Euripides once wrote in Alcestis, ”No one can confidently say that he will still be living tomorrow.” When death is a surprise, there are oftentimes contracts and agreements that have not been completed. When a person dies, their assets, their property, their obligations and their benefits are transferred into an abstract legal entity known as the “Estate.” The Estate is managed by some third-party person known as the “Personal Representative” who acts as the legal signatory for the Estate. The Personal Representative pays off the debts, pays taxes, distributes property to the heirs, carries out the intent of the will, and generally acts as a steward of the estate’s belongings. When a person dies while selling their property or when purchasing property, there are several ways that the law addresses the scenario:
Death of Joint Seller/Buyer
- When a married couple owns a home, they typically own it as “tenants by the entirety,” which is a form of ownership with a right of survivorship. Alternately, Oregon allows multiple people to own property as “not as tenants in common, but with a right of survivorship” [everywhere else in America this is called a “joint tenant”] which will have a similar effect on the property. When one of the tenants by the entirety/not-tenants-in-common, but-with-right-of-survivorship dies, the remainder receive the deceased party’s interest. E.g., when a husband dies, his wife takes the full interest in the property if they were tenants by the entirety. There is no transfer, the deed doesn’t need to be updated, it is simply owned by the remaining surviving spouse [generally the spouse/listing agent would need to record the death certificate or some other proof to show that they are now the undivided owner of the property]. If an Agent has an agreement to list a property for a husband and wife, then wife dies, the Agent does not need to sign a new listing agreement with just the husband; the husband can sign and sell the property as an individual.
- If you have a situation where the sellers were co-tenants, the Agent would address the deceased party’s transaction based on the breakdown below [i.e. it depends on whether you’re under contract or not], but the remaining surviving client’s representation will be unchanged.
- If you have a situation where co-buyers hire an Agent, but one Buyer dies; the agent can proceed with the representation of the surviving client, but financing may become a roadblock to future purchases and the Agent will want to discuss modification to the scope of the representation. If the Buyers were already under contract, the Agent would address the transaction based on the breakdown below (Buyer Side – Death of Sole Party when Under Contract), however the surviving Buyer would be able to take over the transaction [basically absorbing the deceased party’s obligations] if the deceased Buyer’s estate refuses to take up the purchase and Seller approves of the surviving Buyer doing contractual in-filling.
Death of Sole Party Occurs when Property not under Contract
- Buyer Side: When the Agent and Principal are not yet under contract to purchase, but do have a Buyer representation agreement in place [in writing or through implication] and the Buyer-Principal dies, the agency relationship is over. There is no further representation. The Buyer’s estate does not inherit the agent, the estate is not locked into a representation until the end of the Buyer’s Representation Agreement’s term. A 2020 case from Massachusetts called Newton Centre Realty, Inc. v. Jaffe, 97 Mass. App. Ct. 726 (2020) produced a first-of-its-kind ruling on agency relationships in death. The court found that “well-settled common-law principles of agency” terminated brokerage agreements upon death of the principal because the agency agreement did not confer an interest in property. The agreements that do confer an interest in property, however, persist beyond the death of the principal [hence, the Buyer-Seller purchase and sale agreement will remain enforceable after death, but the agency relationship guiding the sale agreement will wither away]. The logic of the Massachusetts court’s ruling would very likely hold in Oregon as well.
Agency relationships without any other moving parts are appurtenant to the individuals; when the Buyer dies, so too does the Buyer’s agency relationship with Agent. The Agent would only persist in searching for property if the Buyer’s estate chooses to enter into a separate representation agreement with the Agent to purchase property for the estate [this would be irregular].
- Seller Side: When an Agent and Principal are in a listing agreement but no offers to purchase have been accepted, and the Seller-Principal dies, the agency relationship ends, the listing should be removed from the MLS or withdrawn until further discussion can be had with the Estate of the deceased Seller. The Estate may choose to engage the Agent and list the property, or the estate may choose not to engage the Agent and to allow the property to move through probate or inheritance. If the Estate chooses to engage the Agent, a separate listing agreement will need to be signed between the Agent and the Estate of Decedent [the Personal Representative would be the signatory here, but the client is the estate]. If the estate chooses not to engage the Agent but the personal representative sells the house nonetheless, the Agent is not entitled to any compensation, as the property was not sold by [or even owned by] the Agent’s Principal in the transaction [i.e. the deceased Seller]. This “Agent gets no compensation when Personal Representative shepherds sale to completion” outcome is the direct holding from Newton Centre Realty, Inc. v. Jaffe.
