Your FREE Michigan Real Estate Flashcards 2026 – 200+ Cards

Michigan Real Estate Exam Flashcards

LARA (Michigan)

The Department of Licensing and Regulatory Affairs — the Michigan agency whose Bureau of Professional Licensing licenses and regulates real estate salespersons and brokers.

Bureau of Professional Licensing (BPL)

The unit within Michigan LARA that administers real estate licensing, processes applications, and handles licensee discipline.

Article 25 of the Occupational Code

Public Act 299 of 1980 (MCL 339.2501 et seq.) — the Michigan statute that governs real estate broker and salesperson licensing and practice.

MCL 339 (Occupational Code)

The Michigan Compiled Laws chapter containing the Occupational Code; Article 25 within it governs real estate licensure.

Michigan prelicensure education (salesperson)

40 clock hours of LARA-approved education, including at least 4 hours of civil rights law and equal opportunity in housing, before sitting for the exam.

Michigan prelicensure recency rule

The 40-hour salesperson prelicensure course must have been completed within the 36 months immediately before applying for the license.

Michigan real estate license cycle

A Michigan salesperson or broker license is issued for a 3-year cycle, then must be renewed.

Michigan continuing education (CE)

18 hours of approved continuing education each 3-year license cycle, including at least 2 hours per year on laws, rules, and court cases (legal updates).

Michigan CE legal-update rule

At least 2 hours per year of the 3-year cycle must cover real estate laws, rules, and court cases — 6 of the 18 CE hours overall.

Michigan salesperson supervision rule

A Michigan salesperson may provide real estate services only when employed by and under the supervision of a licensed real estate broker — never independently.

Michigan salesperson compensation rule

A Michigan salesperson may accept a commission or compensation only from the broker who employs them, never directly from a client.

MCL 339.2512 (escrow deposit timing)

A Michigan broker must deposit earnest money and other funds belonging to others into a trust/escrow account within 2 banking days after notice that the offer was accepted by all parties.

Michigan trust/escrow account rule

Client funds must be held in a separate non-interest-bearing demand account at a recognized depository under the administrative rules — kept apart from the broker's own funds.

Commingling (Michigan)

Improperly mixing client trust funds with the broker's personal or business operating funds — prohibited and grounds for discipline under Article 25.

MCL 339.2517 (agency disclosure)

Requires a Michigan licensee to disclose the available types of agency relationships, in writing, before the buyer or seller discloses confidential information.

Michigan agency disclosure timing

The agency relationship disclosure must be made before the buyer or seller shares any confidential information specific to that person.

Transaction coordinator (Michigan)

On Michigan's statutory agency disclosure form, a licensee who is NOT the agent of either party but provides services to complete the transaction.

Disclosed consensual dual agency (Michigan)

Acting as agent for both buyer and seller in one transaction; lawful in Michigan only with the knowing, informed written consent of both parties.

Designated/affiliated agents (Michigan)

When one affiliated licensee represents the seller and another the buyer, the broker and named supervisory brokers are treated as disclosed consensual dual agents.

Buyer's agent (Michigan)

A licensee hired to represent the buyer; owes fiduciary duties to the buyer even though the seller may pay the commission.

Seller Disclosure Act (Michigan)

Public Act 92 of 1993 (MCL 565.951 et seq.) requiring a Seller's Disclosure Statement for residential property transfers.

Michigan Seller's Disclosure Statement

A statement of the property's condition known by the seller — a disclosure, not a warranty — required by the Seller Disclosure Act.

Seller Disclosure Act scope

Applies to transfers of real estate of not less than 1 and not more than 4 residential dwelling units.

Seller's Disclosure Statement delivery

Must be delivered to the prospective buyer before the seller executes a binding purchase agreement.

Elliott-Larsen Civil Rights Act

Public Act 453 of 1976 — Michigan's primary fair-housing statute prohibiting discrimination in real estate transactions.

Elliott-Larsen extra protected classes

Beyond the federal classes, Michigan's Elliott-Larsen Act also protects age, height, weight, and marital status in housing.

Elliott-Larsen 2023-2024 amendments

Michigan's Elliott-Larsen Act now expressly protects against discrimination based on sexual orientation and gender identity or expression.

Michigan state transfer tax rate

$3.75 for each$500 (or fraction) of the value transferred — the Michigan State Real Estate Transfer Tax (SRETT).

Michigan county transfer tax rate

$0.55 for each$500 (or fraction) of value in most counties — the County Real Estate Transfer Tax.

