What happens if Seller dies before Owner financing term ends

Question

Hey everyone! Have a hypothetical question that came to mind. I am currently negotiating an owner-financing deal with a seller who is in their early 70s. My question is what happens if this said seller passes away? The mortgage agreement would be filed officially with the county. Does the inheritor inherit the agreement?

Marco Bario · Answer

@Hoa Nguyen -

Like any other asset (real estate, stocks, cash, auto, etc), beneficiary interest of seller financed note or contract would pass down as per the instructions of the estate or probate. Your obligation will remain unchanged.

Rick Pozos · Answer

When the seller tells me that they are 60 or 70 or however many years old, I tell them that it is a great way to give money to their heirs. They do not leave a lump sum of 100k or 150k, they leave 950/mo for the next XX years. The heirs will not blow the 150k on a new car and be flat broke again. This 1k per month or 500 per month if split between 2 kids is a reminder of their lost parent every month for the next 25 years and how they left them something that they can spend.

Justin Bauer · Answer

Victor Sine its up to you to know what happens . Have a convesation with him. Just ask him maybe he will put you in his will.I am sure he has some idea were his lifes work is going.

Victor Sine · Answer

What if they have no heirs or will? I'm about to get into this situation where I'm buying a boutique hotel for 3.3MM with seller financing and the seller is 80 and is estranged from his entire family.

Kevin Crowell · Answer

Yes, the heirs.

Frank Greg · Answer

If the contract just so happen to conveniently include a clause that says the buyer's obligation to seller extinguishes with the death of the seller, that could be mighty suspicious if seller strangely dies shortly after closing or during the term of the loan. Obviously not suggesting you go out and off your seller here.

Eliott Elias · Answer

Will go to their heirs and have to abide by the contract you had with the original owner.

Hoa Nguyen · Answer

Love that you mentioned that, I always record any deals with the county!

Chris Seveney · Answer

@Hoa Nguyen

It will go to heirs, for you - you continue to make payments to borrower even if deceased until probate is filed or you get official notice

One thing I see lately is contract for deeds people have not recorded and if lender disappears and it’s not recorded it can lead to problems

What happens if Seller dies before Owner financing term ends

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