Buying a house from out of state is always a challenge. Ideally, you will travel to your new location and inspect properties in person. If possible, try not to rush your decision. Take some time to investigate your new surroundings and think carefully about where you want to live. Get ready for your big move with these tips for how to buy a house in Michigan from out of state.
Decide Where to Live
As someone from out of state, you may not be familiar with the different regions of Michigan. In general, the major urban areas of the state cluster in the lower third of the Lower Peninsula. Population density decreases the farther north that you go. The Upper Peninsula (UP) forms the far north of the state. The UP is remote and sparsely populated except for a few modest cities and towns. Its cold, wet climate has prevented much population growth over the years, but towns in the UP have begun to attract attention from people looking for a climate haven.
The peninsular nature of the state’s geography means that many people live in coastal areas on the Great Lakes: Michigan, Superior, Huron, and Erie. Inland, the state has over 11,000 lakes according to the Michigan Department of Natural Resources.
What all of this means, is you have plenty of opportunities to live on a waterfront or have a “lake access” property.
If you don’t care about living on a waterfront, you can think about whether you want to live in a city, small town, or out in the country. In rural settings, you have the choice of living in farmland areas. These are generally scenic in a pastoral way with fields, orchards, vineyards, and pastures interspersed with small woodlands. The state has a large agricultural industry. Almost anything that tolerates the climate is grown here commercially.
Your alternative to a traditional farmland countryside is living in the woods. There are houses on the market for people who like the secluded nature of living in a woodland.
If you are moving to the state to take a job, you should think about how long of a commute you can tolerate. If you have to attend a job in a city and want to live in the country, you can expect an hour-long commute unless you live in the northern half of the state. There the cities are small, and adjacent countryside homes would only be about 15 to 30 minutes outside a city.
Keep in mind that Michigan’s weather is famously abominable. Snow, ice, and high winds routinely make driving dangerous and sometimes impossible.
The character of different towns and cities varies quite a bit. If you are looking at homes in one town and aren’t thrilled with the area, try looking at adjacent towns. You might like one of them better.
Look Closely at Property Taxes
Property taxes in Michigan are a little on the high side but not ridiculous, such as in places like New Jersey or Illinois. The state ranks 18 out of the 50 states for property tax expenses, but the states with higher taxes are sometimes much more expensive.
Where you live in the state influences your property tax bill. Taxes for comparable properties can be thousands of dollars different from county to county or town to town. Property taxes fund schools, police, fire, and a host of other services. Voters in some locations authorize more taxation for more programs than other places.
Always look closely at the property tax bills for the homes that you’re thinking about buying. If the taxes are uncomfortably high, keep shopping around. Even so, don’t assume that a low-tax property is better than a high-tax property. The high-tax property MIGHT be in a more appealing location with nice schools, parks, and cultural diversity. Or, the town could have high taxes with no perceivable benefit to the community.
Michiganders, as they are called, pay a median annual property tax of $2,145. When looking at the tax rates for all counties, the average for the state comes out to 1.62% of a property’s assessed fair market value.
Examples of variations in property tax rates among counties:
- Wayne County 2.16%
- Washtenaw County 1.84%
- Kent County 1.50%
- Ingham County 2.26%
- Cheboygan County 0.99%
- Grand Traverse County 1.33%
- Leelanau County 0.84%
You Will Test for Radon When Buying a Home
Radon is a gas that seeps naturally from the ground in some areas. The gas molecules are radioactive due to originating from uranium within the ground. The gas is the second leading cause of lung cancer. It threatens homes by rising out of the ground and collecting inside buildings, where occupants gradually suffer long-term exposure to the hazardous gas.
As serious as this sounds, it is an issue that can be managed safely for a minimal cost. You do not have to consider it a deal breaker on a home that you really like.
If your house in Michigan tests possible for excessive radon gas, a contractor will need to install a special ventilation system. This will ensure that the gas does not build up inside the home to a dangerous level.
