Reviewing exceptions/exclusions in a preliminary title report in California

Reviewing a preliminary title report is generally one of those topics for which you may benefit from the experience of a real estate attorney.  A preliminary title report is simply an offer for title insurance – it is often both negotiable and correctable.      

1. Report says: “Taxes and assessments, general and special, for the fiscal year [current year] – [next year], a lien, but not yet due or payable.”

Attorney Glaser: These are probably standard taxes.  If you have an escrow open pursuant to an ordinary home purchase agreement, then taxes will be apportioned (by the escrow) between the parties during the year of the sale.  More information about your property taxes can be found within your Natural Hazard Zone Report, which has a special section devoted to special assessments in your district.

2. Report says: “Taxes and assessments, general and special, for the fiscal year [prior year] – [prior or cur, as follows: [table with property tax info]

Attorney Glaser: You or your escrow officer should check with your County tax assessor to see if back taxes are due on the property.  You may be dealing with a property that was previously subject to foreclosure or tax problems.   If you have an escrow open pursuant to an ordinary home purchase agreement, then back taxes will most likely be paid by the seller (prior to or at close of escrow). This is no biggie.  Check your purchase agreement. Here’s a tip for home buyers and their realtors: on the CAR Form Purchase Agreement section 4D7, check the box for “Seller will pay” and then write, “any sums owing sellers lenders, and any delinquent taxes/liens/judgments.”  This will help make the agreement even more explicit that seller must pay these back taxes.  It will also cover this common sentence in title reports, “Any claim of lien for services, labor or material arising from an improvement or work under construction or completed at the date hereof.”

3. Report says, “Said property having been declared tax defaulted for non-payment of delinquent taxes for [prior year] – [prior or current year]”

Attorney Glaser: You are likely dealing with a property previously subject to foreclosure or tax problems.  Check with your County tax assessor to see if back taxes are still due on the property.   Ask your title officer is there is a trustee’s deed or sherriff’s deed recorded on the property.  You might also be able to find this information directly on the title report, as in “Any insufficiency of the proceedings leading up to and including the recording of the trustee’s deed.” There are some notable legal and practical issues regarding purchasing property that was recently foreclosed upon.  Most buyers just want to know if the foreclosed-out homeowner can come back to reclaim the property?  The answer is most likely no.  In California, post-sale redemption is only available for judicial foreclosures (except where there is a nonjudicial foreclosure by a homeowners association) and not for private sales. Errors in the private sale process can create some wrinkles so consider title insurance.

4. Report says, “Rights and claims of parties in possession.”

Attorney Glaser: This item is just another one meant to protect the title insurance company. It means that if there is anyone living in the property right now, it’s the buyer’s responsibility to deal with them.

5. Report refers to Easements and/or CC&Rs

Attorney Glaser: Utility easements (roads, lines, poles) are very common. Neighbor easements are less common – review the records on file. Subdivision easement examples: “Easements for ingress, egress, private rights and/or utilities and incidental purposes, as disclosed by docs of record affecting the ‘Common Area'”, “Covenants, Codes, and Restrictions”, “Agreement for Subdivision Improvement”.  These may refer to CC&Rs – a document that limits what you and your neighbors can do on a property in your subdivision/neighborhood.  You may want to review a copy of the document. Sometimes though a reference to a subdivision just refers to some subdivision map on file.   Where the report refers to “Liens and charges for upkeep and maintenance as provided in the CC&Rs”.  This just refers to annual/monthly HOA dues, or community subdivision dues.  It’s generally a smart idea to give the local HOA a call to confirm the property is current on the HOA dues.

6. Report says, “Any claim to set aside the trustee’s deed [identifying info], in bankruptcy proceedings filed by [name] within [x] years from the foreclosure sale.”