Michigan transfer tax — who pays

The seller (transferor) customarily pays the state and county real estate transfer tax in a typical Michigan sale.

No Michigan recovery fund

Michigan does NOT maintain a consumer real estate recovery fund; it funds a Real Estate Education Fund and a Real Estate Enforcement Fund instead.

Michigan Real Estate Education Fund

Funded by $15 of each license fee per 3-year cycle (MCL 338.2237); supports real estate education programs.

Michigan Real Estate Enforcement Fund

Money usable by LARA and the Attorney General only for investigation and enforcement against unlicensed activity and real estate fraud (MCL 338.2237).

Board of Real Estate Brokers and Salespersons

The Michigan board that works with LARA to set standards and advise on regulation of real estate licensees.

Michigan real estate board composition

Nine members — six professional (industry) members and three public members.

Article 25 prohibited lottery scheme

Operating a lottery, contest, game, prize, or drawing to promote a real estate sale is prohibited under Article 25 (MCL 339.2511).

LARA disciplinary sanctions

For an Article 25 violation, LARA may impose license suspension, revocation, fines, or other penalties.

Failing to account for client money

Mishandling escrow funds or failing to account for or remit money belonging to others is grounds for discipline under Article 25.

Dower abolished (Michigan)

Michigan's common-law right of dower (a widow's interest in a deceased husband's land) was abolished effective April 6, 2017 (2016 PA 489).

Tenancy by the entirety (Michigan)

The common estate for married couples taking title together; gives automatic right of survivorship and protects against one spouse's individual creditors.

Land contract (Michigan)

An installment contract for deed where the seller keeps legal title while the buyer holds equitable title and makes installment payments.

Michigan broker requirements

MCL 339.2504 requires at least 90 hours of prelicensure education (incl. 9 hours civil rights/fair housing) and the equivalent of 3 years of full-time real estate experience.

Michigan licensing tiers

Salesperson (works under a broker), associate broker (broker-qualified but works under another broker), and broker (may own a brokerage and supervise salespersons).

PSI (Michigan testing provider)

The vendor that administers the Michigan real estate salesperson and broker licensing examinations.

Michigan exam structure

115 questions total — 80 national/general + 35 Michigan state — taken in one session, each portion scored separately.

Michigan exam passing score

70% on each portion: 56 of 80 correct on the national portion and 24 of 35 correct on the Michigan state portion.

Michigan exam time limit

About 180 minutes (3 hours) is allotted to complete both portions of the salesperson exam.

Retaking one Michigan portion

If you pass one portion and fail the other, you may retake just the portion you failed within the allowed period.

Michigan civil-rights education rule

At least 4 of the 40 prelicensure hours (salesperson) must cover civil rights law and equal opportunity in housing.

Net listing in Michigan

A listing where the broker keeps any amount above the seller's set price; disfavored as a conflict of interest and restricted under license law.

Michigan agency disclosure form

The statutory form (MCL 339.2517) describing seller's agent, buyer's agent, dual agent, and transaction coordinator relationships, provided to the client in writing.

Real property

Land, everything permanently attached to it (improvements and fixtures), and the bundle of legal rights of ownership.

Personal property (chattel)

Movable property not permanently affixed to land; transfers by a bill of sale, not a deed.

Bundle of rights

Possession, use (enjoyment), exclusion, disposition (transfer), and control — the rights that come with ownership.

Fee simple absolute

The most complete ownership: unlimited duration, freely transferable by deed or will.

Life estate

An estate measured by someone's lifetime; the remainder or reversion takes over at death.

Fixture

Personal property attached to real property so it becomes part of it and transfers with the land.

MARIA test (fixtures)

Method of attachment, Adaptability, Relationship of parties, Intention, and Agreement — used to decide whether an item is a fixture.

Emblements

Annual crops produced by a tenant's labor; treated as personal property the tenant may harvest even after the lease ends.

Easement

A nonpossessory right to use another's land for a purpose, such as a driveway or utility line.

Easement appurtenant

An easement that benefits an adjoining parcel (the dominant estate) and burdens another (the servient estate); runs with the land.

Easement in gross

An easement benefiting a person or company (e.g., a utility) rather than a parcel of land.

Encroachment

An unauthorized intrusion of an improvement onto a neighbor's land, such as a fence over the boundary.

Encumbrance

Any claim, lien, charge, or right that limits an owner's title — liens, easements, encroachments, deed restrictions.

Lien

A monetary claim against property used as security for a debt; may be voluntary (mortgage) or involuntary (tax lien).

