A Michigan purchase agreement is one of the most important documents you will ever sign. Whether you are buying your first home, investing in rental property, or flipping houses, the purchase agreement controls everything. This includes the price you pay, the protections you receive, and the legal remedies available if something goes wrong.
As a Michigan real estate attorney with more than 35 years of experience, I review purchase agreements every week. Unfortunately, many of the documents I see are woefully inadequate. Just recently, a real estate investor brought me a one-page purchase agreement he downloaded from the internet for a $75,000 property. I always tell my clients that nothing of value is free, and that contract was proof positive. The paper was worth more than the words printed on it.
In this guide, I will walk you through the essential provisions that belong in every Michigan purchase agreement and help you avoid the costly mistakes I see buyers make time and again. If you are purchasing real estate in Michigan, this article is your roadmap to doing it right.
Why a Written Purchase Agreement Is Required
Before discussing what should be in your purchase agreement, it is important to understand why you need a written agreement in the first place. The law requires that any contract for the sale of land or any interest in land must be in writing and signed by the party making the sale. An oral agreement to buy or sell real property in Michigan is void and unenforceable.
This is not a mere formality. The requirement exists because real estate transactions involve significant sums of money and complex legal rights. Without a written agreement, parties can easily dispute what was agreed upon regarding price, closing date, contingencies, and other critical terms. While outside evidence may sometimes supplement the terms of a written real estate contract, it cannot contradict them.
Therefore, every Michigan real estate transaction should begin with a comprehensive written purchase agreement that clearly spells out all terms and conditions. A handshake deal or verbal understanding simply will not hold up in court.
The Closing Date: Why “On or About” Matters
One of the first things I noticed on that one-page purchase agreement was language stating the transaction would close “on or before a certain date.” This is a common and potentially costly mistake. I advise my clients to use the phrase on or about a specific closing date rather than “on or before.”
The Problem with “On or Before” Language
If your purchase agreement says closing must occur “on or before April 1st,” and something delays the process, the agreement technically expires on April 2nd. This happens frequently when a title search reveals an issue, financing takes longer than expected, or a document is missing. At that point, the title company will typically refuse to close the transaction without an addendum extending the deadline.
Getting that addendum signed requires tracking down the seller, which can be especially difficult when you are buying from a distressed seller or an out-of-state owner. Meanwhile, you have already spent money on inspections, appraisals, and attorney fees for a deal that may fall apart simply because of rigid contract language.
The “On or About” Solution
When your Michigan purchase agreement says the transaction will close “on or about” a specified date, you generally receive approximately two additional weeks of flexibility. This buffer gives you time to resolve title issues, finalize financing, and complete inspections without risking the entire deal. This is standard practice recommended by experienced real estate attorneys throughout the state.
Specifying the Type of Deed in Your Purchase Agreement
Another critical issue I frequently encounter involves conflicting or vague language about the type of deed the buyer will receive. In the one-page agreement I reviewed, one paragraph stated the seller would provide “marketable title,” while another paragraph stated the seller would provide a “special warranty deed.” Those are two very different commitments, and the contradiction creates confusion and potential litigation.
Understanding Michigan Deed Types
Michigan recognizes several types of deeds, and each provides a different level of protection for the buyer.
- Warranty Deed: This is the gold standard. A warranty deed means the seller guarantees clear title to the property and will defend the buyer against any claims, even those arising before the seller owned the property. For most residential purchases, you should insist on a warranty deed.
- Special Warranty Deed: A special warranty deed provides limited protection. The seller only guarantees there are no title defects that arose during the seller’s period of ownership. Any issues that existed before the seller acquired the property are not covered.
- Quitclaim Deed: A quitclaim deed provides essentially no warranties. The seller conveys whatever interest they may have, which could be nothing at all. Quitclaim deeds are typically used for transfers between family members, transfers into trusts, or to clear up deed errors. They should generally be avoided in arm’s-length purchase transactions.
Why Your Agreement Must Be Specific
Your Michigan purchase agreement should clearly state which type of deed the seller is required to deliver at closing. If your agreement does not specify the deed type, you could end up receiving a quitclaim deed when you expected a warranty deed. Getting a thorough title insurance policy can help protect against this risk, but the purchase agreement itself should be your first line of defense.
Earnest Money Deposit Provisions
A properly drafted Michigan purchase agreement must address the earnest money deposit. This is the good-faith payment the buyer makes to demonstrate serious intent to purchase the property. Many free or generic purchase agreement templates either omit earnest money provisions entirely or include dangerously vague language.
Key Earnest Money Terms to Include
Your purchase agreement should specify the exact amount of the earnest money deposit, when it must be delivered, who holds the funds (typically a title company or real estate broker), and under what circumstances the deposit is refundable.
In Michigan, the disposition of earnest money when a deal falls through is governed by the terms of the purchase agreement itself. If the buyer defaults, the agreement may allow the seller to keep the earnest money as liquidated damages. If the seller defaults, the buyer is typically entitled to a full refund.
A well-drafted earnest money clause should also address what happens if a contingency is not satisfied. For example, if the buyer’s financing falls through or the home inspection reveals major defects, the agreement should clearly state that the earnest money is returned to the buyer.
Financing Contingencies and Payment Terms
Most Michigan home purchases involve mortgage financing, and your purchase agreement must account for this reality. A financing contingency protects the buyer by making the transaction conditional upon the buyer’s ability to obtain a mortgage loan on acceptable terms.
What Your Financing Contingency Should Cover
Your Michigan purchase agreement should specify the type of financing the buyer will pursue (conventional, FHA, VA, or USDA), the maximum interest rate acceptable to the buyer, the loan amount, and the deadline by which financing must be obtained. Without these details, disputes can arise about whether the buyer made a good-faith effort to secure financing.