The highest radon levels tend to cluster in the state’s southern counties, but the gas can occur anywhere in the state.
This is relevant for real estate transactions because the seller must disclose to buyers if a home has tested positive for radon.
If you look at a seller’s disclosure for a house in Michigan and see that it says NO radon, you still need to get a new test if one has not been conducted recently. Radon can start entering a home years after it was built. The state recommends that all homeowners check their houses every two years in case a problem emerges.
Radon testing only takes a few days. As an out-of-state buyer of a house in Michigan, you can probably negotiate with the seller to pay for the test. The seller should also have to pay for the radon mitigation system to make it safe for occupation.
Find Out the Flood Zones
Michigan has plenty of high ground and plenty of places that will flood. When shopping for a house in Michigan from out of state, cross reference the location of houses that interest you with flood maps prepared by the Federal Emergency Management Administration (FEMA). These maps display the percentage of flood risk for any location.
If a house is in a high-risk flood zone, then your lender will require additional flood insurance on top of homeowners insurance. You need to know if you are going to need it before making a buying decision. Flood insurance is not cheap and could impact your budget negatively.
Non-Attorney State for Real Estate Transactions
In Michigan, a real estate closing does not have to be personally overseen by an attorney as is necessary in some states.
That said, you still may involve an attorney in your transaction if it pleases you.
Find a Good Real Estate Agent
To buy a house in Michigan from out of state, you’re going to need some local help. You should definitely research your options because finding a knowledgeable real estate agent with experience helping out-of-state buyers is a big priority. Real estate agents range in quality from honest dealers who know their markets well to…people who make me wonder how they find their way home every day.
How to find a great real estate agent:
- Ask anyone you know in the area for a referral
- Read real estate agent reviews on Zillow, Yelp, or Realtor.com
- Visit individual agent’s websites and other online profiles
As you browse agents working in the area where you want to move, make a list of those who interest you. Make notes about how long they have been representing real estate. As an out-of-state buyer, you should avoid newbies. Ideally, you will be looking for people with several years of experience.
Your next step is to start contacting them. Email them through their contact forms and call their numbers. How they respond is a good way to judge what working with them will be like. Some might call or write back in a timely manner. Some might not respond except to start sending you marketing emails. A few may never respond in any way. You can cross them off your list.
Among those who do respond, you can explain your needs and decide who to work with based on your impression of each person.
As a buyer, you can switch agents if you’re not having good results with your initial selection.
How to Qualify for Michigan Principal Residence Exemption (PRE)
Michigan has many vacation homes and homes owned by part-time residents, also known as snowbirds. If possible, you want your home taxed as your principal residence because the taxation rate is lower.
You will have a PRE property tax rate if you are a Michigan resident and occupy the home full time or almost full time. This differs from the Homestead Property Tax Exemption. This is a tax break that you file for every year. To qualify, you must be a resident, occupy your home, and have income below a certain threshold.
Are Closing Costs High in Michigan?
Closing costs in Michigan are not high. The state comes in with a below average ranking in terms of closing costs compared to other states.
Of course, your closing costs will still amount to thousands of dollars, and you definitely need to take them into account when planning your house-buying budget.
As of 2023, average closing costs in Michigan stand at just over $4,200.
The terms that you negotiate with the seller will influence what you have to pay at closing as the buyer. Sellers normally pay the real estate agent commission, home inspection, and recording fees.
Because it’s likely that you will have to finance your purchase, a big part of your closing costs will come from lender fees. You can also expect to pay for an appraisal and title insurance policy for the lender. At closing, you will also escrow money to cover upcoming tax and insurance bills.
How to Buy a House in Michigan From Out of State
Buying a house in Michigan from out of state requires extra upfront homework as you research the exact locations where you want to live in your new home. Careful selection of a real estate agent will aid you so that you have someone reliable on the ground who can give you real, actionable advice and guidance.