Sell Land By Owner Michigan
Engineering Your Great Lakes Exit Strategy
Navigate 0.86% transfer tax, PA 116 farmland recapture, EGLE wetlands permits, and the most diverse land market in America—from Detroit sprawl to Upper Peninsula wilderness.
Transfer Tax
PA 116 Alert
Wetlands Risk
Assembly Line Process
Six critical stations every Michigan land seller must navigate
Transfer Tax Reality
$4,300 on $500K sale, $8,600 on $1M (0.86%)
PA 116 Recapture
3.1M acres enrolled, $15K-$50K penalties if sold early
Wetlands Part 303
EGLE regulates >0.5 acre wetlands, permit = 6-12 months
No Attorney Required
Michigan allows title companies OR attorneys (rare flexibility)
Great Lakes Riparian
Waterfront = complex ordinary high water mark rules
Disclosure Exemption
Vacant land sales exempt (but disclose known defects)
Transfer Tax Reality
$4,300 on $500K sale, $8,600 on $1M (0.86%)
PA 116 Recapture
3.1M acres enrolled, $15K-$50K penalties if sold early
Wetlands Part 303
EGLE regulates >0.5 acre wetlands, permit = 6-12 months
No Attorney Required
Michigan allows title companies OR attorneys (rare flexibility)
Great Lakes Riparian
Waterfront = complex ordinary high water mark rules
Disclosure Exemption
Vacant land sales exempt (but disclose known defects)
Regional Market Depth Chart
From Motor City to Copper Country: Michigan's diverse land markets
Southeast Michigan / Metro Detroit
Suburban sprawl • Ann Arbor premium
Up North / Northern Lower
Lakefront premium • Tourism/second homes
West Michigan Lakeshore
Lake Michigan waterfront • Grand Rapids growth
Central Michigan
Agricultural heartland • Most affordable Lower Peninsula
Upper Peninsula
Wilderness • Mining/logging heritage
PA 116 Farmland Preservation Agreements
The $15,000-$50,000 Recapture Tax That Blindsides Michigan Land Sellers
You inherit 80 acres of Michigan farmland from your grandfather. Property taxes are only $800/year—suspiciously low. You list it for $400,000. Two weeks before closing, your attorney discovers a PA 116 agreement you didn't know existed. You now owe $42,000 in recapture taxes. The buyer wants you to pay it. Welcome to Michigan's most common land sale nightmare.
What is PA 116?
PA 116 (Public Act 116 of 1974) is Michigan's Farmland Development Rights Agreement—a voluntary contract between landowners and the Michigan Department of Agriculture & Rural Development (MDARD). Landowners agree NOT to develop their land for non-agricultural use for 10+ years in exchange for massive property tax reductions of 50-90%.
Example: A 100-acre farm enrolled in PA 116 might pay $2,000/year in property taxes versus $18,000/year at full market assessment. That's $16,000 in annual savings—life-changing for family farmers.
Currently, 3.1+ million acres are enrolled in PA 116 statewide, representing 20% of Michigan's farmland. The program is most common in agricultural counties like Lenawee, Gratiot, St. Joseph, Huron, and Sanilac.
The Recapture Tax Trap
Here's where PA 116 becomes a seller's nightmare: If you sell enrolled land OR convert it to non-agricultural use before the agreement expires, you owe a recapture penalty—essentially paying back the tax savings you received.
Recapture Calculation:
(Full Market Rate Tax - PA 116 Reduced Tax) × Number of Years Enrolled (max 7 years lookback)
Example: $16,000 difference/year × 7 years = $112,000 recapture
In practice, recapture amounts typically range from $15,000 to $50,000, though they can exceed $100,000 for large parcels or long enrollments. This penalty is added to your closing costs, often surprises sellers who inherited land or forgot about enrollment, and cannot be waived or negotiated—it's a state law debt.
