Question: I am considering making an offer to buy a house currently owned by an estate. They say my right to buy can be overridden, if a higher offer comes along. Is this true?
Answer: Estate sales are different from standard sales, in many ways. One common factor involves jittery executors (now known as personal representatives, but let’s use the old school term). Concerned with their personal liability to the members of the estate, an executor is best advised to retain the right to accept higher offers, should they come along.
Here is a scenario: Let’s say your contract to purchase is for $300,000. In a few weeks, a hotshot buyer comes along willing to spend $350,000 for the property. The members of the estate are going to be pretty angry with the executor. He took your cheap deal, instead of working harder for a better one. They may even accuse him of colluding with you, in some nefarious way.
In a Massachusetts court, this situation played out similarly. An executor got in trouble for not being diligent enough. The resulting loss of $50,000 could be taken from the Executor’s fee or share of the estate. As a result, executors protect themselves by adding special language to their contracts allowing them to accept higher offers. Some concerns arise in these deals.
- Will the Realtors continue to aggressively market the property?
- How will they reflect the listing in the MLS? (Still Active vs. Under Agreement)
- If the higher offer comes in a day before your closing, what happens
I have started to address these matters in my contracts. One important factor to negotiate involves giving the Buyer a right to review and match any higher offers. With 48 hours, you should be able to assess the legitimacy of the competing offer and match its price terms – keeping you in the driver’s seat to buy the property.
Attorney James Haroutunian practices estate planning and real estate law in Billerica at 790 Boston Road. Contact him to begin an estate plan or with questions at www.hlawoffice.com, 978-671-0711 or email him at firstname.lastname@example.org.