Although the steps involved in selling a home are similar regardless of where in the United States you live, Michigan's real estate laws and practices are unique in some respects. Becoming familiar with them early will help you avoid hassles later.
Here’s an overview of the basics—from working with a real estate agent to making legally required disclosures to closing the deal.
Working With a Michigan Real Estate Agent
Most people selling their home in Michigan work with a licensed real estate broker or agent. A good agent will help prepare and price your house, market it to prospective buyers, review purchase offers, and negotiate with buyers through the closing.
Before signing up with an agent, get references from other home sellers and check online customer reviews.
Signing a Listing Agreement in Michigan
Once you find a real estate agent you want to work with, you’ll sign a “listing agreement,” giving the agent the right to market and handle the sale of your house. Most agents use standard forms created by their state or local Realtor association, such as Michigan Realtors.
Listing agreements typically cover the following terms.
- Commission that you (the seller) will pay. This traditionally ranges from 5-6% of the house sales price, to be split between your real estate agent and the buyer’s agent. You might have seen headlines about recent lawsuits and court settlements that could challenge this model. Although it has raised awareness around the fact that these numbers shouldn't be set into stone, no major adjustments have yet occurred.
- Type of listing. Most listing agents will want you to sign an exclusive right to sell listing, which obligates you to pay a commission to the agent regardless of who brings in the buyer. Other arrangements are possible, however, such as an open listing, in which you agree to pay a commission to whichever agent brings in a buyer, or an exclusive agency listing, in which you agree that your agent is the only agent authorized to sell your house, but that you will pay a commission only if the agent brings in the buyer (not, for example, if you do).
- Duration of listing. The listing agreement will cover a set amount of time, such as 90 days. You can renew it then, if both of you agree and the house is still on the market.
- List price. Your agent will recommend an appropriate list price, by comparing prices of similar homes (“comps”) that have sold in your immediate area, and adjusting for strategic considerations. To educate yourself as to whether the agent is recommending an appropriate price, the National Association of Realtors’ website offers information on prices of houses currently on the market, and websites such as Trulia provide data on actual sales prices.
- Items included (or not) in the sale. For example, you might plan to leave behind a built-in dishwasher (which therefore becomes part of the property that the agent is contracted to sell). Or, you might want to exclude a washing machine that you plan to move to your new home, in which case the agent needs to know and convey that information.
- Duties and obligations of seller and real estate agent. Your agreement will spell out how the real estate agent will list or market your house, what type of insurance you must maintain on the property during this transition period (particularly if you're leaving the house vacant), and what disclosures you must make to prospective buyers.
Making Real Estate Disclosures in Michigan
State law in Michigan (1993 Michigan Comp. Laws §§565.952 and 565.957) requires that property sellers provide prospective buyers a completed disclosure form, the purpose of which is to advise buyers of the condition of the property and provide other information known to the seller.
The law goes so far as to spell out the language to be used within the form, covering details such as:
- what appliances, systems, and services are in place and whether they are in working order
- any history of pest infestations
- whether the property is within a community governed by a homeowner's association
- environmental problems, such as asbestos, radon gas, formaldehyde, fuel or chemical storage tanks, and so on
- structural problems or damage such as from flooding or fire, and
- legal issues such as encroachments, easements, zoning violations, and any pending litigation that could affect the property.
Your agent will have the form for you to fill out.
In addition, if your house was built before 1978, you must comply with federal Title X disclosures regarding lead-based paint and hazards. See the lead disclosure section of the EPA’s website for details.
Creating a Michigan Real Estate Purchase Agreement
A buyer who wants to purchase a particular Michigan home will make the seller a written offer, specifying the price, proposed down payment, and other terms, including any contingencies (conditions that must be met for the sale to close, such as a satisfactory inspection report or the buyers’ arranging financing or selling their current house).
You may reject an offer outright, accept it as, or (as is more typical) respond with a counteroffer. A counteroffer accepts some or most of the offer terms, but suggests changes to others, such as a higher price or a closing date that’s sooner than the buyer proposed.
A legally binding contract is formed when you accept the buyer's most recent signed offer (agreeing to any changes from the original), and notify the buyer of its acceptance. The transaction will go into what’s called “escrow.”
What Is Escrow?
Escrow is the time period between signing the purchase agreement and closing on the house. You will choose an escrow or title agent, a neutral third party, to serve as intermediary and supervise the process.
The buyer typically has a lot more to do during this time period than the seller. By the close of escrow, the buyer will need to finalize financing, remove all buyer contingencies, have the house appraised (typically required by mortgage lenders), and get title insurance—usually under set deadlines.
You'll need to cooperate with scheduling of the inspector and appraiser, and get to work on any contingencies you added to the contract.
Issues often come up that require negotiating, such as who will pay for repair problems identified in an inspection report. The buyer might insist that you pay to remedy a defect or lower the purchase price. If you cannot reach an acceptable agreement, the buyer might have the right to back out of the deal.
What Happens at the Closing of Your Michigan Home
By the close of escrow (known as the closing or settlement), you and the buyer should have fulfilled all the terms of your purchase agreement. At the closing itself (sometimes a meeting of the parties, other times conducted in separate locations and even on separate days or virtually), all final documents and funds will be exchanged between buyer and seller.
The buyer pays you the purchase price, and you give the buyer a deed and other transfer documents and clear title to the house or condo. You pay off any outstanding loans on your property and pay commissions to the real estate agents (per your listing agreement).
Sellers do not usually need to be present at a Michigan closing. Often, the buyers will sign the final documents at the office of their title company or escrow agent and pick up the keys. Then the escrow agent will record the new deed in the buyers' name at a local government office, and the home is officially theirs.
Working With a Lawyer
Unlike some states, Michigan does not require that sellers involve a lawyer in the house-selling transaction.
Even if it’s not required, you might decide to engage a lawyer at some point in the process—for example, to review the final contract or to assist with closing details. Or, you might want a lawyer’s help drafting a lease agreement if you plan to rent the home back for an extended period of time after the house closing, or if problems show up on the title report such as a lien on your property.
And if you are selling your home without a real estate agent (a “for sale by owner” or FSBO), it could be useful to hire an attorney to help with the legal paperwork.