Sellers of most residential property must provide a Seller's Disclosure Statement.
Before you read
Test yourself first: 5 questions
Question 1 of 5
Commingling, as prohibited for Michigan brokers, is best described as:
Answer: B. Commingling is the improper mixing of clients' trust/escrow money with the broker's own personal or business funds. Michigan brokers must keep trust funds in a separate account and not commingle them with operating capital.
Question 2 of 5
A Michigan salesperson deposits an earnest money check into their personal checking account instead of the broker's trust account. This conduct is best described as:
Answer: B. Mixing client or third-party funds with personal funds is commingling (and depositing into a personal account can constitute conversion). Michigan license law prohibits this; trust money must be held in the broker's designated trust/escrow account. It is a state license-law violation subject to LARA discipline regardless of later intent or buyer consent.
Question 3 of 5
In Michigan, when a salesperson receives an earnest-money deposit from a buyer, to whom must the funds be delivered?
Answer: C. A Michigan salesperson works under the supervision of a broker and cannot independently hold client funds. Earnest-money deposits must be turned over promptly to the employing broker, who is the party responsible for depositing them into a designated trust/escrow account. Salespersons may not place client money in personal accounts.
Question 4 of 5
What is the term for a Michigan broker improperly mixing client trust funds with the broker's own operating or personal funds?
Answer: A. Commingling is the prohibited practice of mixing client or third-party trust funds (such as earnest-money deposits) with the broker's own business or personal money. Michigan license law requires client funds to be kept separate in a trust/escrow account to protect the public.
Question 5 of 5
A Michigan broker takes a client's earnest-money deposit held in the trust account and uses it to pay the brokerage's monthly rent. This act is best described as:
Answer: B. Conversion is the unauthorized use of trust funds for the broker's own benefit. Using clients' escrowed deposits to pay business expenses is conversion, a serious violation that can lead to license discipline and criminal liability. It goes beyond commingling because the funds are actually taken and spent.
Keep the streak going with more questions like these, each with a full rationale.
Must-know rules
- Salesperson pre-license hours: 40 clock hours.
- Sellers of most residential property must provide a Seller's Disclosure Statement.
- Federal lead-based paint disclosure applies to homes built before 1978.
- Michigan is NOT a community-property state; it follows common-law (equitable) property rules.
- Client/escrow funds belong to the client and must be held in the broker's trust account.
- Commingling client trust funds with the broker's own money is prohibited.
- Agency relationship must be disclosed; escrow is administered through the broker, not the salesperson personally.
Michigan Disclosures, Escrow/Trust Funds & Key Numbers: FAQs
Is Michigan Disclosures, Escrow/Trust Funds & Key Numbers on the real estate exam?
Yes. State License Law is a scored domain on the Michigan real estate licensing exam, and this topic appears in the state license-law portion.
Is this cheat sheet free?
Yes — every page on Cinna RE's resource library is free to read, print and share. The app adds practice questions, mock exams and a readiness score.
Does Michigan test this differently?
Michigan applies its own license law on top of the national portion. This page covers the Michigan rules specifically, which is what the state section of your exam tests.
