WHAT HAPPENS WHEN A DEATH OCCURS BEFORE TITLE CLOSES IN A REAL ESTATE TRANSACTION?

Typically, there is a fair period of time between the signing of a real estate sales contract and title closing. Most buyers and sellers, when they sign the contract, are presumed to be healthy enough to outlive it. However, death, as we know, can occur quite suddenly. So, what happens when one of the principals in a real estate contract dies before the title has legally changed hands?

In most cases, if it is the seller who passes away, the contract they signed is still valid. While the deceased seller cannot sign the closing documents, their estate is responsible for the seller’s obligations and the buyer has the right to take ownership of the property at closing, according to the terms of the contract.

But property rights, as before any closing, must be determined before the contract can be fulfilled, and upon death, the estate of the deceased must be administered. If a probate process is necessary, that is cause for delay, especially if it involves tracking down heirs and giving notice. If the buyer is not willing to wait weeks or months for probate to finish, the contract can, in most cases, be terminated and the buyer will have their earnest money returned.

If it is the buyer who dies before title closing, the contract they signed is also binding, as the buyer’s estate is responsible for contractual duties entered into before their death. However, the seller may not be able to enforce that. Many contracts state that the seller’s only remedy is to keep the earnest money deposit – and while the seller reserves the right to file a claim against the buyer’s estate for lost profit, it is rare for such sellers to prevail.

The bottom line is that if a seller dies before the title closes, the deal does not necessarily die with them. But if the buyer has gone to the great beyond, the sale is very likely just as dead.

Sources: Statewide Probate, other probate law firms

This material is meant for general illustration and/or informational purposes only. Although the information has been gathered from sources believed to be reliable, no representation is made as to its accuracy. This material is not intended to be construed as legal, tax or investment advice.  You are encouraged to consult your legal, tax, or investment professional for specific advice

About Bobbi Pronin

Bobbi Pronin is an award-winning writer based in Orange County, Calif. A former news editor with more than 30 years of experience in journalism and corporate communications, she has specialized in real estate topics for over a decade.

Bobbi is not an employee of Anywhere Integrated Services or affiliated with its title companies.