The existing policy covers the cost of the land.

Ask if you can have it reissued after construction is complete to account for the additional value of the house.

You cannot get a valuation on a house that does not exist yet.

Thank you for the reply Carolyn, but our situation is not the normal seller/buyer house-on-a-lot situation.

We already have title insurance on the land. There is no "seller" of the house. We have contracted with someone to build it from our architect's plans. Since the title insurance would not cover subcontractors' or material men's liens, we are not sure what the advantage of purchasing it would be. As I indicated in my original post, the convention here is to forgo title insurance in this particular situation. However, we are not entirely comfortable doing so.

Anyone else been in this situation and bought title insurance on the house by itself?

I am in the same situation as you. When we bought the land, we got title insurance for the land value. When we got a construction loan, the lender required title insurance up to the completed value of house and land.

The advantage is that you are protecting more value so you need more insurance. Example - land = $100k. You start building and spend $500k on the build. 3/4 through the build, it turns out that someone else owns the land and so you are out the $100k for the land plus the $300k you have put into the build. But the insurance that you have only covers the $100k land - so sorry.

Now - I personally think that in many situations (such as mine in a suburban development) that title insurance is for a situation that is so rare it probably isn't worth covering. But the bank wants it and I see the value.

In our case, the title insurance was updated to a higher value when we started construction (actually about 2 months in when we needed to start borrowing money). It is now good for the expected final dollar value of the house. So, I am not sure that it costed us any more money since the final mortgage would have required adequate title insurance anyway.

Brickeyee and David, thanks, those are good points. I will talk to the both issuer of the title policy on the land and the CU's title company. We will probably go the least expensive route.

After reflecting on it and reading your responses, I am a bit perplexed why the title company and the CU considers title insurance to be a non-requirement in this situation. They had a "declines" statement ready for our signature at closing and never discussed it with us prior to that.

I questioned it, and they said we had 30 days to change our minds. I assume they would issue it for the appraised value of the build. We paid for an appraisal based on the architect's construction package and our contract with the builder.

I will be following up. Thanks again.

"I am a bit perplexed why the title company and the CU considers title insurance to be a non-requirement in this situation."

They are covered and do not really care about your coverage.
That is why owners title insurance is always optional, while the lenders policy is required.

The title insurer should issue a title policy in the value of the land + construction costs. This can be done initially or with each payout to the contractors, the amount of title insurance increasing by the each payout amount. There are also other important issues. There should be a sworn contractor's statement reflecting the general contractor and all subcontractors listing: 1) the name of each contractor, address, etc., 2) the contract amount for each trade, and 3)the amounts of each payment made, and each payment to be made in the future. Payments should be made only upon the correct dollar of the work completed. All payments should be made to each contractor (general and subs) individually, "NOT" the general contractor. Payments should be made only in exchange for a sworn lien waiver from each party. General contractors have been know to skip town without having paid the subcontractors. You don't want your property liened and have to pay twice for the same work. Construction escrow agreement should also be signed, your title company should have this as a form document. Any necessary changes can be added in a rider to the escrow agreement. The construction escrow agreement will spell-out the specifics of how payments will be made. You need an experienced real estate lawyer with construction loan experience. I have been doing this type of work for many years, and have seen any number of people pay twice because of mechanics' liens. The peace of mind is well worth the cost of a lawyer in these types of situations. With your investment dollar amount, hire a lawyer.

"They are covered and do not really care about your coverage. That is why owners title insurance is always optional, while the lenders policy is required." - brickeyee

Perhaps, but in this case the title company services only credit unions in the local area. In fact, they are a wholly owned subsidiary of our own credit union, which is handling the loan.

Credit unions are supposed to exist for the benefit of their members. All the folks on the other side of the table at closing (CU loan officer, CU construction mortgage official, and title company official) seemed genuinely surprised when I questioned declining owners title insurance.

They flat out stated that none of their construction loan customers ask for or get owner's title insurance, which is why I posted here. Bear in mind that this closing covered both loans. The construction loan automatically converts to a fixed rate conventional loan on completion of the house. There is no second closing where title insurance would come up in the future.

The CU in question has a very active construction loan program with dedicated officials overseeing it. It isn't a small or part time operation. They run a full business credit/risk analysis on the contractor, and they send specialists out to inspect the build on a regular basis and prior to any payout.

I'll be calling the title company next week for further discussions.

"Credit unions are supposed to exist for the benefit of their members."

They benefited you.

They saved you the cost of a title policy.

Your judgment of this 'benefit' is different from theirs.

creekside--we are just like you, we purchased the land and got a title insurance policy paid for by the seller in the amount of the purchase price and then paid cash for the house that we built. We then increased the coverage on our title insurance to the value of our property with the house on it. I'm an attorney and 99% of the time you can get by without that additonal coverage because title insurance company's don't miss things very often. But they do miss things sometimes and if they do miss something they can just pay you the face amount of the policy (i.e., in your case, the value of the land) and walk away even though your real loss exceeds the face amount of the policy by hundreds of thousands of dollars (i.e., in your case, the land plus the value of the house). Although this does not happen very often, it does happen from time to time and when happens to you the fact that it is a rare occurrence does not help you at all. Ask the credit union to sign a document stating that they have advised you that you do not need the owner's coverage and that they will indemnify you if that advice was bad--I bet they will quickly become educated (by their attorneys) as to the risks to the owner.

For years we were always told, too, that you don't need title insurance on new houses. But more and more, I'm reading about buyers of new houses, (mainly tract housing), where the builder didn't pay bills and the buyers wished they'd bought "owners" title insurance that protects THEM not just the lender. The unpaid bills range from subcontracted labor to supplies to even taxes. I personally would not go without owners title insurance from now on. Not sure if it applies in the OP's situation, but for the benefit of other readers I'd say get it.

i am in a situation and would like to know if an owner tittle insurance would help.

I had a construction contract with my builder he went over budget without realizing it until almost the end of the project and decided to present to me some backdated made up change orders. And wanted me to sign them. according to him labor went up and material cost went up. the project is finished, i have a construction Loan have not approved the final disbursement yet because he filled a mechanics lien against the the house. I purchased both the loan and owner tittle insurance when we were closing on the construction loan at the purchase of the lot. will that cover litigation/lawyer fees.. I am really worried on what is all going to happen to me because of his recklessness and poor business strategy. do I have any chance of even fighting this..

Any advice or would be appreciated.

by the way he went over budjet by 50+k

What type of construction contract do you have? That will be the only tell, not the title insurance.

not sure what the answer to your question is.. we had a contract with a specif number of the cost of construction. the contract clearly said any change had to be approved by both the builder and I with a signed change order... but he just shows up with change order at the end almost convinced me to signed them but luckily and also with my realtor's help I did not sign anything.

"we had a contract with a specif number of the cost of construction. the contract clearly said any change had to be approved by both the builder and I with a signed change order"

OK then. Did you have your lawyer involved in the contract I hope? Have you spoken to him about this? This was not the builders contract was it? The wording is going to be more precise than just those words.

Well I have a lawyer now.. also the statement above is just a piece of the contract that addressed changes.