Michigan Real Estate Law, Licensing and Regulation
Michigan Real Estate Law
The statutory frame
Michigan real estate practice is governed primarily by Article 25 of the Occupational Code (MCL 339.2501 et seq.), administered by the Department of Licensing and Regulatory Affairs (LARA) through the Bureau of Professional Licensing. Article 25 defines who must hold a license, describes the duties licensees owe to the public, and authorizes sanctions: reprimand, fines, probation, suspension, revocation, and denial of renewal. Enforcement is administrative - a local board of REALTORS® cannot suspend a license, and neither can the state association.
Michigan statutes that recur in questions
- Agency disclosure - the "Disclosure Regarding Real Estate Agency Relationships" form (MCL 339.2517) must be given to a seller, buyer, landlord, or tenant before that person signs an agency agreement.
- Seller's Disclosure Statement - MCL 565.951 et seq., residential transfers of 1–4 units.
- Recording - MCL 565.29 makes Michigan a race-notice state.
- Transfer tax - state tax of $3.75 per $500 of consideration, plus a county tax of up to $0.55 per $500 where the county has adopted it.
- Property tax - Proposal A caps annual growth of taxable value and uncaps on transfer of ownership.
Traps
Assuming commissions are fixed (they are always negotiable); confusing federal Fair Housing protected classes with the Elliott-Larsen Civil Rights Act list, which adds marital status, age, height, and weight; assuming a licensee's personal opinion of value is an appraisal.
Worked example
A home sells for $200,000 in a county with the full county tax. State tax = $200,000 / $500 = 400 units x $3.75 = $1,500. County tax = 400 x $0.55 = $220. Total transfer tax $1,720, customarily paid by the seller in Michigan.
Licensing and Regulation
Entry requirements
A Michigan salesperson must be at least 18, complete 40 clock hours of approved prelicensing education, pass the state exam, and be sponsored by a licensed Michigan broker. Until a broker sponsors the license, it is inactive and the person may not perform licensed acts. A Michigan broker must be at least 18, hold a high school diploma or equivalent, complete 90 hours of approved prelicensing education, document the required experience as a salesperson, and pass the broker exam.
Maintaining the license
Michigan licenses renew on a three-year cycle, and each cycle requires 18 hours of continuing education, including legal-update hours, completed before renewal. Licensees must report address changes to LARA and must transfer or inactivate a license when the sponsoring broker relationship ends.
Supervision and scope
A broker is responsible for the acts of the licensees the broker sponsors. Salespersons may not accept compensation from anyone except their own broker; all commissions and referral money flow through the brokerage. Unlicensed assistants may perform clerical work, answer phones, and prepare marketing, but they may not show property, quote terms or prices, negotiate, or discuss financing.
Traps
- Assuming an unlicensed assistant "just showing" a home is harmless - that is licensed activity.
- Forgetting that advertising by a salesperson must include the sponsoring broker's name.
- Missing that the license becomes inactive on termination of sponsorship, so continued practice is unlicensed practice.
- Believing continuing education may be completed during the grace period after expiration - it must be done before renewal.
Rule of thumb
"No sponsor, no practice." A Michigan salesperson's authority to act exists only while a broker is legally responsible for supervising that person.