YOU ASK:

Do I need title insurance on a newly built home?

WE ANSWER:

Yes, title insurance comes highly recommended, even if the property you buy contains a newly built home.

When you're buying a newly built home, you tend to think that you're the first owner of the property, since you bought a newly constructed building or you had the building constructed. However, there still are possible title defects that may affect your ownership claim to the lot, as well as to your newly built home. For one, the unimproved lot will have had many previous owners, which multiplies the possibilities of people coming to claim the lot as their own.

In this case, title insurance becomes an attractive option, as you are able to arrange for a professional to do a title search. This will help to discover if there are clouds in the title. Also, it will help to determine the actual boundaries of the lot. This way, you are more or less assured that you are buying a clean title.

During construction - especially after you have fully paid the main contractor, subcontractors and suppliers may place a lien on the lot. This happens when they claim that the main contractor used their supplies or services for the building, but failed to pay them.

When instances like these happen, you can look to your title insurance for financial help or compensation so that you don't have to suffer any financial loss due to your purchase of the said lot or due to any issues that have occurred before you bought the lot. The coverage will include the payment of any legal fees you may have to pay in your defense of claims from other parties or for the advice given by the lawyer on how to clear up the clouds in the title.

Another consideration would be if you are taking out a mortgage on the new home. Lenders will of course require you to get the lenders title insurance - so that they can also protect their interests in your property.

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