Licensing Requirements
Governed by the Michigan Occupational Code, Act 299 of 1980 — Article 25
Salesperson License
Must be at least 18 years old at time of application.
Must complete a 40-hour pre-licensure course approved by the Michigan Department of Licensing and Regulatory Affairs (LARA).
Must pass the PSI national + state exam with a minimum score of 70%.
Must work under a licensed Michigan real estate broker; a salesperson cannot work independently.
Must submit a license application within 3 years of passing the exam.
Must complete 3 hours of Defined Sales Contracts course before first renewal.
Broker License
Must have a salesperson license and 3 years active experience as a licensed salesperson (within the past 5 years).
Must complete a 90-hour broker pre-licensure course.
Must pass the PSI broker exam.
Can operate independently, hire salespeople, and manage a brokerage.
License Renewal & Continuing Education
Licenses are renewed every 3 years (on the licensee's birthday).
Salespersons: 18 hours CE per renewal cycle, including 2 hours Legal Updates.
Brokers: 18 hours CE per renewal cycle, including 2 hours Legal Updates.
Failure to renew on time results in lapsed license — activity with a lapsed license is illegal.
Licenses may be placed on Inactive status; CE still required to reactivate.
License Portability & Reciprocity
Michigan does not have automatic reciprocity with other states; applicants from other states must meet Michigan requirements.
Michigan licensees practicing in other states must comply with that state's laws.
LARA oversees all real estate licensing in Michigan. Complaints and disciplinary actions are handled by the Bureau of Professional Licensing (BPL) under LARA.
Agency Law
Michigan Occupational Code — Article 25; REALTORS® Code of Ethics
Types of Agency Relationships
Seller's Agent (Listing Agent): Owes fiduciary duties exclusively to the seller. Must promote seller's interests.
Buyer's Agent: Represents the buyer; owes full fiduciary duties to the buyer.
Dual Agent: Represents both buyer and seller in the same transaction. Requires written informed consent from both parties.
Designated Agent: One licensee from a brokerage represents the seller; a different licensee from the same brokerage represents the buyer. The broker remains a dual agent.
Transaction Coordinator (Non-Agent): Assists with paperwork only; does not represent either party.
Fiduciary Duties (OLD CAR)
Obedience — Follow lawful instructions of the principal.
Loyalty — Put the client's interests above all others, including the agent's own.
Disclosure — Disclose all material facts known to the agent.
Confidentiality — Keep client information private even after the agency ends.
Accountability — Account for all money and property entrusted to the agent.
Reasonable Care — Use professional skill and diligence in serving the client.
Disclosure Requirements
Michigan requires licensees to provide a written agency disclosure at first substantial contact with a consumer.
The disclosure must explain agency relationships available in Michigan.
Dual agency must be disclosed and consented to in writing before the offer is written.
How Agency Is Created & Terminated
Agency is created by: express agreement (written or oral), ratification, or estoppel.
Agency terminates by: expiration of agreement, completion of purpose, mutual agreement, death or incapacity of either party, or broker's license revocation.
Listing agreements must be in writing in Michigan to be enforceable.
A licensee who fails to disclose agency status may face disciplinary action by LARA and potential civil liability.
Purchase Contracts
Michigan Contract Law; Michigan Association of REALTORS® (MAR) Standard Forms
Essential Elements of a Valid Contract
Offer & Acceptance: A definite offer by one party and an unqualified acceptance by the other.
Consideration: Something of value exchanged (earnest money deposit is common but not required for validity).
Competent Parties: Both parties must be of legal age (18+) and sound mind.
Legal Purpose: The contract cannot require an illegal act.
Mutual Assent: A "meeting of the minds" — both parties agree to the same terms.
In Writing: Real estate contracts must be in writing (Statute of Frauds) to be enforceable in Michigan.
Key Contract Terms
Contingencies: Conditions that must be met for the contract to proceed (financing, inspection, appraisal, sale of current home).
Earnest Money: Good-faith deposit held in escrow; applied to purchase price at closing.
Time is of the Essence: When included, deadlines are strictly enforced; missing one can void the contract.