Attorney Glaser: This is a standard “Durrett clause”. Do you have any specific information that a bankruptcy was involved on the property?  If there was a bankruptcy sale, the title report would normally state “bankruptcy trustee’s deed”.  However, that is not always the case, so it may be worth a quick call to the former trustee to confirm.  Generally, things can be a bit more cumbersome when a debtor is involved in active bankruptcy proceedings.  For example, the inadequacy of the consideration can be grounds to have a sale set aside under federal bankruptcy laws. If the sales priced does not equal or exceed 70 percent of the property’s fair market value, the sale can be voided as a fraudulent transfer if the debtor files for bankruptcy within one year of the sale.  Notably, in order to set aside the sale in a legal action, the debtor must first repay or offer to redeem the property from the purchaser at the price brought at the foreclosure sale.

7. Report says, “We find various Liens and Judgments, that are of record against persons with similar or the same name as that of our vestee(s) shown herein.  In order to complete this report, this Company requires a Statement of Information to be provided for the following vestee(s), which may allow and assist the elimination of some or all of said Liens and Judgments.  After review of the requested Statement(s) of Information, the Company reserves the right to add additional items or make further requirements prior to the issuance of any Policy of Title Insurance.  Vestee(s): [names of the sellers]”

Attorney Glaser: This is a boilerplate clause that some title companies like to put in preliminary title reports — it does not necessarily mean that there are actual liens on the property.  Rather, it just means the title company asks its home sellers to fill out a simple form that provides some background information before they issue a title policy.  So don’t worry about it – if there were liens recorded on the property, those liens should show up on the preliminary title report rather than just the above boilerplate language.

Showing a FSBO Home

After you’ve placed an ad for your home (listed it), then you will start to receive phone calls and/or emails about it.

Screening Phone Calls and Emails

Interested buyers may call or email directly, or you may get calls/emails from realtors. Some of the calls from realtors are just phishing (solicitation) calls and others are legitimate calls.

  • Legitimate Calls. While you are talking on the phone, ask how this buyer or agent learned your house was available. And here’s the general info you’d like to learn about the buyer before a showing: whether the buyer is local or from out of town, whether they have kids, if they have family in the area, what are their jobs, are they renting or owning right now, have they pre-qualified with a lender.  The buyer or agent should also be willing to provide you the buyer’s name and agent’s or buyer’s phone number.  Likewise, you as the seller should also be prepared to answer basic questions about the property condition, property history, and also why you are moving. Tell the truth.
  • Phishing Calls from Realtors. Expect some of your initial calls to be solicitation attempts from local real estate agents who want to help you sell the house for a seller’s commission – you can just advise them that you are okay and confident proceeding as a FSBO.  If they try to convince you FSBOs are less effective, then perhaps they haven’t considered why FSBOs are so common with intelligent sellers, and also why it is also common to have a closing attorney (such as myself) assist with all the paperwork and disclosures.  In any case, if the realtor on the phone is unable to present you with a specific buyer’s name, then you are likely receiving an unsolicited phishing call, so you should not feel guilty by respectfully declining any meeting or showing.  Indeed, some of my clients have been treated very rudely during phishing calls, and have even had realtors claim they will not bring ‘their buyer’ to see the property unless the seller will first agree to allow that realtor to represent both parties (dual agency).  Don’t fall for the trick – the realtor is already professionally obligated to their buyer clients to show them homes in good faith.
  • Suspicious Calls. If you have a suspicious feeling about the person’s moral character or identity during the initial call, just don’t schedule anything – simply take down their information, and advise them that you are managing the long process of receiving inquiries so you will log this inquiry and talk it over with your family members before next steps.  Trust your instincts and don’t show the home to anyone suspicious – there’s a reason for the phrase ‘better safe than sorry’.  Your home is naturally a private place.


Assuming your home is physically ready, you can begin to set appointments and show the place.  Generally, you want to allot about an hour or so for the tour.  You should keep a list of everyone who tours your home, including at least their name and phone number.  If you have security concerns, try to schedule tours at a time when there will be an adult male family member or neighbor in the home.  Some neighbors are happy to pre-screen buyers…


Calm and comfortable is generally what you’re going for here.  If you like, bake organic bread before/during the tour because the aroma is warm and comforting. Fresh flowers can add a nice feeling too.  A well-lit home is often more attractive…

You can let the buyer tour the house freely if you like, but it is conventional advice that most buyers prefer a guided or semi-guided tour. In addition to added security, this provides the seller an opportunity to point out the many features of the home, the property history, the neighborhood, and so forth.  Along these lines, try to remember what first attracted you to this house. Talk about what has been updated or recently replaced and emphasize what you have done to maintain the home. Discuss the advantages of the location, the neighborhood, close proximity to schools, parks, the local book store.   Perhaps you want your prospect to envision living in the home. A positive attitude is very important toward that end.

