Title Insurance Basics

Title insurance is NOT your homeowner’s insurance. Title insurance protects the new homeowner from unforeseen or unknowable title defects and encumbrances. You need title insurance to protect your investment. In the event that a mortgage or another person claims a superior interest to your own, we as your agent, are able to help solve that problem.  

No you don’t. The seller of a property is required to pay for an owner's policy to insure to the buyer that they have clear title. The buyer is required by the mortgage company to buy a policy to insure that the mortgage company receives first lien status for the loan. Who pays for these is determined by your purchase agreement.

The insurance seems expensive but the rates are controlled by the state. Every agent and underwriter is bound by controlled rates. You may receive a credit by turning in an existing title insurance policy you may have. We offer credits based on the age of the policy as well as the insured value. 

Title & Vesting

Requirements are the documents required from the seller to clear the title. Examples of these are deeds that may be in the possession of the seller that are not recorded, mortgages or liens that have to be paid off at the time of closing, as well as many other items we need, as your title agent, to make sure your title is as clear as possible.

There are significant differences between these tenancies. In the State of Michigan, if there is no tenancy mentioned on the deed, there is a presumption of a tenancy in common. In order to take title as joint tenants with full rights of survivorship, you MUST notate that on the deed. The most significant differences in these two tenancies occurs at the death of one of the tenants. In the event that one of the tenants in common passes away, that tenants share of the property does not automatically pass to the other tenants. The estate of the deceased tenant holds title until an order of the probate court determines who then owns that portion of property. When a joint tenants with full rights of survivor ship passes away, that tenants interest automatically passes to every other joint tenant without an order of the probate court. Before deciding on how you want to acquire title with others it is strongly recommended that you seek competent legal advice.

Many times after a divorce, one spouse is ordered to deed to the other. This does not mean that you, as the recipient of that property owns it free and clear. Many divorce judgments contain stipulations for liens that do not appear in a deed. As your title insurer we must verify that there are no outstanding liens of any kind. The lien language in your judgment can appear anywhere within the judgment itself. This is why it is imperative that we are able to examine the ENTIRE judgment. Reviewing only the paragraph that covers the property settlement is not enough and might expose you, your buyer and us as your title agent, to the threat of a lawsuit.

Property Tax

There are two separate taxes, payable to two different entities, one the city, village, township or school district the other being the county in which you reside. In most areas, city taxes, village taxes and school taxes are due and payable July 1st, and cover the fiscal year to the following June 30. These are your Summer taxes. County taxes are due and payable December 1, and cover the fiscal year to the following November 30. These are your winter taxes. Some cities and schools send their taxes to be collected in the winter.

Taxes are due and payable July 1st for Summer, and December 1st for Winter. The summer taxes must be paid by the first week of September, before a penalty attaches. The winter taxes must be paid by the first week of February. You may want to check your bill or call the treasurer for the municipality or county that you live in to verify the delinquent status.

The Michigan Legislature has passed a law that gradually shifts the Winter tax amounts into the Summer billing cycle. Over the course of the next three years, the County taxes, which are now due in December, will gradually move 1/3 at a time, to become due in July. After three years, you will only have ONE tax bill due July 1st. 


You should be certain that your title company has all of your buyer’s contact information, especially the name and phone number of the buyer’s mortgage company. You should contact your buyer and provide them with a copy of your title work. If there are any title issues, you should be working with us to resolve them. Colonial Title Company can help you to get mortgage payoffs, condominium letters, tax bills and other items ready for your closing. To schedule your closing, you must co-ordinate with your buyer. If your buyer is working with a mortgage company, or a real estate agent, all parties involved must agree upon a closing date and time.

The Listing Agent typically schedules the closing. If there are no agents involved, then the seller or loan officer schedules the closing. Closings should be scheduled 5 days in advance, although this is not always possible. The sooner you schedule the closing, the quicker we can process your closing package.

This is really a personal preference. Many people like to schedule their closing at the end of a month. However, the best time to close is really within the first week of any month. Many lenders are willing to work with a new purchaser and give them and interest credit and reduce their cost at closing. It is also best to close earlier rather than later in the day. This assures you that your mortgage company or bank will be open and will be able to solve any problems that may come up in closing and assures you that the bank’s money will be wired in time.

