Title Review and Analysis

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Real Property Attorneys obtain (or have the client obtain) from a title company and review a current preliminary report on the condition of title to the property and copies of all easements, deeds of trust, and other exceptions shown in the preliminary report. If any title exceptions could create a problem, the attorney considers whether to work at removing them before the seller is committed to a sale.

If there is an existing loan secured by the property, the lawyer reviews the loan documents to ascertain the following:

  • Can the loan be assumed by a new purchaser and, if so, under what terms and conditions?
  • Can the loan be paid off before the maturity date? If so, is there a prepayment penalty? Other conditions?
  • Is there a “lock in” clause that prohibits a prepayment before the maturity date or an earlier date during the term of the loan?
  • Is the existing loan balance for more than the seller intends to offer the property for sale? If so, for such a “short sale,” the seller will need to involve the lender sooner rather than later.Many securitized loans prohibit prepayment of the loan, but allow for a defeasance of the loan. Defeasance involves substituting government-backed securities as collateral for the loan and a release of the real property security to permit a sale of the real property. If there will be a defeasance, the lawyer contacts the lender immediately to discuss the lender’s defeasance requirements, because that process will require additional time and cost that the seller and lawyer will need to take into account when negotiating the terms of the purchase agreement.