Why is Title Insurance Needed for New Construction?

In Virginia, residential and commercial mortgage lenders mandate borrowers to acquire a lender's title insurance policy, which involves a one-time premium payment based on the property's sale price or the loan amount. The property's purchase price determines the Owner's Coverage, whereas the Lender's Coverage is based on the loan amount. Owner's Title Insurance aims to safeguard your ownership rights for your home, as specified in the title insurance policy. It protects against any financial losses arising from defects in the property's title before you acquired the house. However, it's essential to note that title insurance won't cover any liens or judgments incurred after the purchase.

Suppose your buyers purchase a newly constructed single-family home or condo in a newly-built development. In that case, they might question the need for title insurance on a property never previously owned. The answer is straightforward: Although your buyers might be the first owners of the newly constructed residence, there's a likelihood that the land on which the residence stands had prior owners. By obtaining a title policy, they can effectively safeguard themselves against any potential liens that might have existed against the land before its development. While, like any insurance, certain conditions and exclusions apply, an owner's title policy protects against the most common title-related issues homeowners may encounter.

New Construction Title Insurance

Consider a scenario where the developer fails to compensate a supplier or subcontractor during the home's construction. In such cases, it is highly probable that the affected party has already filed or will file a lien against the property. Moreover, to ensure undisputed ownership in the future, a title policy can offer coverage if the land in the new subdivision was improperly subdivided or if the owner's newly-built home is not situated on the correct lot as designated. Another critical aspect is that title insurance protects against errors that may have occurred during the recording or registration of deeds in the office of the recorder or registrar. For instance, if a lien is filed and undiscovered due to a mistake at the courthouse, the lienholder can still pursue it, leaving the new homeowner with little recourse but to potentially litigate against the local government.

In reality, the lender requires a clear title on the property, which is why they mandate the purchase of a loan policy. However, it's important to note that the loan policy primarily safeguards the lender's interests and may offer limited protection to the owner in specific situations. To ensure comprehensive protection against potential threats to the title, whether discovered before or after the closing, the homeowner needs to acquire an owner's policy. This policy is the most reliable means to safeguard the homeowner's interests.

The Closers

Operating from Hampton Roads, Virginia, The Closers of Virginia, LLC has been catering to title insurance needs and associated services in the state for an extended period. Stewart Title Insurance, headquartered in Newport News, Virginia, handles our underwriting. Stewart Title Insurance is a trusted partner renowned nationwide for its forward-thinking products, adaptable underwriting approach, competitive pricing, and unwavering integrity.

We acknowledge that engaging in real estate transactions, whether buying, flipping, or selling, can be thrilling and overwhelming. Hence, our primary focus is to streamline the entire process quickly and efficiently. For further details on new construction title insurance or to obtain a quote, please contact us at 757-595-4707 or complete our online form. We are here to assist you and make the journey smoother for you!