- 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
- 3.75foreach500 (or fraction) of the value transferred — the Michigan State Real Estate Transfer Tax (SRETT).
- Michigan county transfer tax rate
- 0.55foreach500 (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 250,000saleat615,000.
- 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 300,000homeisa240,000 loan.
- Property tax (mills)
- Annual tax = taxable value × millage rate; one mill = 1per1,000 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 200,000to230,000 is a 15% gain.
- Michigan transfer-tax math
- Combine 3.75(state)+0.55 (county) per 500.On200,000: 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.
