All About Title Insurance For New Construction
Are you in the process of building a new construction home? New homeowners that are building new construction homes often assume incorrectly that they do not need title insurance, as no one has ever lived in their home before.
But that assumption is wrong, and the title experts at True Concept Title explain why title insurance on a new construction home is so important.
Title Insurance 101
To understand why having title insurance is important, even for a new construction home, it is first important to understand the basics of what title insurance is.
If you are purchasing your home through a mortgage lender, you will know that you are already required to have title insurance. Knowing that the mortgage lender requires title insurance, should make a new homeowner want to protect their new home financially as well.
Title insurance also protects your ownership as well as protects you against any unforeseen or hidden title issues. When you purchase a property, even new construction, an exhaustive title search is performed. Sometimes these searches bring up title defects and issues that can be cleared before closing, but sometimes these issues can arise after closing.
Let’s look at your new construction home. Your home’s lot may have been subdivided from the developer who bought a large parcel. It is not uncommon for the entire parcel to be subject to claims post-closing. Some common title defects may include:
- Forgeries
- Problems with power of attorney
- Sale without an heir’s permission
- Discovery of will that affects the property
- Problems with liens
- Undisclosed spouse with an interest in the property
And finally, while you may assume that your developer and builder were of good standing, it could come out post-closing that there is a contractor’s lien (also known as a mechanic’s lien or construction lien) against the property and the lien must be paid by the new homeowner. Without title insurance, if a contractor’s lien is found post-closing, you will be responsible to pay for the costs to resolve the lien out of pocket.
Understanding the Common Misconception of Title Insurance for New Construction
Saving money here and there can add up over time. Who doesn’t want to save money? Often, new homeowners building new construction homes may assume they do not need to purchase title insurance and opt to save the money. After all, it may be worth saving the small expense when no one has ever lived in your new construction home before, so there is nothing to worry about…right?
Wrong. Many new construction buyers assume that the title to their new property Is free of any disputes. They assume that the developer or builder has taken all the correct steps to resolve any outstanding issues on the title. But that is where you can get into big trouble, a new construction home is just as prone to title issues as an older home, and the cost of disputing it is not cheap.
What Title Insurance Will Do for You
When you purchase title insurance you pay a one-time premium. Once purchased, if there ever are any disputes over ownership, liens, or outstanding payments, the title insurance will cover the legal fees to defend your title interest. In a worst-case scenario, you could lose the property and no longer have the resources to replace it, whereas title insurance would cover that.
Title insurance also protects your heirs. If you own the property, your title insurance remains active and effective. You can safely pass the property to your heirs knowing the rights to the property and home are protected.
Protect Your New Construction Home with Title Insurance
No home—old or new—should be without title insurance! Do not be caught off guard by incorrectly assuming that just because your home is new that it can’t have previous issues or defects that are now questioning your ownership.
Purchasing a home without title insurance is never a good idea. To learn more about protecting your new construction home with title insurance contact True Concept Title today at 813-263-7168!
