Michigan State Law & Practice — Real Estate Broker

Start with the fact that changes everything about how you sit this exam: in Michigan there is no state portion. The broker examination is a single integrated paper. Everything below is Michigan law — Article 25 of the Occupational Code (MCL 339.2501–339.2518), the administrative rules at R 339.22101–R 339.22165, and the ten satellite acts the outline reaches. Nothing here repeats the national portion; where Michigan departs from the national rule, both are named.

What the Michigan portion actually is

There is no "Michigan section" to turn to. PSI bulletin 837 describes one examination: the Broker exam is 115 questions worth 120 points, 210 minutes, passing at 75% — a raw passing score of 90. The string "state portion" appears zero times in the bulletin. The forty Michigan-law items below are embedded in that single paper alongside the seventy-five percentage-weighted national items. You will never see a divider, you cannot bank time for the state material, and you cannot pass the national half and be carried. Michigan law is roughly one item in three and it arrives unannounced.

The vocabulary is fixed by the bulletin itself: on this examination "Department" means LARA and "Board" means the Board of Real Estate Brokers and Salespersons. Use those words in that way.

The published Michigan-law weighting

(Area 3's heading reads "Licenses," not "Licensees." That is the bulletin's own wording, reproduced as published.)

Areas 3 and 5 together are 70% of the Michigan content. This chapter is sized to that, and so should your study time be.

The caveat you must know before you buy any other Michigan guide. A 2016/2017 Michigan bulletin is mirrored all over the internet. It says "Additional State Topics (Broker — 6 Items)" and describes a 120-question exam. It is stale by seven items on that one area alone, and a candidate following it would prepare 33 Michigan-law items instead of 40 — under-studying the second-largest area by more than half. If your study material says Michigan's broker exam has 120 questions, or gives Additional State Topics six items, it is working from a decade-old document. Check the number before you trust the book.

A note on the source: the lettered sub-lists printed under each area heading are not reproduced here, because this book will not present a subtopic list it cannot point to in the published outline. Each section instead tells you what the exam actually asks about in that area.

1. Duties and Powers of the Department and the State Board of Real Estate — 3 of 40 scored items (7.5%)

LARA administers Article 25 and promulgates the rules under MCL 339.205. The current rule set is R 339.22101 to R 339.22165, effective June 4, 2025 (2025 MR 12), and everything from R 339.22201 through R 339.22667 has been rescinded — a study aid citing those numbers is citing nothing. LARA issues, denies, renews and disciplines; the Board sits with it on penalty determinations and on approving limitations placed on a license.

Complaints. A complaint may be filed by the attorney general, the department, the board or any other person (MCL 339.501). The department must begin investigating immediately and acknowledge the complaint in writing within 15 days (MCL 339.502). If an informal conference does not settle it, a hearing follows under the Administrative Procedures Act (MCL 339.511). One deadline is specific to real estate: MCL 339.2512(2) requires a complaint seeking a penalty to be filed no later than 18 months after the later of the date of the alleged violation or, where it arose in a transaction, the date that transaction was completed. Both prongs matter — a violation early in a long escrow is measured from the closing.

Penalties. MCL 339.602 lists them: limitation, suspension, denial, revocation, censure, probation, restitution, and an administrative fine of not more than $10,000.00. The board has 60 days after receiving the hearing report to determine the penalty (MCL 339.514(1)), and a member who investigated the complaint or attended the informal conference may not take part in that determination (MCL 339.514(3)). Practicing without a license is separately a misdemeanor under MCL 339.601(4) — up to $500.00 or 90 days, rising to $1,000.00 or a year on a second offense. A revoked licensee may not reapply for at least 3 years and gets no credit for pre-revocation education, experience or examinations (MCL 339.2502a(7)).

2. Licensing Requirements — 4 of 40 scored items (10%)

Only four items, but this is where Michigan folklore is thickest.

Who needs a license. MCL 339.2501(u) defines a broker broadly — selling, buying, listing, providing market analyses, negotiating a purchase, sale, exchange or mortgage, leasing or renting for others, property management, and selling businesses or business goodwill. MCL 339.2502b then catches the owner selling her own property as a principal vocation, defined four ways: more than 5 real estate sales in any 12-month period; representing to the public that she is principally engaged in selling real estate; devoting over 50% of her working time, or more than 15 hours a week in any 6-month period, to it; or, for a licensed salesperson, any sale other than her principal residence. Exemptions live in MCL 339.2503 — an owner selling other than as a principal vocation, an attorney-at-law rendering services as an attorney-at-law, a receiver, a trustee in bankruptcy, an administrator or executor, and a person selling under order of a court.

Tiers. A salesperson is employed by a broker (MCL 339.2501(v)). An associate broker has met every broker requirement but is licensed to a broker rather than running a firm (MCL 339.2501(a)) — a tier above salesperson, not below. A broker's license may issue to an individual, sole proprietorship, partnership, association, corporation, LLC or common-law trust; where it issues to an entity, each control person designated as a principal must separately hold an associate broker's license, and the entity's license is not transferable (MCL 339.2508).

