How to Read a Michigan Real Estate Purchase Agreement

Few moments in the home buying process feel as significant as signing a purchase agreement. It's the document that transforms your interest in a property into a legally binding contract — and for many buyers, especially first-time buyers, it can feel overwhelming. After more than 20 years in the real estate industry, I've walked countless clients through every line of their purchase agreements. My goal is always the same: make sure you understand what you're signing, what protections you have, and what happens next. This guide will break down the key sections of a standard Michigan purchase agreement so you can approach the process with confidence.

The Big Picture: What a Purchase Agreement Actually Is

A Michigan real estate purchase agreement is a written contract between a buyer and a seller that outlines the specific terms under which the buyer agrees to purchase the property and the seller agrees to sell it. Once both parties sign, it creates mutual obligations — the buyer is committed to purchasing under the stated terms, and the seller is committed to selling. Both sides have rights and responsibilities spelled out in the document, including timelines, contingencies, and remedies if something goes wrong.

In Michigan, purchase agreements typically follow a standardized format that includes several key sections. While the specific language and addenda can vary — and custom terms are common — the fundamental structure is consistent. Let me walk you through each section.

Section 1: Property Identification and Purchase Price

This is the foundation of the agreement. It identifies exactly which property you're buying and how much you're paying. Here's what to look for:

Property address and legal description: The agreement will include the street address, but it may also include a legal description — the formal description of the property as recorded with the county register of deeds. Make sure the address is correct and the legal description matches the property you intend to purchase.
Purchase price: The agreed-upon price for the property, stated clearly as a dollar amount. This is the number both parties are committing to, subject to any contingencies in the agreement.
Inclusions and exclusions: The agreement should specify which items are included in the sale (appliances, fixtures, window treatments) and which are excluded (the seller's personal property, specific items the seller intends to remove). If you expect the washer, dryer, or refrigerator to convey with the property, make sure they're listed in the inclusions section.
Earnest money deposit: Also called "earnest money" or "good faith money," this is the amount you're depositing to demonstrate your serious intent to purchase. In Michigan, earnest money deposits typically range from 1% to 3% of the purchase price, though this is negotiable. The deposit is held in an escrow account — usually managed by the title company, a real estate attorney, or the listing brokerage — until closing, when it's applied toward your purchase price or closing costs.

Section 2: Contingencies — Your Built-In Protections

Contingencies are the conditions that must be met for the sale to proceed. They are your safety net — allowing you to walk away without losing your earnest money if certain conditions aren't satisfied. Understanding contingencies is arguably the most important part of reading your purchase agreement.

The Inspection Contingency

This gives you a set number of days — typically 7 to 14 — to have the property professionally inspected by a licensed home inspector. If the inspection reveals issues you're not comfortable with, you can negotiate repairs or credits with the seller, accept the property as-is, or terminate the agreement entirely. In Michigan, where we see everything from newer construction to estate properties and older homes with decades of history, the inspection contingency is essential.

The agreement should specify:

The number of days you have to complete the inspection
Whether you can negotiate repairs, request credits, or both
The process for terminating if you choose to exercise this contingency
Any specific inspection types required (radon testing, sewer scope, well inspection)

For guidance on what to look for during an inspection, read my guide to hiring a home inspector.

The Financing Contingency

If you're taking out a mortgage — and most buyers are — this contingency states that the sale is contingent upon you obtaining financing approval within a specified period, typically 21 to 30 days. If your loan falls through for reasons beyond your control, you can terminate the agreement and recover your earnest money.

Key details to review in this section:

Loan type and terms: The agreement may specify the type of financing you're seeking (conventional, FHA, VA, USDA) and the maximum interest rate. If you're pre-approved at a specific rate, make sure the agreement aligns with your financing terms.
Approval deadline: The number of days you have to obtain financing approval. Missing this deadline can put your earnest money at risk if you haven't formally extended the timeline.
What happens if financing is denied: The agreement should clearly state that you can terminate and receive your earnest money back if financing is denied through no fault of your own.

Even with a rock-solid pre-approval, financing can still encounter obstacles — a job change, updated lending guidelines, or underwriting conditions. The financing contingency is your protection.

The Appraisal Contingency

When you finance a home, the lender orders an independent appraisal to verify that the property is worth the purchase price. If the appraisal comes in lower than the agreed-upon price, this contingency gives you the right to renegotiate the price, cover the difference in cash, or walk away from the deal.

The agreement should specify:

The appraisal must meet or exceed the purchase price (standard language)
Your options if the appraisal comes in low (renegotiate, cover the gap, terminate)
Whether the seller is obligated to reduce the price or whether negotiation is required

In competitive markets, some buyers agree to an "appraisal gap" — committing to cover a certain amount if the appraisal comes in low. If you've agreed to an appraisal gap, make sure the exact amount is documented in the agreement. For more on this scenario, see my guide to what happens when your home appraises below offer price.

Sale-of-Home Contingency (When Applicable)

If you need to sell your current home before purchasing a new one, this contingency states that the purchase is contingent upon the successful sale of your existing property within a specified time frame — usually 30 to 60 days. If your current home doesn't sell, you can terminate without losing your earnest money.

I'll be honest: this contingency can make your offer less competitive because sellers worry about the deal falling through. If you need this protection, there are strategies to strengthen your position — pricing your current home aggressively, listing it before you make an offer, or exploring bridge financing. For more on moving between homes, check out my guide for empty nesters and move-up buyers.