How Sellers Get Trapped
- Grandparents enrolled the farm in 1985, never told heirs about the PA 116 agreement
- Property tax bill shows "Agricultural Exemption" but doesn't clearly state "PA 116"
- Sellers assume low taxes are simply due to rural location, not a contractual agreement
- Title search reveals PA 116 enrollment one week before closing—panic ensues
- Buyer demands seller pay recapture OR renegotiates purchase price downward
Regional Impact Analysis
Southeast Michigan Reality
Rare to find PA 116 land (most already developed), but when it exists, recapture is MASSIVE ($50K-$100K) due to high market values.
Buyers in Oakland/Macomb Counties are sophisticated—they demand recapture calculations upfront.
Strategy: Order PA 116 status letter from MDARD before listing
Central Michigan Reality
60% of farmland has PA 116 agreements. Recapture averages $20K-$40K.
Local buyers know about PA 116 and factor it into offers. Out-of-state buyers panic when they learn about it.
Strategy: Disclose PA 116 in MLS listing, attach recapture calculation
Up North Reality
30% of rural land in PA 116 (mostly timber/farm). Recapture averages $10K-$25K (lower property values).
Buyers often want land for recreation—PA 116 is less relevant but still a concern.
Strategy: Voluntary termination 1 year before sale to clean title
West Michigan Reality
Fruit farms (cherries, apples, vineyards) often in PA 116. Recapture averages $25K-$50K (tourist area premium).
Buyers may want to develop lakefront parcels—PA 116 can be a deal-killer.
Strategy: Factor recapture into asking price OR offer to pay it yourself
Upper Peninsula Reality
Rare PA 116 (mostly timber land, not traditional agriculture). Recapture averages $5K-$15K (lowest in state).
Buyers are often Michigan residents who understand PA 116 regulations.
Strategy: Minimal concern, disclose in purchase contract
Voluntary Termination Strategy
You can voluntarily terminate your PA 116 agreement BEFORE selling. You'll still owe the recapture penalty, BUT it gives you complete control over timing and allows you to market the land with a clean title to a broader buyer pool.
To terminate, submit a request to MDARD and wait 60 days for processing. This strategy is particularly effective if you're planning a sale 6-12 months out and want to avoid last-minute buyer concerns.
How Buyers React to PA 116
- Michigan buyers (especially farmers/developers) understand PA 116 and factor recapture into their offers
- Out-of-state buyers often walk away when they learn about recapture obligations
- Investors demand seller pay recapture as a condition of sale
- Cash buyers are less concerned (they have funds to absorb the penalty)
Pre-Disclosure Strategy
Order PA 116 Status Letter from MDARD before listing (free, 2-week turnaround)
Calculate Exact Recapture - MDARD provides formula, or hire a CPA
Include in MLS Listing - "PA 116 enrolled, $37K recapture applies, seller to pay"
Adjust Asking Price - Lower by recapture amount to attract offers
Offer to Pay Recapture - Increases net proceeds, simplifies buyer financing
Educate Buyers Early - Provide PA 116 FAQ sheet with all offers
Consider Voluntary Termination - If sale timeline flexible (6-12 months out)
Success Story
"A seller in St. Joseph County owned 120 acres enrolled in PA 116 for 19 years. Attorney calculated $44,000 recapture. Seller voluntarily terminated PA 116 fourteen months before listing, paid recapture with savings, listed at full market value ($540K) with clean title. Sold to a developer in 31 days at asking price. No buyer concerns about PA 116."
Warning Signs You Might Have PA 116 Land
- Property tax bill shows "Agricultural," "PA 116," or "Farmland Preservation"
- Annual tax bill suspiciously low ($500-$2,000 on 40+ acres)
- Previous owner used land for farming, orchards, or timber production
- Property inherited from parents/grandparents who owned 20+ years
- Located in agricultural counties (check MDARD PA 116 map online)
The Bottom Line
PA 116 saves Michigan farmers thousands annually in property taxes—but it creates massive complications when selling land. The recapture penalty can range from $15,000 to $50,000 or more, and it surprises sellers who didn't know their land was enrolled.
Calculate recapture early, disclose it upfront, or pay it yourself to clean title. Or skip the headache entirely with a cash offer that absorbs PA 116 penalties.
