Selling Michigan real estate held in a self-directed IRA

A self-directed IRA that owns a Michigan property does not sell it the way an individual does. The deed names the account, so the account is the seller, the account receives the proceeds, and the account handles whatever tax the sale produces. For an owner of a rental in Grand Rapids, Grandville, or a West Michigan suburb, that means the sale runs through a second set of requirements on top of the ordinary closing: the custodian's written procedures, the prohibited-transaction rules, and the account's own filing. None of that is mysterious, but it is easy to get wrong at the closing table.

The timing of the decision matters. The account's structure has to be settled before the property is listed, not after an offer comes in. The buyer, the title company, and the listing broker all work off the seller's name, and changing the seller after a purchase agreement is signed is slow and sometimes impossible. This is the order the work usually runs in, and what each step requires.

The account sells, not you

The recorded deed decides who the seller is. If the Michigan deed names the self-directed IRA, the account is the party to the listing agreement and the purchase agreement, through the custodian's authorized signatory, and the account's name appears on the settlement statement. The IRA owner is not a party to the sale. That distinction is the one that separates a compliant account sale from a prohibited transaction, and it is why the custodian wants the vesting language confirmed before marketing starts, not after an offer.

The practical consequence runs through every document. The title commitment lists the account as the party to insure. The buyer's lender, if one is involved, conditions on the same vesting. The closing instructions, the settlement statement, and the wire all name the account. When a settlement statement shows a different seller than the recorded deed, the title professional stops. The answer is to confirm the vesting with the custodian in writing and give the title company the exact account name and identifier.

What a straight sale does to the account's tax file

A self-directed IRA does not report the appreciation of the property it holds as income the way a person or a partnership would at the sale. That is part of why the asset sits in the account in the first place. The question on a sale is not whether the account gets taxed like a person. It is whether the sale produces unrelated business taxable income, and who files and pays what.

The 2025 Instructions for Form 990-T describe how the IRS treats the two cases. If the property was debt financed, that is, it carried acquisition indebtedness during the 12-month period before the disposition, a portion of the gain can be unrelated business taxable income, measured by a percentage tied to the highest acquisition debt and the average adjusted basis. If the property was not debt financed, that particular UBTI route generally does not apply. A non-recourse loan taken when the account bought the property is the kind of acquisition debt the instructions have in mind, and the account's CPA is the one who runs the numbers with the basis records, the loan history, and any depreciation taken.

The filing details are specific. The 2025 Instructions for Form 990-T treat each IRA as a separate trust for unrelated business income tax purposes, and the account needs its own employer identification number if it will file a Form 990-T reporting gross unrelated business taxable income of $1,000 or more. Any tax the account owes has to come out of the account's own funds through the custodian's process. A payment made by the IRA owner or a family member is not an account expense. It is a prohibited transaction. That is one of the quiet traps of a sale: the real estate closes without issue, and the tax step afterward is where the account gets broken.

A sale and a later purchase are not a section 1031 exchange

Some owners assume that because an IRA is selling, a like-kind exchange can defer the gain the way it does for a personal sale. A sale, a receipt of cash, and a later purchase by the account are not a like-kind exchange. Internal Revenue Code section 1031 defers gain on an exchange of like-kind property held for productive use in a trade or business or for investment, and IRS Publication 544 sets out the identification and completion windows. A deferred exchange runs through a qualified intermediary or another independent third party the custodian accepts, with the account on both sides of the deal. A straight sale with the proceeds sitting in the account is not that structure, and no deferral attaches to the cash.

Whether a straight sale or a deferred exchange fits the account is a decision the owner makes with the custodian and the CPA, and the answer depends on the debt on the property, the account's tax posture, and the plan for the proceeds. A Michigan rental with a non-recourse loan and a buyer using conventional financing points one way; a cash buyer and a property the account intends to hold in a different form points the other. The article on this site about running a like-kind exchange through a self-directed IRA covers the exchange side. This one covers what a plain sale requires.

The prohibited-transaction check on the selling side

The same disqualified-person rules that govern the purchase govern the sale. The buyer of the account's property cannot be the IRA owner, the owner's spouse, a parent or grandparent, a child or grandchild or their spouse, or an entity controlled by any of those people. Fair pricing does not cure the problem, because the problem is the relationship, not the number. A purchase agreement between the account and a related business is a prohibited transaction even at an appraised price.

