Michigan Real Estate Broker Exam — All Questions

A Michigan salesperson's name appears on a yard sign and a web listing. Since January 1, 2018 that advertising must also carry the employing broker's telephone number or street address, plus the broker's business name in:

• a.Type of equal or greater size than the salesperson's name✓
• b.Type at least half the size of the salesperson's name
• c.Type of any size, provided it is on the same page
• d.Bold 12-point type placed above the salesperson's name

MCL 339.2512e(3) requires that advertising displayed or published on or after January 1, 2018 which includes the name of an associate broker, a salesperson, or a cooperating group employed by the same broker 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 name of the associate broker, salesperson, or cooperating group." A half-size rule, an any-size rule and a fixed 12-point rule are all inventions; the statute states a relative size, so the broker's identity can never be the fine print. MCL 339.2512e(1) governs the broker's own advertising, which must give the broker's name or business name, a telephone number or street address, and state that the advertiser is a real estate broker. MCL 339.2512e(4) limits a salesperson advertising under her own name to her principal residence when selling, or to property she owns when renting, and MCL 339.2512e(5) requires notice of an assumed name to the department with the application or within 30 days of adopting it, whichever is earlier.

A Michigan broker wants to pay $500 to an unlicensed neighbor who supplied the name of a homeowner thinking of selling. Under MCL 339.2512(1)(h) the payment is:

• a.Permitted, because supplying a name is not a licensed activity
• b.Permitted if the seller consents to it in writing at the closing
• c.Prohibited unless the neighbor registers the referral with LARA
• d.Prohibited, because it is a fee shared with an unlicensed person✓

MCL 339.2512(1)(h) makes it a disciplinable act to share or pay a fee, commission or other valuable consideration to a person not licensed under the article, and it says expressly that this "includ[es] payment to any person that provides the name of, or any other information regarding, a potential seller or purchaser of real estate." So dressing the payment up as a referral fee does not save it, and neither a seller's written consent nor a filing with the department can license an unlicensed payee. The one carve-out in the same sentence is payment for the purchase of a commercially prepared list of names; the sentence also lets a Michigan broker pay a commission to a broker licensed in another state provided that nonresident broker conducts no negotiation in this state. MCL 339.2512b is a separate and narrow allowance in the rental context: an owner or the owner's authorized agent may give an existing tenant consideration worth one month's rent or less for referring a prospective tenant.

An unlicensed person negotiated a Michigan sale and now sues the seller for the agreed commission. Under MCL 339.2512a the action fails because the plaintiff cannot:

• a.Show that the seller signed a written listing agreement
• b.Allege and prove licensure at the time of the performance✓
• c.Establish that the fee charged was commercially reasonable
• d.Prove the buyer was procured ready, willing and able

MCL 339.2512a bars a person engaged in, or acting in the capacity of, a person required to be licensed from maintaining an action in a court of this state for the collection of compensation "without alleging and proving that the person was licensed under this article at the time of the performance of the act or contract." The bar goes to status, not to the merits, so it closes the courthouse door before any of the usual commission arguments is reached. A signed listing agreement, a textbook procuring-cause showing and a demonstrably reasonable fee are all irrelevant if the pleading cannot allege licensure at the time of performance. The unlicensed activity is separately a misdemeanor under MCL 339.601(4), and a licensee who aids or abets the unlicensed practice of an occupation is subject to penalty under MCL 339.604(l).

A Michigan licensee lists and sells a rental house she owns herself. She must reveal her ownership interest and her licensure to the purchaser:

• a.In writing, before an offer to purchase is signed✓
• b.Orally, at the first showing of the property
• c.In writing, at or before the closing appointment
• d.Orally, before the deed is delivered to the buyer

MCL 339.2502b(3) requires a licensee selling property that the licensee owns or has an interest in to reveal the facts of that ownership or interest and the licensee's licensure to the purchaser, in writing, before an offer to purchase is signed, and to provide written proof of the disclosure to the department on request. The mirror provision runs the other way in MCL 339.2516(1): when a licensee buys or otherwise acquires an interest in real property, the licensee must disclose the licensure to the owner before the owner is asked to sign the purchase agreement, and MCL 339.2516(2) applies the same rule where the licensee takes an option from an owner who requested the licensee's services. Neither section is satisfied orally, and neither tolerates waiting for the closing; the disclosure exists so the other side knows who it is dealing with before it commits itself.