EGLE Wetlands Part 303
Michigan's wetlands permit requirements can delay sales 6-12 months
Wetlands Permit Schematic
Threshold
Wetlands >0.5 acres OR <0.5 acres connected to lake/stream = regulated
Permit Required
Any fill, drain, dredge, or alteration requires EGLE permit
Timeline
6-12 months for permit approval (minor permits faster)
Cost Impact
- • Mitigation: $20K-$100K if filling wetlands
- • Consultant fees: $5K-$15K
- • Engineering studies: $3K-$8K
Sale Impact
- • Buyers discover wetlands during due diligence
- • Demand price reduction OR walk away
- • Can make land unbuildable
Pre-Listing Recommendation
Order a wetlands delineation BEFORE listing if your land has standing water, cattails, or seasonal flooding. Northern Michigan and the Upper Peninsula have extensive wetlands. Southeast Michigan has fewer but more strictly regulated areas.
Transfer Tax Invoice
Michigan's 0.86% transfer tax explained
Parts Breakdown
Example Calculations
Comparison
Michigan's 0.86% transfer tax is 8.6x higher than Georgia ($1/$1,000) and 3x higher than Massachusetts ($2.28/$1,000 minimum). Sellers should budget accordingly.
Great Lakes Riparian Rights
Waterfront land commands 3-5x premium but comes with complex regulations
What Are Riparian Rights?
If your land touches the Great Lakes, you have riparian rights—legal rights to access, view, and use the water. These rights significantly increase property value.
- Water access and use rights
- Dock and pier construction (with permits)
- Protected views and natural light
- Riparian land = 3-5x higher value
Ordinary High Water Mark (OHWM)
The Ordinary High Water Mark determines where private ownership ends and public ownership begins. This boundary is often disputed.
- State owns land below OHWM
- Private vs. public boundary often confusing
- Inland lakes have different rules
- Many inland lakes have private bottomlands
Disclosure Requirements
Must disclose if riparian rights are disputed, restricted, or if there are known OHWM boundary issues. Buyers pay a massive premium for waterfront—they expect clear, unencumbered riparian rights.
8-Step Assembly Line Process
Michigan-specific timeline: 60-90 days typical (120+ days if wetlands permit needed)
Unique Michigan Flexibility
Michigan allows closings at title companies OR attorney offices—seller's choice. This rare flexibility can save $500-$1,500 in legal fees compared to attorney-only states.
Industrial Toolbox: Tax Strategies
Three powerful tools to minimize your Michigan land sale tax burden
Tool #1
PA 116 Voluntary Termination
Pay recapture 6-12 months before sale to clean title
Tool #2
1031 Exchange
Defer capital gains by reinvesting in replacement property within 180 days
Tool #3
Installment Sale
Seller financing spreads capital gains over multiple years
Michigan-Specific Tax Reality
Michigan has NO state-level capital gains tax deferral programs—only federal 1031 exchanges or installment sales are available. Consult a Michigan CPA to maximize your after-tax proceeds.
Chart Your Michigan Land Exit Strategy
Two paths forward: Master the process or skip the complexity entirely
Path of Learning
Master every PA 116 detail, wetlands permit, and Great Lakes riparian rule with our free 37-lesson course
Path of Simplicity
Skip the complexity—we buy Michigan land as-is, absorb PA 116 recapture, handle wetlands issues, and close in 7-14 days
Southeast Michigan land values up 22% in 2024. Up North lakefront at all-time highs. Don't let PA 116 confusion or wetlands fear leave money on the table.
Industrial Safety Notice
Read Before Proceeding
Educational purposes only. Not legal, tax, or financial advice. Consult Michigan-licensed real estate attorney and CPA. PA 116 recapture calculations, EGLE wetlands permits, and Great Lakes riparian rights vary by property. Verify current regulations with MDARD and EGLE. Transfer tax rates subject to change. Wetlands delineation requires professional surveyor. Riparian rights determinations require legal counsel.