The receipt of the proceeds is the second check. The settlement statement has to pay the account. If part of the proceeds is wired to a personal account, to a relative, or to the IRA owner's own LLC for holding while the owner decides what to do with it, the account has been bypassed. The proceeds belong to the account, and the decisions about them happen inside the account, through the custodian. This is also where the owner's own reflexes come back: a personal check to the buyer for a last rent adjustment, a personal payment of a property tax proration at closing. Each one has to come from the account.

• A buyer who is the IRA owner, a spouse, a family member, or an entity any of them control, at any price
• Proceeds, or part of them, wired to a personal account, a relative, or the owner's own business
• The IRA owner signing the purchase agreement, the settlement statement, or the closing documents in a personal capacity
• Sale expenses or tax payments funded from personal money instead of the account
• The owner taking possession, use, or the keys of the property after the sale closes

Run the closing through the custodian's process

The custodian's written procedures are the operating manual for the sale. Before listing, the owner confirms in writing: who signs for the account, the exact vesting language the title company should use, how the custodian approves the listing agreement and the purchase agreement, how proceeds move at closing, and how the account pays any tax that comes with the sale. A custodian that handles sales by phone call at closing is a custodian that has not handled sales.

The sequence at closing is short. The custodian's authorized signatory signs for the account. The buyer and the account each perform. The title company disburses: it pays off the non-recourse loan if one exists, pays the prorated taxes and fees out of the account's proceeds, and wires the balance to the account. The buyer's deed is prepared with the account's exact name as the seller, and the recorded instrument is what settles the account's interest. The settlement statement is the document that proves the money went where the account said it goes, so it belongs in the account's file next to the custodian's approval.

Keep the Michigan closing calendar clean

A Michigan closing has its own fixed points, and the account's paperwork has to sit on top of them. The title commitment and the survey run early. The property tax proration is set at the closing date against the county record. If the property carries a non-recourse loan, the lender's payoff statement and release requirements come from the lender's file. The recording at the county register of deeds is the last mechanical step, and a vesting mismatch is where the whole calendar slows down. Building the account's approval steps into the same calendar, with the custodian and the title company on the same timeline, is what keeps the closing date honest.

If the property is a rental, two more items sit on the calendar. The tenant's lease and any security deposit follow Michigan law and pass to the new owner with the property. The inspection and showing access is something the property manager coordinates. The account does not renegotiate the tenant's lease as part of the sale, and the property manager does not treat the sale as a reason to change how the unit is screened or maintained.

Fair housing stays on through the sale

If the property is a Michigan rental, the sale does not pause the housing rules. HUD states that the Fair Housing Act prohibits housing discrimination because of race, color, national origin, religion, sex, familial status, or disability, and Michigan and local protections apply as well. The listing, the showings, and the decisions about how the property is presented follow those rules. A property that rented to one kind of tenant is not marketed to exclude the next one, and the property manager keeps the sale file and the tenant file separate.

Build the sale file before the listing goes live

• Confirm the recorded deed vests in the account and match the custodian's exact account name and identifier before marketing starts
• Get the custodian's written procedures for a sale: who signs, who approves, how proceeds move, and how any tax is paid
• Decide with the CPA whether a straight sale or a section 1031 structure fits the account, and put the decision in writing
• Screen the buyer as a stranger and the transaction for personal receipt of proceeds or expenses
• Schedule the title commitment, survey, loan payoff, property tax proration, and recording on one calendar, with the custodian's approvals on it
• Keep the settlement statement, the recorded deed, the custodian's approvals, and the account's tax file together in one record

This article is educational, not legal, tax, financial, or investment advice, and not a recommendation to sell any property. No property, account, structure, or strategy is approved or endorsed by the IRS. Have your own self-directed IRA custodian, CPA, Michigan attorney, and title professional review the account, the recorded deed, and the sale documents before listing.

What Rennie can coordinate

Primary sources for the public-rule portions of this review are Internal Revenue Code section 1031, IRS Publication 544, the 2025 Instructions for Form 990-T, and HUD's Fair Housing Act overview. They describe the general framework. The answer for one account, one recorded deed, and one buyer comes from the current documents and the account's own qualified professionals.

Rennie can help market and sell West Michigan property when the seller is a self-directed IRA: the listing approach, the buyer side, the title company, the survey, the inspection access, and the closing calendar that fits the account's vesting and approvals. The custodian's approvals, the tax treatment, and the prohibited-transaction review stay with the owner's own custodian, CPA, and attorney.