Buying or selling a home is usually an exciting time. But what happens if the unexpected occurs, like the death of a buyer or seller in the middle of a real estate transaction? While this isn’t a topic anyone wants to think about, it’s an important one, especially if you are buying or selling a home in San Diego, where specific laws come into play, and understanding them can save a lot of stress if such a situation arises.
Recently, we worked with a family purchasing their first home in Carlsbad. Everything was moving smoothly until a sudden and unforeseen event caused delays. Thankfully, it wasn’t a death in this case, but it reminded me just how fragile and complicated real estate transactions can be. Life doesn’t stop just because you’re in escrow. And when it comes to something as serious as death, the law has to step in and clarify what happens next.
If the Buyer Passes Away
Let’s start with the buyer. If the buyer passes away during escrow, the outcome depends on how far along the transaction is. In most cases, the purchase agreement becomes void because the deceased buyer cannot complete the purchase. Even if financing was already approved, lenders won’t issue a loan to someone who is no longer alive.
If the buyer was purchasing with a co-borrower, such as a spouse, then that surviving co-borrower may still be able to complete the transaction. For example, if a married couple was buying a home together and one spouse passed away, the surviving spouse may decide to move forward, provided the lender still approves the loan. However, in situations where the deceased was the sole buyer, the transaction usually comes to a halt.
If the Seller Passes Away
When the seller passes away during escrow, the process may look a little different. The property does not automatically transfer to the buyer. Instead, the seller’s estate becomes responsible for the transaction. This means the executor or administrator of the estate must step in and decide how to move forward.
In California, the probate process may come into play if the property was not held in a living trust. Probate is a court-supervised process of distributing a deceased person’s assets. If the home is subject to probate, the sale may be delayed until the court authorizes it. This can add time and complexity, which is often frustrating for buyers who were excited to close quickly.
That said, if the property was held in a living trust, things can move much faster. A successor trustee can step in and complete the sale without the same lengthy court involvement. This is one reason estate planning is so important, especially for homeowners.
Disclosures and Legal Requirements
California law also requires sellers (or their estates) to disclose if a death occurred in the property within the last three years. While this doesn’t directly impact what happens during escrow if a seller dies, it is an important piece of the broader conversation around death and real estate transactions.
Other Considerations
For both buyers and sellers, the sudden death of a party often means delays and sometimes even cancellation of the deal. If you’re the surviving buyer, you’ll want to check with the lender right away to see if financing can still be secured. If you’re a buyer and the seller has passed away, you’ll need to understand whether the sale can move forward through probate or trust administration.
It’s also important to lean on professionals during this time. Real estate agents, attorneys, and escrow officers can help you understand your options and next steps. These situations are rare, but when they do happen, having a team that knows the state laws makes a big difference.
While the topic may feel heavy, it’s worth knowing how these things work so you’re not caught off guard. If a buyer dies, the sale usually falls through unless there is a co-borrower who can step in. If a seller dies, the estate takes over, and probate or trust rules will dictate the next steps.
At the end of the day, real estate is about more than just contracts and closings. It’s about people and their lives. As agents, we’ve seen how unexpected events can impact even the smoothest transactions. The best thing you can do as a buyer or seller is to stay informed and work with professionals who can guide you through the unexpected.
