Can I purchase a duplex AFTER the owner passes away?

Question

My neighbor owns a 2-unit duplex and wants to sell it to me and my husband. She started dialysis months ago and had a close call last week. She has no kids; her siblings are older and want nothing to do with a rental property. We cannot purchase the property at 20% down and are currently house-hacking our first investment property. We cannot move into her property until the end of this year if we want to go the 3.5 - 5% down route.

We are looking for any advice as we see an opportunity to help our neighbor, her great tenants, and ourselves by adding to our portfolio.

Is there a way we can add ourselves to her Will to be the first to purchase the property upon her death? What can we do NOW to make a future transaction and deed transfers a smooth process? Do we look into assuming the loan if assumable? Any advice is much appreciated. I can provide more details if needed. Thank you.

Jeff Nash · Answer

I am not sure if her health condition is purely physical or if it's adversely affecting her mental faculties, but if you have a strong relationship and rapport you can have a candid and open conversation about your intentions and demonstrate any way you can help (through deeds, financial support, etc). I don't know the severity of the situation and if you are talking about final stage renal failure and how much time she technically has left. If you want to do anything that can be enforceable and not be contested later I would definitely seek legal counsel if you start the conversation and process. Do you know if she has an estate plan in place? I think the options are plenty and it's just a matter of open communication during a difficult time that might be awkward and unpleasant and should include her beneficiaries and executor of her estate.

I assume even though the siblings don't want the rental they would want to receive their equitable share of the fair market value after an eventual sale and would not be so generous as to accept a purely bargain purchase.

Tom Gimer · Answer

I would negotiate a written option, valid for a reasonable time period, which is expressly binding on the parties heirs, successors and personal representatives.

Then I would record it in the land records.

Randall Alan · Answer

@Allison Bultman

In answer to your title question… once someone passes away, control of their assets is governed by assignment of beneficiaries, their will, and by probate rules.  Wills generally specify who received the deceased person’s property.  I’m not a lawyer… so bear that in mind on what follows:

Your friend could definitely include you in her will specifying that she wants the house given to you (or possibly sold to you for a certain price.)   The challenge to buying it would be how that comes to pass if you aren’t able to afford it at that time.  The estate still needs to be settled.  I would see it as probably best executed as a first right to purchase the house at a specified price in relationship to its appraised value or something like that.  It is tricky in and of itself as you don’t know when she might pass away… how do you set a value?   And then there is the notion that the property is probably financed.  The mortgage has to be accounted for as well.

Of course all of this presumes she wants the money from the house sale to go to her family… otherwise she might just gift you the house.

This should all be a discussion with your neighbor.  We obviously know nothing of your true relationship with her.  (ie. What her intentions are as to who benefits from her estate at the time she passes away.)

If she has a professionally drawn up will it would cost money to modify that through a lawyer.  If she has no will you would be out of luck if she passed away as the next of kin would inherit her assets and either liquidate the property.

Your best bet would be to have her discuss this with her estate lawyer who drew up her will.  They will know how best to address the issue so that her wishes are followed.

All the best!

Randy

Kevin Sobilo · Answer

@Allison Bultman, I would think an option contract would be the way to go.

You pay the owner a sum now for the right to purchase the property at a set price within the next X years. So, even if they pass away you still should have the right to buy the property at that price until that time frame ends.

Or just sign a sales contract that has an extended closing date of several months to a year out.

Can I purchase a duplex AFTER the owner passes away?

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