Selling a Michigan Home: What Are My Disclosure Obligations?

Before selling residential property in Michigan, a seller is required by law to tell the prospective buyer certain things about the property's physical condition. (This comes from the Michigan Seller Disclosure Act (1994).) As a real estate seller, you must disclose this information by completing a written disclosure statement and giving it to the buyer. (Mich. Comp. Laws § 565.954).

The information you provide will help property buyers make an informed decision as to whether to purchase and on what terms. It's important to comply in good faith, as the statute also requires. (Mich. Comp. Laws 565.960.) Failure to do so could allow the buyer to cancel the sale of the property or later sue you for fraud, upon discovering defects that you knew of but didn't disclose.

Types of Property Transfers Covered by Michigan's Real Estate Disclosure Regulations

Who, in Michigan, needs to fill out the disclosure form? For starters, only sellers offering residential property consisting of between one and four units. This would include, for example, a single family home or a larger building that contains up to four apartments.

The disclosure requirements go beyond standard sales, however. You must comply with the disclosure requirements even if you are selling by a property exchange, land contract, option to purchase agreement (including a lease with option to purchase), ground lease, or a transfer of stock or interest in a residential cooperative. (Mich. Comp. Laws § 565.952.)

However, see the exceptions and limitations discussed below.

Exceptions to Michigan's Real Estate Disclosure Requirements

In some limited circumstances, Michigan home sellers (mostly, ones who never actually lived in the house or who have a family relationship to the new owner) are not required to comply with the disclosure law. These exceptions include:

• transfers pursuant to court order, including by probate, a writ of execution, foreclosure sale, those made by a trustee in bankruptcy, transfers by eminent domain, and transfers resulting from a decree for specific performance
• transfers to a mortgagee or beneficiary of a deed of trust by a mortgagor or trustor in interest who is in default
• certain transfers by a sale under a power of sale or a decree of foreclosure
• certain transfers in the course of the administration of a decedent's estate, guardianship, conservatorship, or trust
• transfers between cotenants
• transfers made to a spouse, parent, grandparent, child, or grandchild
• transfers between spouses resulting from a judgment of divorce or separation
• transfers to or from any governmental entity, and
• certain transfers of newly constructed residential property that has not been inhabited.

(Mich. Comp. Laws § 565.953 (a)–(i).)

Limits on Information Michigan Home Sellers Must Disclose

The Michigan real estate disclosure statement requires that you disclose only information about the property that you actually and personally know, according to the "best information available." (Mich. Comp. Laws § 565.956.) In other words, you need not perform any investigation of the property before completing the form (though if you've done so, you must reveal the results).

If you do not know certain information requested on the form, you may in most cases satisfy the disclosure requirements by checking the "unknown" box.

If conditions on your property change after you've delivered the statement to a prospective buyer; for example, the roof springs a leak; you should amend the disclosure statement in writing as soon as possible. (Mich. Comp. Laws § 565.962.)

If the information you enter on the form came not from your own knowledge, but from what you learned from public agencies or professionals contracted to inspect the property, you are not liable for any error, inaccuracy or omission in the information they gave you; unless, that is, you were aware of contradictory information. (Mich. Comp. Laws Ann. § 565.955 (1)–(3).)

Filling Out the Michigan Disclosure Statement

Michigan requires sellers to use a standardized form for property disclosures, called the Seller Disclosure Statement, and sets forth the language for it within the actual law. (Mich. Comp. Laws § 565.957.)

The form is essentially a checklist asking you to indicate the condition of various features of the property, such as appliances, roof, basement, and HVAC systems, and known problems affecting it, such as encroachment issues, environmental issues, and pending legal issues. You can answer "Yes," "No," "Unknown," or "Not available" to the question of whether each feature is in working order.

The form also asks you for specific information about things like the type of insulation and well, history of repairs and infestations, legal issues such as boundary-line encroachments and unpermitted instruction or improvements, and so on.

While some states have specifically addressed whether or not real estate sellers must disclose whether a property is "stigmatized" (by death, murder, infectious disease, and so forth), Michigan has not. The disclosure statement instead generally limits disclosures to the physical condition of the property.

When in doubt about whether to disclose a particular issue, however, it's usually best to do so. Otherwise, the buyer might be permitted to cancel the agreement, or perhaps worse, one day pursue a claim against you for fraud.

Delivering the Michigan Real Estate Disclosure Statement

You are required to present the disclosure statement to the prospective buyer or the buyer's agent prior to signing a purchase agreement (or sales contract). (Mich. Comp. Laws § 565.954(1).) Complying with this timing requirement is crucial, because the buyer may terminate the purchase agreement if you deliver the statement late, after signing the purchase agreement. (Mich. Comp. Laws § 565.954(3).) In that case, your property sale will not occur.

It is customary, and good practice to provide the disclosure statement early, for example, at open houses or when showing the property to prospective buyers. That way, you avoid the possibility of buyer termination under this provision.

What Happens to Sellers Who Violate Michigan's Real Estate Disclosure Requirements

If you violate Michigan's real estate disclosure law, for example, by failing to provide a complete written disclosure or intentionally misrepresenting information, the buyer may cancel your purchase agreement prior to the closing. (Mich. Comp. Laws § 565.954 (3).)

Or, if the closing has already occurred, the buyer may pursue legal action against you for fraud, on the basis of misrepresentation or omission. (Roberts v. Saffell, 760 N.W.2d 715 (Mich. 2008), Mich. Comp. Laws § 565.961.)

If you are represented by a real estate agent or broker, the agent is not liable under the disclosure requirements unless they acted with you in bad faith. (Mich. Comp. Laws § 565.965.)

Additional Information on Michigan Disclosure Requirements

If you have a specific question about disclosure requirements, want to get the latest news about developments in Michigan's disclosure laws, or find yourself in situation where you need help, consult an experienced local real estate lawyer. These laws can be complicated, and are best interpreted by professionals who handle such matters every day.