Closing Date: The date on which title transfers and funds are exchanged.
Fixtures vs. Personal Property: Fixtures are included in the sale unless specifically excluded in writing.
Counter-Offers & Acceptance
A counter-offer rejects the original offer and creates a new offer; the original offeror is no longer bound.
Acceptance must be communicated to the offeror to be effective.
An offer may be revoked at any time before acceptance is communicated.
Breach of Contract Remedies
Specific Performance: Court orders the breaching party to complete the sale (available for real estate because each parcel is unique).
Liquidated Damages: A pre-agreed amount (often the earnest money) retained if buyer defaults.
Compensatory Damages: Actual losses suffered by the non-breaching party.
Rescission: Cancellation of the contract and restoration of both parties to their original positions.
Michigan uses the MAR Purchase Agreement form as the standard residential contract. Always recommend buyers and sellers consult with a real estate attorney for complex transactions.
Seller Disclosure
Michigan Seller Disclosure Act — MCL 565.951–565.965 (1993)
Who Must Disclose
Sellers of residential property with 1–4 units must provide a Seller's Disclosure Statement (SDS).
The SDS must be delivered to the buyer before an offer is accepted (or as soon as practicable).
Certain transfers are exempt: court-ordered transfers, foreclosure sales, new construction, transfers between co-owners, and others listed in MCL 565.953.
Required Disclosures
Structural components: roof, foundation, basement, walls, windows, and doors.
Systems: plumbing, electrical, HVAC, water heater.
Environmental hazards: lead-based paint (pre-1978), underground storage tanks, hazardous waste, radon, mold.
Legal/title issues: easements, encroachments, deed restrictions, pending assessments.
Water and sewage: well conditions, septic system, flooding or water intrusion.
Any known material defect that substantially affects the value or habitability of the property.
Lead-Based Paint Disclosure (Federal)
Required for homes built before 1978 under federal law (HUD/EPA regulations).
Sellers must provide EPA pamphlet "Protect Your Family From Lead in Your Home."
Buyers have a 10-day right to test for lead paint (can waive).
Buyer's Right to Rescind
If SDS is received after an offer is accepted, the buyer has 72 hours to rescind the offer.
A seller who fails to disclose known defects may be liable for damages even after closing.
Licensees have an independent duty to disclose material defects they observe, regardless of what the seller discloses. "I didn't know" is not a defense if the condition was visible.
Fair Housing Law
Federal Fair Housing Act (1968, amended 1988); Michigan Elliott-Larsen Civil Rights Act (ELCRA)
Federal Protected Classes (7)
Race — No discrimination in any housing transaction.
Color — Skin pigmentation.
National Origin — Country of birth or ancestry.
Religion — Any religious belief or practice.
Sex — Gender (also includes sexual harassment under HUD guidance).
Familial Status — Households with children under 18; pregnant women; those seeking custody.
Disability (Handicap) — Physical or mental impairments that substantially limit a major life activity.
Additional Michigan Protected Classes (ELCRA)
Marital Status — Single, married, divorced, widowed.
Age — Cannot discriminate based on age (with limited senior housing exceptions).
Sexual Orientation & Gender Identity — Added by ELCRA amendment (2023).
Prohibited Activities
Steering: Directing buyers/renters toward or away from neighborhoods based on protected class.
Blockbusting: Inducing owners to sell by suggesting protected-class people are moving into the area.
Redlining: Denying mortgages or insurance in certain geographic areas (historically minority neighborhoods).
Refusing to show, rent, sell, or negotiate with someone based on a protected class.
Advertising that expresses any preference, limitation, or discrimination.
Exemptions (Federal)
Owner-occupied buildings with 4 or fewer units (Mrs. Murphy exemption) — does not apply if discriminatory advertising is used.
Single-family homes sold/rented by owner without a broker, no discriminatory advertising.
Housing operated by religious organizations for members.
Senior housing communities meeting HUD's Housing for Older Persons Act (HOPA) criteria: 80%+ of units must have one resident 55+.
Enforcement & Penalties
Complaints filed with HUD within 1 year of the discriminatory act.
