If we are in contract but the seller passed away, now what?
Question Details: The seller unexpectedly passed away over the weekend. We have money in escrow on the house and have all the contracts signed and have had an inspection. We were suppose to close on the 8th, Im due to have my second child in 3 months. We really want this house but what do we do now.
The contract is enforceable against the seller's "estate"--basically, a legal entity which comes into being on death and owns everything he left behind, and whose purpose is to pay bills or debts, honor any obligations, then distribute the remainder of the asserts to the heirs and beneficiaries. The contract is enforceable against the estate because it's not a "personal services" contract--i.e. not a contract for the seller to have personally rendered services, like performing somewhere. Personal services contracts terminate on death; other "executory" contracts, or contracts to do something, do not, and become obligations of the estate. So the estate should go through with the closing, and if it does not voluntarily do so, you can file a lawsuit against the estate for "specific performance": to force the estate to sell, as per the contract. So you still have the right to buy the home.
That's the good news; the bad news is to expect delays--possibly significant ones. The estate legally cannot do anything until someone is appointed the executor (if there was a will) or administrator/personal representative (if no will) of the estate--only such a person has the legal right to do anything with the house. Even if everyone involved--e.g. the seller's family, etc.--is 100% willing to move ahead, they cannot until the executor or personal representative is appointed, and that could take months. And if they refuse to voluntarily honor the committment to sell, you'd have to sue, which can easily add another year or more to the process.
It may also be difficult to get your escrow back quickly, if you were wanted to terminate the contract for breach (not closing when they should have), since again, only an executor or personal representative has the legal authority to release it.
Through no one's fault, you are in a difficult situation. You are advised to retain an attorney to help you navigate it as best as possible.