The Real Estate Book-Shreveport/Bossier City, LA

TITLE
INSURANCE
ON NEW
CONSTRUCTION?
YES, AND HERE'S WHY!
BY BARBARA PRONIN
When home buyers are purchasing a newly
constructed single-family residence or condo
in a just-built development, they may wonder
why they need to pay for title insurance on
property that no one has ever owned?
The answer is fairly simple: While buyers may
be the first owners of this newly constructed
residence, chances are there were prior owners
of the land upon which the residence was
built. A title search is the safest way to discover
the existence of any liens against the formerly
unimproved land.
Need more reason for a title search? Suppose
the developer, in constructing the home, has
failed to pay a supplier or subcontractor? Very
likely, the injured party will – or perhaps already
has – filed a lien (known as a mechanics lien)
against the property.
Additionally, so that there is no question as to
ownership in the future, it should be verified
that the land in this brand new development
was properly subdivided, and that the owner’s
new home is on the correctly identified lot.
Last but not least, title insurance may cover
mistakes made in the County Recorder’s office.
For example, if an existing lien was filed
but not found due to a clerical error, the new
property-holder might be left “holding the bag”
in defending against a lienholder’s legal action,
if there weren’t a title insurance policy in place
covering the property.
The fact is, because the lender wants to be
sure there is a clear title on the property that
secures their mortgage, they will require that
a lender’s title insurance policy be purchased.
But the lender’s title policy merely protects the
lender and not the buyer who pays for the policy.
Only the purchase of an owner’s title insurance
policy will protect the new homeowner
against any covered threats to the title of the
property, whether they are discovered before
or after the time of closing.
One of the goals of the title company is to
help agents maintain the trust they have built
with their buyers. Stressing the need for title
insurance in connection with the purchase of
a newly-built home is a good way to protect
their property interests, thereby strengthening
productive customer relationships.
Barbara Pronin is an award-winning writer based in
Orange County, Calif. A former news editor with more
than 30 years of experience in journalism and corporate
communications, she has specialized in real
estate topics for over a decade.