What is the difference between owner’s and lender’s title insurance?

Owner’s title insurance protects the homeowner from financial losses or legal costs related to title disputes or defects. This one-time purchase ensures that you, as the property owner, are covered. Lender’s title insurance, on the other hand, protects only the lender's interest in the property if a title issue arises. Note that while lender’s title insurance is commonly required, owner’s title insurance is optional but highly recommended.

Is owner’s title insurance a one-time fee?

Yes, owner’s title insurance is a one-time fee paid at the time of closing. Unlike other types of insurance that require monthly or annual payments, this policy remains in effect for as long as you or your heirs hold an interest in the property. Its long-term coverage for a single upfront cost makes it a cost-effective way to protect your investment.

Common Title Defects in Michigan Homes

Blue Pointe Title
Mar 30
4 min read

Title Insurance for Historic Adrian Michigan Real Estate

Picture this: after months of searching, you've finally found the right home in Michigan. The inspection cleared, the offer was accepted, and closing day is circled on your calendar.

Then, weeks later, a letter arrives. A contractor claims he was never paid for work done on the property two owners ago. His lien is attached to your home, and now it is your problem.

This scenario is not rare. It is one of the most common ways home buyers in Michigan find themselves entangled in costly legal disputes that could have been avoided before the ink ever dried. Liens are the most common title defect, and even if a lien belongs to a prior owner, it stays with the property until the debt is resolved, creating real problems for future owners. Beyond liens, title defects can take many forms: boundary disputes, missing heirs, recording errors, fraudulent transfers, and undisclosed easements, each with the potential to cloud your ownership and derail your investment.

In 2022 alone, title insurance companies paid out $596 million in claims, a figure that underscores just how frequently these issues surface in real estate transactions across the country.

As a Michigan home buyer, understanding title defects is not optional. It is one of the most important forms of due diligence you can perform. Below, we break down the most common title defects found in Michigan properties, explain how each one can affect your purchase, and outline the steps you can take to protect yourself before you close.

What Is a Title Defect? (And Why It Matters in Michigan)

A title defect is any issue or irregularity in a property's ownership history that calls into question the seller's legal right to transfer that property to you. These defects can interfere with the transfer of the property, causing legal and financial complications for both buyers and sellers, and in some cases can make a title unmarketable or uninsurable. In Michigan, title defects are resolved through a variety of legal mechanisms, including quiet title actions, which are court proceedings used to clear ownership disputes and remove clouds from a title.

The Most Common Title Defects Found in Michigan Homes

1. Unpaid Liens

A lien is a legal claim against a property that typically arises from unpaid debts, including mortgages, unpaid real estate taxes, HOA assessments, and court judgments. Contractors and subcontractors who performed work and were never paid may also hold liens against the property. As a buyer, you can inherit these obligations if they are not resolved before closing.

2. Errors in Public Records

Clerical and filing errors are more common than most buyers expect. Mistakes such as incorrect property descriptions or ownership details can cause confusion and disputes over property boundaries or ownership rights. These kinds of errors can affect the deed or survey of a property, causing undue financial strain while you work to resolve them.

3. Boundary and Survey Disputes

Property lines in Michigan are not always as clear as they appear on paper. A fence, driveway, or outbuilding constructed over a property line can create a dispute over rightful ownership of that parcel. Michigan state law allows parties to pursue quiet title actions to resolve boundary disputes or remove clouds on a property title, but these proceedings take time and money that most buyers would rather not spend.

4. Missing or Unknown Heirs

When a previous owner passed away without a clear will or without all heirs being properly identified, it can create significant title complications. Potential heirs who were not identified or accounted for during the transfer of the property can come forward later and challenge ownership, placing the current buyer in the middle of a legal dispute they had no part in creating.

5. Fraudulent Transfers and Forgery

Fraud and forgery are less common than other defects but are among the most costly, making up 21% of the total amount spent by title insurance companies on claims. In a typical scheme, a criminal impersonates an owner and forges their name on a deed to facilitate an unauthorized sale. If you unknowingly purchase a property involved in such a transfer, your ownership rights could be challenged.

How Title Defects Are Discovered in Michigan

The primary tool for uncovering title defects is a title search. Evidence of title is contained in the historical records at the county Register of Deeds office, and a thorough title search examines all recorded documents relating to the property, including deeds, mortgage documents, liens, judgments, restrictive covenants, and other encumbrances. In Michigan, title searches commonly look back 20 years or more depending on the complexity of the property's ownership history.

How to Protect Yourself: Title Insurance and Beyond

Once a title search is complete, purchasing an owner's title insurance policy is your strongest financial safeguard. Michigan law does not require title insurance, but lenders often require their own policy to protect their investment, and an owner's policy provides an additional, separate layer of protection for you as the buyer. Title insurance covers legal expenses and financial losses if a covered defect surfaces after closing.

Beyond insurance, working with a Michigan real estate attorney adds a critical layer of protection. A lawyer can uncover hidden defects in the title and real estate documents that might otherwise go unnoticed, and their role is to protect the buyer's best interests throughout the transaction.

Final Thoughts: Don't Skip the Title Search

Title defects do not always announce themselves. Some surface weeks after closing, and others can take years to emerge, by which point resolving them can be expensive and disruptive. The good news is that most defects are entirely preventable with the right preparation.

A thorough title search, a quality owner's title insurance policy, and guidance from an experienced Michigan real estate professional are the three steps that stand between you and a problem inherited from someone else's past.

If you are preparing to purchase a home in Michigan and want to make sure your title is clean before you close, our team is here to help. Reach out today for a consultation and take the guesswork out of one of the biggest purchases of your life.