Real estate transactions in Michigan follow a defined sequence of steps. Each step has compliance requirements attached to it. When those requirements are met, the transaction proceeds cleanly from offer to closing. When they are not, problems develop. Sometimes those problems surface before closing. Often they surface after, when the options for addressing them are much more limited.
This article explains how Michigan real estate transactions are supposed to work from a compliance standpoint, where they commonly go wrong, and what Coventry Enterprises LLC examines in each phase of a transaction review.
The Compliance Framework for Michigan Real Estate Transactions
Michigan real estate transactions are governed by a combination of state law, federal regulation, and industry standards. The Michigan Occupational Code governs broker licensing and conduct. The Michigan Seller Disclosure Act establishes disclosure requirements for residential sellers. Federal law through RESPA and TILA governs lending practices. The NAR Code of Ethics applies to member brokers. And the purchase agreement itself creates contractual obligations that are enforceable between the parties.
These different layers of regulation do not always point in the same direction. A broker might comply with the minimum requirements of the Occupational Code while still falling short of the conduct standard expected under the NAR Code of Ethics. A seller might provide a disclosure that technically checks the required boxes without fully informing the buyer of known issues. Compliance review requires looking at all of these layers together, not just one of them.
Most compliance failures in Michigan real estate are not criminal or even intentional. They are the product of sloppy practice, inadequate attention to requirements, or professionals who prioritize moving the transaction forward over ensuring all the necessary steps are followed properly.
Phase One: The Purchase Agreement
The transaction begins with the purchase agreement. This document controls most of what happens in the transaction. It establishes the price, the terms, the contingencies, the timelines, and the parties' respective obligations. A properly drafted purchase agreement protects both parties. A poorly drafted one, or one that omits required elements, creates problems that follow the transaction through to closing.
The committee's review of the purchase agreement phase looks at several specific elements:
- Whether the agreement includes all required terms under Michigan law
- Whether contingency provisions give the buyer adequate time and rights
- Whether the property is accurately described
- Whether the parties are properly identified and their authority to enter the agreement is clear
- Whether addenda were properly incorporated and signed by all parties
- Whether any representations in the agreement are inconsistent with the actual transaction
A purchase agreement analysis is one of the foundational components of any full transaction review.
Phase Two: Disclosure
The Michigan Seller Disclosure Act requires residential sellers to complete a disclosure statement identifying known material defects in the property. The seller's disclosure statement must be delivered to the buyer before the purchase agreement is signed, or the buyer has the right to rescind within a specified period after receiving it.
The committee's review of the disclosure phase looks at whether the disclosure was delivered at the required time, whether the disclosure statement was complete, whether any known issues were omitted or understated, and whether the buyer acknowledged receipt of the disclosure properly. In cases where physical inspection findings are inconsistent with the seller's disclosures, the committee notes that discrepancy as a compliance concern.
| Transaction Phase | Key Compliance Requirements | Common Breakdown Points |
|---|---|---|
| Purchase agreement | Required terms, accurate description, valid contingencies | Missing contingencies, inaccurate property description |
| Seller disclosure | Timely delivery, complete and accurate disclosure | Late delivery, incomplete disclosure, known omissions |
| Due diligence | Adequate time, access, and broker support | Shortened periods, pressure to waive, inadequate broker guidance |
| Title commitment | Clear title or disclosed exceptions, buyer review | Exceptions not explained, unresolved requirements |
| Financing | Accurate Loan Estimate, compliant Closing Disclosure | Shifted terms between commitment and closing |
| Closing | Time to review documents, accurate settlement statement | Rushed closing, discrepancies not explained |
Phase Three: Due Diligence
After the purchase agreement is signed, the buyer enters the due diligence period. This is the window during which the buyer can inspect the property, review documents, and investigate any concerns without necessarily losing contingency protections. How the broker supports the buyer during this period is a significant compliance consideration.
The committee examines whether the due diligence period was adequate for the type of property, whether the buyer's broker informed the buyer of their rights and the available investigation steps, whether inspection requests were handled properly, and whether the buyer received all information needed to make an informed decision before contingencies expired.
In competitive markets, buyers are sometimes pressured to waive due diligence rights or shorten inspection periods. That pressure is not always inappropriate, but when it results in buyers making uninformed decisions, it reflects a conduct concern on the part of the broker. The committee's review looks at the pattern of how contingency waivers occurred in a transaction.
Phase Four: Title and Financing
The title commitment is one of the most important documents in a real estate transaction, and one of the least carefully reviewed. The title commitment identifies what the title company will insure, what exceptions apply, and what requirements must be satisfied before closing. Buyers who do not review the commitment carefully, or whose brokers do not help them understand it, sometimes close with title issues that could have been addressed.
The committee's title review looks at whether the commitment was received in time for adequate review, whether exceptions were explained to the buyer, and whether requirement items were resolved before closing. Title issues that appear in the commitment and were not addressed before closing are a compliance concern that the committee documents.
Financing review examines whether the Loan Estimate provided at application was consistent with the Closing Disclosure provided before closing. RESPA requires that the Closing Disclosure be delivered to the buyer at least three business days before closing, giving them time to review and raise questions. Discrepancies between the Loan Estimate and the Closing Disclosure above the tolerances allowed by law are a compliance violation.
Phase Five: Closing
Closing is where all of the prior phases come together. The settlement statement must accurately reflect the agreed terms. The deed must properly convey the property. The loan documents must match the financing terms. And the parties must have adequate time to review what they are signing.
A rushed closing is itself a compliance concern. Buyers who are handed a stack of documents and told to sign quickly, without adequate explanation of what they are signing, do not have the opportunity to identify discrepancies or raise questions. The committee looks at whether the closing process allowed proper review and whether any concerns raised at closing were addressed before the transaction was consummated.
In the committee's experience, closing-day problems often reflect problems that existed earlier in the transaction. A rushed closing is sometimes a symptom of a transaction that was not handled properly at earlier stages, and where pressure to close is being used to prevent the parties from noticing.
What the Committee Looks for Across All Phases
Across all phases of a transaction review, the committee is looking for the same core things. Were the applicable requirements followed? Were all parties adequately informed? Were the professional parties conducting themselves in accordance with applicable ethics standards? Is the documentary record consistent, or are there discrepancies between what different documents say happened?
When the answers to these questions are yes, the committee documents that the transaction met applicable standards. When the answers are no, the committee documents the specific deficiencies and the evidence supporting its findings.
The transaction review page provides additional detail on the specific services the committee offers. For information on the broader compliance framework the committee applies, the compliance page covers the regulatory foundations of the committee's standards.