Death of Sole Party Occurs when Property Under Contract
- Buyer Side: When the property is under contract and a Buyer dies, the Buyer’s estate receives the obligations under the contract. In essence, the estate is required to adhere to the terms of the contract with the Seller. Most Buyer estates at this stage renege on the deal or otherwise terminate, and depending on the reason for the termination, the estate may lose the earnest money in the process. Many estates will let the transaction fail at this stage because the heirs do not wish to own property where the deceased Buyer was purchasing, but if the heirs approve of the purchase, they can direct the Personal Representative of the Estate to proceed with the purchase, adding the property to the estate to then be disbursed amongst the heirs per the will or intestate laws. The estate will typically only be able to purchase the property if it is using assets of the estate to make the purchase, such as cash from a bank account; if the Buyer was using a conventional loan, the estate’s ability to purchase using that loan will entirely be dependent on the lender and whatever deal the heirs can work out with the lender.
If this Buyer was represented by an Agent, the agency relationship ends when the Buyer dies. The estate of the Buyer can sign an independent agreement with the real estate broker, but the estate is not required to do so. If an independent agreement is signed establishing an agency relationship between Agent and the Estate of the Buyer, Agent should proceed with the transaction and amend the documents to reflect the changed ownership of the property [e.g. use a general addendum to reflect that the Buyer is now “Estate of ___,” and that the signatory for the estate will be “______, personal representative of the Estate of ____.”
If the estate proceeds with the transaction and makes the sale without engaging the deceased Buyer’s Agent, the law is unclear whether the Agent would have any claim to compensation as a procuring cause. Presumably, based on the outcome in Jaffe, the courts would rule that the Agent is not entitled to compensation because there was no privity of contract or agency relationship between the agent and the estate of the deceased. The Agent may be able to argue that their services had a cost associated with them and that the Buyer’s Estate is required to pay that cost [e.g. an hourly cost for the Agent’s time in the transaction, applied to the Buyer’s Estate as a debt incurred by the Buyer before their death], but the nature of real estate compensation as a payment upon completion of sale rather than a fee-per-service or hourly-fee structure very likely means the agent has no valid claims to compensation when the client dies mid-transaction and the estate refuses to ratify or re-create a new agency relationship.
- Seller Side: When a Seller under contract to sell the property dies, the transaction remains valid and the Estate of the deceased Seller remains obligated to sell the property. The Seller’s estate does not have the same ability as a Buyer’s estate to simply let the deal fail for want of the heirs. If the Estate allows the deal to fall through “because the Seller died,” the estate would be terminating the transaction for a reason unstated in the contract. Real property sale agreements do not allow a Seller to simply not sell when the Seller dies, so a Seller Estate termination would allow the Buyer to claim specific performance and force adherence to the original terms of the contract through judicial order. The Estate is allowed to terminate for valid reasons [e.g. if the Buyer didn’t put in the earnest money, the estate could likely terminate based on Buyer’s failure], but the death of the Seller is not considered a valid reason for termination. Occasionally the heirs of the estate will disregard the risk and terminate nonetheless, if that is the case, those heirs are well advised to seek an attorney’s counsel before sending any termination documents.
The Agent of the deceased Seller faces the same problem the Buyer’s Agent faces. They no longer have an agency relationship connected to the Property that is under contract. If the Estate signs a listing agreement with the agent, Agent can proceed with representing the estate in the sale, but if the Estate refuses to sign a listing agreement, the Agent has no legal connection to the estate and will receive no compensation for the sale of that estate. Similar arguments about Agent’s entitlement to compensation for time exist in this context as well, but the commission payment structure likely means the agent will not be entitled to any compensation for their work if the estate freezes the agent out of the partially-completed transaction.
Death of Person with a Power of Attorney
- The Power of Attorney allows a third-party to perform the legal acts of the original person. If the Buyer has a general Power of Attorney, the Power of Attorney is going to be able to sign and contract as though they were the Buyer. Once the Buyer dies, the Power of Attorney is no longer effective. It is a tool that is used to assist infirm or mentally unfit parties in contracting, it is not a bypass for probate and personal representative appointment. The same answer is true for Sellers with Powers of Attorney. All signatory authority of the Power of Attorney disappears with the death of the Seller.