Need Owners Title Insurance on new construction?

Question

I’m going to close on new construction, where I know that title is clear and I know builder and seller personally at some extents. Planning to refi into LLC after 3-5 years since it’s investment house for college students room renting. Is it ok for opt out on owners title insurance? I’m still paying for lender part at closing and closing cost is almost 6K for 260k house. Is it wise to save 700 bucks on title ins and get it later after refinancing into LLC ? Please advice as I’m 2 days to closing date

Peter Walther · Answer

I'm not sure why you think you "know" title is clear particularly when it's new construction.  All you need is one supplier or subcontractor to claim they didn't get paid and the cost of the simultaneously issued owner's policy pays for itself.  Even if the builder has an owner's policy there may be defects or liens in/on the title and you won't be an insured so you can't make a claim.  Yes, if you receive a Warranty Deed you may be able to sue the builder to recover but the cost of the litigation will be paid by you.  I don't think it's worth the risk for the dollars involved.

Tom Gimer · Answer

Title is clear until it isn’t.

Purchasing owners title insurance 3-5 years after acquisition in connection with a refinance will cost more (2 full title searches, no simultaneous issue rate) and will raise red flags. Also 3-5 years of self-insuring.

Scott Wolf · Answer

I'm biased, but you're looking to save a one-time $700 cost to insure a $260K investment.  Seems like bad math to me.

Need Owners Title Insurance on new construction?

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