3.4 Michigan Closing Procedures
Key Takeaways
- Michigan closings are commonly conducted by title companies; attorneys and escrow officers may also close, and title insurance protects against undiscovered title defects
- Federal TRID rules require the Closing Disclosure to be received by the borrower at least 3 business days before consummation; an APR jump, loan-product change, or added prepayment penalty restarts the 3-day clock
- A warranty deed gives the buyer the greatest protection; a quitclaim deed conveys only whatever interest the grantor has, with no warranties; a covenant deed warrants only the seller's own period of ownership
- Michigan property taxes are billed as summer and winter taxes and are prorated at closing; deeds are recorded with the county Register of Deeds
- Michigan transfer tax is $3.75 per $500 state plus $0.55 per $500 county = $8.60 per $1,000 of value, customarily paid by the seller
Who Closes and the Role of Title
Michigan has no statewide requirement that an attorney close; most residential deals are closed by a title company, though attorneys and escrow officers also close. The closing agent searches the public record, examines the chain of title, identifies liens and encumbrances, and issues a title insurance policy.
| Closing agent | Typical role |
|---|---|
| Title company | Searches title, issues insurance, prepares docs, disburses, records — most common |
| Attorney | May conduct the closing and resolve legal title issues |
| Escrow officer | Holds funds/documents and closes per escrow instructions |
Two kinds of title insurance
| Policy | Protects |
|---|---|
| Owner's policy | The buyer's equity against title defects, for as long as they own |
| Lender's (loan) policy | The lender up to the loan balance; usually required by the lender |
The Closing Disclosure (Federal TRID)
Under the TILA-RESPA Integrated Disclosure (TRID) rules, two forms control timing:
| Form | Timing |
|---|---|
| Loan Estimate | Delivered within 3 business days of the loan application |
| Closing Disclosure | The borrower must RECEIVE it at least 3 business days before consummation |
Three changes restart the 3-day clock: the APR becomes inaccurate (increases beyond tolerance), the loan product changes (e.g., fixed to adjustable), or a prepayment penalty is added. Minor changes (a small fee adjustment, a seller credit) do NOT restart the clock. Worked example: A Closing Disclosure is received Monday; the loan stays the same. The earliest legal closing is Thursday. If on Wednesday the lender switches the borrower from a fixed to an adjustable loan, a new 3-business-day waiting period begins.
Deeds Used in Michigan
| Deed | Protection | When used |
|---|---|---|
| Warranty deed | Greatest — warrants title against ALL defects, even before seller owned it | Standard arm's-length residential sales |
| Covenant deed (limited/special warranty) | Warrants only against defects arising during the seller's ownership | Some institutional or fiduciary sales |
| Quitclaim deed | None — conveys only the interest the grantor has, if any | Clearing clouds, divorce, family transfers |
Trap: A quitclaim deed is perfectly valid to transfer ownership; it simply makes no promises about the quality of that ownership. 'No warranty' does not mean 'no transfer.'
Prorations at Closing
Michigan bills property taxes in two installments, and the closing agent prorates them so each party pays for the time they own the property.
| Item | Michigan convention |
|---|---|
| Summer taxes | Billed ~July 1 |
| Winter taxes | Billed ~December 1 |
| HOA dues | Prorated by payment cycle |
| Rent (income property) | Prorated to the closing date, with deposits transferred |
Local custom on whether taxes are treated as paid in advance or arrears varies by community, so exam questions test the concept of proration (each party pays its share of the ownership period) more than a single fixed formula.
Recording and Transfer Tax
The deed is recorded with the Register of Deeds in the county where the land lies. Recording gives constructive notice to the world and establishes priority among competing interests.
Michigan imposes a real estate transfer tax:
| Level | Rate | Per $1,000 |
|---|---|---|
| State | $3.75 per $500 | $7.50 |
| County | $0.55 per $500 | $1.10 |
| Combined | $4.30 per $500 | $8.60 |
Worked calculation: On a $250,000 sale, transfer tax = $250,000 ÷ 1,000 × $8.60 = $2,150, customarily paid by the seller (negotiable). Some statutory transfers — such as certain government or qualifying family transfers — are exempt.
Reading the Closing Statement: Debits and Credits
The closing statement allocates every dollar between buyer and seller using debits (charges) and credits (amounts in a party's favor). A confident grasp of who is debited and credited is one of the most reliably tested closing skills.
| Item | Buyer | Seller |
|---|---|---|
| Purchase price | Debit (buyer owes it) | Credit (seller receives it) |
| Earnest money already deposited | Credit (reduces buyer's cash) | — |
| New loan proceeds | Credit | — |
| Existing mortgage payoff | — | Debit |
| Unpaid taxes accrued to closing | Credit | Debit |
| Prepaid taxes covering buyer's period | Debit | Credit |
| Transfer tax (by custom) | — | Debit |
Worked proration example: Annual taxes are $3,600 ($300/month). The seller has prepaid the full year and closing is at the end of the 9th month. The buyer owns the property for the remaining 3 months, so the buyer reimburses the seller 3 × $300 = $900. On the statement that $900 is a debit to the buyer and a credit to the seller. If instead the taxes were unpaid and accrued, the seller would owe their share — a credit to the buyer and debit to the seller.
Possession, Title Defects, and Marketable Title
Legal title passes when the deed is delivered and accepted, typically at closing; possession (the keys) transfers per the contract — usually at closing, but sometimes at a later agreed date with an occupancy agreement and per-day holdover charge.
Marketable title is title a reasonable buyer would accept — free of undisclosed liens, encroachments, or clouds. Common defects the closing agent must clear include unpaid mortgages, mechanic's liens, unpaid property taxes, and recording-chain gaps. A title commitment lists these as exceptions the seller must cure before closing.
Scenario / trap: A title search reveals a $4,000 contractor's lien from a prior remodel. The seller cannot deliver marketable title until it is paid or bonded around. The fix is almost always to pay the lien from the seller's proceeds at closing — shown as a seller debit — rather than to delay possession. Recording the deed afterward at the Register of Deeds gives constructive notice and protects the buyer's new ownership against later claims.
Under TRID, which change to a Michigan loan RESTARTS the 3-business-day Closing Disclosure waiting period?
Which deed conveys only whatever interest the grantor actually holds, with no warranties of title?
On a $250,000 Michigan home sale, approximately how much is the combined state and county real estate transfer tax?