The bottom line black and white answer is no. You do not have to purchase title insurance. There is not a title insurance company out there that would recommend that but it is not an absolute requirement.
I think it best depends on the specific buyer / builder situation and ultimately that buyers/builders level of risk adversity and of course their knowledge and understanding of real estate.
If the landowner has owned the building site / land for some time or perhaps inherited the tract and the tract has been held in the same family for generations then you probably have minimal risk exposure. However if the tract is a lot created by a developer or building company and the buyer/builder has little or no knowledge of the history of the land then probably the money is well spent for peace of mind.
The basic premise of insurance never changes: Where do you want the burden of risk exposure placed on yourself or someone else.
Stephen B. McClain, Broker Owner
Cornerstone New Home Solutions
The builders often will not pay for title insurance so I'm presuming you are wondering if you really need to cover that expense. You want a policy because if there is a failure in title to the property you would be covered. If no title policy, no coverage and you could loose the house and land!
A title attorney told me recently that he has seen several cases of title failure recently. If it was me I would sleep better having a title policy.
Good Luck and enjoy your new home!
Claire McIntyre, Architect / Real Estate Broker / Builder
512 699 9912
MMI McIntyre Associates
Real Estate Brokerage
McIntyre & McIntyre Inc
Architecture / Engineering
You can also run into trouble getting financing, or selling if the next buyer can't get financing. Lenders want to see a clean chain of title and by breaking that you may be asking for trouble.
The custom in Texas is that the seller pays for the title insurance, so in a sense it doesn't come out of your pocket - it's just built into the price.
Feel free to contact me if you have other questions or would like help making a purchase.
Charlie McLagan, CNE, SFR