Most banks, mortgage companies, financial institutions and home owner’s insurance companies close at 5:00 P.M. A closing after 5:00 P.M. could mean complications in the funding of your loan as well as other unforeseen problems. We urge sellers and buyers to take the morning off. A transaction that probably represents the largest, single investment of your life needs to be done right and with the respect it deserves.

Your branch might be open but nearly every mortgage and property division of financial and lending institutions are closed. The same problems that may arise with a late closing are present with a weekend closing.

Every closing is a little different. For every closing you will need state-issued picture identification. It may also be a good idea to have your last pay stub if you are purchasing with a mortgage. If you just sold your house you may need proof that your old mortgage was paid off when you buy your new house.

Closing Procedures

Tax prorations are charged to the Purchaser on the Settlement Statement and the Seller is credited with the same amount. The amount represents the Purchaser’s share of this tax bill. The actual amount of the proration depends on the type of tax and the period covered by the bill. Prorations are usually based upon the current year’s tax amounts. Your purchase agreement dictates if and how your taxes are to be prorated.

Each month, when you make your mortgage payment, part of it is placed in an escrow account managed by your mortgage company. When your taxes are due, they are paid from this escrow account. Depending upon the date you close, there may not be enough time to build up an adequate amount to pay the entire tax bill. Therefore, the mortgage company may request that a number of months of escrow be collected from you at your closing, to ensure that there will be enough money to pay your taxes.

Failing to file a property transfer affidavit promptly can result in a fine. Also, the affidavit triggers the assessment of the property, and sets the amount of your property taxes for the future year. It is possible for the taxes to be increased retroactively with penalties and interest when an affidavit is not filed timely.

It depends, if you are the Seller, the title company must approve the Power of Attorney prior to the closing date and they generally need the original Power of Attorney to record along with the Warranty Deed. If you are the purchaser, the title company must approve the Power of Attorney prior to the closing date and, if you are obtaining financing from a lender, they must approve the Power of Attorney as well. We will need the original Power of Attorney to record. Power of Attorneys can be rejected if not property prepared and executed.

Transfer tax is based on the selling price of the property and is paid by the Seller. The seller pays the transfer tax usually because the purchase agreement states so. There are two types of transfer tax: state and county. Both of these taxes are paid to the Register of Deeds when recording the Deed. State transfer tax is .0075 X the sales price – rounded up in increments of 500. County transfer tax is .0011 X the sales price – rounded up in increments of 500. Transfer tax is determined by an act of the state legislature.

The purchase agreement usually states that all water bills must be paid at closing. As your closing agent, we do our best to make sure the final water charges are paid. If not, the water may be cut off and the bill added to next years taxes. 

After Closing

The Right of Rescission for primary residences is a non-waivable federal law that allows a borrower to cancel a refinance decision anytime within three business days of the closing, excluding Sundays and sometimes Saturdays. If you are refinancing an investment property, there is no Right of Rescission. It is an immediate disbursement at the time of closing. 

No. There is no right of rescission on a purchase. Colonial Title Company strongly recommends the use of competent legal counsel BEFORE you sign your purchase agreement.

If you sold the property and receive a tax bill, contact the purchaser and the title company and forward both a copy of the bill. The sellers are responsible for property tax bills that are due as of the date of closing. If property taxes become due after the closing date, it is the purchaser’s responsibility to pay the due taxes. For example, if you are the seller, and you close November 30th, the Winter taxes that are available on December 1st are the sole responsibility of the purchaser.  

How quickly you receive your owner’s policy depends on how quickly the Register of Deeds can record and post the recording information for your documents. All documents sent for recording must be properly recorded and returned to the title company before we can issue the title insurance policies. Sometimes delays can occur if the seller’s mortgage company is slow to record a discharge. The typical wait is 4 months.

You should keep your closing documents in a safe place – preferably, the same place you keep all other important paperwork. The Seller should retain their documents for at least 7 years for IRS/tax purposes. The Purchaser, however, should hold onto their closing documents for as long as he or she owns the property. There are many occasions when trying to resolve title matters/discharge problems, when a subsequent Title Company will want to know information about the purchase. Was a mortgage paid off? Who was the Title Company that handled the closing? Was Owner’s Title Insurance purchased?