What happens if a seller who is under contract dies before closing?

QUESTION: I am a listing agent. About six weeks ago, my client entered into a contract to sell her property. Unfortunately, my client died unexpectedly just a few days before the agreed-upon Settlement Date. Her daughter contacted me today and said that she had already initiated the probate process. However, the buyer’s closing attorney has informed us that if the executor is unable to close the transaction within seven days of the Settlement Date, the buyer will be entitled to damages for the seller’s breach. Is that correct?

ANSWER: It is. The first thing to remember is that the contract signed by your seller client remains binding. Paragraph 17 of Standard Form 2-T states as follows: “This Contract shall be binding upon and shall inure to the benefit of Buyer and Seller and their respective heirs, successors and assigns.” This language obligates the Seller’s heirs and the personal representative of her estate to honor all of the Seller’s contractual obligations, including the obligation to complete the purchase in a timely fashion.

Section 28A-17-9 of the North Carolina General Statutes states that when any decedent has contracted in writing to sell any real property, the decedent’s personal representative (i.e., the executor or administrator) may execute and deliver a deed to that property and such deed shall convey the title as fully as if it had been executed and delivered by the decedent. Title companies will require that an estate file be opened for the deceased owner.

A person seeking to qualify as a personal representative must apply to the clerk of the Superior Court on a form provided by the clerk’s office. If the clerk determines that the applicant is entitled to appointment, the clerk will issue either letters of administration (if the decedent died without a will) or letters testamentary authorizing the applicant to take certain actions with respect to the decedent’s estate. Once authorized, the personal representative must publish a Notice to Creditors in a local newspaper before they can convey a deed to the property. North Carolina law requires at least one publication of that Notice before property can be transferred out of an open estate.

The process outlined above will almost certainly take longer than the seven-day period of delay permitted by Form 2-T. If the buyer is unwilling to accept a longer period of delay, the buyer has the right to terminate the contract based on the Seller’s breach. If the buyer exercises that option, the buyer would be entitled to all of the remedies outlined in paragraph 23(b) of the contract including return of the Earnest Money Deposit and the Due Diligence Fee and reimbursement of the buyer’s “Due Diligence Costs.”