Real Estate Practice, Disclosures and Ethical Duties
Real Estate Practice
Day-to-day brokerage
A licensee's work runs from prospecting and listing presentations through negotiation, transaction management, and closing. Written listing agreements and buyer's agency agreements define the scope of service, the term, and compensation. Compensation is always negotiable and must be stated in the agreement.
Handling money
Earnest money and other funds belonging to others must be placed in the broker's trust (escrow) account - never in a personal or operating account. Trust records must be maintained and reconciled, and the funds may not be commingled with the broker's own money.
Advertising and representation
Advertising must identify the brokerage; a salesperson may not advertise in a way that suggests independent practice. Unlicensed assistants cannot show property, quote prices, or negotiate. Referral fees may be paid only to licensed persons or through the broker, subject to limited statutory exceptions.
Multiple offers
When several buyers compete, the seller decides how to respond. The agent must present all offers promptly, may not disclose one buyer's price or terms to another buyer, and must follow the seller's written direction on counters and highest-and-best instructions.
Traps
- Disclosing the existence or terms of a competing offer to advantage a favored buyer.
- Depositing a buyer's earnest money check before the contract is fully executed when the contract says otherwise.
- Promising a specific sale price or a specific tax increase - the agent is not the assessor or the appraiser.
- Discussing commission rates with agents at another brokerage.
Worked example
A buyer client hands the agent a $5,000 earnest money check payable to the brokerage. The agent delivers it to the broker, who deposits it into the trust account and receipts it in writing. The agent never deposits it into a personal account or the brokerage's operating account.
Disclosures and Ethical Duties
The Seller's Disclosure Statement
For residential transfers of one to four units, Michigan requires a written Seller's Disclosure Statement covering the condition of the property and its systems before the buyer signs the purchase agreement. The form is a good-faith statement of actual knowledge - "unknown" is an acceptable answer only when the seller truly does not know. If the disclosure is delivered after the purchase agreement is signed, the buyer has a short statutory window (72 hours) to terminate.
Exemptions
Common exemptions include newly constructed homes never occupied, court-ordered transfers, foreclosure sales, transfers between co-owners, transfers by gift or to a family member, and transfers of property not used as a residence. Exempt does not mean the seller may lie.
"As is"
An as-is sale transfers the property in its present condition, but it does not excuse fraud, misrepresentation, or the statutory disclosure obligation. A seller who conceals a known defect remains liable.
Agent duties
A licensee must disclose known material facts about the property to all parties and may not make a false statement about a material fact. Confidential information gleaned in an agency relationship is not a material fact and stays confidential. Federal lead-based paint disclosure applies to pre-1978 housing.
Fair housing and ethics
Michigan's Elliott-Larsen Civil Rights Act adds marital status, age, height, and weight to the federal protected classes, and the Persons with Disabilities Civil Rights Act covers disability in housing. Steering, blockbusting, and discriminatory advertising violate both state and federal law. RESPA prohibits referral kickbacks.
Traps
Believing "as is" waives disclosure; assuming a seller must volunteer opinions rather than facts; treating an exempt transfer as permission to conceal; disclosing a seller's motivation to a buyer.
Worked example
A seller knows the basement floods and marks "no" on the disclosure. The buyer later discovers the flooding. The as-is clause does not protect the seller - a false statement of a known material fact is misrepresentation.