There are two main types of title insurance.
A lenders title policy protects the lender when they loan money on the property and is paid for by the buyer. A owners title policy protects the buyer and their heirs and in Michigan is paid for by the seller.
It sounds like the buyer should pay for it, but no, you the seller provide the buyer an Owner's Title Policy. It is a customary fee for the seller. It will be one of your 3 major closing costs that you will occur when you sell your home. You can find out what an approximate cost of selling your home by going to a Michigan title insurance site such as Liberty Title. They will usually have a sellers net sheet calculator. Here is a link to one
So basically you are paying for a title policy to protect you from any claims against any title defects. All home closings in Michigan with a real estate agent and title company will have the owners title policy. The title company will not do a closing if there is not clear title. Otherwise they would be on the hook for the damages and the costs.
Here are some of the possible title defects covered by title insurance:
Sometimes title problems occur that could not be found in the public records or are inadvertently missed in the title search process. To help protect you in these events, as a property seller it is recommended that you obtain an Owner’s Policy of Title Insurance to insure you against the most unforeseen problems. Owner’s Title Insurance, called an Owner’s Policy, is usually issued in the amount of the real estate purchase. It is purchased for a one-time fee at closing. The cost of an Owners title policy varies because it is based on sales price of the home. The lower the sales price the lower the owners policy.
Once you pay for the owner's title policy at closing you are out of it (unless you were the one committing fraud. After closing you have no worry about the buyer coming after you because of title issues.
I hope this explained why you have to pay for an owners title insurance policy when you sell your home. Always feel free to call or email me with any questions about the home selling process. My cell is (248) 310-6239