Michigan Compiled Laws, Chapter 400. Social Services § 400.205

Sec. 5.  In case a child has been committed to said institute, and a person in the same county has been found who is willing to take said child into his home under the same conditions as children placed out on agreement, or for adoption from the said institute, the court, county agent, probation officer or any other person representing the court or state in the placement of children may notify the superintendent of said institute, giving the name and the address of the party interested in taking the child into his home;  whereupon the superintendent shall order an investigation be made, and if it appears that the home is a suitable one for said child, the child shall be placed and the order of the court entered on the records of the said institute.  Upon entering the order of the court on the records of the said institute, the child shall be considered a ward of said institute and may be supervised, or adopted as are other wards of the said institute:  Provided, In case the investigation indicates that the child is not eligible for admission to the said institute because of some mental or physical defect, or should not be offered for adoption because of a mental defect in its forbears, or being of unknown parentage and too young to determine its mental and physical development, the superintendent shall so notify the court with reasons thereof and further disposition shall be made by said court.