Police power

Government's authority to regulate land for public health, safety, and welfare — zoning and codes, with no payment to the owner.

Eminent domain

Government's power to take private property for public use through condemnation, paying just compensation.

Escheat

Reversion of property to the state when an owner dies with no will and no heirs.

PETE

The four government powers: Police power, Eminent domain, Taxation, Escheat — only eminent domain pays the owner.

Zoning

Local regulation dividing land into use districts (residential, commercial, industrial) under police power.

Variance

Permission to deviate from a zoning rule due to a hardship, without changing the underlying zoning.

Nonconforming use

A lawful use predating a zoning change that may continue (grandfathered) even though it no longer conforms.

Metes and bounds

A legal description using distances (metes) and directions (bounds) traced from a point of beginning.

Rectangular (government) survey

Describes land by townships, ranges, and sections off principal meridians and base lines.

Section (survey)

One square mile of land — 640 acres — and one thirty-sixth of a township.

Township (survey)

A 6-mile by 6-mile area containing 36 sections.

Acre

A unit of land area equal to 43,560 square feet.

Lot-and-block

A legal description referring to a recorded subdivision plat by lot and block number.

Severalty

Sole ownership of property by one person or entity.

Tenancy in common

Co-ownership where each owner holds an undivided, willable share with no right of survivorship.

Joint tenancy

Co-ownership with the right of survivorship; requires the four unities of time, title, interest, and possession.

Four unities

Time, Title, Interest, and Possession — all required to create a joint tenancy.

Right of survivorship

On the death of one co-owner, their interest passes automatically to the surviving co-owners, not to heirs.

Tenancy by the entirety

A survivorship co-ownership reserved for married couples; common in Michigan and shields against one spouse's separate creditors.

General warranty deed

The deed giving the most protection; the grantor warrants clear title against all defects, even before their ownership.

Special (limited) warranty deed

Warrants only against defects arising during the grantor's ownership.

Quitclaim deed

Conveys whatever interest the grantor has with no warranties; often used to clear a cloud on title.

Covenant warranty deed (Michigan)

Michigan's customary deed form that conveys with covenants of warranty, similar to a general warranty deed.

Grantor and grantee

The grantor conveys title; the grantee receives it. Only the grantor signs the deed.

Delivery and acceptance

Title passes when the deed is delivered by the grantor and accepted by the grantee, not when it is recorded.

Recording

Entering a deed in the county register of deeds; gives constructive (public) notice and sets priority.

Constructive notice

Notice the law presumes everyone has of recorded documents, whether or not they actually read them.

Title insurance

A policy protecting the insured against loss from title defects existing before the policy date.

Chain of title

The recorded history of ownership of a parcel from the earliest grantor to the present owner.

Cloud on title

A claim or encumbrance that may impair title and that an action to quiet title or a quitclaim deed can remove.

Adverse possession

Acquiring title by open, notorious, hostile, continuous possession for the statutory period (15 years in Michigan).

Will (devise)

A written instrument transferring real property at death to a devisee.

Intestate succession

Distribution of a decedent's property by state statute when there is no valid will.

Market value

The most probable price a property should bring in a competitive, open market under fair-sale conditions — an opinion of value.

Market price

The actual price a property sold for, which may differ from market value.

Appraisal

An impartial, supported opinion of value by a licensed appraiser as of a specific date, following USPAP.

USPAP

Uniform Standards of Professional Appraisal Practice — the ethical and performance standards appraisers must follow.

Comparative market analysis (CMA)

A licensee's estimate of value from recent comparable sales, used to price a listing — not a formal appraisal.

Sales comparison approach

Values property by comparing it to recently sold similar properties and adjusting for differences; best for homes.

Cost approach

Land value plus the cost to rebuild improvements new, minus depreciation; best for new or special-use property.

Income (capitalization) approach

Value = net operating income / capitalization rate; best for income-producing property.

Net operating income (NOI)

Effective gross income minus operating expenses, before any mortgage payment.

Capitalization rate

The rate of return on an income property: NOI / value. A higher cap rate implies more risk and lower value.

Gross rent multiplier (GRM)

A quick value tool: sale price / gross monthly (or annual) rent.

Highest and best use

The legally permissible, physically possible, financially feasible, and most profitable use of a site — the basis of value.

Reconciliation (appraisal)

Weighing the three value indications into one final opinion of value — not averaging them.

Depreciation (appraisal)

Loss in value from physical deterioration, functional obsolescence, or external obsolescence.

Principle of substitution

A buyer will pay no more for a property than the cost of an equally desirable substitute.

