When you work in real estate it is bound to happen at some point. A homeowner will die on their property. As an agent, if you have never dealt with this situation before you’re going to have questions.
Do agents have to tell buyers if someone died in a house? How does the death disclosure work? What do you do as an agent if someone dies in the house and it’s in escrow?
As a real estate agent, there is essential information that you need to know when dealing with a death in the property. When you know the procedures and disclosures involved, selling a home that has had a death on the property will be easier to handle.
How you handle the death disclosure will be different depending on when it’s discovered. We’ll discuss each scenario, what disclosures are involved and the proper procedures to follow.
Let’s start by talking about the basic rules as it pertains to California real estate.
How Does the Death Disclosure Work?
Death on the property is considered a “material fact” and must be disclosed.
A material fact is considered to be any information that can influence the decision of the buyer involved in the real estate transaction.
Material facts include items like a cracked slab, known plumbing issues, or anything else that can be considered a defect. Yes, “death” is included as a material fact.
This is critical because a death on the property would definitely be a deciding factor that a potential buyer would want to know.
Many people are uncomfortable with the idea of living in a house where death occurred. It could be due to superstition, the belief that the house could be “haunted,” or it could be a personal issue. The fact remains that some people are very adamant about this and will not purchase a house where someone has died.
If you are the listing agent selling a home with death on the property, you must disclose this information. But per California civil code 1710.2, you only have to disclose this information if the death occurred within 3 years of the buyer making an offer.
First Scenario: Representing the Seller
So as we just discussed, it’s important to disclose this information when you are representing the seller and have the listing.
But what if the death in the home happens after the offer has already been made and you are in escrow? It can happen and in this scenario, you will want to make sure you are still following the correct procedures.
Per the California civil code 1710.2, you are only required to disclose a death before an offer is made, right? Not the case and we’ll explain why.
You need to approach this like you would any other transaction once the house has been modified while in escrow. If the home had a new leaky roof or was recently flooded, you would disclose this new information to the buyer because it has affected the integrity of the house.
In this case, the death in the home is treated in the same way. It is a new variable that has modified the home and may influence the buyer’s decision to continue with the transaction. You must disclose this information.
If you are lucky enough to have the buyer agree to continue with the purchase, it’s crucial to document everything.
Using Addendums in the Transaction
Whenever there is a critical change in the property materially, it’s important to document it. You can do this by using an Addendum to the contract.
When completing the addendum, be as detailed as possible. You will want to note that there has been a death on the property and include the address and date of occurrence. State that the buyer has been informed and accepts the new condition of the home.
Then, have all parties acknowledge and sign it. That includes you as the seller’s agent, your seller, the buyer, and the buyer’s agent. Once executed, send that change to escrow immediately.
Disclosures and documentation are designed to limit your liability as an agent and these will also safeguard your client.
At the listing stage, we disclose the death in the property on the seller disclosures and on the Multiple Listing Service in the private remarks.
If the death occurs during escrow, we use the addendum.
What happens if the buyer discovers that there has been a death in the property AFTER escrow closes? What then?
Second Scenario: After Escrow Closes
With all the need for disclosure and documentation, you might be wondering how this can even happen. Although it’s not the usual, there is an instance where this can occur.
We’re not referring to any properties where it has been more than three years later. Technically the death does not have to be disclosed.
However, we recommend always erring on the side of disclosure — it’s better to be honest than to conceal facts when trying to be a reputable agent.
As we discussed, it’s required to disclose a death on the property if it is within 3 years, although there is one exception.
An exception to this rule is when the house is a foreclosure or a bank-owned property. Since the bank could not have reasonably known what was happening in the house, they are exempt from the rule about disclosing deaths within the last 3 years.
Unfortunately, there isn't much that can be done at this point. If the buyer finds the information too overwhelming to remain in the home, they can always choose to sell the house and move.
As an agent, there are a couple of things you can do to prevent this from happening if you are actively seeking out bank-owned properties for your buyer.
ASK YOUR BUYER
During the consultation, ask your buyer up front whether or not death on the property is an issue.
DO SOME RESEARCH
If it’s a deal-breaker, make sure to do your due diligence beforehand to find out if there has been a death on the property. You can check public records or ask the neighbors.
Taking these simple steps will make sure you are on the same page with your buyer and can prevent a bigger issue from developing later.
Final Thoughts on How to Handle a Death in the Property
Having to deal with death on the property is never the ideal situation. But knowing what to do when you are faced with that situation will make all the difference.
Whether you are representing the buyer or seller, the key to closing the deal is proper disclosure.
Death in a property will not be a deciding factor for all buyers. Make it a practice to ask your client before you start looking at houses. There is always going to be a buyer that is willing to overlook this material fact.
Remember, a death in the property does not mean the death of the deal.
