Buying in Palo Alto moves fast. Your offer is accepted, escrow opens, and a thick packet appears in your inbox labeled “Preliminary Title Report.” If you are like most buyers, you skim it and move on. Yet this report can make or break a smooth closing. It outlines what you are really buying and what risks the title insurer will not cover.
In this guide, you will learn what a prelim is, how to read it, and the specific issues that show up often in Palo Alto and Santa Clara County. You will also get a simple checklist to use during your contingency period so you can move forward with confidence. Let’s dive in.
What a preliminary title report is
A preliminary title report is a snapshot of the property’s title as of a specific date and time. It lists who owns the property, the legal description, and recorded items that affect the property, such as liens, easements, and restrictions. It is prepared by a title company after an order for title work.
The prelim is not insurance. It shows what the title company would insure and what must be cleared before it issues a policy. The actual owner’s and lender’s title policies are issued at closing once the title company’s requirements are satisfied.
Prelims follow a standard structure. You will typically see a Schedule A with basic information and a Schedule B with requirements and exceptions. The effective date matters. Anything recorded after that date will not appear in the report and can affect your transaction.
Key sections to review first
Schedule A basics
Schedule A confirms the essentials. Review these items closely:
- Vesting and ownership. Confirm the seller’s exact name and how title is held, such as an individual or a trust. Incorrect vesting can complicate signings and payoff authorizations.
- Effective date and time. This is the “as of” date for what the title company found in public records.
- Legal description. Verify that the lot description, unit number for a condo, or parcel numbers match your contract and any site plans your agent provides.
Schedule B requirements
Schedule B Part I lists what must be done before the title company will issue a policy. Typical requirements include paying off existing deeds of trust, obtaining payoff demands, recording releases, and providing identity information. These items are usually handled through escrow, but you should know what is pending so there are no last-minute delays.
Schedule B exceptions
Schedule B Part II lists recorded items the policy will not cover unless addressed by endorsement. Common exceptions include:
- Recorded easements and rights of way
- Covenants, Conditions and Restrictions for a subdivision or condo
- Building setback lines and recorded maps
- Tax liens and special assessments
- Mechanic’s liens
- Judgments, notices of pending actions, or UCC filings
The prelim shows recorded items only. Unrecorded claims or conditions, such as unpermitted work, may not appear and may still pose risk.
Easements and rights of way
Easements give others limited rights to use part of the property. In Palo Alto, this often includes utility, drainage, or access easements. An easement may restrict where you can build or plant, or it may give a neighbor or utility company the right to enter for repairs. Confirm the location and scope of each easement listed.
Liens and encumbrances
Liens are claims that must be paid or otherwise addressed before closing. Typical items include deeds of trust, property tax liens, special assessments, mechanic’s liens, and judgments. Escrow and the title officer will organize payoffs and releases, but you want to understand each item early so you can keep your closing timeline.
Survey and encroachments
Standard policies often exclude unrecorded boundary issues and encroachments. If fences, driveways, or sheds appear close to a property line, consider a survey and ask about a survey-related endorsement. This can help address risks that do not appear in the public record.
HOA and condo considerations
For condos and planned communities, the prelim will list the recorded declaration of CC&Rs. It will not show current dues, special assessments in progress, or fines. You need an HOA estoppel or status letter to confirm these details. Review the declaration along with HOA documents to understand use restrictions, architectural controls, and leasing rules.
Endorsements to consider
Endorsements add specific coverage to your policy. Options can address survey matters, access, encroachments, or subdivision law. Some endorsements require extra documentation or a survey and involve added cost. Ask your title officer which endorsements are prudent for the property and what the lender requires.
Palo Alto and Santa Clara County issues to watch
Unpermitted work and mechanic’s liens
Many Palo Alto homes have a long remodel history. Unpermitted work does not always show in a prelim. However, unpaid contractors can record mechanic’s liens that do appear. Review the prelim for any liens and ask the seller for permit documentation. You can also check permit history through the City of Palo Alto Building Division.
Supplemental property tax bills
When a property changes ownership or when new construction is completed in California, a supplemental assessment often follows. That can lead to an additional tax bill after closing. Review how taxes are handled in escrow and ask how any supplemental taxes will be treated.
Special taxes and Mello‑Roos
Some properties are subject to community facilities district obligations or special taxes. If you see references to a special tax or community facilities district in the prelim, request details on the annual amount and remaining term. Confirm who is responsible for upcoming payments.
Public infrastructure and utility easements
Expect to see recorded utility, drainage, and access easements. Regional rail and local infrastructure improvements can also create recorded rights that limit certain uses. Review each easement’s recorded document to understand location and impact.