Civil suits filed in federal court within 2 years.
First offense civil penalty up to $21,663 (indexed); subsequent violations higher.
Aggrieved parties may recover actual damages, punitive damages, and attorney's fees.
In Michigan, discriminating based on sexual orientation or gender identity also violates the ELCRA. Always treat all protected classes equally and consistently.
Landlord-Tenant Law
Michigan Landlord and Tenant Relationships Act — MCL 554.601 et seq.
Security Deposits
Maximum security deposit: 1.5 × monthly rent.
Landlord must provide written notice of the financial institution where deposit is held within 14 days of receiving it.
After move-out, landlord has 30 days to return deposit or provide itemized written deduction list.
Tenant must provide forwarding address; failure to do so may waive right to deposit return.
Improper withholding: landlord may be liable for 2× the deposit amount.
Move-In Checklist
Landlord must provide a move-in checklist (Inventory of Premises) within 7 days of occupancy.
Tenant has 7 days to note disagreements in writing.
Failure to provide checklist limits landlord's ability to make deposit deductions for damages.
Notice Requirements for Termination
Month-to-month tenancy: 1 rental period (typically 30 days) written notice from either party.
Nonpayment of rent: landlord may issue a 7-day Notice to Quit.
Lease violations (other than nonpayment): 30-day Notice to Quit.
Illegal drug activity: landlord may issue a 24-hour Notice to Quit.
Habitability & Repairs
Landlord must keep the property in reasonable repair and comply with health/safety codes.
Tenant must give written notice of needed repairs; landlord has a reasonable time to repair (varies by severity).
Michigan does not allow rent withholding or "repair and deduct" without court involvement in most cases.
Retaliatory eviction against a tenant who exercises legal rights is prohibited.
The Michigan Truth in Renting Act (MCL 554.631) prohibits unconscionable lease clauses and those that waive tenant's statutory rights.
Foreclosure & Redemption
MCL 600.3101–600.3285 (Judicial); MCL 600.3201–600.3285 (Non-Judicial/Advertisement)
Types of Foreclosure in Michigan
Foreclosure by Advertisement (Non-Judicial): Most common method. No court required; lender publishes notice of sale for 4 consecutive weeks in a local newspaper.
Judicial Foreclosure: Court supervised; used when a defect exists in the mortgage or when power of sale clause is absent. Less common.
Foreclosure by Advertisement — Key Steps
Lender records a Notice of Default and publishes sale notice for 4 weeks.
Sheriff's sale conducted at the courthouse; property sold to highest bidder.
Borrower receives a Sheriff's Deed at sale but retains possession and redemption rights during redemption period.
Redemption Periods
6 months — Standard redemption period for most residential properties.
12 months — If the property is abandoned OR if the outstanding loan balance exceeds 2/3 of the original mortgage.
1 month — Properties of 3+ acres (agricultural).
During redemption, borrower may pay off the full amount owed plus costs to reclaim the property.
If not redeemed, the purchaser at sheriff's sale receives a Sheriff's Deed that becomes marketable.
Deficiency Judgments
If the foreclosure sale price is less than the amount owed, the lender may pursue a deficiency judgment for the difference.
Michigan law limits the deficiency to the difference between the debt and the fair market value of the property at the time of sale.
Buyers purchasing at foreclosure sales should obtain title insurance and be aware of the redemption period; the former owner may still occupy the property until it expires.
Deeds & Title
MCL 565.1–565.201; Michigan Land Title Standards
Types of Deeds
Warranty Deed (General): Grantor guarantees title against all claims, past and present. Maximum seller protection for the buyer.
Limited Warranty Deed (Special): Grantor only warrants title against claims arising during their ownership.
Quitclaim Deed: Grantor conveys only whatever interest they have (if any) — no warranties. Used for clearing title defects or transfers between family members.
Sheriff's Deed: Issued after a foreclosure sale by the county sheriff.
Trustee's Deed: Issued by a trustee transferring property held in trust.
Requirements for a Valid Deed
Grantor must be a competent adult (18+, sound mind).
Grantee must be clearly identifiable.