Eligibility, and the experience trap. Ninety clock hours of approved prelicensure classroom courses, at least 9 in civil rights and fair housing law, completed within the 36 months before application — and these 90 are in addition to the salesperson's 40 (MCL 339.2504(1)(b); R 339.22111). R 339.22111(3) gives credit for credentials: a law degree counts as 60 hours including 6 civil-rights hours, an MBA or master's in business or finance as 60, a bachelor's in business or finance as 30. Then comes the equivalent of 3 years of full-time experience (MCL 339.2505(7)) — and that is a credit schedule, not a calendar. A salesperson earns one year for each 12-month period in which she closed 5 or more transactions; a builder one year per 12 months building and personally selling or leasing 5 or more units; an investor 6 months per 5 personally negotiated transactions, capped at one year; an attorney one year per year handling 6 or more real estate transactions. Bare licensure earns nothing. The department may not license anyone under 18 (MCL 339.2502a(1)) and may not issue a broker's license to anyone convicted of embezzlement or misappropriation of funds (MCL 339.2505(2)). A passing exam score is good for 1 year (MCL 339.2505(6)(b)).

Continuing education. 18 clock hours per license cycle, with an annual floor added by 2023 PA 246: at least 2 hours of law, rules and court cases and 1 hour of fair housing in EACH year of the cycle, the remaining 9 completable at any time (MCL 339.2504a(2)(a); R 339.22161(1)). Evidence is kept 4 years (MCL 339.2504a(3)). CE credits do not count toward prelicensure hours and prelicensure hours do not count toward CE (MCL 339.2504a(7)).

3. Statutory Requirements Governing the Activities of Licenses — 15 of 40 scored items (37.5%)

The largest area on the paper. Almost every subtopic carries a hard number or a bright line.

Advertising

A broker's advertising must carry the broker's name or business name, a telephone number or street address, and a statement that the advertiser is a real estate broker (MCL 339.2512e(1)). Since January 1, 2018, advertising naming an associate broker, a salesperson or a cooperating group must also carry the employing broker's telephone number or street address and the employing broker's business name in equal or greater type size than the licensee's name (MCL 339.2512e(3)) — a relative size rule, so the broker's identity can never be the fine print. A broker or associate broker may advertise property he personally owns in his own name but must affirmatively indicate that he is a licensee (MCL 339.2512e(2)); a salesperson may advertise under her own name only for her principal residence, or, for a rental, only property she owns (MCL 339.2512e(4)). A broker may not advertise under a name other than the licensed one, and must report an assumed name with the application or within 30 days of adopting it, whichever is earlier (MCL 339.2512e(5)). A licensee representing a seller may not advertise the property as "for sale by owner" (MCL 339.2512d(4)).

Commissions and fees

A salesperson may accept compensation for licensed activity only from the employing broker (MCL 339.2510(1)). A broker may not share a fee with an unlicensed person, and MCL 339.2512(1)(h) says expressly that this includes paying anyone for the name of, or other information about, a potential buyer or seller — the only carve-out in the sentence is the purchase of a commercially prepared list of names. A Michigan broker may pay a commission to a broker licensed in another state if that broker conducts no negotiation here. MCL 339.2512b permits an owner or the owner's agent to give an existing tenant consideration worth one month's rent or less for referring a prospective tenant. And MCL 339.2512a closes the courthouse door: an unlicensed person cannot maintain an action for compensation in a Michigan court without alleging and proving licensure at the time of performance.

Disclosure and conflict of interest

A licensee selling property she owns discloses her interest and her licensure in writing, before an offer to purchase is signed (MCL 339.2502b(3)). A licensee acquiring an interest discloses her licensure to the owner before the owner is asked to sign the purchase agreement or option (MCL 339.2516(1)–(2)). R 339.22137 forbids a referral fee for placing a loan alongside the commission unless buyer and seller both consent in advance in writing, and forbids a fee from an abstract, home warranty, title insurance or other settlement service provider unless the client consents in advance in writing — in each case subject to RESPA. R 339.22139(1) forbids misrepresenting material facts, and R 339.22139(2) protects the licensee who discloses a material condition against a claim that the disclosure was disloyal.

Contracts, documents and listings

A signed copy of the offer to purchase goes promptly to the buyer; all terms and conditions must be in the offer; all signed written offers reach the seller within 2 business days of receipt — a business day being any day that is not a Saturday, Sunday or federal holiday; and true executed copies of an acceptance go promptly to both sides (R 339.22132; R 339.22101(1)(b)). Once the seller has accepted and the agreement is fully executed, R 339.22132(5) protects a licensee who does not submit later offers, unless the service provision agreement requires it. Since 2024 PA 122, a right-to-list home sale agreement is void and unenforceable if it is unwritten, unsigned by all owners, longer than 2 years, or missing both an early-termination option capped at the broker's initial consideration plus 6% per annum and a conspicuous first-page explanation of the term and that option (MCL 339.2512g); entering a void one is a disciplinable act (MCL 339.2512(1)(l)).

