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Do you need title insurance if you are paying cash for a brand new home?

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2014-10-15 15:17:25
2014-10-15 15:17:25

When paying cash for a new home, there are no regulatory laws that providing that you MUST purchase Owner's Title Insurance. However, an Owner's Policy protects you against liens and title defects that might have occurred during previous ownerships. A comprehensive title examination should always be performed to support the title policy.

What if the builder of your new home never paid off a mechanic's lien against the property and it was never paid? Liens affect the property, not the previous owner. If the builder refused to pay the lien amount after the closing took place, you would have to either sue the builder or pay the lien and then sue the builder. If you had an Owner's Policy, the title insurance company would be required to defend the claim in court - all for the one-time fee you paid for the policy.

It is a low cost, one-time fee insurance that is in effect for the lifetime of your ownership, whether you own the property for 1 year or 100.

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Yes. Title insurance protects your title to the property regardless of the cost or whether you paid cash. Banks insist on a title examination for mortgaged property in order to protect their investment. A person who pays cash should also obtain a policy in order to protect their investment. Title defects are usually disclosed when you sell the property and the buyer's attorney arranges to have the title examined in order to protect their client's investment and their own liability. If the title exam discloses any defects in your title you will be responsible for the costs of having any problems corrected that can be costly. Also noteworthy is that people who purchase distressed properties on the cheap often do not have a thorough title examination performed in order to save money. Those properties are more prone to defects in the chain of title.


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