Selling a Home in Michigan? Key Legal Requirements

You've decided to sell your Michigan home. Now what? Besides listing the property for sale and finding a buyer, there are a few key legal requirements that need your attention in order for the sale to take place.

Double-Check Whether You're the Legal Owner of the Home

If you think you own your home, you probably do—but now's the time to make sure some unusual turn of events hasn't impacted your ownership or affected who will handle the legal aspects of the sale.

For example, a husband and wife might believe they are both legal owners of the home until they look at the current deed to the property and realize the husband owned it before he was married and never transferred the property to himself and his wife jointly. In this case, the husband is the legal owner of the home and the only person who need to sign legal documents transferring it to the new owner. The reverse can happen if, for instance, the husband's ex-spouse is still listed on the deed.

Checking on such matters can also help determine things like who needs to sign a listing agreement if you use a real estate agent, and ultimately to sign closing documents and a new deed to the property.

Start by checking that your name is on the deed to the property. You should have a copy of the deed, most likely mailed to you from your county registrar after you purchased your home. Or, you might be able to download it from your county's website or can go there in person and request a copy.

Another possibility is to wait until the title company the buyer works with during the sale of your home checks the ownership for you. This is the company that will insure the buyer and lender against undiscovered "clouds" on the title to your property.

Provide a Michigan Seller's Disclosure Statement

Michigan law requires the seller of a home to provide a Seller's Disclosure Statement to the buyer before accepting an offer on the property. This statement is described in the Michigan Seller Disclosure Act. The Act sets forth the exact language the disclosure statement should contain (though your real estate agent can give you a nicer-looking copy). Its purpose is to provide information on the condition of the property.

In order to comply with this law, it is best to complete this disclosure statement right away and provide a copy to any person who's interested in purchasing your home. If you receive an offer on your home before providing the disclosure statement, just be sure to provide a copy of it before you accept the offer.

What Needs to Be Disclosed About Your Michigan Home?

The Michigan Seller's Disclosure Statement begins with the property address and then sets forth a list of all appliances and systems included with the home. It includes everything from the refrigerator and dishwasher to ceiling fans, water heater, plumbing systems, septic tank, city sewer, the furnace, and more. You must check whether or not each item is in working order. If the property does not contain an item, or you're not sure about its condition, there is a spot to indicate it is "not available" or "unknown."

Following the list of appliances and systems are specific questions about property conditions, such as whether there has been water in the basement, whether the roof leaks, whether there has been a history of infestation, and more.

Next, the form contains a list of questions relating to potential title issues, such as whether an existing lawsuit affects the property, or any utility bills remain unpaid.

The disclosure statement then asks you to provide the dates during which you lived in the property and to certify that you are being truthful about the answers provided.

Finally, the disclosure statement includes a warning to buyers that it should not be substituted for a professional evaluation of the property, like a home inspection and professional title review by a title insurance company.

The Seller's Disclosure Statement is important, because if you are not honest about the facts listed on it, the sale could be deemed illegal and the buyer could bring a lawsuit for violation of the Seller Disclosure Act.

Sign a Purchase and Sale Agreement

A purchase agreement is usually a standard form document used by real estate agents to allow their client to make an offer on a property. This standard form document may vary slightly between real estate agencies. It contains blank lines for the name of the buyer, the amount of the proposed purchase price, the type of financing for the sale, the amount of the earnest money deposit, the fixtures included, and the closing date.

This form is filled out by the buyer's real estate agent and signed by the buyer. It is then presented to the seller and if the seller agrees with the terms and signs the purchase agreement it becomes a legally valid and enforceable sale agreement.

In Michigan, the amount of the earnest money deposit is commonly 1% to 2% of the purchase price. Closing costs such as transfer taxes and recording fees are typically paid by the buyer. The appraisal fee and other mortgage fees are usually paid by the buyer as well. Title insurance costs can be paid by either the buyer or the seller. There might also be closing costs due to the mortgage company and real estate agents, besides a commission, that need to be paid by both the buyer and the seller.

Who pays for which closing costs can be negotiated, so it is very important to make sure this information is included in the purchase agreement to avoid surprises at closing. An attorney can review your closing documents prior to signing and ensure the costs are accurately reflected on the final accounting of the sale, known as the HUD-1 statement.

Provide a Lead Paint Disclosure

Another key legal requirement under Michigan law is for the seller to provide a Lead Paint Disclosure to the buyer. You are required to disclose to the buyer whether or not you are aware of any lead paint hazards in the home. Often, homes built prior to 1978 used paint containing lead, which is particularly dangerous to children.

The disclosure form is a simple checklist, in which you indicate your knowledge and any details you can provide. It also provides a notice to the buyer that further inspection might be reasonable.

Sign the New Deed

The final legal document you will sign to sell your home in Michigan is the deed. The deed serves to transfer the property from the seller to the buyer. The deed must include the name of the seller, the marital status of the seller, the name of the buyer, and a legal description of the property. It must be signed by the seller in the presence of a notary public.

Your title insurance company should prepare the deed for you as part of your closing package. It is always a good idea to have an attorney review this legal document before signing.