Maybe it’s the cottage on a northern lake that nobody has opened since the kids moved away. Maybe it’s a hunting cabin in the U.P., a condo near Traverse City, or a place you inherited and never planned to own. Whatever the property is, a second home you no longer use keeps costing money every month, and Michigan has a few rules that make holding onto it more expensive than many owners expect.
The good news is that you have several ways to sell or hand off a vacation property, and each one fits a different situation. Below, we’ll walk through the main options, the Michigan-specific costs and taxes to plan for, and how to pick the route that fits your timeline and the condition of the home.
Why a second home costs more to hold in Michigan
Your primary residence in Michigan usually qualifies for the Principal Residence Exemption, which removes up to 18 mills of school operating tax from your bill. A second home doesn’t qualify. On a property with a taxable value of $150,000, those 18 mills alone add about $2,700 a year.
Then come the seasonal expenses. Owners of Up North properties often pay for winterizing, snow plowing, dock and lift removal, propane, association dues, and insurance that can cost more for a home that sits empty for months. Add travel time to check on the place after storms, and an unused vacation home can quietly turn into one of your largest monthly bills.
There’s also a cost on the buyer’s side that affects your price. Under Michigan’s Proposal A rules, a home’s taxable value “uncaps” when it sells, so the new owner’s property taxes can jump well above what you’ve been paying. Smart buyers factor that into their offers, especially on lakefront homes that have been in one family for decades.
Option 1: List it with a real estate agent
A traditional listing usually brings the highest sale price, especially for a well-kept property in a popular lake or resort area. An agent who knows the local market can price the home against recent waterfront sales, market it to out-of-town buyers, and handle showings while you’re 3 hours away.
The tradeoffs are time and money. Lake and resort properties in Michigan tend to sell best in late spring and summer, when buyers can see the water and the shoreline. A listing that goes up in November may sit until April. You’ll also pay a commission, which has historically landed somewhere around 5% to 6% of the sale price when both agents are paid, though rules changed in 2024 and commissions are always negotiable.
Expect to handle some prep work as well. Buyers who finance through a bank will bring inspectors and appraisers, and older cottages often turn up issues with roofs, decks, electrical panels, wells, or septic systems. Michigan sellers of most residential property must also complete a Seller Disclosure Statement, so be ready to put what you know about the home’s condition in writing.
Option 2: Sell to a cash buyer
If the property needs work, sits far from where you live, or you simply want it off your plate, a cash sale is often the fastest path. Cash buyers purchase homes as-is, which means no repairs, no staging, and no long stretch of showings. Many can close in a few weeks, and some will work around your schedule if you need time to clear out the contents.
Local companies such as Michigan Houses For Cash focus on buying properties directly from owners across the state, which can be useful when a cottage has deferred maintenance or the season is wrong for a listing. Investor buyers in other markets, like Steadfast Home Buyers, follow a similar model, so it’s worth understanding how these offers are typically built before you accept one.
The main tradeoff is price. A cash buyer accounts for repairs, holding costs, and resale risk, so the offer will usually come in below full retail value. Whether that gap matters depends on what you’d spend on repairs, commission, and another season of taxes and upkeep. If you’re weighing both paths, this breakdown of selling for cash versus selling with a realtor lays out the costs side by side.
Before you sign with any cash buyer, take a few basic steps:
- Ask for proof of funds and a written purchase agreement.
- Make sure the closing runs through a licensed title company or real estate attorney.
- Walk away from anyone who asks you to pay fees up front.
- Get at least 2 offers so you have a sense of the range.
Option 3: Sell it yourself
Selling “for sale by owner” saves the listing agent’s commission, and it can work well if you already have a buyer in mind, like a neighbor on the lake or a longtime renter who loves the place. Some families quietly sell cottages this way to friends who’ve visited for years.
It does take real effort. You’ll set the price, write the listing, answer calls, schedule showings, negotiate, and coordinate with a title company. You’ll still owe the Seller Disclosure Statement, and many FSBO sellers hire a real estate attorney to review the purchase agreement. If you live far from the property, the logistics can wear thin fast.
Option 4: Offer a land contract
Land contracts are more common in Michigan than in many other states, and they can help a vacation property that’s hard to finance through a bank. With a land contract, you act as the lender. The buyer makes a down payment, then pays you in monthly installments, and you hand over the deed once the contract is paid off.
This route can widen your pool of buyers and give you steady monthly income, often at an interest rate higher than a savings account would pay. The risk is default. If the buyer stops paying, you may need to go through a forfeiture or foreclosure process to get the property back, sometimes in worse shape than when you sold it. Have an attorney draft the contract and screen the buyer carefully.
Option 5: Rent it out before you sell
If you aren’t ready to let go, or the market feels soft, renting the property can cover some of the carrying costs. Short-term vacation rentals can earn strong summer income in tourist areas, while a long-term lease brings steadier, lower-maintenance returns.
Check local rules first. Many Michigan townships and cities regulate short-term rentals, and some restrict them heavily or require permits and inspections. Renting also changes your tax picture. Once a home is used as a rental, you may owe depreciation recapture when you sell. On the other hand, a property that qualifies as an investment may be eligible for a 1031 exchange, which lets you defer capital gains by buying another investment property. The IRS sets specific rental and personal-use tests for vacation homes, so talk with a tax professional before you count on that strategy.
Option 6: Transfer it to family
Plenty of Michigan cottages stay in the family for generations. If a child or sibling wants the property, you can sell it to them, gift it, or plan to pass it down through your estate.
