Do You Need Title Insurance on a New Construction Home?

By Marc Shaw

You may think of title insurance as something that protects you from incurring financial losses due to title defects that originated from past owners. While it’s true that a title insurance policy will cover your losses due to certain title defects like tax liens that did not come up in the title search and originated from previous owners, it doesn’t mean you can skip buying title insurance if you’re building a new home.

Just like those who own older homes, the owners of new construction homes need a title insurance policy to protect their investment. The team at World Wide Land Transfer has a few reasons why you should always buy an owner’s title insurance policy, even if you are the first person to live in your home.

Owner’s Title Insurance on New Construction Homes

It’s important to remember that your title insurance is added protection for your new construction home. There are a range of title defects that can apply to new construction homes and their associated plots of land.

For example, many housing developments are subdivided from larger plots of land. That means you aren’t necessarily the first person who has lived on that land. That plot has likely been transferred from a landowner to a developer, who divided it up into parcels and sold it to you. There could potentially be issues that arise from liens, subdivision violations, access issues, easements, and heirs of the original landowners. Your standard title policy will cover some of these, and you can purchase specific endorsements or enhanced title insurance policies to cover others.

There may also be mechanic’s liens associated with your newly constructed home. When a development is being built, the developer must pay dozens of people like plumbers, roofers, and electricians. If the developer fails to pay, or they have other disagreements with these workers, it could result in a lien being placed on the home. A lawsuit against the developer could even mean that your home gets awarded to another party in a judgment! These issues may not come up during a title search if a lawsuit is still ongoing when you purchase your home.

Protecting Yourself from Title Defects

If you are considering going without an owner’s title insurance policy for your new construction home, the team at World Wide Land Transfer strongly urges you to reconsider. Lenders will always protect themselves by requiring you to pay for a lender’s title policy before they will give you a loan – even on newly constructed homes – and we advise you to do the same by purchasing a separate owner’s title policy. If you have any other questions, our title agents will be happy to assist you. Call us today for a range of title and escrow services, whether you are a buyer, lender, or seller.

World Wide Land Transfer is a service-oriented PA title company with offices in Philadelphia, New York, and Washington, D.C. With a record of going above and beyond, we are trusted to close everything from complex commercial transactions to residential refinance and purchase transactions.