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Title policyThere are two main types of title insurance.

  1. Lenders title policy
  2. Owners title policy

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

                                                  https://libertytitle.com/seller-net-calculator/

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.

Owners Title Policy

Here are some of the possible title defects covered by title insurance:

  • Forged deeds, releases, or wills.
  • False impersonation of the true owner of a property from years ago.
  • Documents executed under invalid or expired powers of attorney.
  • Misinterpretations of wills, or discovery of a later will after the first will goes through probate.
  • Deed by minors, by someone of unsound mind, or by someone married representing themselves as single.
  • Mistakes in recording, or deeds recorded but improperly indexed and therefore not discoverable by a title search.
  • Undisclosed divorce by someone who conveys title of a deceased former spouse.
  • Claims resulting from the use of aliases or fictitious names by someone earlier in the chain of title.
  • Liens for unpaid IRS, state, estate, inheritance, income, or gift taxes.
  • Disputed or fraudulently obtained release of a mortgage document.
  • Unpaid property taxes, or unpaid water bills.
  • Unpaid City assessments.
  • Undisclosed heirs who surface years or decades later.

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

Russ Ravary Helping make your move easier