MI Real Estate cheat sheet

Michigan real estate licensees are regulated under Article 25 of the Occupational Code (Public Act 299 of 1980), administered by the Department of Licensing and Regulatory Affairs (LARA).

Michigan real estate transfer tax is $3.75 per $500 of consideration at the state level; a county may add up to $1.10 per $500, collected when the deed is recorded.

Proposal A limits annual increases in a property's taxable value to the lesser of 5% or the inflation rate; the limit is removed (uncapped) in the year after a transfer of ownership.

State equalized value (SEV) is 50% of true cash value, and assessed value is likewise 50% of market value; taxable value may be lower than SEV because of the Proposal A cap.

The Principal Residence Exemption exempts a portion of local school operating millage (up to 18 mills) for an owner's principal residence; the owner files the claim with the local assessor by June 1 (November 1 for claims filed after May 1).

The Seller Disclosure Act applies to transfers of residential property containing not more than four dwelling units; if the statement is delivered after the purchase agreement is signed, the buyer may rescind within 72 hours.

Foreclosure by advertisement is the nonjudicial Michigan remedy; after a sheriff's sale the statutory redemption period for residential property is generally six months.

The buyer files a Property Transfer Affidavit with the local assessor within 45 days of a transfer; the affidavit is separate from the transfer tax return filed at recording.

A Michigan salesperson license requires 40 hours of approved prelicensing education and passage of the state examination; a broker license requires 90 hours plus three years of experience.

A salesperson must be sponsored by and work under a licensed broker; commissions are paid to the broker, who then compensates the salesperson.

Michigan licenses run on a three-year cycle with 18 hours of approved continuing education per cycle, including required legal update hours.

Grounds for discipline include fraud, misrepresentation, undisclosed dual agency, commingling trust funds, and failure to account for money belonging to others.

Brokers must maintain a separate trust (escrow) account for funds belonging to others and may not commingle those funds with operating or personal money.

Unlicensed assistants may perform clerical and ministerial work but may not negotiate terms, solicit business, or perform any act requiring a license.

A licensee must disclose in writing the type of agency relationship before the parties sign a purchase agreement, and dual agency requires the informed written consent of all parties.

Brokers must keep transaction and trust account records available for examination by the licensing agency, and advertising must include the employing broker's name.

Michigan co-ownership forms include tenancy in common (no survivorship), joint tenancy (right of survivorship), and tenancy by the entirety (married couples only).

Tenancy by the entirety requires the unities of time, title, interest, and possession plus a valid marriage; a creditor of one spouse generally cannot attach the property.

Freehold estates include fee simple absolute, fee simple determinable, and life estates; leaseholds are personal property interests held for a term.

An easement appurtenant benefits a dominant parcel and runs with the land; an easement in gross benefits a person or entity and has no dominant estate.

Michigan uses the reasonable-use doctrine for riparian owners on inland lakes, and the state holds title to Great Lakes bottomlands in trust for the public.

An item becomes a fixture based on the method of attachment, adaptation to the property, and the intent of the party who installed it.

Michigan bars an action to recover land after 15 years of another's possession that is actual, open, notorious, exclusive, hostile, and continuous.

Mineral rights may be severed from the surface estate, creating separate ownership; the surface owner retains rights reasonably necessary to use the surface.

The Michigan statute of frauds requires real estate purchase agreements, deeds, and leases longer than one year to be in writing and signed by the party to be charged.

Required elements of a valid contract are offer, acceptance, consideration, legal capacity, lawful purpose, and, for real estate, a compliant writing.

Michigan's statute of limitations for an action on a written contract is six years; oral contracts carry a shorter period.

In a land contract the seller retains legal title while the buyer receives equitable title and possession; the deed is delivered after the final payment.

An option gives a buyer the right to purchase within a set period at set terms; a right of first refusal gives a right to match a third party's offer only.

Contingencies to address include financing, appraisal, inspection, title review, and sale of the buyer's existing home; failure of a contingency typically permits termination.

Liquidated damages clauses must be a reasonable forecast of loss; earnest money forfeiture terms should state who holds the deposit and when it becomes nonrefundable.

A time-is-of-the-essence clause makes deadlines enforceable; without it, courts may allow a reasonable extension of performance.

Michigan recognizes seller agency, buyer agency, disclosed dual agency, and non-agency services; the relationship type must be disclosed in writing.

Fiduciary duties owed by the agent are care, obedience, loyalty, disclosure, accounting, and confidentiality; confidentiality survives termination of the agreement.

Dual agency is permitted only with the informed written consent of all parties, and the agent may not disclose one party's confidential information to the other.

Listing types include exclusive right to sell (commission regardless of who procures the buyer), exclusive agency (owner retains a named buyer), and open listing.

The broker who is the procuring cause of a sale may be entitled to compensation even without a written agreement with the buyer.

Only a licensed broker may contract for and receive compensation for brokerage services; referral fees to unlicensed persons are prohibited.

A broker is generally responsible for the acts of affiliated licensees performed within the scope of the brokerage relationship.

Loan-to-value ratio equals loan amount divided by property value or purchase price, whichever is lower; a lower ratio reduces lender risk.

PITI includes principal, interest, taxes, and insurance, and is the figure used in most affordability and underwriting calculations.

