Death And Real Estate, Part 2: When The Buyer or Seller Dies While Under Contract
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By Lydia Blair
Special Contributor
Lots of folks are dying to buy or sell a home. They may be eager, desperate, impatient, or anxious. However, they’re not literally dying.
Except when they are.
Yes, it has happened that a buyer or seller dies while they have a property under contract. They could die the day after the contract is signed or as they are walking into the title company on closing day. Both of those scenarios have occurred in offices where I’ve worked and it’s awful for everyone.
But what happens to the deal?
Terry Carpenter and Lydia Blair
When a seller passes away before closing, the contract that they signed is still binding. A deceased person can’t sign closing documents. But their estate is responsible for the seller’s obligations. The buyer still has the right to buy the property according to the terms of the contract.
Before the sale can proceed, the property rights must be determined and the estate of the deceased must be administered. Last month we talked about what happens when a person dies holding real estate in their name. There may be a probate process and either the executor of the will or the heirs must sign documents to sell the property. This can take some time, especially if it involves tracking down heirs, giving notices, etc.
The buyer may not be willing to wait weeks or months. For Terry Carpenter of Ebby Halliday, the sale still happened for her sellers.
“Four days before closing, the spouse passed away,“ said Carpenter. “In this case, the buyer was willing to wait. But it was difficult. We had to go through probate and it took a couple of months.”
She coordinated with all parties to amend the closing date and the sale was ultimately finalized.
In the event that the seller’s estate makes reasonable efforts to perform under the contract, and they can’t, the contract may terminate with the buyer getting their earnest money back. If the estate does not make reasonable efforts to perform under the contract, they could be sued. Since every situation is different, the parties would need to consult attorneys and let the courts determine the outcome.
When a buyer passes away before closing, the contract they signed is also still binding. The buyer’s estate is obligated to all of the contractual duties that the buyer entered into prior to death. The buyer’s estate, like the buyer, may still have rights to terminate the contract based on the terms of the contract.
In order to enforce a contract against a buyer’s estate all of the contingencies under the contract must have been satisfied or waived. In reality, it is rare that a seller successfully enforces a contract against a buyer’s estate.
If there is a good chance that a buyer could pass away soon, it is unlikely they’d be entering into a contract to purchase a property. On the other hand, someone gravely ill or expecting to die soon might want to sell their property before they pass away. In that case, they could execute a Transfer On Death Deed while they are still alive and mentally competent.
By signing a Transfer On Death Deed, the owner transfers their ownership of their property upon their death. This deed must be signed and recorded with the court while the signer is living and it only becomes effective when the owner dies. If the owner dies, then the title transfers to the person named in this deed. Then the person named in this deed could sell the property without waiting for the probate process. If the owner hangs on long enough to sell the property and sign a deed over to the buyer at closing, then the Transfer on Death Deed is revoked.
If the seller expires before the sale closes, it doesn’t have to mean the deal is dead. But if the buyer is six feet under, the sale is probably too.
The opinions expressed are of the individual author for informational purposes only and not for the purpose of providing legal advice. Contact an attorney to obtain advice for any particular issue or problem.
Lydia Blair (formerly Lydia Player) was a successful Realtor for 10 years before jumping to the title side of the business in 2015. Prior to selling real estate, she bought, remodeled and sold homes (before house flipping was an expression). She’s been through the real estate closing process countless times as either a buyer, a seller, a Realtor, and an Escrow Officer. As an Escrow Officer for Allegiance Title at Preston Center, she likes solving problems and cutting through red tape. The most fun part of her job is handing people keys or a check.
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My husband is very sick and I have his power of attorney to sell our home.
I have signed our closing documents, as his attorney in fact on 2-24-2020
Our properties closing date is 2-28-2020
The property is in both of our names.
What happens if he dies before 2-28?
I am not a professional, but this scenario is happening to me right now so I thought I would comment on your question. The spouse of the selling couple was in hospice at the time I signed the contract, but I didn’t know that at the time. The husband had POA and signed the contract for them both and things moved along. My realtor heard from the seller’s agent that the wife was in hospice, but we didn’t realize that could affect me. The wife’s name was still on the title, Everything was a “go”, at this point.. Unfortunately the spouse died 4 days prior to our scheduled settlement date. Then everything ground to a halt, and we are currently in limbo until the death certificate is received by the title company….no one knows when this will occur. The main point of this is that once we wrote up an extension for the contract, allowing a couple of weeks for the death certificate to arrive, my lender sent me a new closing disclosure showing that I would now owe an additional $418 in rate lock fees. (I had not paid points in the beginning of the process, but now, in order to keep my interest rate, the lender is charging me ‘points’ and they are not discounted. If we do not close by 11/30, the coordinator will have to extend the lock rate for another period and that will incur more fees for me!
I’m very sorry that the wife died, but this delay is totally not my fault. All my documents, signatures, appraisal and home inspection were done quickly and submitted along with all the “to do’s” on the lender’s list of things.