Principle of progression

A lower-value home gains value from being near higher-value homes.

Principle of regression

A higher-value home loses value from being near lower-value homes.

Assessed value

The value a county assessor assigns to property for taxation; in Michigan, half of true cash value.

Taxable value (Michigan)

The capped value used for Michigan property taxes; rises by the lesser of inflation or 5% until ownership transfers.

Valid contract

An enforceable agreement requiring offer and acceptance, consideration, legal purpose, and competent parties.

Void vs voidable

A void contract has no legal effect (missing an essential element); a voidable one may be rescinded by a party (e.g., a minor's).

Statute of frauds

Requires real estate contracts (and most leases over a year) to be in writing to be enforceable.

Consideration

Something of legal value exchanged by the parties — required for a binding contract.

Earnest money

A buyer's good-faith deposit showing serious intent; held in trust and usually applied to the price at closing.

Contingency

A condition that must be satisfied for a contract to become binding — financing, inspection, or appraisal.

Specific performance

A court order compelling a defaulting party to complete the sale, because each parcel of land is unique.

Liquidated damages

A pre-agreed amount (often the earnest money) a party keeps if the other defaults.

Listing agreement

A contract employing a broker to find a buyer for the owner's property in exchange for compensation.

Exclusive right-to-sell listing

The listing broker earns the commission no matter who finds the buyer.

Exclusive agency listing

The broker earns the commission unless the owner personally sells the property.

Open listing

Only the broker who actually procures the buyer earns the commission.

Agency

A fiduciary relationship in which an agent represents a principal in dealings with third parties.

Fiduciary duties (OLD CAR)

Obedience, Loyalty, Disclosure, Confidentiality, Accounting, and Reasonable care — the duties an agent owes a client.

Principal vs customer

The principal is the client the agent represents; a customer is the other party, owed honesty and fair dealing.

Procuring cause

The broker whose efforts directly bring about a ready, willing, and able buyer — entitled to the commission.

Puffing vs misrepresentation

Puffing is non-factual opinion ('great view'); misrepresentation is a false statement of material fact — the latter is actionable.

Subagency

When a cooperating broker represents the listing broker's principal (the seller) — less common today.

Power of attorney

A written authorization for an attorney-in-fact to act for a principal; required to sign a deed on another's behalf.

Fair Housing Act (1968)

Federal law banning housing discrimination based on race, color, religion, national origin, sex, familial status, and disability.

Federal protected classes

Race, color, religion, national origin, sex, familial status, and disability — seven federal fair-housing classes.

Steering

Illegally guiding buyers toward or away from neighborhoods based on a protected class.

Blockbusting

Inducing panic selling by claiming members of a protected class are moving into an area.

Redlining

A lender refusing to lend or insure in an area based on its racial or ethnic makeup.

Reasonable accommodation

A change in rules or services a housing provider must allow for a person with a disability, such as a service animal.

ADA

The Americans with Disabilities Act — requires accessibility in commercial and public-accommodation properties.

Do Not Call Registry

A federal list of consumers who opted out of telemarketing; firms must scrub call lists against it.

CAN-SPAM Act

Federal law setting rules for commercial email, including an opt-out and accurate header information.

Property management agreement

A contract by which an owner hires a manager to operate the property for a fee.

Lease

A contract conveying the right to use property for a term in exchange for rent (landlord = lessor, tenant = lessee).

Gross lease

The tenant pays a fixed rent and the landlord pays the operating expenses.

Net lease

The tenant pays rent plus some or all of the property expenses (taxes, insurance, maintenance).

Estate for years

A lease for a fixed term that ends automatically without notice.

Antitrust (price fixing)

Competitors agreeing to fix commission rates or divide markets — illegal; commissions are always negotiable.

Trust (escrow) account

A separate account where a broker holds client funds; commingling with the broker's own funds is prohibited.

Michigan Landlord and Tenant relations

Michigan statutes governing residential leases, including security-deposit limits and return timelines.

Material fact

A fact that would affect a reasonable buyer's decision or price; must be disclosed even if the buyer does not ask.

Latent defect

A hidden physical defect not discoverable by ordinary inspection; a known latent defect must be disclosed.

Caveat emptor

'Let the buyer beware' — the old rule now limited by modern disclosure law.

Lead-based paint disclosure

Federal rule (Title X) requiring sellers/landlords of pre-1978 housing to disclose known lead paint, give the EPA pamphlet, and allow a 10-day test window for sales.

