The ins and outs of Estate Sale Contracts: A Complete Guide

What is an Estate Sale Contract?

An estate sale agreement is a legally binding document that serves the purpose of transferring the ownership of property from an estate to a buyer. This type of agreement is most often used when the property is being sold by an estate, usually conceptualized as a sale that is the result of a court order to do so either before or after the actual sale takes place. The estate may be selling the property to pay off debts, solve any distribution problems or simply just get rid of properties that are no longer needed by the estate.
In a general sense, this type of agreement is simply a real estate contract that includes a few additional particulars that address the unique situation of an estate sale, and insures that all legalities are dealt with.
Typically, an estate sale agreement will include the basic information of a real estate contract, including things like parties, description of subject property, price and closing date. However, these basic clauses will generally need to be expanded, and if there are two or more dates involved, for instance, all of them need to be addressed . There may be a date for sale, a date for preparing the documents and a date for signing the documents.
In addition, the agreement needs to have something regarding the order which gave the order to sell the property. This may not seem like a necessity, but it’s important in order to protect all involved from unexpected losses that can occur if a new heir comes forward after the sale (since the new heir will likely not have a share of the estate to receive). It also protects the buyer, in case the seller does not adequately meet the requirements for the sale when it comes to documents and other preparation. This includes a clause that protects the buyer from damage to the property that occurs between the time of signing and a later closing date.
In most estate sale cases, an estate sale agreement is a necessary document in the transactions that occur among the estate and buyers, and it helps to ensure that both parties are protected during the process.

Essential Components of an Estate Sale Contract

The estate sale contract is a legal agreement introduced by the liquidator or seller to be signed by the customer. It’ll list the items included in the pending sale, the properties available, and important terms & conditions for both parties.
This document is important as it’s used to safeguard both the customer(s) involved and the liquidator. It will also help establish your business as reputable. A good contract protects you from being taken advantage of by your client(s), and also shields you from potential lawsuits.
The following are some critical details that should be included in estate sale agreements:
Identifying Parties
This is where the information of the owners of the items is identified, as well as the owners of the property. The purpose of first identifying the sellers is, of course, so as to identify who exactly you’re making the sale with. The purpose of identifying all owners of a property you’re working with is to protect you as the liquidator. It protects you from lawsuits. For example, if you only had a contract with a spouse, and the other spouse wasn’t a part of the agreement. If the property were sold, and the non-included spouse was unhappy with the agreed price, they could sue you and claim that the sale was invalid.
Estate Sale Contract Identifier
The contract also identifies the property to be sold, as well as the company that is conducting the sale, and the location of the sale itself. So the sale will be taking place at the property owner’s house, which may now be yours. The contract identifier will also contain the date of the sale, and give enough time for customers to have ample time to prepare.
Property List
The contract will also have a list of the items that are included in the sale. Items not on the list are not included in the transaction and the property owner will be able to retain ownership.
Sale Price
Once the parties are identified, and the items for sale are listed, the accepted overall price will be given in the estate sale contract. The liquidator will likely use pricing guides, current internet research, and physical descriptions to determine the value of the items. This list will future details on how the items were understood to be purchased. I.e. that this is the total cost, including sales tax, the costs of delivery, and the costs of credit card expenses.
Sale Terms
It will likely include the types of terms for the sale. The sale terms will include: The means of payment that is acceptable (cash, check, debit, credit card, etc.), as well as whether or not the items can be sold for a certain amount and any other items that might be considered credit.
You may also consider including the following terms:
For many reasons, estate sales agreements are important when it comes to estate sales.

Legal Requirements and Factors to Consider

Like most contracts, an estate sale agreement establishes the legal duties and responsibilities of each party according to a set of terms. All of these requirements must be fulfilled for a sale to be legally binding. Any missing terms in the agreement may result in a dispute that could have otherwise been easily prevented through more comprehensive documentation.
The first requirement for an estate sale agreement is that it be written. Verbal agreements are not sufficiently legally binding. The agreement should further be signed by both parties to confirm acceptance of its terms. In the case of an estate sale agent, a written signature may not be required for a legally binding contract to occur. The terms of an offer and the estate sale agent’s acceptance may be clearly recorded over the phone via an audio recording. Absent the establishment of a legally binding contract, the real estate agent cannot be held liable for any loss or claim resulting from a caveat denying the estate sale agent’s rights to commission.
Necessary components of a legally binding estate sale agreement include:
All of the details listed above may not be necessary in an agency agreement made between two real estate agents to jointly sell a property through an estate sale. In such cases, the duties and responsibilities of the seller and the real estate agent would apply equally if an agreement were entered into by either agent.

