Selling a home in Michigan is rarely as simple as putting up a “For Sale” sign and waiting for offers. Legal issues can surface at almost any stage of the transaction. Problems arise from the moment you list your property to the day you hand over the keys.
As a Michigan real estate professional with more than 35 years of experience, I see sellers lose thousands of dollars—and sometimes face lawsuits—because they were not prepared for the legal complexities that come with selling a home.
Whether you are selling a primary residence, an investment property, or a rental home, understanding the most common legal pitfalls can save you significant time, money, and stress. This guide walks through each issue in plain English so you know exactly what to watch out for before, during, and after your Michigan home sale.
What Michigan Home Sellers Must Disclose to Buyers
One of the most problematic areas for home sellers concerns what a seller must disclose about a home’s condition. If there are defects, the purchaser holds a legal right to know about them. Nearly every state, including Michigan, has laws that require sellers to advise buyers of certain defects in the property. This is typically done by filling out a standard disclosure form before the sale is finalized.
In Michigan, disclosure laws are comprehensive. Sometimes a feature or defect isn’t even listed on the standard form, yet the seller may still be required to disclose the problem. That surprises many sellers who assume that if something isn’t on the standard form, they have no obligation to mention it. Under the explicit requirements of the
Additionally, a seller is usually not required to actively seek out problems they are not aware of. However, once they know, or have reason to know, the duty to disclose is triggered.
What Counts as a Material Defect?
A material defect is any condition that could significantly affect the value or desirability of the property. Common examples include:
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Structural issues such as foundation cracks, shifting, or settling
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Water intrusion or ongoing moisture problems in the basement or crawl space
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Roof damage or age-related wear that affects the home’s structural integrity
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Mold or toxic mildew problems anywhere in the home
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Electrical or plumbing system failures known to the seller
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Environmental hazards such as lead paint (homes built before 1978 require a federal disclosure)
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Legal issues affecting the property, such as boundary encroachments or pending litigation
The Duty to Disclose: When You Must Speak Up
A seller is required to disclose issues when they actually know about a problem—or have a reason to know. Once that knowledge exists, the duty to disclose is triggered. Misrepresentations or deliberate omissions about a home’s condition are never acceptable and can expose a seller to serious legal liability after closing.
Here is a simple rule I share with every client: if you have to ask whether you should disclose something, the answer is almost always yes. Disclose it. It is far better to address a known defect upfront than to face a civil fraud claim after the sale closes.
If a buyer discovers after closing that you knew about a defect and concealed it, the consequences are severe. They can include claims to rescind the sale entirely or demands for steep repair damages. To understand the statutory guidelines behind these forms, you can review the official text of the
Agent Commissions and the ‘Procuring Cause’ Dispute
Another issue that Michigan home sellers frequently encounter involves whether a real estate agent is the “procuring cause” of a sale. This determines whether that agent is entitled to a commission even if they no longer represent you at closing. This creates significant disputes, and I see it regularly in my practice.
Here is how it typically unfolds. A home is listed with an agent, and that agent shows the property to potential buyers. Then the listing expires, or the seller fires that agent and hires a new one. Later, one of the buyers who toured the home with the former agent comes back and purchases the property. The question becomes: is the former agent entitled to a commission?
What ‘Procuring Cause’ Means in Michigan Real Estate
The doctrine of procuring cause means that a real estate agent is entitled to a commission if their efforts were the primary, direct cause of the eventual sale. This applies even if they were not the agent of record at closing. In a competitive market where buyers look at multiple homes over many months, this standard creates real and costly disputes.
Most standard listing agreements include a protection period. This represents a window of time (often 180 days) after the listing expires during which the original agent can still claim a commission if a buyer who toured the home during the listing period closes on the property.
Sellers who switch agents—or who are approached directly by buyers after a listing expires—need to understand this risk clearly before entering a new listing agreement or accepting an offer. Review your listing parameters at our
Seller Credits, Late Payments, and Money Owed at Closing
The third common issue involves seller credits and disputes over who is owed money at or after closing. These disputes are especially common in transactions involving investment properties or rentals.
