Why Title Review Is a Critical Step Before Buying a Home

Title review sounds like paperwork. In practice it is one of the few steps that can protect you from a problem you cannot renovate away. You can replace a roof. You cannot replace a recorded easement that runs a neighbor's driveway across the side yard you planned to build on.

Escrow delivers a preliminary title report early in the transaction — usually within the first week — and your contingency period is the window to act on it. Most buyers open the PDF, see forty pages of legal language, and set it aside. Here is how to read it in about thirty minutes and know what actually matters.

What a preliminary title report is (and isn't)

The prelim is an offer to issue title insurance under stated conditions. It lists the current vested owner, the legal description of the parcel, and every recorded exception the title company will not insure against unless it is cleared.

It is not a guarantee that nothing is wrong. It is a list of what is recorded. Anything unrecorded — a boundary agreement made verbally between neighbors, work done without permits, a tenant with an oral lease — will not appear. That gap is why title review and physical investigation have to happen together.

What we look for

• Vesting: who legally owns the property, in what form, and are all owners available and competent to sign? Trusts, probate estates, and divorce situations all require extra steps.
• Monetary liens: property tax liens, mechanic's liens from unpaid contractors, HOA liens, judgment liens, IRS or Franchise Tax Board liens, and any second mortgages or HELOCs.
• Easements: utility, drainage, ingress-egress, or shared driveway rights that limit where you can build and what you can fence.
• Encroachments: a neighbor's fence, driveway, shed, or eave crossing the property line — or yours crossing theirs.
• CC&Rs and use restrictions that may prohibit rentals, short-term stays, ADUs, RV parking, or exterior changes.
• Solar leases and PACE assessments, which are extremely common in Orange County and must be either assumed, paid off, or transferred with lender approval.
• Notices of default, lis pendens, or bankruptcy filings signaling distress that will affect timeline and certainty.

Easements: the exception buyers underestimate

An easement gives someone else the right to use part of your land for a defined purpose. Most are harmless — a utility company's right to access a line along the rear lot. Some are consequential.

The ones to look closely at are access easements benefiting a neighboring parcel, drainage easements crossing a buildable area, and any easement running through the footprint of a future ADU, pool, or addition. If your plan for the property depends on that square footage, read the recorded document itself, not just the one-line summary in the prelim. Escrow can pull the underlying instrument for you at no cost.

The unpermitted-work trap

Title will not tell you a garage conversion was done without permits, but county and city records combined with the disclosure package usually will. Compare the square footage on the tax assessor's record to the square footage in the listing. A meaningful gap is a question, not necessarily a problem.

Unpermitted square footage can affect appraisal (an appraiser may not give value to it), insurance (a claim on an unpermitted structure can be denied), lending (some underwriters require legalization or removal), and your ability to resell to a financed buyer.

Identify it during contingencies and negotiate — either a credit sized to the cost of legalization, a seller-completed permit resolution before closing, or a price adjustment reflecting the risk you are absorbing. What you should not do is discover it after closing and find out the city has an open code enforcement case.

Solar leases and PACE liens in Orange County

Solar is everywhere in this county, and how it was financed changes the transaction. An owned system that was paid for outright transfers with the home and adds value. A leased system or power purchase agreement requires the buyer to qualify with the solar company and assume the contract. A PACE or HERO assessment is a lien repaid through the property tax bill, and many lenders require it to be paid off at closing.

Each path is workable. Each also takes time — solar company transfer approvals routinely take two to three weeks. Identify the structure in week one of escrow, not week four.

Owner's title insurance

The lender's policy protects the lender's interest, not yours. An owner's policy is a one-time premium paid at closing that defends your ownership against claims that predate your purchase — forgery in the chain of title, an undisclosed heir, a recording error, a previously unknown lien.

On a million-dollar Orange County home, declining an owner's policy to save a few hundred dollars is a poor trade. Also ask your title officer about an extended or homeowner's policy, which covers additional risks such as certain unrecorded easements and encroachments that a standard policy excludes.

Your title review checklist

• Read the prelim within 48 hours of receiving it, while contingency time is still ample.
• Ask escrow for copies of every underlying recorded document referenced in the exceptions you care about.
• Verify the legal description and parcel number match the property you toured.
• Compare assessor square footage and bedroom/bath counts against the listing.
• Confirm all monetary liens will be paid through escrow and reflected on the estimated settlement statement.
• Ask directly about solar, PACE, and any Mello-Roos or bond assessments.
• Buy the owner's policy, and ask what the extended coverage adds for your situation.

The bottom line

The physical inspection tells you about the house. Title review tells you about the ownership. Skipping either one means buying half informed — and title problems are the kind that follow you for years rather than getting fixed with a weekend and a contractor.