FHA loans require a 3.5% minimum down payment plus upfront and annual mortgage insurance; VA loans allow 0% down with a funding fee; conventional loans typically require 20% down to avoid mortgage insurance.

Federal TRID rules require the Loan Estimate within three business days of a completed application and the Closing Disclosure at least three business days before consummation.

One discount point equals 1% of the loan amount and is paid upfront to reduce the rate or cover origination charges; the APR expresses the total yearly cost of credit.

RESPA limits the lender's escrow cushion to one-sixth (two months) of the estimated annual disbursements for taxes and insurance.

Common underwriting guidelines are a 28% housing ratio and 36% total debt ratio for conventional loans, with FHA often allowing 31%/43%.

A due-on-sale (alienation) clause allows the lender to accelerate the loan if the property is transferred without approval.

The three approaches to value are sales comparison (typical for residential), cost (new construction and special-use property), and income (investment property).

Income approach value equals net operating income divided by the capitalization rate; the gross rent multiplier equals sale price divided by gross monthly rent.

In the sales comparison approach the subject is the benchmark, so a superior comparable is adjusted downward and an inferior comparable is adjusted upward.

Depreciation is classified as physical deterioration, functional obsolescence, or external obsolescence; only the first two may be curable by the owner.

Highest and best use must be legally permissible, physically possible, financially feasible, and maximally productive.

Key valuation principles include substitution, contribution, conformity, progression and regression, anticipation, and increasing or decreasing returns.

Market value is the most probable price in a competitive and open market under all conditions requisite to a fair sale; market price is the actual amount paid.

Michigan appraisers are licensed or certified by LARA and must comply with USPAP; a comparative market analysis is not an appraisal.

A Michigan deed must be in writing, signed by the grantor, contain a legal description and the grantee's name and address, be acknowledged before a notary, and include a preparation statement naming who drafted it.

Deed types include general warranty, covenant deed (Michigan statutory form with limited covenants), special warranty, and quitclaim (conveys only the grantor's interest with no warranties).

Recording with the county Register of Deeds gives constructive notice; Michigan is a race-notice state, so a later purchaser must record first and take without notice.

A deed is effective only upon delivery by the grantor with present intent to convey and acceptance by the grantee; recording does not substitute for delivery.

The state and county real estate transfer tax is computed on consideration and paid at recording; a Property Transfer Affidavit goes to the assessor within 45 days.

An owner's title policy protects the buyer for as long as the buyer or heirs hold title; a lender's policy protects the lender only up to the loan balance.

Michigan closings are commonly conducted by title agencies; attorney participation is permitted but not required, and closing costs and prorations are itemized on the settlement statement.

Title evidence includes the title commitment, abstract of title, and attorney's opinion; the commitment lists requirements to clear and exceptions to coverage.

Michigan's Marketable Record Title Act treats a title as marketable when the recorded chain shows an unbroken root of title of at least 40 years, subject to statutory exceptions.

A warranty deed contains covenants of seisin, right to convey, against encumbrances, quiet enjoyment, warranty, and further assurances.

Encumbrances include liens, easements, deed restrictions, encroachments, and lis pendens; a cloud on title may be removed by a quiet title action.

Michigan property taxes are paid in arrears through a summer bill based on a July 1 levy and a winter bill based on a December 1 levy.

Delinquent property taxes can lead to forfeiture and foreclosure by the county treasurer, followed by a statutory redemption period before title vests in the purchaser.

Prorations at settlement divide taxes, rents, and similar items between buyer and seller as of the closing date, typically using a 365-day year.

Federal fair housing protected classes are race, color, religion, sex, national origin, familial status, and disability.

Michigan's Elliott-Larsen Civil Rights Act adds age, marital status, height, and weight to the classes protected in real estate transactions.

Prohibited practices include steering, blockbusting, redlining, discriminatory advertising, and differing terms or services based on a protected class.

The federal Fair Housing Act exempts certain private sales and rentals of single-family homes by an owner without a broker, provided no discriminatory advertising is used.

Advertising by a Michigan salesperson must identify the employing broker; the salesperson may not hold out as an independent brokerage.

A comparative market analysis estimates value for listing purposes but is not an appraisal and must not be presented as one.

Earnest money must be handled per the written agreement and deposited by the broker into a trust account; the broker must account for it and keep transaction records available for inspection.

The Michigan Seller's Disclosure Statement must be delivered before a binding purchase agreement is signed for residential property of one to four units.

If the disclosure is delivered after signing, the buyer may rescind within 72 hours; the right does not apply once the buyer closes.

Seller Disclosure Act exemptions include court-ordered transfers, foreclosure sales, transfers to or from a government entity, transfers between co-owners, and new construction never occupied.

Federal law requires sellers and landlords of pre-1978 housing to disclose known lead-based paint hazards and provide the EPA pamphlet and a 10-day inspection opportunity.

Licensees owe a duty to disclose known material facts affecting value or safety, and must disclose in writing whom they represent in the transaction.

Members of the National Association of Realtors are additionally bound by the Code of Ethics, including duties of honesty, fairness, and non-discrimination.

Confidential information learned in an agency relationship may not be disclosed without consent, even after the relationship ends, unless required by law.