A Michigan licensee receives a signed written offer to purchase on a Thursday. Under R 339.22132(3) the offer must be delivered to the seller within:

• a.24 hours of receipt, weekends excluded
• b.2 business days after receipt of the offer✓
• c.5 calendar days after receipt of the offer
• d.3 business days, or sooner if the offer expires

R 339.22132(3) requires a licensee to deliver all signed, written offers to purchase to the seller within 2 business days after receipt, and R 339.22101(1)(b) defines a business day as a day that is not a Saturday, Sunday or federal holiday, so an offer taken in on Thursday runs to Monday. Delivery may be in person, by mail, or by electronic communication under the Uniform Electronic Transactions Act, 2000 PA 305 — but electronic records or digital signatures require the parties' prior agreement. The neighboring subrules complete the picture: a signed copy of the offer goes promptly to the buyer, all terms and conditions of the transaction must be included in the offer, and true executed copies of an acceptance go promptly to both purchaser and seller. Once the seller has accepted and the sales agreement is fully executed, R 339.22132(5) protects a licensee who does not submit later offers, unless the service provision agreement requires that subsequent offers be presented.

Under MCL 339.2512g, added by 2024 PA 122, a right-to-list home sale agreement is void and unenforceable if it:

• a.Is recorded against the residential property
• b.Runs for a period of more than 2 years✓
• c.Names a supervisory broker who is not a principal
• d.Pays the owner more than 6% of the sale price

MCL 339.2512g(1) voids a right-to-list home sale agreement on any of four grounds: it is not in writing; it is not signed by all persons that have an ownership interest in the residential real estate; it is for a period of more than 2 years; or it omits either an option for the owner to terminate early for consideration no greater than the initial consideration the broker paid the owner plus interest of 6% per annum, or a conspicuous statement on the first page of the term and of that early-termination option. The 6% is the interest rate on the broker's own money, not a share of the sale price, and recording has nothing to do with validity. A supervisory broker is a designated-agency concept under MCL 339.2517, not a term of these agreements. MCL 339.2501(w) defines the agreement as one obligating the owner to list at a future date for consideration and excludes service provision agreements from it, and MCL 339.2512(1)(l) makes entering a void one a disciplinable act.

Earnest money that a Michigan broker holds for others must be deposited in a trust or escrow account that is:

• a.A non-interest-bearing demand account✓
• b.An interest-bearing account for the buyer
• c.A money-market account in the broker's name
• d.A 90-day certificate of deposit held to closing

R 339.22134(2) says a trust or escrow account must be maintained in a demand account only, and R 339.22134(3) requires the broker to deposit all money received in a fiduciary capacity, including escrow funds and earnest money, in a non-interest-bearing demand trust account. Checks drawn on it must be signed by a broker or associate broker, and a cosignatory may be added only alongside that signature. MCL 339.2512(1)(k)(vi) requires the account to designate the broker as trustee and to allow withdrawal without previous notice, which rules out a time deposit. Property management money is the deliberate exception: MCL 339.2512c(3) allows a property management account to be interest-bearing unless the property management employment contract says otherwise, and MCL 339.2512c(2) requires those accounts to be kept separate from all others. A broker may keep up to $2,000.00 of its own money in each trust account to cover service charges and minimum balances under MCL 339.2512(1)(k)(iv), and no more.

