Detailed answer — how this works under Michigan practice

Start with two basic concepts every buyer and seller should know:

• Equitable title vs. legal title: A deed that is properly delivered conveys the seller’s interest even if the buyer hasn’t yet recorded it. In practical terms, delivery of a deed transfers ownership (legal effect depends on facts and intent), but recording gives public, constructive notice to everyone else.
• Recording protects against later claims: Recording the deed in the county Register of Deeds creates public notice. Until the deed is recorded, a later purchaser or lienholder without actual notice may claim rights that complicate the deal.

Because of those points, escrow agents, title companies, and attorneys focus on the escrow instructions. The escrow (or trust) agreement typically lists conditions that must be satisfied before the escrow agent will disburse funds. Common conditions include:

• Delivery of an executed deed to the escrow agent;
• Evidence that the deed has been submitted for recording;
• Receipt of title insurance or a title commitment showing clear title; and
• Payment of closing costs, prorations, and payoff of existing liens as required.

Because escrow instructions control, an escrow agent can legally release funds before the deed is recorded if the parties’ written instructions permit it and the agent has satisfied any conditions in those instructions (for example, the agent holds the executed deed and has clear written directions to disburse). However, doing so can create risk for the buyer if the deed is not timely recorded or if a third party later claims an interest.

Common safe practices used in Michigan closings

• Record-first approach: The buyer or escrow agent waits until the deed is recorded and the county Register of Deeds issues the indexed record. Once the recorded instrument number or copy is obtained, the escrow agent disburses funds.
• Conditional disbursement / holdback: If parties agree to a limited disbursement, a portion of the proceeds can be held until the deed is recorded or until title insurance issues.
• Title insurance and title company assurances: Buyers typically insist on a title insurance policy. Title companies will often coordinate recording and may rely on a short post-closing hold to confirm recordation before paying out lender or seller funds.
• Escrow acknowledgment of delivery: If the escrow agent holds the executed deed and has written instructions to record it, many agents will record first and then pay funds out immediately after recording is confirmed.

Risks of releasing funds before recordation

• Another buyer or creditor might claim an interest if they have acquired rights without notice.
• If the deed is defective, incorrectly executed, or not delivered as required, money may be hard to recover.
• If recording is delayed (clerical error, missing attachments, or unpaid transfer taxes), the buyer’s protection is weakened.

Hypothetical example

Imagine Buyer deposits the purchase price into an escrow account. Seller signs the deed and gives it to the escrow agent, but the deed is not yet recorded. The escrow instructions say the agent will release funds when the deed is delivered to the agent and title insurance is ordered. The agent releases the funds. Two months later a judgment creditor of the seller claims a lien on the property because the creditor recorded a lien before the deed was recorded. The buyer still may have strong equitable rights, but the buyer now faces litigation and must rely on title insurance or a lawsuit to clear title or recover funds.

What Michigan law and public filing do for you

Michigan uses public recording to protect subsequent purchasers and creditors by giving constructive notice to the world. Recording the deed is the most reliable, routine way to make a buyer’s ownership public and reduce the risk of competing claims. Because recording is county-level, obtaining a recorded copy or confirmation from the county Register of Deeds gives clear, verifiable proof that a deed was recorded.

Practical takeaway: Funds can be released before the deed is recorded if the escrow/trust instructions allow it and conditions are met. But that increases risk. Most prudent buyers and escrow agents either require recordation first or use holdbacks/title insurance to manage the risk.

Note: This article explains common Michigan practice and basic legal concepts. It is not legal advice.

Helpful hints — what to do if you are closing a Michigan real estate sale

• Read the escrow/trust instructions carefully. Make sure they list exactly what the escrow agent must obtain before releasing funds.
• Ask the escrow agent or title company to record the deed and confirm the recorded document number before disbursing funds.
• Obtain a title commitment and insist on owner’s title insurance to protect against hidden liens or defects.
• If you are worried about timing, negotiate a short holdback (e.g., a percentage of sale proceeds) until recording is verified or title insurance is issued.
• Get everything in writing: any agreement to release funds before recordation should be documented in the escrow instructions and signed by all parties.
• If funds were released prematurely and a problem arises, contact your title insurer and consider speaking with a Michigan real estate attorney promptly.
• Verify recording yourself: you can check the county Register of Deeds where the property is located to confirm whether the deed has been recorded.

Where to get more information

• County Register of Deeds office for the county where the property sits (they can confirm recording).
• Title companies and escrow agents who routinely handle Michigan closings.
• A Michigan real estate attorney if you need advice about a particular dispute or unusual facts.

Final reminder: This information is educational only and does not constitute legal advice. If you face a live dispute or uncertainty about releasing or recovering funds, consult a licensed Michigan attorney who can review the specific documents and facts.