Must include a legal description of the property.
Must contain words of conveyance (granting clause, e.g., "grant, bargain, and sell").
Must be signed by the grantor (no grantee signature required for delivery).
Must be delivered and accepted by the grantee to be effective.
To be recorded, must be notarized; recording is not required for validity but protects against subsequent purchasers.
Recording & Title Protection
Michigan is a Notice-Race state: a subsequent purchaser who records first and has no notice of prior unrecorded deed wins.
Deeds are recorded at the County Register of Deeds.
Title Insurance protects buyers and lenders from undiscovered title defects.
Owner's policy protects the buyer; Lender's policy protects the lender (required by most mortgage companies).
Legal Descriptions
Metes and Bounds: Uses compass bearings and distances from a point of beginning (POB).
Government/Rectangular Survey: Divides land into Townships (6 miles × 6 miles), Sections (1 mile²), and fractions. Michigan uses this system.
Lot and Block (Plat): References a recorded subdivision plat map.
A deed is valid between grantor and grantee upon delivery and acceptance. Recording protects against third-party claims.
Property Rights & Ownership
Michigan common law and property statutes
Forms of Ownership
Tenancy in Common: Two or more owners each hold an undivided interest. Interests may be unequal. No right of survivorship — interest passes through the owner's estate on death.
Joint Tenancy: Two or more owners with equal, undivided interests and the right of survivorship. Requires the 4 unities: Time, Title, Interest, and Possession. Must be expressly stated in the deed.
Tenancy by the Entireties: A form of joint tenancy available only to married couples in Michigan. Strong protection from individual creditors; requires divorce or death to sever.
Sole Ownership (Severalty): One person owns the entire interest.
Bundle of Rights
Real property ownership includes the rights to: possess, use, enjoy, exclude others, and dispose of the property.
Government powers that limit private property rights: Police Power, Eminent Domain, Taxation, and Escheat (PETE).
Easements
Easement Appurtenant: Benefits an adjacent parcel (dominant estate) across another parcel (servient estate). Runs with the land.
Easement in Gross: Personal right benefiting an individual or entity (e.g., utility easements). Does not transfer automatically with land sale.
Created by: express grant, implication, necessity, or prescription (adverse use for 15 years in Michigan).
Terminated by: merger of ownership, release, abandonment, or end of necessity.
Adverse Possession
A person may claim title to another's land if possession is: Actual, Open, Notorious, Exclusive, Hostile (claim of right), and Continuous.
In Michigan, adverse possession requires 15 years of continuous possession.
Must be confirmed by a court action to quiet title.
Condominiums in Michigan are governed by the Michigan Condominium Act (MCL 559.101 et seq.). The master deed and bylaws are the controlling documents.
Financing & Mortgage Law
Federal RESPA, TILA, ECOA; Michigan Mortgage Brokers, Lenders and Servicers Licensing Act
Key Federal Mortgage Laws
RESPA (Real Estate Settlement Procedures Act): Requires disclosure of settlement costs; prohibits kickbacks and referral fees. Requires Loan Estimate (within 3 days of application) and Closing Disclosure (3 days before closing).
TILA (Truth in Lending Act): Requires lenders to disclose APR, finance charges, and total cost of credit.
ECOA (Equal Credit Opportunity Act): Prohibits credit discrimination based on race, color, national origin, religion, sex, marital status, age, or receipt of public assistance.
CRA (Community Reinvestment Act): Encourages banks to meet credit needs of low- and moderate-income areas.
Mortgage Instruments
Promissory Note: The borrower's written promise to repay the loan (personal obligation).
Mortgage: Security instrument pledging the property as collateral. In Michigan, title remains with the borrower (lien theory state).
Deed of Trust: Used in some states (not Michigan) — title held by a neutral trustee.
Michigan is a Lien Theory State: borrower retains title; lender holds a lien on the property.
Types of Mortgages
Conventional: Not government-backed; typically requires 20% down to avoid PMI. Conforming loans follow Fannie Mae/Freddie Mac limits.