Some more conventional advice is that unless your prospective buyer is bringing their children, you may wish for your own kids to stay at Grandma’s.  For example, if your child is watching television, the buyer may feel intrusive in touring that room.  I think it depends – you can generally gauge interested buyers during your initial phone call.  I like to think that most people enjoy seeing a home in some organized action, with the dog running in the back yard, the kids playing, dad reading or working in the garage. There’s no right answer here in my book.

Following Up

Don’t be discouraged if you don’t hear back from a prospective buyer – there are a lot of window shoppers out there.  Consider waiting a couple of days before following up with a call or email. All you really need to ask when following up is if they have decided on a home yet.  If they haven’t, then you should ask whether your home is one they are considering. This gives the buyer the opportunity to talk about your home.  You can generally gauge their interest from the specifics they provide.

Next Steps

Generally the next step is negotiation of the purchase contract’s essential terms: price and timing.  Here’s my article on the FSBO process:

And I intend to write many articles here at NorCal FSBO about purchase contract logistics and standard practices.  Thanks for reading.

Greg Glaser, Attorney at Law
San Francisco Bay Area – Northern California
(925) 642-6651
Flat Fee Packages Available

FSBO Process – A Helpful List of Steps

Here is a list of typical steps for a successful For-Sale-By-Owner (FSBO) transaction:

Tour – The buyer tours the property.  Sometimes the seller will also present the buyer during the tour (or shortly afterwards) with pre-completed inspection reports, such as:
o Transfer Disclosure Statement (TDS), which is a two-page form describing the condition of the property
o Wood Destroying Organisms Report, which is an approximately 10-page inspection report discussing any observable evidence of termites or moisture/mold (or any other things that may have affected the wood or foundation of the property)
o Natural Hazard Zone Disclosure Report, which is an approximately 40-page document providing lots of boilerplate information about the geographic area and taxes and so forth
o Any other pertinent inspection reports, such as a water well report or a septic system report

Negotiate – Before a formal offer/contract is written up, the parties will usually get together to negotiate less formally (in person or by phone or email) regarding the purchase price and other key items of the sale. For example, this is a nice time to discuss details about the property’s condition (i.e., any needed pre-sale repairs) and the fixtures that will come with the property (i.e., home appliances).  It is also useful to discuss the desired move-in date (close of escrow date) and whether the buyer is also selling their current home (and whether such sale will be a condition precedent to the current sale).  Another item to negotiate is how the parties would like to apportion closing costs (i.e., escrow fee, title insurance) – you generally either want to split the closing costs 50/50, or just use the customary closing costs allocation for your county.  Expect closing costs to total about 1.5-3% of the purchase price.

Bank Pre-Approval – Buyers usually obtain a pre-approval letter from their bank before writing up a formal offer on a home.  The buyer provides a copy of this letter to the seller at the same time the formal offer is written up, or within about 1-3 days of the offer.

Contract – The parties write up the formal offer/contract.  Where the buyer does not have a real estate agent, usually it is the seller (or a FSBO attorney such as myself) who prepares the purchase contract.  Where both parties have agents, the process is generally more formalized around the use of forms and tends to involve counteroffers as well.  I also use the standard forms because typically third parties and institutions involved in the sale are most comfortable with them (i.e., escrow, lenders) and they help speed up the process.

Prepare a Checklist or Timeline – Often it is helpful to make a checklist or timeline to track each party’s responsibilities.  For example, usually the seller needs to secure a termite inspection within 10 days or so, and the buyer needs to secure a home inspection within about 17 days, and then the seller needs to confirm the loan is going to go forward (remove the loan contingency) within 30 days or so.