Michigan offers a helpful break here. Under state law, a transfer of residential property between certain close relatives can avoid uncapping the taxable value, as long as the property isn’t used for commercial purposes. The new owner usually has to file an affidavit with the local assessor to claim the exemption, and the deadlines matter.
The federal tax side needs attention too. A gifted property generally carries your original cost basis to the recipient, which can mean a large capital gains bill if they sell later. An inherited property usually gets a “stepped-up” basis instead. Some families use a trust or an LLC to share ownership and set rules for use and costs. An estate planning attorney can help you pick the structure that fits.
When money trouble is part of the picture
Sometimes the decision to sell comes from financial pressure, like falling behind on the mortgage, property taxes, or other debts. Acting early gives you more choices. In Michigan, most mortgage foreclosures happen outside of court, and unpaid property taxes can lead to a county tax foreclosure, so waiting too long can cost you control of the sale and much of your equity.
If you’ve already filed for bankruptcy, you can’t simply list the property and sell it on your own. The trustee or the court usually needs to approve the sale, and the rules differ between Chapter 7 and Chapter 13. This guide to selling a house during bankruptcy explains how that process typically works. Talk with your bankruptcy attorney before you accept any offer.
Taxes and closing costs to plan for
The tax rules for a second home differ from the rules for your main residence, so it pays to run the numbers before you choose a sale price.
- Federal capital gains tax. The exclusion of up to $250,000 ($500,000 for married couples) applies to a primary residence you’ve lived in for 2 of the last 5 years. A vacation home usually doesn’t qualify, so your full gain may be taxable.
- Michigan income tax. Michigan taxes capital gains as regular income at its flat rate, which has been 4.25% in recent years.
- Depreciation recapture. If you rented the home and claimed depreciation, part of your gain may be taxed at a higher federal rate.
- Transfer taxes. Michigan charges a state transfer tax of $7.50 per $1,000 of sale price, and most counties add $1.10 per $1,000. Sellers typically pay these, though some transfers are exempt.
- Title and closing fees. Expect title insurance, recording, and settlement fees, plus any payoff on an existing mortgage.
A CPA can tell you whether keeping records of past improvements, like a new roof or seawall, will raise your cost basis and lower your tax bill. Those receipts are worth digging up.
Clearing out the property
Vacation homes tend to collect decades of furniture, boats, kayaks, fishing gear, and pantry supplies. Decide early what stays with the sale, since many buyers of furnished cottages are happy to take the contents. List boats, docks, and lifts separately in the purchase agreement so there’s no confusion at closing.
Do a final sweep of the kitchen, bathrooms, and storage closets. Leftover medications, propane tanks, and cleaning chemicals need proper disposal. If the family dog spent summers there, gather its food and anything your vet recommended, such as L-carnitine supplements, before the cleanout crew hauls things away.
Also check with your county or district health department about wells and septic systems. A handful of Michigan health departments have required well and septic evaluations when a property changes hands, and lenders often ask for them even where local rules don’t.
How to choose the right option
The best choice comes down to 3 questions: how fast you need to sell, how much work you’re willing to do, and what shape the property is in. This table offers a quick comparison.
| Option | Typical timeline | Your effort | Best fit |
|---|---|---|---|
| List with an agent | Often 1 to 4 months, longer off-season | Moderate | Updated homes in high-demand areas |
| Cash buyer | Often 1 to 4 weeks | Low | Homes needing repairs or a fast exit |
| Sell it yourself | Varies widely | High | Owners with a buyer already lined up |
| Land contract | Fast to close, paid over years | Moderate to high | Owners who want monthly income |
| Rent first | Ongoing | High | Owners who aren’t ready to sell |
| Transfer to family | Depends on estate planning | Moderate | Families keeping the cottage in the family |
Timelines above are general ranges. Your local market, the season, and the property’s condition will shape how long any sale actually takes.
Frequently asked questions
Do I Need a Seller Disclosure Statement for a Vacation Home in Michigan?
Seller disclosure is generally required for residential sales in Michigan, including second homes. Some transfers are exempt, so confirm with your title company or attorney.
Is It Hard to Sell a Michigan Cottage in Winter?
Winter sales usually draw fewer buyers for lake and resort properties. Cash buyers and land contract sales can be good options during the off-season.
Will I Pay Capital Gains Tax on My Second Home?
Capital gains tax usually applies because a vacation home doesn’t qualify for the primary residence exclusion. Michigan also taxes the gain at its flat income tax rate.
How Fast Can a Cash Buyer Close on a Vacation Property?
Cash buyers can often close in 1 to 4 weeks. The exact timing depends on title work and your schedule.
Can I Give My Cottage to My Kids Without Uncapping the Taxes?
Family transfers between certain close relatives can avoid uncapping under Michigan law if the property isn’t used commercially. The new owner usually needs to file an affidavit with the assessor.
Who Pays the Transfer Tax When Selling a Home in Michigan?
Transfer tax is typically paid by the seller in Michigan. The combined state and county rate in most counties is $8.60 per $1,000 of sale price.
The bottom line
A second home you no longer want doesn’t have to drain your budget for another year. If the property is in good shape and you can wait for the right season, listing with an agent will likely bring the highest price. If it needs work or you want a quick, clean exit, a cash sale may leave you with more peace of mind. Land contracts, rentals, and family transfers each fill a specific gap. Whatever you choose, get your tax questions answered early, and compare at least 2 paths before you commit.
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