What Happens If the Seller or Buyer Dies Before the Real Estate Closing?

Posted By on May 17, 2016

Sometimes, buying or selling real estate isn’t as easy as it is portrayed on TV. Even in a cash transaction where no lender is involved, the buyer and seller may have to deal with all sorts of complications, such as removing any clouds on title (like satisfying any outstanding mortgages or paying any tax liens) or satisfying any municipal violations (for things like overgrown grass or excessive trash on the property).

Which means it can take several days, if not weeks or months, before some Florida residential real estate transaction can close even when it’s a cash deal. (If the buyer needs a mortgage to buy the home, then it’s a given that it’s going to take some time before the deal can close: lenders have all sorts of requirements these days.)

 

 

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When Do The Buyer and Seller Have a Deal Under Florida Law?

The obligations to buy and sell real estate don’t happen until a legal contract is entered into between the buyer and the seller.  That happens when the buyer’s offer is accepted by the seller and the sales contract is signed by both parties.

What Happens When Someone Doesn’t Perform Under The Contract?

After the sales agreement is in place, failure of a party to perform a mandatory obligation (like giving a deposit) under the contract is considered a breach of contract; a breaching party can be sued for damages under Florida law (of course, most residential real estate contracts contain provisions which set forth the type of relief a party can seek when one party is in default of the contract).  (For information on what happens when a Seller defaults on a residential sales contracts, read our earlier post, “What Happens When a Seller Defaults on a Residential Sales Contract in Florida?”)

The signing of the contract begins the clock ticking on deadlines for the parties to meet, including the closing date.  During this process, lots of unexpected things can happen that can derail the transaction. The buyer or seller may have a change of heart about the deal, for instance, or one party may have a change in financial circumstances that may prevent them from closing the deal.

Or, the buyer or seller may pass away before the closing has occurred and before title has transferred to the buyer.

What happens then? What happens if either the seller or the buyer dies before closing occurs?

Does Florida Contract Law Control When a Party To a Real Estate Transaction Dies?

When either the buyer or the seller in a residential real estate deal passes away, Florida contract law will provide part of the answer to the problem. Under Florida law, when a party to a executory contract dies, that death will not void or nullify the contract.

That’s the general rule. The exception? An example is if the agreement is a personal services contract. For instance, if a singer passes away unexpectedly in his purple palace, then any Florida contract he had signed to perform in Miami would not remain enforceable.

A real estate contract is not a personal services contract. A real estate contract is an “executory contract” that remains legally valid until the closing is completed.

If a party to that Florida contract dies, then the contract remains valid.

When this happens to a seller, the personal representative of the seller’s estate must deal with the contractual responsibilities created under the sales agreement; the contract will be considered an obligation of the decedent’s estate.

Will Florida Probate Law Delay the Closing?

There can be complications here, of course. The personal representative may not have the power or legal authority to act on behalf of the decedent’s estate until the proper probate procedures are undertaken (the probate judge may restrict the personal representative’s authority by requiring all sales of real property be approved by the court). Undoubtedly, this can  force the original closing date to be delayed.

It may be possible for the surviving party — the buyer — to argue that the closing date being delayed is a reason to terminate the transaction altogether. A buyer that wants to back out of the contract after the seller has passed away, for instance, might use this extenuating circumstance to legally get out of the deal.

How? Most sales contracts have provisions and deadlines that must be strictly adhered to by the parties, and the seller’s death and resulting probate administration may make it difficult, if not impossible, for these deadlines to be met. This may allow the buyer to point to the time provisions as a basis for ending the deal and getting a return of his or her deposit.

When would a buyer want to do this? It depends upon the particular situation. However, if the seller passed away in the home or condo being sold, then the buyer may have some personal trepidation about moving into a property where someone has recently died.

However, if the buyer wants to continue with the transaction he or she is free to do so. There’s nothing that a buyer has to do to make sure the contract is valid and to continue with the transaction.

The buyer is considered to have “equitable title” to the property. When a seller dies before closing, the buyer has the legal right to have his or her claim to that property considered an equitable claim on the property even though the buyer has not filed any claims or demands with the probate court or with the seller’s estate. See, Buck v. McNab, 139 So. 2d 734 (Fla. 2d DCA 1962).

Closing With the Seller’s Personal Representative

The Florida Probate Code and common law allows for a seller’s personal representative to convey real estate.  However, as mentioned above, a probate judge may restrict the Letters of Administration (which often occurs in Miami-Dade probates) by requiring that any sale of real estate be approved by the court.

Depending on the status of the property, meaning whether or not the property was the homestead of the decedent, the personal representative, after obtaining court approval, may be required by the buyer’s closing agent, for title insurance purposes, to convey the property to the buyer by delivering a Personal Representative’s Deed.

Forcing the Sale After the Seller Has Died

There may be an occasion where the buyer wants to continue with transaction but the personal representative isn’t cooperating with getting the deal closed. Here, the buyer may have to take legal steps to force the sale.

This can be done (if the contract says this remedy is available to the buyer) by filing a lawsuit demanding “specific performance” of the sales contract. This type of lawsuit is filed in the probate court where the estate administration is being overseen.

In this situation, the buyer will argue that because land is considered unique under the law, simply returning his or her deposit is not sufficient or just and the right thing to do is to force the closing to occur. Here, the probate judge can order the personal representative of the seller’s estate to complete the closing and finalize the transfer of the property to the buyer.

What Happens When The Buyer Passes Away?

If it is the buyer that has passed away after the sales contract has been signed but before the title has been transferred then things are different. The buyer’s interest in that real estate is considered to be an “estate of inheritance.” The rights to the contract pass to the buyer’s heirs or beneficiaries and does not pass into the buyer’s estate. The deceased buyer’s personal representative shouldn’t be involved in making the decisions now.

Here, the heirs or beneficiaries must decide if they want to go through with the purchase or not. They can gather the cash and complete the transaction. If they choose not to do so, then the deposit made by the deceased buyer will be returned to them.

(Note: There are insurance policies provided by companies like AssureClose that offer sellers protection in the event that the buyer passes away before closing. In these policies, if the buyer dies, then the insurance company will buy the home from the seller.)

Are You Involved in a Real Estate Transaction Where There is an Unexpected Death?

Experienced real estate attorneys know how to deal with  an unexpected death of either the seller or the buyer in a Florida residential closing. Most will be familiar with Florida probate law and the steps that need to be followed in order to get a deal done.  They will know which documents to submit to the probate court and know how to “walk through” a petition authorizing a sale.

A good piece of advice if you are faced with the death of one party to a real estate transaction, is to at least speak with an experienced Florida real estate lawyer to learn about your rights. Most real estate lawyers, like Larry Tolchinsky, offer a free initial consultation (over the phone or in person, whichever you prefer) to answer your questions.

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Do you have questions or comments? Then please feel free to send Larry an email or call him now at (954) 458-8655.

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Comments

One Response to “What Happens If the Seller or Buyer Dies Before the Real Estate Closing?”

  1. I am in contract to purchase a condo in FL.(delrey Beach). The seller who was

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