Matt McAlister
Thursday, July 19, 2018

Is Title Insurance Necessary?

You may know that when buying a new home, you need to have title insurance to protect you in case the seller does not have a free and clear title to the home they're selling. But what about title insurance on new construction? If you’re buying a new build, you might be wondering, “Why do I need title insurance for new construction?” After all, there’s no previous home that a seller needs to have a title on. So is owner title insurance necessary on new constructions? Here’s what you need to know.

What Is Title Insurance and What Does It Protect You Against?

When you buy a home, the original seller transfers the title deed to you. It's assumed that the seller has full possession of the title — without any liens on the property or split in ownership — and thus has the right to sell you the home. Your realtor should naturally verify that there's a clean title before allowing the sale to go through.

But there are still circumstances where the ownership of the title can fall into dispute. Someone may have misfiled or improperly recorded paperwork related to the title somewhere down the line, there could be fraud involved, or an inheritor could come out of nowhere claiming that a family’s property is partially theirs.

Whatever the reason is, if there's a claim against the title after you've purchased the property, in most cases, your only recourse is your title insurance. If you have title insurance, the insurer will research the claim, fight it in court if necessary, and if you do not win, cover some or all of your losses if you have to relinquish the property. The cost of title insurance is quite low relative to what it could save you if there's a problem.

Why You Still Need Owner’s Title Insurance for New Construction

That all makes sense if you’re actually buying a home that someone else has owned. But what if you're paying for a brand new home to be constructed? No one is selling the house, because there is no house, so why do you need title insurance?

The answer is because someone owned the land on which you are building your house before you did, and the title to that land may at some point come into dispute. Perhaps the brother of whoever sold the land wants to claim that the land is partially theirs, for example. The truth is that there's no land you can rely on to be completely claim-free. SK Builders has worked on land originally granted by King George, so there could be a lot of history to guard against.

All right then, why not just get insurance for the land claim? Why do you need owner’s title insurance for your new home? Well, try to imagine what would happen if there were a claim on your land. The title insurer fights the claimant in court, and for whatever reason, you lose. Well, your title insurance will cover the cost of the legal battle, and you may even recoup the cost you paid for the land itself, but what about the home you built on it? What happens to that?

Well, if you’re “lucky,” maybe the new (or old, depending on how you look at it) owner of your land will sell or lease the land back to you. The idea of paying rent for the land your home sits on probably doesn’t seem that appealing, but you may find it better than the alternatives. The other choices are to abandon your home entirely, sell it to the landowner for a rock bottom price because they have all the leverage, or trash it and sell as much as you can for scrap.

Whatever your choice, it could end up costing you hundreds of thousands of dollars. Unless, of course, you have title insurance that covers your home. In such a case, while losing your home is still not a desirable outcome, you'll at least be able to recoup your losses and buy a new home with a clean title somewhere else.

Contact SK Builders for Information About New Home Construction in South Carolina

If you’re interested in a new home construction and would like to live in the upstate South Carolina area, the company to contact is SK Builders. We enjoy a proud partnership with McAlister Realty and have been building semi-custom homes for South Carolina residents for nearly 25 years. We know what South Carolina residents are looking for in a home, and we know how to tailor a build to your budget.

As important as our skills, flexibility and cost-effectiveness when it comes to home building is the fact that we're a new home construction company that you can be sure you can trust. We build more than 100 homes a year as a regional South Carolina builder, and we're a family owned and operated company that always maintains close contact with our clients.

We’re big enough to get great deals from suppliers and pass those savings on to you, but not so big that you can’t get the president or vice president of the company on the phone if you need them.

The fact that we're partnered with another trusted, local company in McAlister Realty makes the entire process even easier for you. From contract to building to closing, you’ll enjoy a transparent, low-stress process and always know where you stand every step of the way.

We have over 70 customizable floor plans, so we’re confident we can create the perfect South Carolina home for you and your family. But don’t just take our word for it — get in touch with us to talk about all of the great projects we’ve done in the past and what we can do to build you the home of your dreams. For more information on new home construction in South Carolina, contact SK Builders for a free consultation today.

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