What Is Title Insurance?
When you purchase real estate, you are essentially buying the ownership rights to the property, which is represented by the title. Titles can sometimes unearth hidden and unknown defects or discrepancies like liens from unpaid taxes or debts, easements, undisclosed heirs, errors with public records, and fraud or forgeries, threatening the integrity and viability of the title itself. Title insurance is a type of insurance that can protect both the buyer and the lender against financial loss and legal expenses that could arise from title defects.
Do You Need Title Insurance in Michigan?
Although title insurance is not legally required in Michigan, it is often secured in real estate transactions, especially if the buyer is purchasing their home with a mortgage. Lenders will often require buyers to hold title insurance to protect their investment should any issues arise with the property’s title history.
What Does Title Insurance Cost in Michigan?
Title insurance is issued based on the current value of the insured property. The cost of title insurance in Michigan varies depending on the type of policy — owner’s policies are valued based on the purchase price of the property, while lender’s policies are set by the amount of the loan. Title insurance also includes a handful of fees that can differ in price.
Title Search Fee
Title companies perform title searches to detect any potential discrepancies with the title. During their search, the companies comb through historical public records to identify any title defects or areas of concern for the property being purchased. The fees associated with these searches are estimated to range between $75 to $200.
Title Settlement Fee
The title company charges a title settlement fee (which is often referred to as a closing fee) to cover any administrative costs accrued during closing. The title settlement fee encompasses escrow fees, deed preparation fees, notary fees, and land survey fees. In Michigan, title settlement fees are estimated to cost anywhere from $400 to $600.
Lender’s Title Insurance
Lender’s title insurance keeps the lender protected against any claims that might be on the property. As you might have guessed by the name, this insurance covers the lender, not the buyer. This insurance is commonly purchased as part of a bundle with owner’s title insurance and is often required by mortgage companies. This one-time fee is estimated to be between 0.5% to 1% of the property’s sale price.
Owner’s Title Insurance
On the flip side of lender’s title insurance, an owner’s title insurance policy covers the owner from any title mishaps that might have been missed. With this insurance, if a covered homeowner discovers there is someone with a claim to their property a couple of years after they take ownership, they are protected against that claim. If the homeowner did not have an owner’s title insurance policy in that scenario, they could wind up losing their property and still owe their remaining mortgage balance. Owner’s title insurance is not required by the mortgage company like lender’s policies are, but it is usually recommended, and it remains valid the entire time you own the property. On average, these policies run about $1,000, but can vary.
If you use a real estate attorney to help secure your title insurance, you will need to pay attorney fees which differ depending on the attorney.
When you file deeds and other official public record documents, they are paid for through recording fees, and the national average cost of those fees is about $125.
Types of Title Insurance Policies in Michigan
There are two types of title insurance policies in Michigan: lender’s policies and owner’s policies.
You can purchase title insurance from a licensed title insurance agency or directly from a title insurance underwriter authorized to operate in Michigan. When you obtain title insurance, the agent or company will conduct a thorough investigation of public records to establish the complete ownership history of the property. If any liens or flaws are discovered, the title company will take steps to address them before issuing the title policy, or they may choose to exclude them from coverage. Once the company is confident that the property’s title is clear, they will provide you and your lender with title insurance policies to serve as financial safeguards against any undisclosed claims or defects that may exist at the time of purchase.
Who Pays for Title Insurance in Michigan?
The seller or the buyer can pay for title insurance in Michigan, but depending on your area, there is more than likely a customary payment practice, so you should talk to your Real Estate Agent about the expectations. Keep in mind, whoever pays for the title insurance also holds the right to choose the insurance provider.
Are the Title Costs in Michigan Worth It?
In the grand scheme of things, title costs are a drop in the bucket compared to the detriment a homeowner would face should an unknown title defect arise down the road. There are a lot of moving parts when it comes to purchasing a property, and as a buyer, you’ll want to make sure everything is intact with the title since your ownership relies on it.
Subject to credit qualification. Not all borrowers may qualify. Rates, terms, and Annual Percentage Rate (APR) are dependent on credit profile, property selected, down payment, and program. Not a commitment to lend.
is a type of insurance that can protect both the buyer and the lender.