Death of a Seller Versus Death of a Buyer

In most cases, there is some lapse of time between the signing of a real estate transaction contract and the actual sale (the “closing”). What happens if, during this period, one of the parties to the contract dies?

Surprisingly, the results depend on who dies. If a seller dies, usually the buyer has the right to enforce the contract against the estate of the deceased seller. Dying does not extinguish the obligation to perform a real estate contract if the deceased is the seller.

But if the buyer dies, the seller may not be able to enforce the contract against the buyer’s estate. Many contracts state that the seller’s only remedy is to keep the earnest money deposit. In other cases, it is possible for the seller to file a claim against the estate for lost profits, but the seller will run a problem.

The probate law has a detailed priority list of how estate funds should be used, and a frustrated seller is pretty far down that list – if he is even on the list at all. The money the buyer was going to use to buy the property may be needed for administration of the estate, the funeral bill, final medical expenses, or a family allowance to a spouse or children, all of which come ahead of the class of general creditors.

So while the law tries to treat people equally in many respects, enforcing a sales contract when one person dies is not equally available.