Purchasing Property from a Deceased Estate
Nineteen-year-old first home buyer Jasmine, bought a $220,000, three-bedroom home in Porirua with a $15,000 deposit from a deceased estate in February 2008. Settlement (the date a buyer actually pays the money and gets the keys) was set down for 10 March 2008.
The first thing to note here is that Jasmine was buying from a deceased estate. An issue with deceased estates that we don't often appreciate is that once someone dies, the ownership of any house they owned is basically in limbo - first Probate (the right to deal with the deceased person's property) needs to be granted by the High Court, and then the Executor of the estate has to get the property transferred, legally, into his or her name – all this before the property can legally be transferred to the buyer. While this doesn't usually take too long, delays can happen - for example if the deceased died intestate (ie without a Will), or the Executor is overseas, or the High Court has a backlog of other applications to deal with.
Another interesting thing about deceased estates that buyers often don't appreciate is that extra clauses are often added to, and some standard clauses deleted from, the standard agreement for sale and purchase in order to protect the Executor and allow for the possibility that settlement can be pushed back if legal documents relating to the deceased estate don't arrive in time.
In Jasmine's case, the papers didn't arrive in time. In fact, 11 weeks later, they still hadn't arrived. Jasmine was left feeling angry, out of pocket (with bank fees and higher interest rates), and without the house she had a binding contract to buy.
What could Jasmine have done differently, and what can we learn from this?
The biggest thing we can do as buyers is change the order in which we do things. How often do we see a house we love, take advice from the (seller's!) real estate agent, sign the offer, have it accepted, and only then take the signed contract to a lawyer?!
If Jasmine had taken the contract to a lawyer before signing anything, her lawyer could have explained what tends to happen with the sale of deceased estates. Perhaps if Jasmine had understood the process and why the contract contained the extra clause, the delays in settlement wouldn't have come as such a shock: buyers are much less likely to feel aggrieved if they understand what they are signing and why.
"But the expense", you cry! Actually, buyers may be able to get initial advice at no extra cost if they go on to use the same lawyer to handle the real estate transaction. And the extra cost, if any, is surely a small price to pay for the peace of mind and security that good advice can bring.
This article is brought to you by Colette Mackenzie of Gibson Sheat Lawyers and its subsidiary The Conveyancing Company, specialists in property law, mortgage broking, refinancing, buying and selling residential or commercial property, and subdivision.
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