FHA Loan: Insured by Federal Housing Administration; lower down payment (3.5%); requires mortgage insurance premium (MIP).
VA Loan: For eligible veterans; no down payment required; no PMI. Guaranteed by the Department of Veterans Affairs.
USDA Loan: For rural areas; no down payment; income limits apply.
Adjustable-Rate Mortgage (ARM): Interest rate adjusts periodically based on an index; includes caps on adjustment amounts.
Key Loan Terms
LTV (Loan-to-Value): Loan amount ÷ appraised value. Higher LTV = higher risk for lender.
DTI (Debt-to-Income): Monthly debt payments ÷ gross monthly income. Most lenders prefer DTI under 43%.
Points: Prepaid interest (1 point = 1% of loan). Discount points lower the interest rate; origination points are a lender fee.
PMI (Private Mortgage Insurance): Required on conventional loans with LTV > 80%. Cancelled when LTV reaches 78% (federal law).
Real estate licensees cannot recommend specific lenders, but can refer buyers to multiple lenders. Accepting referral fees from lenders violates RESPA.
Zoning & Land Use
Michigan Zoning Enabling Act — MCL 125.3101 et seq. (2006)
Zoning Classifications
Residential (R): Single-family, multi-family, or mixed residential uses.
Commercial (C): Retail, office, restaurant, and service businesses.
Industrial (I / M): Manufacturing, warehousing, light and heavy industrial.
Agricultural (A): Farming, forestry, and rural uses.
PUD (Planned Unit Development): Mixed-use development approved as a package with flexible standards.
Nonconforming Uses
A use that was legal when established but no longer conforms to current zoning is a legal nonconforming use.
Generally allowed to continue but cannot be expanded or rebuilt if substantially destroyed.
Abandonment (typically 1 year) may extinguish nonconforming status.
Variances & Special Use Permits
Variance: Permission to deviate from specific zoning requirements (setback, height, lot coverage) due to unique hardship. Granted by a Zoning Board of Appeals (ZBA).
Special Use Permit (SUP): Allows a use that's conditionally permitted in a zone subject to specific conditions (e.g., a daycare in a residential zone).
Rezoning (Amendment): Change to the zoning map or ordinance text; requires public hearing and approval by governing body.
Eminent Domain & Takings
Eminent Domain: Government's power to take private property for public use with just compensation (5th Amendment).
Condemnation: The legal process by which eminent domain is exercised.
Inverse Condemnation: Property owner sues the government when a government action effectively takes or damages their property without formal condemnation.
Michigan's Zoning Enabling Act requires each township, city, and village to adopt its own zoning ordinance. Always check local ordinances — they vary significantly.
Environmental Law
CERCLA (Federal); Michigan Natural Resources and Environmental Protection Act — NREPA (MCL 324.101)
Key Hazardous Substances
Lead-Based Paint: Present in homes built before 1978. Federal disclosure required; removal regulated by EPA.
Asbestos: Commonly found in insulation, floor tiles, and roofing materials pre-1980. Must be professionally assessed and abated if disturbed.
Radon: Colorless, odorless gas from uranium decay in soil. Michigan's average indoor level is higher than the national average. EPA action level: 4 pCi/L.
Underground Storage Tanks (UST): Must be registered and inspected; leaks can cause soil and groundwater contamination.
Mold: No specific federal law; Michigan requires disclosure of known mold on the Seller's Disclosure Statement.
PFAS (Per- and Polyfluoroalkyl Substances): Emerging contaminants; Michigan has strict drinking water standards.
CERCLA / Superfund
Federal law governing cleanup of severely contaminated sites.
Liability is strict, joint, and several — any past or present owner may be held responsible for full cleanup costs.
Innocent Landowner Defense: Buyers who conduct an All Appropriate Inquiry (Phase I Environmental Assessment) before purchase may avoid CERCLA liability.
Wetlands & Floodplains
Michigan has some of the strictest wetland regulations in the nation under NREPA Part 303.
Filling or disturbing wetlands typically requires a permit from the Michigan DEQ (now EGLE — Department of Environment, Great Lakes, and Energy).
