Title Insurance & New Construction

Title insurance is a must-have if you’re buying a home that someone else has owned. But what if you’re paying for a brand new home to be constructed? Or one that has just been built? It may not seem necessary because no one is selling the house, because there is no house, or no one has lived in the house, so why would you need title insurance?

Although a brand new home has no previous owners, the unimproved land may have had prior owners. A title search reveals any existing liens on the land. Title insurance also protects against potential contractor liens from a builder who may have failed to pay his suppliers or subcontractors. To ensure a clear title, lenders require buyers to purchase a Loan Policy of Title Insurance. The Loan Policy only protects the lender’s interest. You can protect yourself from overlooked title threats by purchasing an Owner’s Policy of Title Insurance.

The Bottom Line: In the end, it is advisable to make sure that the title is clear. Anyone buying a new construction home should get title insurance. So much goes on with new construction which could affect the title: potential issues with new boundary lines, potential liens from subcontractors, outstanding construction loans, etc.

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