Michigan Purchase Agreement: How Offers, Contingencies, and Earnest Money Work

The moment a seller accepts your offer in Michigan, you're under contract — and specific legal timelines start running that determine what protections you have, when your earnest money is at risk, and what happens if something goes wrong. Michigan's purchase agreement process is different from attorney-driven states, and the differences matter. Here's how it works.

Michigan Is a Title Company State — Not an Attorney State

Buyers relocating from states like New York, Illinois, or Massachusetts often expect that a real estate attorney will negotiate the contract and manage the closing. That's not how Michigan works.

Michigan is a "title company state." Title companies serve as the neutral settlement agent for nearly all residential transactions. The title company searches the public record, issues title insurance, calculates tax prorations, holds escrow funds, prepares closing documents, and disburses funds on closing day. They are not your advocate — they're a neutral third party who ensures the mechanical process runs correctly.

This means that if you have questions about the legal meaning of specific contract language, the implications of a complex easement, or risks specific to your transaction, you need to hire a Michigan real estate attorney yourself. An attorney in a Michigan real estate deal is retained for legal advice and review, not to mechanically run the closing.

For a standard residential purchase, the purchase agreement template comes from the Michigan Realtors association or regional boards like Northern Great Lakes Realtors. Your agent typically uses these standard forms. Understanding the key provisions is your responsibility.

Earnest Money: What's Required and What's at Stake

Once your offer is accepted, you're required to submit an earnest money deposit — also called an EMD — typically within 24 to 72 hours of contract execution. This demonstrates good faith and creates a financial stake in completing the transaction.

Where it's held: Earnest money in Michigan is held in a trust account maintained by the listing broker, buyer's broker, or title company. State law (MCL 339.2512) requires real estate brokers to deposit the EMD into a non-interest-bearing trust account within two banking days of notification that the offer was accepted.

How much: Varies by market and price point:

• Rural or lower-priced properties: $500–$2,000 is common
• Suburban Michigan markets: 1% of purchase price is standard
• Competitive bidding situations in Ann Arbor, Grand Rapids, or Detroit suburbs: 2–5% to demonstrate financial seriousness

What happens if the deal falls through: If you exercise a valid contingency (inspection issues, financing denial), your earnest money is returned in full. If you breach the contract without a valid contingency basis, the seller is typically entitled to keep it. If there's a dispute, the escrow holder cannot release the funds without a signed release from both parties or a court order — meaning a disputed EMD can be frozen for months.

The Seller Disclosure Form

Before or at the time of your accepted offer, the seller must provide a completed Michigan Seller Disclosure Statement. State law mandates that sellers proactively disclose all known material defects affecting the property.

The disclosure form covers:

• Roof, attic, and structural components
• Water intrusion, basement, and foundation conditions
• Plumbing, electrical, and HVAC systems
• Environmental hazards (radon, lead paint, underground storage tanks, contaminated soil or water)
• Known PFAS contamination
• Pending legal disputes or assessments
• HOA membership and fees
• Any unpermitted additions or renovations

What disclosure doesn't substitute for: Inspection. A seller discloses what they know. They can't disclose what they don't know, and they may not know about slow foundation movement, early-stage roof deterioration, or a failing drain field that's showing no interior symptoms. The Michigan Court of Appeals established in Kondrat v. Servitto (2019) that buyers aren't required to conduct invasive inspections to verify seller disclosures — sellers are liable for conditions they knew about but didn't disclose. But that legal protection does you no good if a defect was genuinely unknown and emerges after closing.

Read the seller disclosure before making your offer if possible. Red flags — "unknown" answers to critical systems, disclosures of past water intrusion, or known but unresolved foundation cracks — should inform your inspection strategy and your offer price.

Key Contingencies in a Michigan Purchase Agreement

Contingencies are the clauses that let you exit the contract — and get your earnest money back — if specific conditions aren't met.

Inspection contingency: Grants you a defined window, typically 7–10 days, to conduct a professional home inspection. If inspection reveals material defects, you can negotiate repairs, request a price reduction, or walk away. The clock starts from the accepted offer date, not when you schedule the inspection. Schedule immediately.

Financing contingency: Protects you if your loan is denied despite good-faith efforts. The contingency should specify the loan type (conventional, FHA, USDA), maximum interest rate, and loan amount so the terms are clear.

Appraisal contingency: Protects you if the property appraises below the purchase price. Without this clause, you're obligated to either pay the gap in cash or lose your earnest money if the appraisal comes in low. In competitive markets, some buyers waive this — understand the risk you're accepting.

Title contingency: Ensures the title company can deliver clean title. If title search reveals unresolved liens, clouds, or encumbrances that can't be cleared, you can exit.

Home sale contingency: Lets you back out if your current home doesn't sell first. Relevant for move-up buyers; rarely applies to true first-time buyers.

What happens when you waive contingencies: In competitive bidding wars — common in Ann Arbor, the Detroit suburbs, and Grand Rapids — sellers sometimes pressure buyers to waive inspection or appraisal contingencies. Waiving inspection puts your earnest money at risk if you discover serious defects post-acceptance. Waiving appraisal means covering any gap between appraised value and purchase price out of pocket. Both decisions carry real financial exposure. Do not waive them without fully understanding what you're agreeing to.

The Michigan Closing Timeline: 30–45 Days

A standard financed residential transaction in Michigan runs 30–45 days from accepted offer to closing. The general timeline:

• Days 1–3: Earnest money submitted; inspection scheduled
• Days 1–10: Inspection contingency window; inspections completed, results reviewed
• Days 7–14: Inspection resolution (repairs, credit, or walk-away decision)
• Days 5–25: Appraisal ordered by lender; appraiser completes visit; results delivered
• Days 10–30: Lender underwriting; document requests and conditions
• Days 25–40: Closing Disclosure delivered (required 3 business days before closing)
• Day 30–45: Closing day — signing with title company; funds disbursed; keys received

Delays typically come from slow appraisal scheduling, underwriting conditions (document requests that drag on), or title issues that require resolution. Building some buffer into your timeline for lease break or moving logistics is practical.

Post-Closing Occupancy Agreements: A Michigan-Specific Pattern

In competitive Michigan markets — particularly the Detroit suburbs and Washtenaw County — sellers frequently request the right to remain in the home for a period after closing. This "rent-back" or post-closing occupancy agreement is more common in Michigan than in most states.

The buyer is technically the owner and responsible for insurance; the seller-occupant maintains renter's insurance and compensates the buyer at a daily rate (typically 1/30th of the monthly PITI payment). A security deposit is withheld from seller proceeds and held by the title company.

Conventional mortgage guidelines cap post-closing occupancy at 60 days — beyond that, the lender's primary residence assumption is violated. If you agree to a rent-back, ensure it's in writing with a clear move-out date and a funded security deposit.

Understanding the full purchase agreement process — including how Michigan contingencies interact with your loan type and what your earnest money protection actually looks like — is essential before you make your first offer. The Michigan First-Time Home Buyer Guide covers the complete transaction timeline with specific guidance on what to negotiate and when.

See more Michigan guides →