Title Insurance on New Home?

[Rozzie]

I am helping my mom with all the details of purchasing her home in TV. She is closing in 2 weeks on a new home in Hadley. We just got in the mail a letter with brochure talking about title insurance, and offering it to us at the price of $1185.00. We are really perplexed at why you would need title insurance on a new home. (ie, How can you sell a new home willingly without a clear title?) She is going to be a cash buyer, so there would not be a issue with a mortgage/bank wanting the title insurance.

Can anyone help us figure this out? Her budget has already is popping at the seams with moving expenses, and we would like to opt out of this if it truly isn't necessary.

The letter is from a firm "McLin & Burnsed".

Thanks for any help/insight you can offer.

[villages07]

Roz,

Here are 2 prior threads about title insurance; some do, some don't get it; you have to weigh the risk vs peace of mind vs cost and make your own decision.

https://www.talkofthevillages.com/smf/index.php/topic,6499.0.html

https://www.talkofthevillages.com/smf/index.php/topic,5771.0.html

[Boomer]

V'07,

Thanks for finding those. I was just getting ready to do an archives dive. I'm glad you beat me to it.

Rozzie,

I hope you will take the time to read through these links. What you find when you ask a question on TOTV is that your information comes from what is a lot like what your old English or history teacher used to refer to as "Primary Sources."

The people who answer here speak from direct personal knowledge and experiences are shared. You will find a wealth of information on TOTV from which to draw your own conclusions. Primary sources are often the best sources. Point of view. Not trying to sell you anything. Just reporting and sharing.

Boomer

[Rozzie]

Thank you for such quick help! Ya'll are great. :bigthumbsup:

Yep Boomer I agree, I prefer primary sources when considering decisions such as this. I have already read through them and about to forward them to my mom. I can see both sides of the issue for sure, and it really just comes down to what we can sleep with at night. We are both still leaning to opting out of it, but will do some more considering and research.

This board has been such a valuable resource in this big adventure, many thanks to all of you.

[JohnN]

I recently bought and declined the title insurance. Didn't see the purpose on a new home with no history of problems in the area.
Depends how well you'd sleep at night, I guess

[livsea2]

Just keep in mind the developer isn't the builder. The builder could fire a contractor and not pay him, it could be for faulty work or any number of reasons. That contractor could place a lien on the property. I've seen it happen. Just because it is a new home doesn't mean there is clear title. :(

[ROEnBILL]

I am not familiar with Florida law but ...

Someone way back could have used the land as collateral for a loan and defaulted. Hopefully, the builder had this insured but maybe not. You never know - there are a lot of possibilities. I've heard of cases where a house was sold several times before something showed up on Title. At least the person in thehouse was protected because they had insurance.

If you are taking a mortgage, banks require it as protection for their loan.

[NJblue]

I have read this thread as well as the linked threads and would like to add my 2 cents. One rationale for getting the insurance was based on the theory that if the banks thought that it was necessary for their protection that when you self finanance, you, taking the role of the bank, should also take the same risk averse position. However, there is one key difference between you and the banks - the banks are not paying for the title insurance; they mandate that you pay it. Hence, their risk aversion comes at zero cost to them. When it doesn't cost you anything for insurance, of course you would mandate it.

However, when you, the cash-paying home buyer are acting as "banker", the risk/reward scenario is compeletely different. In this scenario the "banker" (you) has to pay for the insurance out of your own pocket. Now, you must weigh the risks versus the costs to avoid/mitigate the risks. My thinking is that the developer is so large and probably very highly "lawyered up" and would have researched any potential title issues very well before purchasing the land to begin with.

On the issue of a potential mechanics lien against the property. While I guess there is a slight possibility of this, one has to look at the magnitude of the risk versus the costs to mitigate the risk. Assume that a subcontractor was not paid to perform a certain function on your house; how much could this lien amount to? A few thousand dollars? Ten thousand? Does it pay to buy insurance for $1,600 against a very remote possibility of this scenario occuring when the cost to settle the issue may be no more than a few thousand dollars? Everyone has their own level of risk aversion, but in my thinking, this amounts to being over-insured.

[starflyte1]

Very nicely thought out and written NJblue. Thank you.

Coming from Lake of the Ozarks in MO, the thought would never occur to me to NOT get title insurance. However, after reading your post, it is worth thinking about not getting it in TV.

Two questions? Is there a time frame that a lien can be placed against your property for work done and not paid? And, could it be possible for someone to take out a 2nd mortgage from a private party and not record it? Just hold it privately?

[SteveFromNY]

Very nicely thought out and written NJblue. Thank you.

Coming from Lake of the Ozarks in MO, the thought would never occur to me to NOT get title insurance. However, after reading your post, it is worth thinking about not getting it in TV.

Two questions? Is there a time frame that a lien can be placed against your property for work done and not paid? And, could it be possible for someone to take out a 2nd mortgage from a private party and not record it? Just hold it privately?





If you read the post by nanci2359 in the linked threads, you'll see that her house was built on someone else's land 25 years before, and she wound up losing.
Probably the most common issue resulting in making a claim against TI is for a mechanics lien, but there is the remote possibility that someone, even a long time ago, has some proof they own the land you're on. Given TV is built on many relatively small parcels purchased over time, can anyone be sure there isn't some unopened will out there that says "Johnny gets my farm" dated before the property was sold to TV?
Maybe you are over-insured. But considering that TI runs only a couple of percentage points of the sale price, it's low cost protection for what could be a painful process. Even if "Johnny" never gets the property out from under you, the stress induced just getting served the lawsuit papers would be worth the cost of TI to me.
I'm not that kind of gambler, and I'd consider buying a house that costs $1200 less and thinking of the TI as part of the price if the money is that tight.
Good luck to you - whatever you decide to do.

[starflyte1]

My bad, I didn't read the links! We will give lots of thought as to title insurance for the property we purchase.

[Rozzie]

My mom and I decided not to buy the Title insurance. I think this is one of those things that you have to make up your own mind on, and what you can sleep with at night. We feel comfortable with the decision, but I can totally respect anyone's decision to buy it.

[SteveFromNY]

My mom and I decided not to buy the Title insurance. I think this is one of those things that you have to make up your own mind on, and what you can sleep with at night. We feel comfortable with the decision, but I can totally respect anyone's decision to buy it.

Rozzie, like you said - it's a personal choice. You'll have no problems I am sure. Good luck with the purchase.

[784caroline]

AT closing if you ask, you can get a statement (which I believe is notarized) where all sub contractors sign off that no liens have been placed on the property going to settlement.

[graciegirl]

Just keep in mind the developer isn't the builder. The builder could fire a contractor and not pay him, it could be for faulty work or any number of reasons. That contractor could place a lien on the property. I've seen it happen. Just because it is a new home doesn't mean there is clear title. :(


It is my understanding that the builders are employed by the developer and not independent sub contractors. I got that impression when the builder who acts as a project manager walked through our home after closing.

[JohnN]

Just to add,
I've known a lot of homebuyers and sellers over the years.
I've not ever heard of anyone actually using title insurance.

And in TV with it's recent history and good rep, I'd think the odds are infintestimal.

However, make the choice that lets you sleep.