Should You Buy Title Insurance for a new Home Build?

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August 22, 2016
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September 5, 2016

Should You Buy Title Insurance for a new Home Build?

Title insurance can come in the form of residential title insurance or commercial title insurance, and it would apply to the house and lot which a homeowner buys, or the business property that a company might purchase. Apart from that distinction, there are also two types of title insurance, offering protection for each of the two parties in any kind of real estate transaction, the lender and the buyer.

Both the mortgage holder and the prospective new homeowner would need protection against any claims which might arise from unexpected sources, as well as certain obstacles which may arise during the closing process. In any case, the whole point of purchasing insurance from a title company is to ensure that the party buying the insurance does not suffer serious financial laws if some claim against the property were to be upheld.

What title insurance protects against

Most people have heard horror stories about someone who purchased property in good faith, only to find that after the purchase, a previously unknown owner surfaced with a valid claim on the property. In such a case, the courts must decide the validity of the claim, and award ownership to whomever it determines to be the rightful owner. While this may be the most common scenario which title insurance protects against, it’s not the only kind of protection provided by a good title insurance policy. Here are some other scenarios that it defends against:

  • improper filing or recording of title, somewhere in the history of the property
  • fraudulent or inaccurate title
  • abandonment of the transaction during closing (lenders title insurance)
  • problems with financing during closing

New home title insurance?

One might think that purchasing title insurance is not necessary on a new home, because there’s no way that any other party could previously have owned it. While that may be true, it doesn’t really apply, because in actuality title insurance covers the property itself, not the home built upon it.

In effect, this means that after you’ve built a brand-new home on land that you just purchased, someone could still come forward and make a claim against the property and everything on it, because they still hold valid title to the property. This principle is of course well known throughout the real estate world, and any reputable company doing a title search should uncover any such possibility.

But it still happens often enough that a title search isn’t sufficiently thorough, or that a legitimate claim is missed for some other reason, and it comes back to haunt the new owner. For this reason, it’s best to just purchase title insurance in every single case, because the small cost of the one-time title insurance premium is far less than the amount you might lose if you had to surrender ownership of the property.

Don’t be half sure when purchasing real estate – purchase title insurance from Jones & Raulston Title Insurance, and have complete confidence that your newly acquired property cannot be claimed by anyone else.

 

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