The Importance of Title Work in a Real Estate Transaction

When you're buying a home, there are dozens of steps between signing the purchase agreement and sitting at the closing table. One of the most important — and least understood — is the title process.

Title work protects you from one of the most serious risks in real estate: discovering after you've purchased a home that someone else has a legal claim to it.

What Is Title?

In real estate, "title" refers to the legal ownership of a property. When you buy a home, the seller transfers title to you through a deed. But title isn't just about who owns the property today — it's about the entire history of ownership and any claims or encumbrances that may have attached to the property over time.

What Is a Title Search?

A title search is a thorough examination of public records to trace the history of ownership of a property and identify any issues that could affect your ownership rights. A title company or real estate attorney conducts the search by reviewing:

• Deeds: Who has owned the property and how it was transferred
• Mortgages and liens: Any outstanding loans or claims against the property
• Tax records: Unpaid property taxes
• Court records: Judgments, bankruptcies, or legal actions involving the property
• Easements: Rights others may have to use part of the property
• Restrictions: Covenants or deed restrictions that limit how the property can be used

What Can Go Wrong Without a Title Search?

Title issues are more common than most buyers realize. Problems that can surface include:

• Unpaid liens: A previous owner's unpaid contractor, tax authority, or creditor may have a lien on the property that transfers with it
• Forged deeds: Fraudulent transfers in the chain of title
• Unknown heirs: A deceased owner's heir who wasn't included in the estate
• Clerical errors: Mistakes in public records that affect ownership
• Boundary disputes: Disagreements about where the property lines actually are
• Undisclosed easements: Rights of way that affect how you can use your property

Without a title search, you could purchase a home and later discover that someone else has a legal claim to it — or that you're responsible for a previous owner's unpaid debts.

What Is Title Insurance?

Title insurance protects you (and your lender) against losses arising from title defects — even ones that weren't discovered during the title search.

There are two types:

Lender's Title Insurance

Required by virtually all mortgage lenders. It protects the lender's interest in the property up to the loan amount. The buyer typically pays for this at closing.

Owner's Title Insurance

Protects the buyer's equity in the property. It's optional but strongly recommended. A one-time premium paid at closing provides protection for as long as you own the home.

Owner's title insurance covers:

• Defects in the title that existed before you purchased
• Forgery or fraud in the chain of title
• Undisclosed heirs or missing signatures
• Errors in public records
• Legal costs to defend your title

How Much Does Title Insurance Cost?

Title insurance is a one-time premium paid at closing. In Michigan, the cost is regulated and based on the purchase price of the home. For a $250,000 home, expect to pay approximately $1,000–$1,500 for owner's title insurance.

Given that it protects your largest investment for as long as you own the home, it's one of the best values in the closing cost package.

The Role of the Title Company

The title company (or closing attorney) plays a central role in the real estate transaction:

• Conducts the title search
• Issues title insurance
• Coordinates the closing
• Holds earnest money in escrow
• Prepares closing documents
• Disburses funds to all parties
• Records the deed and mortgage with the county

Choosing a reputable, experienced title company is important. Your Realtor and lender can recommend trusted local title companies.

The Bottom Line

Title work isn't the most glamorous part of buying a home — but it's one of the most important. A thorough title search and owner's title insurance protect your investment from claims and defects that could otherwise cost you thousands of dollars or even your home.

Don't skip owner's title insurance to save money at closing. The one-time premium is a small price to pay for lifetime protection of your most valuable asset.