A typical scenario: a seller has a tenant in the property who owes back rent. The seller then conveys the property to a new owner. Who does the past-due payment belong to when the tenant finally pays?
Without a specific provision in the purchase agreement addressing this situation, the general rule is that unpaid rent collected after closing belongs to the new owner—the buyer. If you want to retain the right to collect that past-due rent, that right must be explicitly documented in the purchase agreement before closing.
Common Seller Credit Disputes to Watch For
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Prorated Rent: How rent is divided between seller and buyer as of the closing date
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Repair Credits: Credits negotiated after a home inspection that weren’t clearly defined
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Security Deposit Transfers: Whether and how tenant security deposits are transferred
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Utility Adjustments: Outstanding utility bills or escrow balances that need settling
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Property Tax Prorations: How taxes are calculated and allocated between parties at closing
Each of these items represents a potential source of dispute if not addressed clearly in the purchase agreement. A well-drafted agreement closes these gaps before they become problems. Review our guided analysis at our
Tenant Security Deposits in Michigan Home Sales
Closely related to the issue of late payments is the question of tenant security deposits. This creates a surprising amount of conflict in Michigan real estate transactions, particularly when sellers are conveying a property with tenants in place.
When a property transfers ownership, the question of what happens to those deposits—and who is responsible for returning them to tenants—needs to be resolved clearly in the purchase agreement. For instance, the seller may be required to transfer the security deposit funds to the buyer at closing, along with a written accounting. Failure to do this properly can create liability issues for both the seller and the new owner.
If you’re selling a property with tenants, this is not an area to leave to a handshake agreement or an afterthought at closing. The relevant provisions in the purchase agreement must be thoroughly audited to ensure all parties are protected—and that the transaction doesn’t unravel over a deposit dispute.
Purchase Agreement Disputes: The Legal Foundation of Every Sale
Every Michigan home sale rests on a purchase agreement. Disputes over what’s included in (or excluded from) that agreement are among the most common legal issues home sellers face. A solid purchase agreement covers:
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Which fixtures and appliances are included with the sale
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The closing date and what happens if it is delayed
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Contingencies such as financing, inspections, and appraisals
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What ‘as-is’ means—and whether the seller is accepting or rejecting that language
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Seller possession arrangements after closing
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How disputes will be resolved
Many sellers—especially those selling For Sale By Owner (FSBO)—rely on standard boilerplate forms and assume everything is covered. However, boilerplate forms are not designed to address every unique situation. A standard form that doesn’t include a provision for past-due rent, security deposits, or a listing protection period can expose a seller to significant financial risk.
Remember, real estate agents are not attorneys and cannot provide legal advice. If your transaction involves an investment property, tenants, or any unusual arrangement, professional review is a sound investment.
Title Issues That Can Derail a Michigan Home Sale
A clear title is required for most home sales. If there is a lien, judgment, easement, or encroachment on your property, it must be resolved before or at closing. Sellers are sometimes blindsided by title issues they didn’t know existed. Discovering them just days before closing can derail an entire transaction.
Common title problems include:
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Unpaid contractor liens or mechanic’s liens from prior work on the property
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Judgment liens against the seller that attach to real property
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Boundary disputes or encroachment issues with neighboring properties
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Errors in prior deeds that create questions about ownership
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Probate issues when the property is part of an estate with unresolved heirs
Ordering a title search early in the listing process gives you time to resolve any clouds on title before closing. This avoids scrambling when a buyer’s lender flags the problem later. If title issues arise, a quiet title action may be necessary to clear the record. See our specialized resources on
Earnest Money Disputes Between Michigan Home Sellers and Buyers
Earnest money—the good-faith deposit a buyer provides when making an offer—is another common source of conflict for Michigan home sellers. If a buyer backs out of a transaction, whether the seller is entitled to keep the earnest money depends entirely on the language in the purchase agreement and the reason for the buyer’s withdrawal.
Not every buyer default automatically entitles the seller to the deposit. The circumstances under which the earnest money is forfeited, and the process for claiming it, must be clearly spelled out in the purchase agreement.
