Key Takeaways
- Michigan requires purchase agreements to be in writing to be enforceable under the Statute of Frauds
- Earnest money deposits must be handled according to the terms of the purchase agreement
- Time is of the essence clauses make all deadlines strictly enforceable
- Michigan uses standard purchase agreement forms developed by real estate associations
- Contingencies for financing, inspections, and other conditions are common in Michigan contracts
Michigan Purchase Agreements
Important: This content covers Michigan-specific contract law. You should complete the National Real Estate Exam Prep first, as general contract principles are tested on the national portion.
Real estate contracts in Michigan must meet standard contract requirements plus state-specific provisions.
Contract Requirements
For a valid Michigan real estate contract:
| Requirement | Description |
|---|---|
| Competent Parties | Legal age (18+) and mental capacity |
| Offer and Acceptance | Meeting of the minds |
| Legal Purpose | Transaction must be lawful |
| Consideration | Something of value exchanged |
| Written Form | Statute of Frauds requires writing |
| Property Description | Property must be identifiable |
Standard Purchase Agreement
Michigan real estate transactions typically use standard forms developed by real estate associations.
Key Contract Provisions
| Section | Purpose |
|---|---|
| Purchase Price | Total price and payment terms |
| Earnest Money | Amount, holder, and deposit timing |
| Financing | Loan type, amount, and contingency |
| Inspections | Inspection rights and contingencies |
| Closing | Date, location, and costs |
| Contingencies | Conditions that must be met |
Earnest Money
Earnest money in Michigan:
- Amount is negotiable between parties
- Typically held in broker's trust account or escrow
- Must be deposited according to agreement terms
- Disposition determined by contract terms if deal fails
Key Contract Provisions
Time is of the Essence
Michigan contracts typically include a "time is of the essence" clause, meaning:
- All deadlines are strictly enforceable
- Missing a deadline can be grounds for default
- Extensions must be in writing and agreed by all parties
Common Contingencies
| Contingency | Purpose |
|---|---|
| Financing | Buyer must obtain loan approval |
| Inspection | Property must pass inspections |
| Appraisal | Property must appraise at value |
| Sale of Buyer's Property | Buyer must sell current home |
| Title | Clear title must be deliverable |
Financing Contingency
The financing contingency protects the buyer if:
- Loan application is denied
- Loan terms change significantly
- Appraisal comes in below purchase price
Buyer must diligently pursue financing and provide documentation.
Inspection Contingency
Inspection contingencies may allow:
- Professional inspection of the property
- Negotiation of repairs
- Termination for significant defects
- Price reduction requests
Contract Amendments
Changes to the contract after signing require:
| Change Type | Method |
|---|---|
| Before acceptance | Counter-offer |
| After binding agreement | Written amendment signed by all |
| Extension of deadlines | Amendment to contract |
| Price changes | Amendment with new terms |
When Contract Becomes Binding
A Michigan purchase contract becomes binding when:
- All parties have signed the agreement
- Acceptance is communicated to the offering party
- No counter-offers are pending
Note: Until acceptance is communicated, an offer can be withdrawn.
Under Michigan's Statute of Frauds, what is required for a real estate contract to be enforceable?
What does "time is of the essence" mean in a Michigan real estate contract?