All parties accept an offer and the Michigan broker is notified. The broker must deposit the earnest money into the trust account no later than:

• a.2 banking days after notice of the acceptance✓
• b.The next business day after the offer is written
• c.5 banking days after the buyer's check clears
• d.The date of closing, or of an earlier default

MCL 339.2512(1)(k)(v) starts the clock when the broker "has received notice that an offer to purchase is accepted by all parties" and allows not more than 2 banking days from that point to deposit money belonging to others into a separate custodial trust or escrow account with a bank, savings and loan association, credit union or recognized depository. It does not run from the writing of the offer, from a check clearing, or from the closing. The same 2-banking-day limit appears in subparagraph (vii) for the case where the purchase agreement names an escrowee other than the broker: the licensee in possession must cause the deposit to be delivered to that named escrowee. Note that "banking days" is the statute's unit here, distinct from the "business day" the administrative rules use for offer delivery. A salesperson has no holding discretion at all; MCL 339.2512(1)(k)(ii) requires delivery to the broker on receipt.

A Michigan sale collapses and buyer and seller each claim the earnest money the broker holds. Under R 339.22134(9) the broker must:

• a.Keep it in trust pending a court ruling or written agreement✓
• b.Split it evenly and account to both sides within 30 days
• c.Release the deposit to the party the purchase agreement favors
• d.Forward it to the department to hold until the dispute ends

R 339.22134(9) provides that any deposit in the broker's trust account claimed by both the buyer and the seller "shall remain in the broker's trust account until a civil action has determined to whom the deposit shall be paid, or until the buyer and seller have agreed, in writing, to the disposition of the deposit," and the same subrule expressly allows the broker to commence a civil action to interplead the deposit with the proper court. Reading the purchase agreement and paying whichever party the broker believes is right is precisely the judgment the rule removes from the broker. An even split is a disposition neither party agreed to and no court ordered. The department licenses and disciplines; it is not a stakeholder and holds no disputed deposits. In the ordinary case, the same subrule requires disbursement at consummation or termination in accordance with the agreement the parties signed.

A Michigan broker opens a branch office 40 miles from the nearest boundary of the municipality holding its main office. That branch must be:

• a.Staffed by at least two full-time licensed salespersons
• b.Registered with the county register of deeds office
• c.Under the direct supervision of an associate broker✓
• d.Limited to property management and leasing activity

MCL 339.2505(3) requires a real estate broker to maintain a place of business in this state and to obtain a branch office license for each additional place of business; where a branch office is located more than 25 miles from the nearest boundary of the municipality in which the main office sits, the broker must ensure the branch is under the direct supervision of an associate broker. The subsection defines direct supervision as an associate broker being physically present at the branch on a regular basis to supervise and manage the business during ordinary business hours, so it is a staffing duty rather than a paperwork one. "Place of business" is defined in MCL 339.2501(m) as a physical location the broker holds out to the public as a place where clients and customers may do business with a licensee. Recording with a county office, minimum headcounts and restrictions on the activities a branch may conduct form no part of the requirement.

Michigan trust or escrow account records must be kept for a period of not less than:

• a.1 year after the transaction closes
• b.5 years after the license is renewed
• c.7 years after the account is closed
• d.3 years after the records' inception✓

R 339.22134(8) fixes the retention period for all trust or escrow account records at not less than 3 years after the date of inception of the records — a date tied to the records themselves, not to a closing, a renewal or the eventual closing of the account. R 339.22134(6) requires the records to reflect the current balance of each account and to be made available to the department on request, and R 339.22134(4), (5) and (7) set out what each receipt and disbursement entry must show, down to the check number, the payee and the property address. MCL 339.2512(1)(k)(vi) adds that the records must show clearly for whose account money is deposited and to whom it belongs, and makes them subject to inspection by the department. The continuing-education retention period is a different clock: 4 years under MCL 339.2504a(3).

