What a Title Company Actually Does Before You Close

Every other policy you own is watching for what might happen. Title insurance is the only insurance you buy that looks backward.

That’s the least understood part of the last step in buying a home, so I asked Kathy Sleboda to explain it. She’s been in the field for 15 years, and I’ve known her going on 20. This home-buying series has already covered the Realtor, lender, inspector, appraiser, and insurance agent. The title is the piece that ties it all off.

The search goes back 40 years, and it’s the law. On a residential property, the title company does a 40-year look-back, which isn’t company policy; it’sMichigan's Marketable Record Title Act. In the commercial, Kathy says it can run a hundred years. That means pulling county records and, if it’s an up-north property, sometimes physically sending somebody there. Her exam team compiles what’s called a title commitment, the pre-insurance handed to the agent before anything closes.

What they’re looking for is whether the seller is really the seller. If you’re meeting with Mike Smith, but the paperwork says Bob Smith owns it, is that the dad? Then comes what Kathy calls clouds on the title. How many mortgages are on the property? Is there an IRS lien? Did they forget to pay their roofing contractor and leave a $40,000 mechanic’s lien behind?

The goal is a clean, clear, marketable title, which just means they can actually sell it to you. And fraud is real. Kathy has seen fake sellers, fake buyers, fake IDs, and fake cashier’s checks. One crew hit four title companies about four years ago, and the FBI got involved.

The mistakes that hurt most aren’t fraud. They’re paperwork nobody thought about. A seller tells me there’s one mortgage and forgets the home equity line they took out 20 years ago, which has carried a zero balance since. Payoff authorizations let the title company close those accounts, because some people close on their house and then go draw on that line afterward.

“Every other policy you own is watching for what might happen. The title is looking at the past.”

Then there’s the one that gets me. A couple has lived together in one home for 55 years, and it’s in his name only. He passes, and she has to probate to sell the home she’s lived in for half a century. Four words on a deed, full rights of survivorship, and probate never happens.

Decide how you’re taking the title before you’re at the table. This is the education gap. If two people buy a property together, how are they taking it? Full rights of survivorship means that if something happens to one, the other owns it outright. If you want your kids to inherit your share instead, that’s a different structure.

The fancy word is tenancy, and it carries real tax implications. Neither your Realtor nor your title company can give legal advice on it, so slow down and educate yourself before closing day.

Never skip the final walk-through. We meet at the house and make sure it’s in the order we last saw it. No holes in the wall, plumbing still there, appliances per the contract, no water in the basement. I’ve seen copper plumbing ripped out of the walls. I heard about an agent who skipped it, and her client ended up walking into a completely flooded basement. The time to know that is before you sign, not after.

Who you hire matters. Kathy and I both watch deals get delayed because somebody didn’t order pre-title when the listing went up, and then an IRS lien surfaces on a cash offer that’s supposed to close in a week. That’s months, not days.

If you’re thinking about buying or selling in the Greater Lansing area, I’d love to help you get it right. Call or text me at 517-204-3311, email me at Jeff@jeffburkeassociates.com, or visitmichiganhomelife.com. If you have title questions, Kathy Sleboda can be reached at kathy@titlemi.com or 586-292-8436. Getting the title right isn’t the exciting part of buying a home, but it’s the part you’ll be glad you didn’t rush.