We are both waiting for the death certificate, but it appears that only I am paying for this delay with the additional fees to be charged by the lenders. I don’t know if it is possible for the husband seller to have taken his wife’s name off the deed/title once she went in to hospice, but it would have made things easier. I don’t the details of this…or whether this idea was ever discussed or was even possible in this type of situation. My partner and I are splitting up and we had to remove my name from the title of our current house in order for me to qualify for the loan, (even though we had paid cash for it) because it was still problem for the lender to see my name on another property and be potentially liable for taxes, HOA dues etc. So we did it, but obviously I was not in hospice.
I see that you wrote your question last year so I would like to know what the outcome was. I am wondering if you had considered removing your husband’s name from the title on the house you are selling? Knowing what I am going through now, I would be inclined to consult with an attorney to see what one might do so that the settlement would not be held up in the event that a spouse is very ill and passes before the settlement.
My husband has a contract and all the receipts for our land. The seller is dead and the land is paid in full. The seller’s son now has all of the estate and won’t sign over the land. What can my husband do about it. The lady at the title company said she was new at the time and she admits she made a mistake and only transferred the trailer house not the land.
What happened to a sell contract executed and the seller committed suicide on the property?
Friends a (married couple) purchased a home and possession date was 18th. All documents were completed at the lawyers on the 13th so as money for purchase could be disbursed on 18th. In meantime one of the
Purchasers died of a massive heart attack on 14th. Can everything just proceed as is??+
My grandfather bought a farm but the seller didn’t sign the change of ownership so it is difficult for use to own that land and the seller is no where to be found so we don’t know what to do, I m asking for help.
My husband and I were in the process of buying our first home (newly built) when he suddenly passed away. The seller’s contract is in my name and the title was going to include both of us. With his passing, I can no longer move to the state where the home will be built nor can I afford to move forward and pay everything on my own. Can I cancel the contract due to personal hardship?
Interesting question, Kearston. I’ll reach out to a title expert, but the law may not be the same in Texas as it is elsewhere.
My mom entered a real estate contract to purchase a house and lot..there is still outstanding balance when she died. will death conclude the fullfillment of the contract? or the obligation to fulfill will be pass on to her sons? unfortunately, the seller failed to file an insurance, can we file a claim for negligence then?
Our Son passed away back in April and he didn’t have his wife added to the land the paper and we didn’t no where to go from here?
I am buying property from my sister. But she passed away unexpectedly before we could sign a contract. But we had already made several payments. Can her kids stop the sell even if they knew she was selling to us. An can they change the price.
In my sisters will she willed all her real estate to me, she has a property in contract and is terminally ill, if she dies before closing will the proceeds go to me or other heirs in her will
Between buyer and seller both signed contract
Opened escrow and title contract to be expires in 4 months loan to be paid off but seller dies leaving no will behind is probate necessary I’ve tried to sell twice but it gets stuck in escrow because seller is dead and her two sons are doing nothing about it what can I do?
I made a down payment.on owner financed land.i never did pay the lump mortgage note.the owner died.i haven’t heard from the one trustee. I have been paying property tax for 15 years.even though it says I’m the owner.am i?I what to do?
My husband and I sold our family home to our son and daughter in law. We carried the paper for five years, then they will refinance. Four years to go. If we should both die prior to the note being paid off, do they still continue to make their payments? To the executor? It’s a 1M note and we have seven other children that we want to share equally in the proceeds of our estate.
Me and my grandma are in the process of getting a house built and she passed away. What’s going to happen.
My son recently passed away and just purchased a brand new home. I am the father and he has a mother. I do not know if he has a living will. If I continue to pay the house payment what steps do I take in moving forward to obtain the deed to the home?
My husband & I jointly with survivorship own real estate that was under contract to buyers. Prior to their obtaining mortgage commitment after being given an extension, my husband passed away leaving me as sole owner. There is no estate or probate attached to the property. I terminated the contract in writing the day following my husbands passing for their lack of obtaining said mortgage commitment for the second time (though they claim to have gotten commitment several days later) however as I became sole owner of the property immediately upon my husband passing it would be physically impossible for him to fulfill his duty to the contract- as now sole owner would a new contract need to be drawn up should I chose to sell this property to these buyers or (other) potential buyers or not sell at all. Is the original contract null & void as I am sole owner?
I’m buying a house everything approved until I found out the original owner is dead and had a lien on the house so the people selling it to me bought it from them now I have to wait to see how the lien is going to be paid how the sellers didn’t catch that when they bought the house so now I don’t no if it’s getting paid
I am purchasing a house and the closing is November 4th. The owner passed away and his will has gone to probate. If it doesn’t close on November 4th , can I cancel the contract? Probate can take a long time.
My Dad died without a will my mom also passed.
My Dad passed in 2009 while under contract.
I have made an agreement with the seller and have made improvements, added electric power, and water lines. I also have a home on the property.
What rights do I have to claim the property when I finish paying the contract?
Mom (allegedly) signed APS to sell home but did not execute closing documents – twice. Eight months later mom passed. Lawyer cancelled “real estate file” after second closing was missed. Does estate need to honour APS?