Buying new construction in Olympia WA and Obtaining Mechanic’s Lien Coverage with your Title Insurance Policy

There are a lot of tips and checklists for buying new construction in Olympia, WA but I’d like to add one more tip that is sometimes overlooked yet very important, and that is obtaining mechanic’s lien coverage with your title insurance policy

What are Mechanic’s Liens?  Mechanic’s liens are legal claims placed on the home you are purchasing by contractors, subcontractors and suppliers who have completed the work but haven’t been paid by the builder/seller.   New construction in Olympia WA and mechanics liens 

In our turbulent economic environment, now more than ever, it is very important to understand what title insurance policy you are getting as a buyer.   The builder you are purchasing that new home from may not be able to pay his contractors, subcontractors and suppliers, and they may have put liens on the property.

When buying new construction in Olympia, WA, the most comprehensive title insurance is a Homeowner’s Insurance policy.  It is extremely common for builders/sellers to offer a lesser Owner’s Insurance policy.  One reason why builders do this is to save money.  The cost difference between an Owner’s policy and a Homeowner’s policy is an additional 10%, which for a home sale of $250,000, the additional coverage is about $100 more. 

But for a buyer, you need to make sure your title policy covers mechanic’s liens especially when buying new construction.  The marketplace where I work, typically, the Owner’s policy does NOT cover mechanics liens, however the Homeowner’s policy does.  Without the proper title insurance policy, you may be held fully accountable for any prior liens, judgments or claims brought against your new home.

If you run into a situation where the builder/seller refuses to purchase the Homeowner’s policy, you can ask the title company to issue a Homeowner’s Endorsement that can be added to the Owner’s policy, which would cover mechanic’s liens.  This endorsement is typically at no added cost. 

But just because this is at no added cost, doesn’t mean you’ll get this endorsement issued.  Some title companies do not want to take on the risk or liability, so therefore they may not issue the endorsement.   

When buying new construction in Olympia, WA, make sure you understand what type of title insurance policy you are getting and that your policy covers mechanic’s liens.

Note:  These policies and endorsements may have different names in each marketplace.  Be sure to check with your Realtor and Title Representative to understand what policy would be best for you.

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  1. Pingback: What is title insurance when buying a home in Olympia WA? | Francine Viola, Realtor in Olympia WA