The seller died. Now what?
The PAR Legal Hotline has been receiving an unusually high number of calls involving scenarios where a seller or prospective seller has recently passed away. Let’s review some of the legal issues and then look at a couple of specific scenarios to see how that might play out.
Who can act?
When a person is alive, the most common way someone acts on their behalf is through a power of attorney. By definition, a POA acts “in the shoes of the principal.” Once the principal has passed, they obviously can no longer act. This means that the POA is now unable to act after the principal’s death.
The only way to act on behalf of the deceased is through the executor or administrator of their estate – anything in place before then is void. There is no authority until there is an executor/administrator established and the relevant authorization has been provided to that person. Until that documentation is received, nobody has the authority to sell the property. This paperwork is often called the short certificate, letters testamentary or letters of administration. If some other documentation is brought forward, it’s best to consult with the estate attorney.
Remember, just because someone was the POA, does not mean that they will be the executor. Merely producing a will is not sufficient either – they must follow the full process to open the estate and get the appropriate paperwork from the court. There are many different fact patterns, such as co-executors, an heir challenges the decision, the executors do not actually agree, the executor is a different individual than the POA… you get the point. There are so many different options, which is why there is no authority until paperwork proving such is provided.
Boiling this all down, immediately after death, there is no one with the authority to sign. Okay, great, now what? Well, it depends, our favorite catch phrase. Let’s look at what that means in two common scenarios.
In a market short on inventory, agents are trying to get properties listed as soon as they possibly can. We’ll often hear things like “We were making all the plans with the POA before she died” or “It’s what the owner wanted” or “He showed me a copy of the will.”
So, can you sign a listing contract for a property if the owner has only recently passed away? No, not until there is an estate and executor/administrator established and you can get a copy of the relevant forms for your files. A listing agent could express their interest in signing a listing contract once there is someone who is actually authorized to sign a listing contract. And perhaps an attorney representing the estate would be willing to put something in writing about the presumed intent of the estate to list the property. But even if a listing contract were to be signed, that signature would not be binding since they do not have authority to bind the estate to anything at that time.
A death before listing the property is fairly easy to deal with, compared to the issues that come up if the death occurs in the middle of the transaction. With all the contingencies and deadlines in a typical deal, what happens now?
A lot of that will depend on where you are in the contract. If you’re two days before settlement, well, the courts do not act overnight, so you’re not going to be able to settle on time. If the contract was just signed yesterday, then it’s possible that the paperwork could all come through before the first deadline for the seller to respond to something.
But remember that the other kicker is until that executor or administrator is set up, there’s also nobody with the authority to even extend the contract. So, again, communication is key. Perhaps buyers are willing to write up a proposed extension that they are willing to hold to, even without a seller signature. Or maybe the estate attorney would respond to this with an assurance of an extension being signed when the time is right. This is where communication is key to be sure everyone is on the right page.
Bonus tip – What’s your name?
We’ve written before about this before, but remember that someone acting on behalf of the estate has to identify themselves NOT just by their name, but as a representative of the estate. For example, “Estate of Arthur Fiedler, John Williams, executor” rather than just “John Williams.” That may be your first tip-off that there’s an issue. If someone doesn’t sign that way then it may be that they haven’t yet gotten the appropriate paperwork and instructions on how to handle things. And if they do sign as an executor or administrator, the next logical step is for any agent to say “please show me the papers” and then to hold things up if they can’t do so.