Title Insurance On New Construction

By Kurt Real Estate Nov 23, 2019

To follow-up our latest blog on buying new construction, we’re going to give you the quick rundown on title insurance and why it is just as important to have on your new home as it is when purchasing an old home. You may be thinking to yourself, what’s the need for title insurance when no one has previously owned the home? Sounds like money that could be better spent. While it’s true, no one has owned that house before you, chances are the land it sits on was previously owned. A quick title search can help you discover any liens against the formerly unimproved land.

Furthermore, there was likely a developer that built that house. Suppose the developer failed to pay a subcontractor or improperly paid a supplier, it’s quite possible the injured party will file a mechanic’s lien on the property (if they haven’t already done so).

If you still need more reason, verification of proper subdivision will identify that your new home is on the correctly identified lot. Title insurance also covers mistakes made in the county recorders office. For example, if a lien was filed but not found due to a clerical error, you as the buyer could be held responsible for the lienholder’s legal action against the property.

At the end of the day, title insurance is so important when purchasing a home (new or old), that most lenders require that a lender’s title insurance policy be purchased to ensure there is clear title on the property. However, this policy only covers the lender in the event that there is a hiccup with title. It does not cover the buyer who purchases the policy. Therefore, you will want to be sure to purchase an owner’s title policy in addition to the lender’s policy so that you are covered.

Just like any other form of insurance – it’s not worth taking the risk. Sure you may never get in a car accident, have a need to visit the hospital, or lose your home in a fire, but it’s not worth the risk of not having insurance should a freak accident happen. You pay for protection. Believe us, you’ll be glad you did should you ever need to use it.