A letter report, also known as a preliminary title report, is an essential protection in a real estate deal. Title companies routinely prepare one after receiving an application for title insurance but prior to writing a title insurance policy. The intent is to describe findings uncovered during a title search that a resulting title insurance policy will exclude. A letter report format, which generally presents information in a single page, supplies only what the buyer needs to know to decide whether to proceed or ask the seller to address the exceptions before closing the sale.
What to Include
By itself, a letter report is simply a communication designed to inform the customer. The “meat” of the report is in the accompanying attachments and schedules that include a legal description of the property, as well as identify and provide details for what the policy will exclude. According to Lawyers.com, include liens, encumbrances and issues that affect property valuation in the report. For example, the property may have a tax lien, the city’s planning department may claim a right-of-way to modify the street on which the property is located or the water company may possess an easement giving it the right to install water pipes under the property.
Heading and Introduction
A letter report format is similar to a business memo. Use company letterhead, but replace standard memo headings with identification information specific to a letter report. This information includes a reference number, which according to Chicago Title is usually the buyer’s escrow file number, the address of the property, the title order number and the “plant” date, which is the date and time the report was prepared and deemed accurate. Following this, write a short paragraph confirming receipt of an application for title insurance and offering to provide title insurance, subject to certain exclusions, if there are any.
Disclaimer and Warnings
Include disclaimers and warnings in the body of the report to make sure the customer understands that if the title company issues a policy it assumes no liability for any exclusions or exceptions. In addition, tell the customer where to look for these, which most often is in attachments, schedules and a plat map, and caution the customer to read and consider these conditions carefully before making a decision about whether to proceed.
Specify the type of title insurance coverage the company will issue, which for customers in most states is a standard policy developed by the American Land Title Association. Define the scope of the coverage, such as standard or extended coverage. As a final step, the issuing title officer should sign the report.