Key Takeaways
- Michigan requires written agency disclosure to all parties before substantive discussions about specific properties
- An agency disclosure statement must explain the different types of agency relationships available
- Michigan recognizes seller agency, buyer agency, dual agency, and transaction coordination
- A written agency agreement is required to establish a client relationship with fiduciary duties
- Licensees owe honesty and fair dealing to all parties, whether clients or customers
Michigan Agency Relationships
Important: This content covers Michigan-specific agency law. You should complete the National Real Estate Exam Prep first, as agency concepts are also tested on the national portion.
Michigan law requires real estate licensees to disclose and establish agency relationships clearly with all parties to a transaction.
Agency Disclosure Requirements
When to Disclose
Agency disclosure must be provided before substantive discussions about:
- Specific properties
- Client's needs and motivation
- Financial qualifications
- Terms of potential transactions
Agency Disclosure Statement
Michigan requires licensees to provide a written agency disclosure that explains:
| Element | Description |
|---|---|
| Types of relationships | Seller agency, buyer agency, dual agency |
| Duties owed | Fiduciary duties to clients, duties to customers |
| How agency is created | Written agreement required |
| Compensation disclosure | How agents are paid |
Types of Agency Relationships
Seller Agency
The licensee represents the seller's interests:
- Owes fiduciary duties to seller
- Must disclose material facts to buyer
- Promotes seller's best interests
- Keeps seller's confidential information private
Buyer Agency
The licensee represents the buyer's interests:
- Owes fiduciary duties to buyer
- Advocates for buyer in negotiations
- Assists buyer in finding suitable properties
- Keeps buyer's confidential information private
Dual Agency
The licensee represents both parties:
- Requires informed written consent from both parties
- Limited advocacy for either party
- Cannot disclose confidential information to either party
- Must treat both parties fairly and honestly
Creating Agency Relationships
Written Agreement Required
In Michigan, a written agency agreement is required to establish a client relationship with fiduciary duties. This applies to:
- Listing agreements (seller agency)
- Buyer representation agreements (buyer agency)
- Dual agency consent forms
Required Elements of Agency Agreements
| Element | Description |
|---|---|
| Parties | Names of broker and client |
| Property description | Type or specific property |
| Duration | Start and end dates |
| Compensation | Commission terms |
| Services | What broker will provide |
| Duties | Fiduciary duties explained |
Duties to Clients vs. Customers
Duties to Clients (Fiduciary)
When you have an agency relationship:
- Loyalty - Put client's interests first
- Obedience - Follow lawful instructions
- Disclosure - Reveal all material facts
- Confidentiality - Protect private information
- Accounting - Handle funds properly
- Reasonable Care - Act competently
Duties to Customers
When dealing with non-clients:
- Honesty - Do not lie or deceive
- Fair dealing - Treat fairly in all interactions
- Material facts - Disclose known material facts about property condition
- Accurate information - Provide truthful answers to questions
Key Point: Even without an agency relationship, you owe duties of honesty and fair dealing to all parties.
Transaction Coordination
Michigan allows for transaction coordination (sometimes called transaction brokerage):
- No fiduciary duties to either party
- Facilitates the transaction
- Must disclose this role clearly
- Both parties are customers
- Cannot advocate for either party
When must a Michigan real estate licensee provide agency disclosure?
What is required in Michigan to establish a client relationship with fiduciary duties?