Usually, when a real estate buyer purchases title insurance, it’s for a previously owned home. This vital insurance protects the new buyer from title disputes, search errors, encumbrances and liens, as well as fraud.
But what if your real estate purchase is a new construction home? Do you really need title insurance? Yes, you do. Here’s why.
But what if your real estate purchase is a new construction home? Do you really need title insurance? Yes, you do. Here’s why.
Title Insurance and New Construction Homes
Buyers often assume that the land on which they are building a new home is legally clear and undisputed. It’s generally believed the builder has resolved all possible ownership issues before buying the land.
That’s not necessarily true. What if a previous contractor or subcontractor who completed work did not get paid in full?
Should that happen, a contractor’s lien is placed against your property as security for payment. What’s more, we cannot stress enough that even the most thorough title search cannot find defects or problems that were not legally recorded.
Further, there are cases where a title search was performed, and no lien was found. How does this happen? If a clerk mistakenly does not file the lien!
Or, if the deadline for filing a lien occurs after a real estate contract has been executed, the lien may not be found while performing the title search.
That means you would have to pay to have the contractor’s lien removed—if you did not have homeowner’s title insurance.
Additionally, a real estate developer may purchase a large parcel of land, dividing it into smaller lots. Despite a title search on the property, it’s common for the whole parcel to be vulnerable to claims not uncovered during the search.
8 More Title Issues That Can Arise After Closing
There are many reasons to purchase title insurance for new construction. Here are eight of the most common:
- Frauds committed by a previous seller, buyer, notary, or witness
- Improperly indexed titles
- Sale of the land without the heir’s consent
- Judgment liens, tax liens, child support liens, prior mortgages, setback and boundary disputes
- Undisclosed spouse with a property interest
- Finding a will that impacts the property
- Lawsuits filed against the property
- Issues with power of attorney
Get the Right Title Insurance for New Construction
Your lender will require that you buy lender’s title insurance. This protects the lender only. Should a claim arise, the lender will be compensated, not the buyer.
However, there is homeowner’s title policy for buyers, which is an optional purchase. Do not risk losing the biggest investment of your life!
Homeowner’s title policy protects you, the buyer, from possible future claims. This one-time fee paid at closing is far less expensive than the legal fees you could incur to protect your property.
What’s more, homeowner’s title insurance remains in effect for as long as you or your heirs own the property. That means you can transfer the ownership of your property to your heirs and their property rights are protected.
Get peace of mind! Feel excited about building your new construction home,but feel legally safe and protected, too.
When you’re ready to close on your new home, turn to Lilly Title & Settlement. We’re obsessed with legal details and fabulous customer service. Learn more about us here.
However, there is homeowner’s title policy for buyers, which is an optional purchase. Do not risk losing the biggest investment of your life!
Homeowner’s title policy protects you, the buyer, from possible future claims. This one-time fee paid at closing is far less expensive than the legal fees you could incur to protect your property.
What’s more, homeowner’s title insurance remains in effect for as long as you or your heirs own the property. That means you can transfer the ownership of your property to your heirs and their property rights are protected.
Get peace of mind! Feel excited about building your new construction home,but feel legally safe and protected, too.
When you’re ready to close on your new home, turn to Lilly Title & Settlement. We’re obsessed with legal details and fabulous customer service. Learn more about us here.
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