Half Built House/Lien Potential

[Jason Linden]

I’m a newbie Real Estate Investor so please be gentle. ;)

Here’s the situation on what I’m calling Half Built House.

A residential project manager decided to build a new spec house on a parcel which already had his current house on it. Not sure what the story is but work (supposedly) stopped on the property 2 years ago and he is now trying to sell it. I’m interviewing attorneys but haven't selected one yet.

My questions are around liens and how to protect myself against the potential of future liens. If we assume work occurred in the past 6 months (which he says it hasn’t) and a contractor can still file a mechanics lien after closing, how to I protect myself? Can I buy extended title insurance that protects me? Can I make the seller take out a bond? Since the parcel will be (is not currently) sub-divided off of the current property, is there a case where I can ensure any liens go against the original parcel and not the new parcel with the new house?

What other guidance would you have for me? Yes, I will need a mortgage and construction loan, so I’m working with my banker as well to get them comfortable with the risk.