Trust money — and the two different clocks

The trust or escrow account is a demand account only, and all money received in a fiduciary capacity — escrow funds and earnest money included — goes into a NON-interest-bearing demand trust account (R 339.22134(2)–(3)). Checks must be signed by a broker or associate broker; a cosignatory may only accompany that signature. The account designates the broker as trustee and must allow withdrawal without previous notice (MCL 339.2512(1)(k)(vi)) — which rules out a time deposit. The broker deposits within 2 banking days after receiving notice that all parties accepted the offer, and delivers within the same 2 banking days to a third-party escrowee named in the purchase agreement (MCL 339.2512(1)(k)(v), (vii)). A salesperson delivers deposits to the broker on receipt and has no holding discretion (MCL 339.2512(1)(k)(ii)).

Watch the units. Offer delivery runs on business days (administrative rule); escrow deposit runs on banking days (statute). Michigan uses both words and means different things by them.

The broker may keep up to $2,000.00 of its own money in each trust account for bank charges and minimum balances (MCL 339.2512(1)(k)(iv)), and may not otherwise commingle. Property management money is the deliberate exception: those accounts are kept separate from all others and may be interest-bearing unless the property management employment contract says otherwise (MCL 339.2512c(2)–(3)). Where buyer and seller both claim a deposit, R 339.22134(9) keeps it in trust until a civil action decides it or the parties agree in writing, and lets the broker commence an action to interplead it.

Offices, records, inducements

A broker maintains a place of business in Michigan — a physical location held out to the public (MCL 339.2501(m)) — and obtains a branch office license for every additional one. A branch more than 25 miles from the nearest boundary of the municipality holding the main office must be under the direct supervision of an associate broker physically present at that branch on a regular basis during ordinary business hours (MCL 339.2505(3)). Trust and escrow records show the date and source of each receipt, the deposit date, the payee, check number, purpose and amount of each disbursement, the current balance of every account, and the receipts and disbursements affecting each single transaction with both parties' names and the property address; they are kept not less than 3 years after the date of inception (R 339.22134(4)–(8)). MCL 339.2511 bars any plan or scheme involving a lottery, contest, game, prize or drawing for the sale or promotion of a sale of real estate; a game promotion complying with MCL 750.372a may be used for any purpose other than the direct promotion of a specific piece of real estate.

Where Michigan departs from the national rule: the stigmatized-property shield

The national manuscript teaches a broad duty to disclose material facts. MCL 339.2518 carves three holes in it, and Michigan expects you to know their edges exactly. No action lies against a broker, associate broker or salesperson for failing to disclose (a) that a former occupant has or is suspected of having a disability; (b) that the property was or was suspected to have been the site of a homicide, suicide or other occurrence prohibited by law which had no material effect on the condition of the property; or (c) any information from the sex offender registry compilation under MCL 28.728(2). The shield covers stigma only. Physical condition remains governed by the Seller Disclosure Act and by R 339.22139 — a known roof leak is not protected by anything.

Dispute resolution: two tracks, and they do not wait for each other

A LARA complaint and a civil suit run in parallel. MCL 339.2515(3) provides that Article 25 does not diminish a party's right to pursue direct and immediate legal or equitable remedies in a court of competent jurisdiction, and MCL 339.2515(2) puts the burden of proof on the department at all times. What a complainant cannot do is turn the Board into a civil court: the Board's remedies are the article 6 penalties, and although restitution is among them it rests on proofs made to the hearing examiner in a contested case, not on a complainant's demand. Binding arbitration in Michigan real estate law arrives by contract only — for example the paragraph every residential condominium purchase agreement must carry, submitting claims under $2,500.00 to the American Arbitration Association at the purchaser's exclusive option (MCL 559.184(4)(d)).

Where it bites

A Michigan brokerage takes a $10,000 earnest money check on a Friday afternoon. The salesperson keeps it in her desk over the weekend and hands it to the broker on Tuesday; the broker deposits it Thursday, three banking days after the parties' acceptance was communicated on Monday. Meanwhile the firm's yard sign carries the salesperson's name in 4-inch type and the brokerage name in 1-inch type, and a neighbor who tipped off the listing is promised $500 "for the introduction."

That is four separate violations in one file, and only one of them involves anyone losing money. MCL 339.2512(1)(k)(ii) required the salesperson to deliver the deposit to the broker on receipt, not on Tuesday. MCL 339.2512(1)(k)(v) allowed 2 banking days from notice of acceptance, not three. MCL 339.2512e(3) required the brokerage name in equal or greater type size than the salesperson's. And MCL 339.2512(1)(h) flatly prohibits the $500, because the payment is for the name of a potential seller and the payee is unlicensed — a fact no seller's consent can cure. Each is independently disciplinable, and under MCL 339.2512f(1) the broker's own failure to have written operating policies and to review the salesperson's practice is a fifth exposure sitting on top.