Do I need to buy Title Insurance for my condo? What is the risk?
February 15, 2010 by
Filed under condo insurance
I am buying a condo in a new development and paying cash for it. I understand that mortgage lenders require title insurance, but that isn’t an issue here. I understand that the insurance is there for peace of mind to protect the large investment, but I don’t understand what the risk is, especially since the other 110 new condo owners in the building are likely going to purchase title insurance at the requirement of their lender. The Title Insurance company wants to charge $820 for ALTA Owners Standard Coverage.
Please get the title insurance. The risk? Loss of your purchase.
There are any number of legal headaches that could impair your title. If the developer didn’t pay all of his builders, there could be mechanic’s liens. There could be liens or residual interests from previous owners. One example: technically, I own a 1/8 interest in a certain property that my daughter sold a number of years ago; I could whack the current owner for payment for that interest, and the title company would pay. You have big bucks on the line; better to be safe than sorry.
I have to disagree with everyone else. You don’t need it. Basically title insurance protects you against claims against the property from other people. In a new development, chances are that there is no issues with title.
Regards
As a REALTOR in Indiana, I know that title insurance is not needed for new construction. The need for title insurance is for flub ups from prior owners (clouds on title.) Since it is a new construction if the developers lawyer messes up on the legal description of your condo, you may be out of some of your legal property. Contact a local REALTOR and discuss some of the options you have in your area. Good Luck
Since everybody disagrees that you should or shouldnt buy title insurance to protect yourself against potential problems to title, here is what one of the title insurance companies says about what is done in preparation for title insurance. Read it and then you can decide what you think is best.
What’s involved in a title search by Chicago Title: https://www.ctic.com/4417.asp
Buena Suerte
You didn’t state where the property is located, but in Oregon & California it is the seller’s responsibility to provide clear title, which is where title insurance comes in. I am scared for anyone who uses the real estate agent who said it isn’t necessary…I personally know of a purchaser who didn’t not obtain a title policy, paid cash to the developer, the developer went belly up and the homeowner’s property was taken back by the bank on the construction loan. Sad and true! Just because other condo owners have title insurance your property isn’t covered if you don’t get insurance, also just because the lender gets insurance if you don’t get an Owner’s policy you are not covered.
Title insurance protects the buyer from any defects in the title upon conveyance. It is advisable to get it when you buy property.
It is ultimately up to you. It’s like renting a car… You have the possibility that you may need it, but you won’t know until you do. There is always a chance that you can get into an accident, but you won’t know that until it happens, and at that time you would either be: a) happy you took insurance, or, b) really unhappy you didn’t get insurance. It is true, you don’t HAVE to have it, but is $820 worth the peace of mind? That is your call…
Get the insurance!!!!!! Just because it is new, doesn’t make it clear. Save yourself the headache.
-Angela
I don’t know about new construction, but I too, bought my sisters home for cash and I didn’t do a title insurance….My attorney advised me against it, but I know she didn’t have any liens on the property…..When we went to sell it, the buyers needed title insurance, for they were getting a loan and it came out clean….But I knew my sister and I know she has impeccable credit! I have to agree with the person that said, you don’t know if the builder may not have paid everyone, other contractors, who may come back and placed a mechanic’s lien….I would recommend it for this property…..BUY the insurance, you don’t know who you are dealing with….it just makes sense…
The answer stating that the builder could go belly-up and leave open liens in place is the RIGHT ANSWER. Condo development in the current housing market is increasingly risky. Unless you’re dealing with one of the few national builders who have publicly traded stock, (and millions of shareholders watching over their shoulders), anything can happen. And considering that 110 units are probably being built on dozens of separately purchased parcels, all of which have their own history (and potential clouds), just PAY THE $820. That’s less than 3 hours of an attorney’s time, and owner’s policies remain in force as long as you own your property. Many of the newer policies also cover lots of “extras” you wouldn’t even think of. Get something from the title company showing you what your coverage actually entails. You’ll be amazed at how many different problems can actually affect your rights to your property.