Escrow & Title – Within about three days of signing the purchase contract, the parties open an escrow account (often with a local title company) and give the escrow holder a copy of the Purchase Agreement. The title company then provides a preliminary title report and offer of insurance (i.e. CLTA or ALTA). The buyer also deposits with the escrow holder any initial deposit (earnest money) defined in the purchase agreement (i.e., 1% of the purchase price).

Disclosures – Within the first couple weeks or so of completing the purchase contract, the seller provides the buyer with all the required legal and real estate disclosures.  A FSBO attorney such as myself often helps prepare the required disclosures.

Inspections – The seller ensures the property is available at some convenient times to the buyer’s property inspector(s).  By law, the buyer has a certain amount of time (i.e. 72 hours) after receiving a home inspection report to decide whether to cancel the agreement and receive a full refund of his initial deposit.  The law requires that any such termination decision be made in good faith by the buyer, so for example it should not be over a trivial matter or something the buyer already knew the details about.

Funding the Purchase – The buyer works with this bank to ensure the bank makes timely payment into escrow of the loan amount, and then the buyer makes payment of any additional funds described in the purchase agreement to cover the purchase (i.e. 20% of the purchase price, plus the buyer’s share of the closing costs).

Pre-closing Walk Through – Contracts usually provide the buyer the option to do a walk through of the home about 3-5 days before the close of escrow date.  The buyer’s approval of the exact physical state of the home is not supposed to be a condition of the closing, but rather this walk-through is just an opportunity for the parties to open up a dialogue regarding any small items or loose ends.  For example, this might be a nice opportunity to discuss transferring utilities, mail forwarding, etc.  As always, parties should be reasonable with one another.  If the property is not in perfect condition, or not totally clean, generally that is a risk accepted by the buyer (unless the purchase contract states that the buyer will receive the property in perfect condition and perfectly clean).  That is the nature of an ‘as-is’ sale, and rightfully so.

Legal Transfer – Within 1-3 days of ‘closing date’, escrow pays out funds to all the relevant parties and simultaneously records the new deed.  A portion of these escrow funds go to the seller’s lenders (any banks holding a mortgage on title), and any remaining funds go to the seller.  Once these parties have been paid and the deed has been recorded, and the old lender releases the old deed of trust, and the new lender records the new deed of trust, escrow is closed.

Possession – The buyer receives the keys to his new home.  The parties are encouraged to accomplish this transfer of the keys anytime that is convenient, whether shortly before or after close of escrow.

Please remember that these steps above are general.  Home sales are by their very nature unique (each property is unique, and every person is special just as your kindergarten teacher advised you – she was right about a lot of other things too!)

So these steps can and should be customized, and even rearranged, with the expectations and flexibility of the parties.

Greg Glaser, Attorney at Law
San Francisco Bay Area – Northern California
(925) 642-6651
Flat Fee Packages Available

Mortgage Loans – Some Tips & Terminology

Types of Loan

A conventional loan is provided by a bank, usually with a 10-30 year term providing a manageable monthly payment.

A private money loan is provided by a private investor, or a family member or friend.

Seller financing is when the buyer pays the monthly mortgage to the seller directly.  Usually the term is 3-5 years, amortized over 30 years — so the monthly mortgage amount is manageable like a conventional loan, but then the whole loan becomes due in 3-5 years, so the buyer has an incentive to refinance or sell before the whole loan (‘balloon payment’) is due in 3-5 years.

Mortgage Loan Amount

Typically a lender can offer a loan between two and three times your annual household income plus assets, assuming you are not saddled with too much debt (such as credit card debt with high monthly payments).

Fixed rate mortgages and adjustable rate mortgages

Fixed rate mortgages have an interest rate that remains unchanged for the term of the loan.

By contrast, adjustable rate mortgages change at certain intervals to reflect interest rates published from time-to-time through indexes floated by the money magicians.  That means that as this rate goes up or down, so will your mortgage payment.  Note also that caps are limits allowed in the interest rate and/or monthly payment on an adjustable rate mortgage.

If you have a convertible mortgage, then you can convert from an adjustable rate to a fixed rate, provided you are willing to pay an additional fee.

