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Investing in real estate: Are you protected from title defects?

On Behalf of | Jan 23, 2025 | Estate planning

When you are ready to buy property in Michigan, you are not just investing in bricks and mortar. You are securing a piece of rich history and a promising future. But a potential risk lurks beneath the surface of your dream home or prime commercial space: title defects. These hidden issues can turn your investment into a costly nightmare.

What are title defects, and how can they affect your property rights?

Title defects are problems with the property’s ownership history that can challenge your right to the property. Common title defects include:

  • Undisclosed heirs: Potential heirs of a deceased property owner not identified or accounted for during the transfer of the property
  • Forged documents: Forged documents can lead to disputes over rightful ownership and may require legal action to resolve.
  • Errors in public records: Mistakes, such as incorrect property descriptions or ownership details, can cause confusion and disputes over property boundaries or ownership rights.
  • Liens from unpaid taxes or contractors: A lien is a legal claim against a property from to unpaid debts, such as unpaid property taxes or bills for work done by contractors.

These issues can create significant challenges in real estate transactions, affect the precise transfer of property titles, and potentially lead to legal disputes.

How does title insurance protect your investment?

Title insurance helps protect property owners from losing money due to title issues. It covers legal costs if someone disputes ownership, pays off hidden liens, and guards against past fraud or forgery. Michigan law does not require title insurance, but lenders often ask for it to protect their investments. The Michigan Insurance Code ensures title insurance companies meet their duties to policyholders.

Safeguarding your real estate purchase

Buying property is a significant decision, and protecting your investment is crucial. A thorough title search and insurance policy are vital steps in the process. While these measures provide substantial protection, complex title issues can still arise. A real estate attorney’s knowledge of Michigan property laws can be invaluable in such cases. They can review title documents, explain potential risks, and help resolve any issues that surface during your transaction. Remember, it is better to be safe than sorry when securing your property.