1: Preliminary title reports (PR’s) are easy to get.
You totally don’t have to have an active transaction for a PR. I get them all the time for my short sale listings before I have a buyer.
2: A PR is not an authoritative statement of encumbrance.
A PR will generally show trust deeds and liens but not demands. Since you never know how much a place is encumbered without a demand, the PR is not much better than just the public records (or Realist). Generally a demand is lower than the full value (in my experience) showing on the PR. Further, if there were other non-liened obligations (eg: a year of back HOA dues) they might not even show up on a PR. Fail.
3: Banks can add stuff in that is not known to anyone.
I just closed a buyer’s purchase in Murrieta. The seller had $50k of equity. They had lost some of their income and could not keep up. Wells put them through no less than 5 different modifcation programs (all the while telling them not to pay). Eventually, the sellers got frustrated and gave up. When they sold to my clients, the bank added in over $40k in fees for non-payment (non-payment which was done at the bank’s direction). Those fees were in excess of liened amounts and did not show on any PR or public record. It meant the sellers walked with $5k instead of $50k.
4: The duty does not change.
The agent’s duty is still to show all the warts of which he is aware. Even if he was banging both the buyer and seller simultaneously, he still failed utterly to disclose a known material fact. Specifically, he concealed major negative equity to a client.