Credit Issues

If you’ve had previous credit problems, expect that you may need to explain the circumstances to your lender or broker. By keeping your debts paid-current for at least one year (following a credit problem), it does help improve your mortgage application.  Again, credit card debt is a real stain on an application.

Private Mortgage Insurance

If the buyer is not putting at least 20% down to purchase the house, then FDIC-insured loans have an extra cost called “Private Mortgage Insurance”.  The cost is basically just a monthly insurance fee.

Fannie Mae, Freddie Mac

These organizations are designed to guarantee the mortgage debt of private citizens, so that the government will bail out the lender if the loan is not repaid.  If you seek one of these loans and yet also complain about big banks being bailed out,  then I suppose you are being hypocritical. Modern history offers many examples of lending abuse between individuals, banks, and nations. It seems most people don’t even know that international financiers frequently fund both sides of the same war! For an in-depth analysis, I recommend the scholarship of G. Edward Griffin, and this documentary called Fiat Empire.


This is just another word for mortgage interest. For example, if a loan is ‘amortized over a 30-year period at 4%’, then it means the interest rate is 4% over the course of 30-years.  Just plug these two figures into a mortgage calculator (google it) along with the loan amount and you can calculate your monthly mortgage amount.


These are often charged by mortgage brokers as a kind of pre-paid interest on the mortgage. A point is equal to one percent of your total mortgage amount.  Points are prepaid because they are collected at closing (during the escrow).

Locking In

Your mortage broker can help you ‘lock in’ a loan, which means that the lender will guarantee the interest rate on your mortgage for a limited period, regardless of any interim change in market rates.  Sometimes you have to pay a fee for this lock-in guarantee.

The Appraisal

Appraisals take place about 5-20 days after a purchase contract is signed by the buyer and seller.  In a nutshell, an expert tours the home and looks at comparable property sales and then writes up a report for the lender that estimates the home’s value.  If the property is not appraised at or above the purchase price amount, the loan might not go through.  The consequences of this to the parties are specified in the purchase contract with regard to any ‘loan contingency’.


An escrow refers to the company that helps receive and payout the funds between all the parties (buyer, seller, lenders).  They also help process lots of documentation (sale, recording, etc), taxes, HOA fees, and coordinate the title insurance.  Accordingly, it is really nice to have a helpful, personable, and diligent escrow officer working on your transaction.


The ‘closing’ refers to the process of finalizing the escrow so everyone gets paid and the deed is recorded and the buyer receives the keys.  Sometimes ‘closing’ also refers to the escrow process itself (usually in its final stages).


This refers to the last stages of the escrow closing, when all the parties sign the necessary closing papers and legally transfer the property and all associated funds.

Closing Costs

I’ll plan to detail these more in another article, but in the meantime, closing costs are all the items that need to be paid in addition to the purchase price in or der to close escrow, such as: escrow fee, title insurance, prorated homeowner’s insurance, broker and lender fees, recording fees, notary fees,

Typically these add up to 1-2% of the purchase price.

Late Payments

Assuming the world does not spontaneously implode because of your unforgivable transgression… continued delinquency (late payment) or defaulting on mortgage (failing to make one or more payments) can lead to foreclosure, or judgment against you on the note for the amount owed.

Prepayment Penalty

Most mortages do not have a prepayment penalty, so there is no extra fee or interest charged if you decide to pay off the loan early.  In other words, without a prepayment penalty, there is no balloon payment on interest.

Lease Option

That if the price is right, a ‘rent to own’ option can be the best way to  secure the right to buy from a willing property owner, and still keep  your ‘options’ open. One way to look at the situation is that you are  paying the owner a premium rent for the option to purchase if you  choose.

Buying in 2012

If you don’t have enough money to buy right now, look on Craigslist for a “Lease with Option to  Purchase” (also called a “lease option” or “rent-to-own”).