Radon

An odorless, colorless radioactive gas from the natural breakdown of uranium in soil; can accumulate indoors.

Asbestos

A fibrous mineral once used in insulation and flooring; controlled by removal or encapsulation.

Mold

Fungal growth in damp areas that may require disclosure and remediation.

Underground storage tank (UST)

A buried tank that can leak and contaminate soil and groundwater, creating cleanup liability.

CERCLA / Superfund

Federal law imposing liability for cleanup of hazardous-waste contamination on current and past owners.

Stigmatized property

Property psychologically impacted by an event (e.g., a death); disclosure rules vary by state.

Wetlands

Protected areas where development is restricted; regulated in Michigan by EGLE under state and federal law.

EGLE (Michigan)

Michigan's Department of Environment, Great Lakes, and Energy — regulates wetlands, contamination, and water resources.

Flood zone disclosure

Notice that a property lies in a FEMA-designated floodplain, which may require flood insurance.

Promissory note

The borrower's written promise to repay a loan — the evidence of the debt.

Mortgage

A two-party security instrument pledging real property as collateral for a loan (mortgagor = borrower).

Deed of trust

A three-party security instrument conveying title to a trustee until the loan is repaid.

Michigan foreclosure

Michigan allows foreclosure by advertisement (non-judicial) as well as foreclosure by judicial action.

Foreclosure by advertisement

Michigan's non-judicial foreclosure: the lender publishes notice and sells at a sheriff's sale without a lawsuit.

Equity of redemption

The borrower's right to reclaim the property by paying the debt; Michigan allows a statutory redemption period after the sheriff's sale.

Conventional loan

A loan not insured or guaranteed by the government; PMI is usually required when the LTV exceeds 80%.

FHA loan

A loan insured by the Federal Housing Administration, allowing low down payments.

VA loan

A loan guaranteed by the Department of Veterans Affairs for eligible veterans, often with no down payment.

Loan-to-value ratio (LTV)

Loan amount / property value (or price); a higher LTV means a smaller down payment and more lender risk.

Private mortgage insurance (PMI)

Insurance protecting the lender on a conventional loan with an LTV above 80%.

Discount points

Prepaid interest paid at closing to lower the rate; one point equals 1% of the loan amount.

Amortization

Repaying a loan with regular payments of principal and interest until the balance reaches zero.

RESPA

The Real Estate Settlement Procedures Act — requires loan-cost disclosures and bans kickbacks at closing.

TILA

The Truth in Lending Act — requires disclosing the cost of credit, including the annual percentage rate (APR).

Loan Estimate

A TRID disclosure of estimated loan terms and costs, due within 3 business days of application.

Closing Disclosure

A TRID form of final loan terms and costs the borrower must receive at least 3 business days before closing.

Usury

Charging interest above the legal maximum rate.

Escrow (closing)

A neutral third party that holds funds and documents and disburses them when conditions are met.

Proration

Dividing prepaid or accrued items such as taxes, rent, and interest fairly between buyer and seller as of closing.

Commission formula

Commission = sale price × commission rate. A $250,000 sale at 6$15,000.

Seller net formula

Price for a target net = net / (1 − commission rate). A $300,000 net at 6% needs $300,000 / 0.94 ≈ $319,149.

Area of a rectangle

Area = length × width; for a triangle, area = ½ × base × height.

Square feet to acres

Divide square feet by 43,560. One acre = 43,560 square feet.

Feet per mile

5,280 feet = 1 mile — a figure not provided at the test center.

LTV calculation

LTV = loan / value. An 80% LTV on a $300,000 home is a$240,000 loan.

Property tax (mills)

Annual tax = taxable value × millage rate; one mill = $1 per$1,000 of value (0.001).

Discount-point cost

Cost = loan amount × points × 1%. On a $425,000 loan, 1.5 points = $425,000 × 0.015 = $6,375.

Income approach value

Value = NOI / cap rate. NOI of $96,000 at a 7.5% cap rate = $96,000 / 0.075 = $1,280,000.

Profit / percentage of gain

Percent change = (new − old) / old. A rise from $200,000 to$230,000 is a 15% gain.

Michigan transfer-tax math

Combine $3.75 (state) +$0.55 (county) per $500. On$200,000: 400 × $4.30 =$1,720 total.

Tax proration

Allocate annual taxes by the days each party owns the property; the seller is usually charged through the closing date.

Rent proration

Divide monthly rent by the days in the month, then multiply by the days owed to the other party.

Commission split

Apply each split percentage in turn — first between brokerages, then between brokerage and agent.