Section 3: Seller Disclosures

Michigan law requires sellers to provide certain disclosures about the property's condition. The purchase agreement typically references or includes:

Seller's disclosure statement: A detailed form in which the seller discloses known defects, issues, and conditions affecting the property. This covers everything from roof age and foundation issues to past water intrusion, environmental hazards, and zoning violations. Read this carefully — it tells you what the seller knows about the property's history.
Lead-based paint disclosure: Federally required for homes built before 1978. The seller must disclose any known lead-based paint hazards and provide you with an EPA pamphlet about lead safety. You also have the right to a lead inspection during your inspection period.
Well and septic disclosures: If the property is served by a private well or septic system rather than municipal utilities, additional disclosures and inspections are typically required.
HOA disclosures: If the property is in a homeowners association, the purchase agreement should include provisions for your review of HOA documents, including bylaws, financial statements, rules and regulations, and any pending assessments or special charges.

For a comprehensive look at Michigan disclosure requirements, read my guide to Michigan real estate disclosures.

Section 4: Closing Timeline and Possession

The purchase agreement specifies a target closing date — the date when ownership officially transfers and all remaining funds are exchanged. In Michigan, the typical closing timeline is 30 to 60 days from the date the agreement is accepted, though this can be negotiated.

Key timeline provisions include:

Closing date: The target date for all parties to sign documents and complete the transaction. This date should be realistic given your financing timeline, inspection period, and title work requirements.
Possession date: In Michigan, possession typically transfers at closing — meaning you get the keys and can move in as soon as the deed is recorded and funds are disbursed. However, the agreement may include provisions for the seller to remain in the property after closing (a "post-occupancy agreement" or "rent-back").
Extensions: If the closing date needs to be pushed back — due to financing delays, title issues, or other reasons — both parties must agree to an extension in writing. The agreement should outline how extensions are requested and approved.

For a detailed walkthrough of what happens at the closing table, see my guide to what to expect at closing.

Section 5: Closing Costs and Allocation

The purchase agreement addresses how closing costs are divided between buyer and seller. While some costs are traditionally paid by one party or the other, many items are negotiable. Here's a general overview:

Buyer typically pays: Loan origination fees, appraisal fee, credit report fee, title insurance (owner's policy), recording fees, prepaid taxes and insurance, and potentially a portion of the title search cost.
Seller typically pays: Real estate commissions, the owner's title insurance policy (though this varies by local custom), any outstanding liens or judgments, and potentially a portion of transfer taxes.
Michigan transfer tax: Michigan charges a state transfer tax of $0.55 per $500 of value, plus a county transfer tax of $0.55 per $500 of value. The allocation of who pays this tax — buyer, seller, or split — varies by local custom and is stated in the agreement.

For a complete breakdown of Michigan-specific closing costs and transfer taxes, read my guide to Michigan's transfer tax and closing cost breakdown.

Section 6: Default and Remedies

This section outlines what happens if either party fails to fulfill their obligations under the agreement. If the buyer defaults (for example, fails to close without a valid contingency reason), the seller may be entitled to retain the earnest money as liquidated damages. If the seller defaults, the buyer may have the right to specific performance (a court order requiring the seller to complete the sale) or to recover their earnest money and potentially sue for damages.

This section is important but rarely comes into play in a well-managed transaction. The key takeaway: understand what's at stake if you fail to close, and communicate early with your agent if any issues arise.

Section 7: Additional Provisions and Addenda

The purchase agreement may include additional provisions or attached addenda that address specific situations:

Home warranty: Whether the seller will provide a home warranty and who pays for it. A home warranty can cover major system and appliance repairs during the first year of ownership. For guidance on whether a warranty is worth it, see my analysis of home warranties in Mid-Michigan.
Personal property: Any specific items of personal property that are included in the sale (appliances, fixtures, outdoor equipment).
Radon testing: Whether radon testing is required and who pays for it. Radon is a concern in many Michigan homes, particularly those with basements.
Well and septic addenda: If applicable, specific provisions for well water testing and septic inspection.

Practical Tips for Reviewing Your Purchase Agreement

Here's my advice for every buyer who's about to sign:

Read every page. Yes, it's dense. Yes, there's legal language. But this is the most significant financial contract most people will ever sign. Take the time to read it. Your agent should walk you through every section.
Understand the timelines. Mark every deadline on your calendar — inspection period, financing approval deadline, appraisal deadline, and closing date. Missing a deadline can put your earnest money at risk.
Know your contingencies. Make sure you understand exactly what protections you have and how to exercise them if needed.
Ask questions. If anything is unclear, ask your agent. If your agent can't answer satisfactorily, ask for clarification from the attorney who drafted the agreement. Never sign something you don't understand.
Keep copies of everything. After closing, keep all signed documents, disclosures, inspection reports, and correspondence in a safe place. You'll reference them during ownership, at tax time, and when you eventually sell.

The Bottom Line

A Michigan real estate purchase agreement is a detailed document with significant financial and legal implications — but it doesn't have to be intimidating. When you understand the key sections — property identification, contingencies, disclosures, closing timeline, and cost allocation — you can approach the signing with confidence rather than anxiety. The best protection you can have is an experienced local agent who walks you through every line and ensures your interests are represented at every stage.

If you're preparing to make an offer on a Mid-Michigan home and want an agent who will make sure you understand exactly what you're signing, schedule a consultation or call me at 810-513-3335. I'll help you navigate the agreement from offer to keys. For a look at the full timeline from accepted offer to closing day, read my guide to the home buying timeline. And to understand how contingencies specifically protect your investment, check out my contingencies 101 guide.