MCL 339.2511 tells a Michigan licensee that a lottery, contest, game, prize or drawing may NOT be used to:

• a.Recruit salespersons to the brokerage's own office
• b.Attract attendance at a continuing education seminar
• c.Raise money for a charity named in the office's ads
• d.Promote the sale of a specific piece of real estate✓

MCL 339.2511 forbids a plan or scheme involving a lottery, contest, game, prize or drawing to be used by a real estate broker or salesperson "for the sale or promotion of a sale of real estate." It then carves out a game promotion as defined in and complying with section 372a of the Michigan penal code, MCL 750.372a, which a licensee may use "for any purpose other than the direct promotion of a specific piece of real estate." The line the statute draws is therefore the specific property: recruiting licensees, supporting a charity and filling a classroom all sit outside it, while a drawing run to move a listing sits inside it. Inducements aimed at unlicensed people who feed the brokerage names run into a different prohibition altogether, the fee-sharing bar in MCL 339.2512(1)(h).

A Michigan seller files a LARA complaint against a broker and is told the matter is now in the agency's hands. Under MCL 339.2515(3) the seller may still:

• a.Demand that the board award her money damages
• b.Pursue direct legal or equitable remedies in court✓
• c.Compel the department to prove her private claim
• d.Require the broker to submit to binding arbitration

MCL 339.2515(3) provides that the article "shall not diminish the right of a party to pursue and utilize direct and immediate legal or equitable remedies in a court of competent jurisdiction." The disciplinary track and the civil track run in parallel, and neither waits on the other. What the complainant cannot do is turn the board into her civil court: the board assesses the article 6 penalties under MCL 339.602, and although restitution is among them it rests on proofs submitted to and findings made by the hearing examiner in a contested case, not on a complainant's demand. Nothing in the article lets a party impose arbitration on a broker who never agreed to it — binding arbitration in Michigan real estate law appears by contract, as in the small-claim arbitration paragraph every residential condominium purchase agreement must carry under MCL 559.184(4)(d). MCL 339.2515(2) puts the burden of proof on the department at all times, which is a different thing from the department litigating a private claim.

MCL 339.2518 bars an action against a Michigan licensee for failing to disclose that:

• a.The roof of the house has a known active leak
• b.The property was the site of a prior homicide✓
• c.The seller has received a higher competing offer
• d.The lot lies partly within a mapped flood plain

MCL 339.2518 shields a real estate broker, associate broker or salesperson in three defined situations: failure to disclose that a former occupant has or is suspected of having a disability, as that term is drawn from the federal Fair Housing Act; failure to disclose 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; and failure to disclose information from the sex offender registry compilation made available under MCL 28.728(2). The shield covers stigma, not condition. A known active roof leak is a material fact the licensee may not misrepresent under R 339.22139(1) and one the seller is asked about directly on the Seller's Disclosure Statement; R 339.22139(2) goes further and protects a licensee who does disclose a material condition against a client's claim that the disclosure was disloyal. Competing offers and flood-plain mapping fall outside section 2518 as well.

A Michigan broker involved at a closing must furnish the buyer and seller a signed, complete and detailed closing statement, except where the closing is conducted by:

• a.The listing broker's own in-house closing department
• b.An attorney retained by the buyer for the transaction
• c.A federally chartered bank funding the buyer's loan
• d.A title insurance company or its designated agent✓

MCL 339.2512d(3)(e) requires a real estate broker or associate broker involved at the closing of a real estate or business opportunity transaction to furnish, or cause to be furnished, to the buyer and seller a complete and detailed closing statement signed by that broker showing each party all receipts and disbursements affecting that party — and then provides that the subdivision "does not apply if the closing is conducted by a title insurance company, or a person designated to act as the agent of a title insurance company, that is licensed or authorized to do business in this state." That is the only closing agent named. A lender at the table, a buyer's attorney and the brokerage's own staff all leave the broker's duty intact. Two related closing duties sit in the same subsection: at execution of an offer to purchase the licensee must recommend that the purchaser require a fee title policy in the amount of the purchase price, and under MCL 339.2512d(3)(d) a licensee may not close on terms contrary to the executed purchase agreement without the written approval of buyer and seller.