Death And Real Estate, Part 2: When The Buyer or Seller Dies While Under Contract

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.