In the present day, I generally don’t recommend buying a house in  the suburbs or city unless you need to live there.  If you can find organic rural homestead land  with water rights, do yourself a favor and buy it (or rent it) for your family and then farm it organically. Read the literal-based gospel too and search out who YHVH is.   My research suggests that we are experiencing the end of an age, so watch and prepare:

Comparative Advantage of Buying And Selling Real Estate Without a Realtor

Selling real estate can actually be pretty straightforward, so it is routinely accomplished without a realtor simply by utilizing the services of a closing attorney or a FSBO Attorney, such as myself.  With that said, some folks (especially first time sellers) really do benefit from having a realtor help them appraise, market and show the property.  Realtors tend be very personable as well, and they are trained in providing step-by-step guidance and negotiations through the process. Indeed, real estate agents tend to advertise that they can negotiate a higher price (or lower price) for the property – and apparently that’s correct, as evidenced by data compiled by the National Association of Realtors. So this is not a blog for criticizing realtors in order to promote some cost-saving alternative of a FSBO attorney (i.e., thesis – antithesis).

Rather, this is a blog to highlight that if you are a confident and intelligent homeowner who is comfortable marketing and showing your own property, and you don’t mind spending $1k or $2k on a skilled FSBO attorney, then proceeding without a realtor might be an attractive option for you because: (a) saves you money, (b) promotes direct information and communication between the parties, and (c) promotes traditionalism. The same analysis applies to buyers who proceed without a realtor – most people know how to use the internet to find homes for sale, and a FSBO attorney can help you negotiate and document every step of the transaction.

So what I want buyers and sellers to understand is that they should independently determine what is right for their own needs in relation to their own skills… the correct answer depends on your circumstances.

Here’s how FSBOs save money: (a) no real estate commissions, (b) reduced sales price means lower annual property taxes and transfer taxes at sale, (c) reduced sales price means reduced monthly mortgage and interest (this helps creditworthiness), and (d) reduces sales price means reduced closing costs.

a. Commissions

The typical 6% commission charged by two real estate agents is added to the total cost of the home.  Either the buyer pays this commission in the purchase price, or the seller pays this commission by taking a hit on his home sale profit. So by eliminating the commission from the price of the home, both parties stand to benefit.

b. Loan Amount

Lenders use the purchase price to set the ‘loan to value ratio’ that is key to determining the buyer’s eligibility to purchase the home. Therefore, purchasers without a realtor have a slight advantage in this sense – the less you borrow, the less interest you pay.

c. Closing Costs

The escrow fee and title insurance premium are typically determined in relation to the purchase price. So a lower purchase price reduces these closing costs.

d. Tax

There are also two key tax advantages to a FSBO in California: (a) tax assessors use the purchase price of the home to set the assessed value, so by lowering the purchase price, the buyer lowers the annual property tax, and (b) the closing cost item of city and county transfer taxes are set as a percentage of the purchase price, so by lowering the purchase price the buyer also lowers the transfer taxes.

Where a FSBO seller has priced his home at, or slightly below the market value of the home, the seller has anywhere from three to six percent “negotiating room” because a commission will not be paid on the transaction. Therefore, it can be in the seller’s best interest to sell FSBO to help the home sell faster (because the home is more competitively priced than those listed or sold by full priced real estate agencies), and because the seller can ultimately net more from the sale.

Consider the example of a $600,000 home. Assume full service realtor commissions are six percent, or $36,000. In this scenario, the seller will only net $564,000 from the sale; $600,000 – $36,000 = $564,000. If the seller decides to sell FSBO, the price of the home can be significantly lowered, let’s say to $580,000. The seller then benefits by $16,000, the difference between the $580,000 sales price and the $564,000 net proceeds if listed with a full service agent. The buyer benefits by $20,000 because the purchase price was $20,000 less. It is a win-win situation for both buyer and seller.

Without real estate agents, you deal directly with the buyer or seller. When communication is direct and informative, this can add confidence to the agreement.


There is also a traditionalism that may come with a home sale by the owner. Talk to your family members about their property buying history and you may find what I did: one of our family homes was sold on a handshake in Davis, California. A gentleman’s agreement was reached on the essential terms of the deal, and then everything was put down in writing later. In a way, it helps builds community.

Greg Glaser, Attorney at Law
San Francisco Bay Area – Northern California
(925) 642-6651
Flat Fee Packages Available