Michigan Real Estate Contract: Different Types and Key Terms to Include

What is a Michigan Real Estate Contract?

A Michigan real estate contract, sometimes called a residential real estate purchase and sale agreement, is a contract between a party selling property and a party who is offering to purchase the property.

The contract is typically drafted by the buyer’s realtor or real estate attorney after the buyer makes an offer. If the seller accepts the offer, the parties will negotiate the terms of the contract to facilitate the sale. Once both parties sign a real estate contract, it becomes legally enforceable.

Common Michigan Real Estate Contracts

There are several standard contract forms that are used in real estate transactions in Michigan. These forms include:

• Huron Title Company Purchase Agreement. A contract template provided by Huron Title Company when this title company is hired.
• Liberty Title Company Purchase Agreement. Provided by Liberty Title Insurance, this contract is easy to use and great for FSBO customers.
• Michigan Association of Realtors contract. The most commonly used contract for residential real estate in Michigan and provided by the Michigan Association of Realtors.
• West Michigan Regional Purchase Agreement. An easy-to-use purchase agreement approved by the West Michigan Board of Realtors.

Using one of these templates provided by title companies and real estate associations will ensure that the contract includes all necessary terms to create a legally binding agreement.

4 Essential Elements of a Michigan Real Estate Contract

All contracts must include specific essential elements to be valid and legal. In Michigan, a real estate contract must have these four essential elements:

1. Legally competent parties
2. Mutual consent between the parties to enter the agreement
3. An offer, acceptance, and consideration
4. Legal purpose

If a real estate contract is missing any of these four elements, a court could rule that it is invalid. In addition, all real estate contracts must be in writing and signed by both parties to be enforceable.

What Must Be Included in a Michigan Real Estate Contract?

A Michigan real estate contract needs to include specific information to facilitate the sale of the property. This contract should include the following essential information:

• Purchase price. The agreed upon amount the buyer has promised to pay the seller in exchange for the property title.
• Closing date. The date that the sale is finalized and payment must be made for the property.
• Earnest money deposit. The deposit made by the buyer, often when the real estate contract is signed, to show the seller they are committed to purchasing the property.
• Contingencies. Contingencies are the conditions that must be met by either the buyer or the seller to complete the deal. Common contingencies include the buyer selling their previous home or the home passing a home inspection.
• Disclosure requirements. Disclosures are potentially problematic conditions about the property the seller must reveal to the buyer before closing the sale. Michigan requires that all real estate contracts include a seller’s property disclosure statement and a lead-based paint disclosure.

Can a Seller Back Out of a Real Estate Contract in Michigan?

A seller can back out of a real estate contract in Michigan under limited circumstances. The most common way a seller can terminate a contract is by including a contingency in the contract that allows them to do so if certain conditions, often called contingencies, are not met. Contingencies can include the property not passing inspection or the buyer not securing financing.

A seller can also back out if the buyer breaches the contract, for example if the buyer does not fulfill their obligations outlined in the contract. Additionally, under Michigan laws, the seller has five days after signing the contract to cancel the agreement.