Additionally, if the transaction involves seller financing or a land contract, the purchase agreement should include all relevant terms. This includes the interest rate, payment schedule, balloon payment provisions, and the seller’s obligations regarding the deed.
Home Inspection and Due Diligence Contingencies
A home inspection contingency gives the buyer the right to have the property professionally inspected and to cancel the purchase agreement or negotiate repairs if significant defects are discovered. This is one of the most important protections available to a Michigan home buyer, and it should never be omitted from your purchase agreement.
Structuring the Inspection Clause
Your inspection contingency should specify the time frame within which inspections must be completed (typically 10 to 14 days after acceptance), the types of inspections permitted, and the process for notifying the seller of any issues.
Furthermore, the contingency should clearly outline the buyer’s options if the inspection reveals problems. Generally, the buyer should have the right to request repairs, negotiate a price reduction, request a credit at closing, or cancel the agreement and receive a full refund of the earnest money deposit. If the property is being sold as-is, the inspection contingency takes on additional significance because the seller will not be obligated to make repairs.
Seller Disclosure Requirements
The seller of residential property must provide the buyer with a written disclosure statement before executing a binding purchase agreement. This is a legal requirement for most home sales.
What the Seller Must Disclose
The disclosure requires the seller to reveal known conditions affecting the property, including issues with the roof, basement, plumbing, electrical systems, heating and cooling, well and septic systems, and environmental hazards. The disclosure must be made in good faith based on the seller’s actual knowledge.
Consequences of Failure to Disclose
If the seller fails to provide the disclosure statement before the purchase agreement is signed, the buyer has the right to terminate the agreement. Specifically, if the disclosure statement is delivered in person after the purchase agreement is executed, the buyer has 72 hours to cancel. If delivered by registered mail, the buyer has 120 hours to cancel. However, this right to cancel typically expires once the sale closes.
Tenant and Occupancy Provisions
This is an issue that many generic purchase agreements overlook completely. The client I mentioned earlier was purchasing an investment property with an existing tenant and planned to continue the lease, yet the purchase agreement contained no reference to tenant occupancy whatsoever.
What Your Agreement Should Address
When purchasing a property with existing tenants, your Michigan purchase agreement should include provisions covering:
- The assignment of the existing lease.
- The transfer of the security deposit.
- The proration of rent payments.
- The handling of any outstanding late fees or unpaid rent.
- The seller’s representations about the current lease terms.
Without these provisions, you could inherit a tenant situation that costs you thousands of dollars. For example, if the seller collected the security deposit but does not transfer it to you at closing, you may still be legally obligated to return it to the tenant when the lease ends.
Property Tax Proration and Transfer Tax
The law requires that real estate transactions include specific disclosures about property tax obligations. Your purchase agreement should specify how property taxes will be prorated between buyer and seller at closing.
Additionally, Michigan imposes a state real estate transfer tax of $3.75 per $500 of value transferred and a county transfer tax of $0.55 per $500 in most counties. Your purchase agreement should specify which party is responsible for paying these taxes. In most Michigan transactions, the seller pays the transfer tax, but this is negotiable and should be clearly stated in the agreement.
Title Insurance and Title Commitment
A thorough Michigan purchase agreement should address title insurance. This includes who will pay for the owner’s title insurance policy, the deadline for providing a title commitment, and the buyer’s right to review and object to title exceptions.
Under standard Michigan real estate practice, the seller pays for the owner’s title insurance policy. The title commitment should be delivered to the buyer within a specified number of days after the effective date of the agreement. This gives the buyer time to review it and raise any objections regarding liens, encumbrances, easements, or other title defects.
Default and Remedy Provisions
A well-drafted Michigan purchase agreement must address default and remedies for both the buyer and the seller.
Buyer Default
If the buyer defaults by failing to close on time without a valid reason, the agreement should specify the seller’s remedies. The most common remedy is for the seller to retain the earnest money deposit as liquidated damages. However, some agreements also allow the seller to force the buyer to complete the purchase or pursue actual damages.
Seller Default
If the seller defaults by refusing to convey the property, the buyer should have the right to recover the earnest money deposit and may also pursue specific performance or damages. Michigan courts have historically recognized the remedy of specific performance in real estate transactions because each piece of property is considered unique.
Why You Need a Michigan Real Estate Attorney
If you are spending tens of thousands of dollars on real estate, invest in a qualified real estate attorney to draft or review your purchase agreement. A one-page template downloaded from the internet is not going to protect you. An experienced attorney will ensure your agreement protects your interests and contains the specific provisions needed for your unique transaction.
Frequently Asked Questions
What should be included in a Michigan purchase agreement? A Michigan purchase agreement should include the legal description of the property, purchase price, earnest money terms, financing contingencies, closing date, type of deed to be delivered, inspection contingencies, seller disclosure acknowledgment, and default remedies.
Do I need an attorney to write a purchase agreement in Michigan? Michigan does not legally require you to hire an attorney. However, given the financial stakes involved and the complexity of the law, having an experienced real estate attorney draft or review your agreement is strongly recommended.
Can I cancel a purchase agreement in Michigan? You can cancel a Michigan purchase agreement under certain circumstances, such as when a contingency is not met, when the seller fails to provide a timely disclosure statement, or when both parties mutually agree to cancel.
What type of deed should I receive when buying property in Michigan? For most residential purchases, buyers should request a warranty deed, which provides the strongest title protection. A special warranty deed offers limited protection, and a quitclaim deed provides essentially no warranties.
How does property tax proration work in Michigan real estate closings? Property taxes are prorated between buyer and seller based on the closing date. The seller is typically responsible for taxes through the day of closing, and the buyer assumes responsibility from that point forward.
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.