HOA rules and rental restrictions
If the property is part of a homeowners association, the prelim will reference the declaration. Compare recorded use restrictions with city rules to understand how they affect leasing, short-term use, or remodeling. Request an HOA estoppel to confirm dues, special assessments, and any compliance issues.
Encroachments and lot lines
Older parcels can have irregular boundaries. If there are signs of potential encroachments, consider an ALTA-type survey and ask about a survey endorsement. This is especially useful when fences or driveways appear to sit near a line.
Judgments and UCC filings
If a trust or business holds title, judgments or UCC filings may appear in the report. These items must be cleared or subordinated before closing. Confirm the plan with escrow early.
How to use the prelim during contingencies
You want the prelim as soon as possible after escrow opens. Share it with your agent, lender, and your title officer. Use the list below to review it methodically.
Prelim review checklist
- Confirm the seller’s vesting and the property’s legal description.
- Verify the effective date. Ask if any new recordings are expected before closing.
- List all deeds of trust and liens. Confirm how each will be paid or released.
- Identify tax items, including special taxes and assessments. Ask how escrow will handle prorations and supplemental taxes.
- Review all easements, setbacks, and CC&Rs that affect use or building rights.
- Look for notices of pending action, judgments, or UCC filings.
- For condos or HOAs, request the HOA estoppel and review dues status and pending assessments.
- If there was recent remodeling, check for mechanic’s liens and verify permit history with the City of Palo Alto.
- If boundaries are unclear, order a survey and ask about survey-related endorsements.
Questions to ask your title officer
- Which Schedule B exceptions are standard and which require action by the seller?
- What documents are required to remove specific liens or exceptions?
- Which endorsements are recommended for this property and what is the cost and timing?
- Does my lender require any specific endorsements or policy forms?
- Are there open items that could delay closing if not addressed now?
Actions to clear exceptions
- Request payoff statements and recorded releases for all liens and deeds of trust.
- Obtain the HOA estoppel. If there are unpaid dues or assessments, negotiate a cure or an escrow holdback.
- For special taxes or assessments, get estimates and confirm responsibility per the purchase contract.
- If a recorded easement or restriction is not acceptable, discuss options with the seller. Solutions may include a modification, a release, or a credit.
Timing and costs
Clearing straightforward liens and recording releases can happen quickly once payoff demands are in hand. Complex title issues can take weeks or longer, so start early. Title insurance premiums are a one-time cost at closing that are based on the purchase price. Endorsements and surveys are additional expenses and vary by provider and scope. Ask your title officer for an estimate.
Simple buyer playbook
- Get the prelim early. Do not wait to review it.
- Share it with your agent and lender. Schedule a quick call with your title officer.
- Map every exception to an action. Decide what must be cleared, what needs an endorsement, and what you can accept.
- Confirm tax handling. Understand regular taxes, special assessments, and supplemental bills.
- Align timing. Make sure there is enough time within your contingency period to clear open items.
- Do not remove your title contingency until you understand the prelim and have a plan in writing for any open issues.
Work with a local advisor
In Palo Alto’s fast market, clarity saves time and protects value. A careful prelim review helps you avoid surprises and negotiate with confidence. You do not need to become a title expert. You need a team that knows how to read the report, ask the right questions, and guide next steps with escrow and the title officer.
If you want a tailored review and a plan built around your goals, connect with our team at The Grail Group. We bring three decades of Silicon Valley experience, white-glove transaction management, and a trusted network of escrow, title, CPAs, and attorneys to help you move forward with confidence.
FAQs
What is a preliminary title report and why does it matter?
- It is a title company’s snapshot of ownership, legal description, and recorded items that affect a property, and it outlines what must be handled before issuing a title policy.
How is a prelim different from a title policy in California?
- The prelim is informational and not insurance, while the policy is issued at closing after requirements are met and provides coverage subject to listed exceptions and endorsements.
What should I check first on a Palo Alto prelim?
- Confirm vesting, the effective date, the legal description, recorded liens, easements, CC&Rs, tax items, and any judgments or mechanics’ liens.
How do supplemental property taxes affect my budget in Santa Clara County?
- A change in ownership or new construction often triggers a supplemental assessment and an additional bill, so ask escrow how these will be handled after closing.
What if the prelim shows a mechanic’s lien after a recent remodel?
- Ask escrow to obtain payoff demands and recorded releases, and do not remove contingencies until there is a clear plan to resolve the lien.
Do I need a survey or survey endorsement in Palo Alto?
- If boundaries or encroachments are unclear, a survey and survey-related endorsement can help address risks that are not shown in public records.