Properties in FEMA-designated 100-year floodplains require flood insurance if they carry a federally backed mortgage.
Real estate licensees are not environmental inspectors. When environmental concerns arise, recommend clients hire a qualified environmental professional and consult an attorney.
Key Michigan Statutes
Statutes every Michigan real estate licensee should know
Licensing & Brokerage
MCL 339.2501–339.2518 Michigan Occupational Code — Article 25. Governs all real estate licensing, broker duties, and disciplinary actions.
R 339.22301–339.22344 Administrative Rules under Article 25. Details license application requirements, CE, and brokerage operations.
Transactions & Contracts
MCL 565.951–565.965 Michigan Seller Disclosure Act. Mandatory disclosure requirements for residential sellers.
MCL 566.132 Statute of Frauds — real estate contracts must be in writing to be enforceable.
MCL 565.1–565.201 Conveyances Act — governs deeds, recording, and title transfer.
MCL 565.25 Requires certain deeds to be acknowledged before a notary to be recorded.
Landlord-Tenant
MCL 554.601–554.641 Michigan Landlord and Tenant Relationships Act — security deposits, notice requirements, and tenant rights.
MCL 554.631–554.641 Michigan Truth in Renting Act — prohibits illegal lease clauses.
Foreclosure
MCL 600.3201–600.3285 Foreclosure by Advertisement — the primary non-judicial foreclosure method in Michigan.
MCL 600.3101–600.3175 Judicial Foreclosure statute.
Civil Rights & Fair Housing
MCL 37.2101–37.2804 Elliott-Larsen Civil Rights Act — Michigan's broad anti-discrimination law covering housing, employment, and public accommodation.
42 USC § 3604 Federal Fair Housing Act — prohibits discrimination in the sale, rental, and financing of housing.
Environmental & Land Use
MCL 324.101 (NREPA) Natural Resources and Environmental Protection Act — comprehensive environmental statute covering wetlands, contaminated sites, water quality.
MCL 125.3101 Michigan Zoning Enabling Act — authorizes local governments to create zoning ordinances.
MCL 559.101 Michigan Condominium Act — governs condominium creation, master deeds, bylaws, and association powers.
Transfer Taxes
MCL 207.521–207.537 Michigan Real Estate Transfer Tax Act — state transfer tax of $3.75 per $500 (or fraction) of the sale price.
MCL 207.502 County Real Estate Transfer Tax — $0.55 per $500 (or fraction) of the sale price.
Quick-Reference Numbers
Critical figures for the Michigan PSI exam — memorize these
40 hrs
Salesperson pre-license course hours
90 hrs
Broker pre-license course hours
18 yrs
Minimum age for licensure
3 yrs
License renewal cycle (birthday)
18 CE hrs
CE required per 3-year renewal
3 yrs exp
Salesperson experience required before broker exam
70%
Minimum passing score on PSI exam
$3.75
State transfer tax per $500 (or fraction)
$0.55
County transfer tax per $500 (or fraction)
72 hrs
Buyer's right to rescind after late SDS delivery
1.5× rent
Maximum security deposit
30 days
Landlord return security deposit after move-out
7 days
Landlord must provide move-in inventory checklist
7-day
Notice to quit for nonpayment of rent
24-hr
Notice to quit for illegal drug activity
6 months
Standard foreclosure redemption period
12 months
Redemption period if property abandoned or loan > 2/3 original balance
4 weeks
Foreclosure advertisement publication period
15 yrs
Adverse possession / prescriptive easement period
10 days
Buyer's right to test for lead paint (pre-1978 homes)
4 pCi/L
EPA action level for radon
1978
Cutoff year for lead paint disclosure requirement
43%
Maximum preferred DTI ratio for most mortgage lenders
78% LTV
LTV at which PMI is automatically cancelled
3 days
Lender must provide Loan Estimate after mortgage application
3 days
Closing Disclosure must be delivered before closing
1 yr
HUD complaint filing deadline (Fair Housing)
2 yrs
Federal court Fair Housing lawsuit deadline
640 acres
1 Section (Government Survey)
36 sections
1 Township (Government Survey)
