Legal Question in Real Estate Law in California

The exception means the title insurer will not insure against the recorded deed of trust. The deed of trust is used as security for an underlying debt. Lay people call them mortgages, but legally they are not the exact same as a mortgage. This means the title company has found an existing deed of trust that can be foreclosed on if it is not paid off and cleared with a reconveyance.

As to the deed issue, I would have to read the exact report to advise you.

Mr. Roach is exactly right. Title insurance only insures against claims against title that they do not disclose but that affect record title (and a few other things that might not be on record, but not much). The preliminary report will show the seller's deed of trust as an exception, meaning that if it is not paid off in the escrow for the sale, they will not defend against the lender asserting the lien. If the loan is paid off, then the final title insurance will show no exception for that, but will show an exception for YOUR new loan. The reference to the deed suggests that there has only been one prior sale of this property on or around the record date. Lastly, your real estate agent is not doing their job if you have to ask us this stuff instead of them.