Although a preliminary title report or commitment are useful for an “interim” review of the condition of title, it is a crucial object to and negotiate the removal of certain exceptions that should not appear on title to a property. It is also important to ensure that a buyer works with an experienced real estate attorney to ensure the buyer receives an acceptable title policy commitment or pro forma policy prior to closing, and receives an acceptable owner’s policy of title insurance after the closing. If there are any title issues that arise after closing, the owner’s policy of title insurance will be the controlling document to determine if the insured has coverage for the particular title issue that arises.

The owner’s title insurance policy generally provides coverage in two types of situations. First, if ownership of a property is contested, a title insurer will defend the title at its own expense and attempt to eliminate the title defect for the insured. Second, if it turns out that there is a title defect that cannot be eliminated; title insurance will protect the insured from financial loss up to the amount of the policy.

Buyer Tip: Always request that the title company provide a preliminary title report or commitment with all exception documents “hyperlinked” within the report. Title review is a very detail-oriented task and often requires reviewing a lot of documents, sometimes documents going back several decades. If the exception documents are not hyperlinked, it can be difficult to find the documents that contain certain exceptions and restrictions on the title to a particular property.