safe. The discovery did not kill the deal, did not require any concession from the seller who wasn't even aware there was prior drilling themselves. The buyer closed after making an informed decision and bought a detector to give themselves additional peace of mind that was less than $100. That's why I always say the prelim is not just some escrow formality. Sometimes it's the first place where the property's real backstory starts peeking through. And if nobody is paying attention to that story, it can stay hidden until way too late. Old restrictions can create very real problems, even when they're wrong. This is another area where people get tripped up because old restrictions in title can be confusing enough on their own, but they can become even more dangerous when somebody prior to the transaction misapplies them. And this is where the issue is not always whether the restriction is valid. Sometimes the issue is simply that somebody added something in the title chain and assumed it applied without slowing down enough to confirm whether it actually did. And that can change the entire way a property gets positioned. How it's discussed, how it's marketed. Because once a bad assumption gets baked into the listing, the disclosures, or the overall understanding of the property, now the damage is already happening, whether the title item was actually relevant or not. And I saw a really good example of this with an old restriction that initially looked a lot more serious than it actually was. I was reviewing a preliminary title report for a new listing. The property was a quarter-acre corner lot and would be ideal for an ADU. However, the listing agent told me that the property had a building restriction that only allowed for a primary residence to be built. He said he was the agent when the buyer bought the property a few years earlier and wanted to build an ADU, but was told he couldn't build a separate unit per the restriction from 1911. I clicked through the handwritten restriction and then the multiple property maps that had been altered and changed over the last hundred plus years. It took a while to try to piece everything together, but ultimately I realized the building restriction was for an entirely different lot. I brought this to the attention of the title company. They reviewed it, confirmed my findings, and had it removed. This allowed them to now market the property differently. Now it's prime for development of a freestanding ADU and garnered more interest from developers and investors, and then ultimately a family that wanted to have a rental unit that would help to offset the cost of the mortgage and make the property more valuable. That kind of thing can completely change how people think about a property, even when the initial interpretation is wrong. And that's why these old title items can't just be casually skimmed and mentally filed under probably nothing, because probably nothing can still become a very real transaction problem if people start making decisions based on it. Now, this is where agents sometimes get themselves into trouble. And just to be clear, I'm not saying agents need to suddenly become title officers or attorneys. That's not the point. The point is not that you need to personally interpret every recorded instrument like a legal expert. The point is that you need to be aware enough to recognize when something deserves more attention. That's the real skill. Because the issue is usually not the agent didn't know the legal answer. The issue is usually the agent didn't even realize there was a question. That's where the risk lives. Because if something unusual is sitting in the prelim and nobody raises it, and the buyer later finds out after closing that there were there was some weird easement, old use issue, or recorded restriction that should have at least been discussed, now you're in a very different kind of conversation. Now it's no longer, what is this? Now it becomes why did nobody bring this up? And that is not a fun conversation. Especially if the answer is basically, well, it was technically in the file. Because as we've talked about on this show before, delivered does not mean understood. And that absolutely applies here too. So what should you actually do with a prelim? Honestly, it starts with something very simple. Read it like it matters, because it does. Not just the vesting, not just the tax section, not just the payoff items, the whole thing, or at least enough of it to catch the things that look unusual, old, unclear, or potentially important. And if something stands out, slow down, ask questions, loop in title, loop in escrow, loop in legal counsel if needed, loop in whoever is actually qualified to clarify what the issue means. That is a very different approach than just shoving it into the file and hoping nobody asks. And that's really the bigger message of this whole episode. You do not need to have all the answers, but you absolutely do need to recognize when something deserves attention. Because the prelim is one of those documents that can look incredibly boring, right up until it isn't. So, if you're an agent listening to this, here's the takeaway. The preliminary title report is not just a document-declear title. It's often where the hidden story of the property starts to show up. Old easements, prior land use, recorded restrictions, and details that may seem minor until they suddenly aren't. Those issues may not stop the deal, but they can absolutely affect how a property is understood, how it's marketed, and whether your buyer feels fully informed before they close. Because the risk usually isn't that the information didn't exist, the risk is that nobody paid enough attention to it while there was still time to ask the right questions. I'm Jason Fiskey with House Owl, and remember, it's not the disclosures, it's the consequences. See you next time.