If the buyer withdrew due to a valid contingency—such as a failed inspection or inability to obtain financing—the deposit is typically returned. If the buyer defaulted without a valid contingency and your agreement is properly drafted, you may be entitled to retain the deposit as liquidated damages. However, this outcome is not automatic, and vague contract language can make it very difficult to enforce. For a complete look at deposit rules, review our
Do You Need an Expert When Selling Your Michigan Home?
Michigan does not legally require sellers to secure legal representation to close a transaction. However, that does not make going without it a wise choice.
Sellers often walk into closings with significant legal exposure they weren’t aware of—simply because they relied on an agent or a title company to catch every issue. Agents are skilled at marketing and negotiating, but they cannot provide legal advice. Title companies work to clear title and close the transaction, but their job is not to protect you as the seller.
A comprehensive review of your transaction ensures your interests are shielded:
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Reviewing your listing agreement and identifying provisions that limit your liability
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Drafting or reviewing the purchase agreement to address seller-specific risks
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Advising you on your disclosure obligations before you complete the disclosure form
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Resolving title issues before they delay or derail your closing
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Addressing tenant, security deposit, and rent credit issues in the purchase agreement
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Protecting your interests if a dispute arises before or after closing
The cost of having an expert review your transaction is small compared to the cost of a post-closing lawsuit or a failed closing. For sellers with investment properties, tenants in place, or complicated title histories, professional representation is a necessity. Review our primary
Frequently Asked Questions
What must a home seller disclose in Michigan? Sellers must provide a written disclosure statement covering the physical condition of the property. This includes structural issues, water leaks, mechanical system health, and known legal or boundary disputes. Sellers must disclose any defect they actually know about or have reason to know about.
Can a buyer sue a seller for non-disclosure after closing? Yes. If a buyer discovers a material defect that the seller knew about but failed to disclose, they can file a civil lawsuit for fraud or misrepresentation. The buyer can seek monetary damages for repair costs or attempt to rescind the transaction entirely.
What does ‘procuring cause’ mean in a real estate transaction? Procuring cause means the agent who was the primary cause of bringing the buyer and seller together may be entitled to a commission, even if their contract expired before closing. This often applies during a 180-day protection period built into listing agreements.
What happens to a tenant’s security deposit when a rental property is sold? The seller must transfer all security deposit funds to the buyer at closing alongside a detailed written accounting. Failing to handle this transfer properly creates immediate statutory liability for both the buyer and the seller under state landlord-tenant laws.
Who keeps the earnest money deposit if a deal falls through? It depends on why the transaction failed. If the buyer backs out due to an active contingency, such as a failed inspection or financing denial, the deposit returns to the buyer. If the buyer defaults without a valid contingency, a properly drafted contract allows the seller to retain the funds as liquidated damages.
How do unresolved title issues impact a pending home sale? Unpaid contractor liens, judgment claims, boundary disputes, or unreleased prior mortgages will halt a transaction because buyers cannot secure clear title insurance. Finding these defects early via a preliminary title search gives you the runway to clear them before closing. If your transaction involves an inherited home, review our
Soble Law helps clients identify where real estate and business deals break down, define the legal risk, and take control of the next step.
Call: 888-789-1715
Website: www.provenresource.com
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About David Soble: David is a seasoned real estate and finance attorney with more than 35 years of experience, combining his background as a “big bank insider” with a commitment to demystifying complex legal issues for his clients. As the founding attorney of Soble Law (Soble PLC), he leads a specialized team in Michigan and Ohio that handles real estate transactions, contract disputes, probate, and financial litigation. Known for a practical, no-nonsense approach and peer-rated excellence (Martindale-Hubbell AV Preeminent), Soble and his team strive to protect clients’ property and financial interests with clarity, integrity, and experience.
Disclaimer: The information in this article is for general educational purposes only and does not constitute formal legal, financial, tax, real estate, finance, probate, or any other professional service or advice. Reading this content or contacting us does not establish an attorney-client relationship. Every situation is unique, and laws change frequently, so you should always consult with your own qualified attorney or professional advisor before making any decisions.
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