Contracts, Agency and Brokerage Relationships
Contracts
Formation and the statute of frauds
A valid contract needs offer, acceptance, consideration, legal capacity, and a lawful purpose. Michigan's statute of frauds requires land sale contracts, deeds, and leases longer than one year to be in writing and signed by the party to be charged. Earnest money is consideration but not the measure of damages. Electronic signatures satisfy the writing requirement under Michigan's version of UETA.
Negotiation mechanics
A counteroffer terminates the original offer - the party making the last counteroffer becomes the offeror, and the other party's signature creates the contract. Acceptance must be communicated to the offeror. "Time is of the essence" clauses make deadlines enforceable; without them, courts may allow reasonable delays.
Key clauses
Financing, appraisal, inspection, and sale-of-buyer's-home contingencies protect the buyer. A mortgage-contingency clause does not excuse a buyer who simply changes lenders. Assignment is permitted unless the contract prohibits it.
Remedies
If the buyer breaches, the seller may keep the earnest money as liquidated damages (if so written), sue for damages, or seek specific performance. A buyer may seek specific performance or return of deposit.
Land contracts
Michigan uses contract-for-deed sales heavily. The vendee holds equitable title and the vendor retains legal title. Michigan law prescribes notice requirements before forfeiture and gives a defaulting vendee redemption rights in defined circumstances, so a vendor cannot simply retake possession.
Traps
Treating verbal assurances as contract modifications; confusing void (never enforceable) with voidable (can be rescinded); assuming a home inspection contingency allows cancellation for any dislike rather than a material defect discovered in the stated period.
Rule of thumb
"Last shot wins" - the party who makes the final counteroffer is the offeror, and once the other party signs, a contract exists on those exact terms.
Agency and Brokerage Relationships
Who represents whom
Michigan recognizes seller agency, buyer agency, and dual agency. Before a seller, buyer, landlord, or tenant signs an agency agreement, the licensee must deliver the state's "Disclosure Regarding Real Estate Agency Relationships" form and explain the relationship in writing. Dual agency requires the informed written consent of all parties. A consumer who has not signed an agency agreement is a customer, owed honesty, disclosure of material facts, and fair dealing - but not loyalty or confidentiality.
Fiduciary duties
The classic package is obedience, loyalty, disclosure, confidentiality, accounting, and reasonable care. Confidentiality survives termination of the relationship. The broker must account for all money belonging to others and may not commingle it with operating funds.
Brokerage mechanics
Michigan licensees typically work as independent contractors of the brokerage, which affects withholding but not the broker's supervisory responsibility. A listing agreement is a contract between the seller and the broker, not the salesperson. Compensation is negotiable, is typically earned when a ready, willing, and able buyer is produced on the listed terms, and is paid to the broker.
Traps
- Assuming an agent who shows a buyer homes automatically represents that buyer - without a written buyer's agency agreement, the agent is most often the seller's agent.
- Forgetting that a buyer's confidential financial information may not be passed to the seller when a buyer's agent is involved.
- Missing that a seller's agent still owes the buyer truthful disclosure of material defects.
- Believing a "limited service" listing eliminates fiduciary duties - it changes the scope of service, not the duty of loyalty.
Worked example
A buyer calls the number on a yard sign. The licensee represents the seller. The licensee must treat the buyer honestly and disclose known material defects, but must not reveal the seller's bottom line or motivation to the buyer.