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Purchase and Sale of a Home

The purchase and sale of a home may be the most significant financial decision of your life. This brochure discusses some of the more important aspects of that decision.

  1. Purchase Agreement

    The purchase agreement is the contract between a buyer and seller of a home. The agreement must be in writing and signed by the buyer and seller. Before you sign the agreement, make sure that it includes everything that is important to you. If the agreement is not in writing, it is not enforceable.

    What You Are Buying

    When you buy a home, you are also buying the land and other structures on the land. The sale may also include household appliances or other personal property.

    Offer and Acceptance

    In most home purchases, the buyer makes an offer by signing the agreement and giving it to the seller. The seller can then accept or reject the buyer's offer, or propose changes to the offer. If the parties agree upon all terms of an offer, and both sign the agreement, then the parties have a binding contract.


    If the buyer makes a deposit, it is usually held by a real estate agent, title company, lawyer, or the seller. The deposit usually should be returned to the buyer if the seller cannot transfer good title to the property, the home inspection is not satisfactory, the buyer cannot obtain mortgage financing, or another condition is not satisfied.


    Many buyers go to a bank or mortgage broker to obtain a loan. Sometimes the seller sells the home to the buyer on land contact. With a land contact, the buyer makes a substantial down payment, and pays the seller the balance of the purchase price over time. A third option is for the buyer to sign a lease with a purchase option. This permits the buyer to rent the home for a period of time before deciding whether to buy it. The lease should state if any portion of rental payment would be applied to the purchase price.

  2. Condition of Home and Personal Property


    The purchase agreement should give the buyer an opportunity to inspect the property thoroughly before deciding whether to complete the sale. Often a buyer employs a professional inspector to examine the property for structural defects, roof and basement leaks, heating, mechanical, electrical and plumbing problems, and environmental matters such as the presence of asbestos, radon or nearby contaminated property. Any well or septic system should be checked to make sure it is in good working order. Some cities require a government inspection of the home for well, septic or possible code violations. A city inspection, however, is not a good substitute for a private inspection.

    As Is

    Many purchase agreements provide that a used home will be sold in "as is" condition. What this means is that, with certain exceptions, the buyer is liable for any problems with the home after closing.

    Seller's Disclosure Statement

    Michigan law now requires the seller of an existing home to furnish the buyer with a Seller's Disclosure Statement before the parties execute a binding purchase agreement. Disclosure statements tell what the seller knows about the condition of the property. If the seller provides a disclosure statement after the parties sign the purchase agreement and before closing, the buyer has the right to cancel the agreement.

    Lead Based Paint Disclosure

    If the sale involves a home built before 1978, federal law requires the seller to furnish the buyer with a lead based paint disclosure form, stating whether the seller is aware of the presence of any lead based paint in the home. The seller must also provide the buyer with the EPA pamphlet, "Protect Your Family From Lead in Your Home," and allow the buyer an opportunity to inspect the home for the presence of lead based paint and/or lead based paint hazards.

  3. Title To Property And Home

    Definition of Title.

    "Title" is the legal term for ownership of property. When you buy a home, you are acquiring title to the home.

    Reasons for Title Concerns

    When you buy a home, you want to make sure that you own clear title to the property. Examples of title problems include rights of tenants, unpaid taxes, existing mortgages and land contacts, or dower. Title to the property may also be affected by easements or building and use restrictions which limit how the property can be used.


    A deed is the legal document used to transfer title to the property. By using a warranty deed, the seller guarantees certain things regarding title to the property. A warranty deed is generally used when selling a home.

    Title Commitment

    Before closing, the buyer should receive a title insurance commitment that lists recorded easements, building and use restrictions and liens on the property. If there are any problems with title, the seller should correct those problems before closing.


    A survey confirms the general location of the land and improvements. Better surveys will show the amount of land and exact boundaries, as well as roads, easements and encroachments onto or off of the property.

    Land Division

    A land division is the right to lawfully partition or split land into 2 or more separate parcels. If the home is not part of a subdivision or condominium, the purchase agreement and deed should state the number of land divisions the seller is giving the buyer.

  4. IV. Closing

    The closing occurs when the buyer pays the seller, and the seller transfers title to the property to the buyer by delivery of a deed or land contact. When the land contract is paid in full, the seller should deliver a deed to the buyer. Most closings are handled by a title company, lender or lawyer.

    Closing Statement

    The closing statement is a summary of the amounts paid and received by the buyer, seller and third parties at closing. The closing statement contains the purchase price, adjustments for real property taxes and utilities, broker commissions, transfer taxes, title insurance premiums, mortgage and lien payoffs and other closing adjustments. Buyers and sellers should review the closing statement with particular care to make sure that all dollar amounts are correct, and all charges are included.

    Transfer Taxes

    Michigan imposes two transfer taxes upon the seller of real estate, payable when the deed is recorded. The county transfer tax is $.05 per $500 of value. The state transfer tax is $3.75 per $500 of value.

    Real Property Taxes and Assessments

    The purchase price is usually adjusted to give the seller credit for prepaid real estate taxes, and give the buyer credit for unpaid taxes. Special assessments are either paid in full by the seller or assumed by the buyer. These adjustments should be contained in the closing statement.

    Rent for Delayed Possession

    Many times the buyer receives possession of the home at closing. Other times, the seller may remain in the home for a period of time after closing. When this happens, the seller generally pays the buyer rent. Monthly rent usually equals the amount of the buyer's monthly mortgage payment, real property taxes and insurance premiums.

    Recording of Deed or Land Contact

    The buyer should make sure that the deed or land contact is recorded with the local county Register of Deed office promptly after closing.

    Bill of Sale

    Just like a deed transfers title to the home, a bill of sale transfers title to appliances and other personal property. Unlike a deed, a bill of sale is not recorded.

    Ordering Title Policy

    At closing, the seller usually pays the title insurance premium and orders an owner's policy of title insurance. The policy insures that the buyer owns the property.

    Property Transfer Affidavit

    The buyer must file a property transfer affidavit with the local assessor's office within 45 days after closing. This affidavit discloses the identity of the seller and buyer, as well as the date of transfer and the purchase price.

    Homestead Affidavit

    If you own and occupy the property as your principal residence you can claim it as your homestead and pay lower real property taxes. However, to do so, you must file a homestead affidavit with your local assessor.


    Everyone should have insurance on their home. The insurance policy should cover liability matters if someone gets hurt on the property and property damage in the event of a fire or other casualty.


    Occasionally the buyer and/or seller cannot perform all their obligations at the closing. Documents or money (including rent or water charges) may be placed "in escrow" (which means held by a title company, broker or lawyer and not given to the other party) until all conditions are satisfied.

1998 Real Property Law Section of the State Bar of Michigan

This information is not a substitute for legal advice. If you need legal advice, see a lawyer.

If you fee you are being harassed, call a lawyer or your legal aid office.

Legal services of Northern Michigan can provide legal assistance to low-income persons in civil matters.

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