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Review Title Reports Carefully

One of the most arcane yet important documents that buyers and sellers need to review when engaged in a real estate transaction is the preliminary title report along with the supporting attachments and exhibits. While purchases of condominiums tend to be fairly straightforward and it is unusual to find significant issues with these title reports, houses and freestanding condos pose a much more complicated situation.

When you are buying a condo, the homeowners association generally owns the land on which the structures are built and the common areas. The easements for utilities, water and sewer lines, driveways, sidewalks, etc. are generally under the purview of the homeowners association and not of great concern to people who are buying a condo in the development. Also, the property lines are not generally a big issue except in the rare case where a condo actually has some type of outside space or land that is deeded to the unit.

Condo buyers do need to make sure that property taxes are paid up to date, that there are no liens against the property and that the seller (especially if it is a corporation or trust) has completed all of the appropriate authorizations and other paperwork required for a successful closing. Every now and then the seller of a condo has a mortgage that is greater than the purchase price. In those situations it has to be determined whether the transaction is going to be a short sale that requires lender approval or maybe the seller just has to bring money to the closing table to cover the difference between the proceeds from the sale and the mortgage balance due plus closing costs.

While anyone purchasing a condominium needs to carefully review the CC&Rs, common interest community documents, Board of Directors minutes, financial statements and other related information it is unusual for a condo sale to be delayed or fall out of escrow due to issues involving the title report.

However, purchasers of single-family homes and freestanding condos need to perform much more in depth due diligence to ensure they are not only getting a property that is free of any clouds on the title but to be certain that there are no other encumbrances that could create problems or future liabilities. Even though Incline Village is a master planned community, during the early days of development property owners and their contractors did not always take the great care needed to prevent problems from arising in the future.

When reviewing the preliminary title report it is critical to pay close attention to each item listed in the various schedules and exhibits. This is where you will find references to easements, subdivision CC&Rs, plat maps, property lines and other important topics that could have a substantial impact as to whether a transaction proceeds smoothly towards closing or ends up being terminated. It might sound strange to the uninitiated but many of the subdivisions in our community were built by just one or two developers and the original deeds contained restrictions that prohibit the installation of fences, storage sheds and other things that are relatively common for homeowners to put on their property.

Some of the builders in the 1960s through 1980s were owners of multiple parcels. They ran water and sewer lines wherever they deemed it appropriate but did not necessarily record easements for each parcel that was connected to these utilities. In some cases, houses have been bought and sold several times before anyone discovered that a particular property did not have an easement for the utilities which were running through the next-door neighbor’s parcel. Only by carefully examining the title reports and getting the details behind every item of concern can a buyer truly understand the nature of the property they are purchasing.

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