How to Create an Effective Estate Sale Contract

To ensure clarity and enforceability, an estate sale agreement should be comprehensive and include terms that establish a clear understanding between the parties. Typical provisions in an estate sale agreement include:
Purchase Price
A provision to address the purchase price, including how the price is to be paid (i.e., lump sum, over time, etc.). If a down payment is involved, when will it be paid? And, if the payment is in installments, what happens if one of the parties fails to pay?
Financing
A provision to address whether the buyer will be receiving financing to purchase the property. For example, if so, does the seller have to wait until the buyer can obtain the financing?
Contingencies
A provision to include contingencies, such as whether the sale is subject to the buyer obtaining a loan or will the buyer have to pay cash? Additionally, is the buyer’s obligation to close the sale or buy the property dependent on the sale or purchase of another property? Alternatively, is the sale contingent upon the sale or purchase of another property?
Closing
Address how and when the closing will occur. In addition, include whether the buyer will receive any prorated taxes (i.e. , water, sewer and any income at closing).
In addition, include how any funds will be handled through escrow, if applicable. Leases should also be addressed in the agreement establishing the disposition of any leases. Do any estate leases stay in place after the sale? Were security deposits paid? If so, who receives them at closing?
Conveyance
Draft the purchase agreement to ensure that the estate will convey good and marketable title to the buyer. In addition, to appropriately address judgment liens or interests in real property.
Disputes
Include a mechanism for resolving disputes. For example, do the parties want to include a mediation clause?
Additional documentation
In the sale of an estate with a larger asset base, additional documentation may be necessary, such as an Affidavit of Personal Representative or Certificate of Trust. In addition, it may be helpful to obtain title insurance.
By including any of these provisions in your written estate sale agreement, you will ensure a clear and enforceable understanding of the sale.
State law regarding real estate contracts varies. Please consult an attorney for guidance.

Common Pitfalls and How to Avoid Them

A primary hurdle in estate sale agreements is often the misunderstanding of precisely what property is covered under a "household goods" clause and what must be provided to the buyer as part of the sale. The fundamental issue is what is a "household" good? Must the seller justify the value of the household good to be deducted from the purchase price? For example, if the seller decides to keep the couch, which has a value of $300, and the buyer wants to deduct that amount from the purchase price, does the seller have to prove that the couch is worth $300, or can the seller simply claim the couch as a household good?
The first step to determine whether something qualifies as a "household" good is to review the remainder of the sales agreement to see if the bargain is for the entire house and its contents. If so, then generally household goods are permitted to be removed without adjustment of the purchase price. However, if the sales contract lists out the seller’s personal property in a Schedule A or provides a specific number of square feet of personal property, then the household goods language in the sales agreement may not be broad enough to give a seller the benefit of ripping out the microwave and the dining room chandelier without some sort of reduction in purchase price.
Another hurdle is determining whether the payment is "due at closing" or subject to an "as-is" risk of loss. A classic example of this is the earnest money deposit. Most contracts take the form of earnest money agreements where the buyer pays a portion of the purchase price as a deposit and the balance is due at closing. Any failure by the buyer to present this payment is grounds for termination of the contract. However, in other contracts, the earnest money is considered earned by the seller even if never made to the seller. In these transactions, the buyer assumes the risk that the deposit money was paid to the Seller or held in trust.
Another example of the risk of loss occurs in "as-is" transactions. It is a common mistake to incorrectly draft an "as-is" "where-is" transaction to require payment at closing. For example, instead of the buyer transferring the entire purchase price, the seller receives the balance due "subject to adjustment of any expenses" such as taxes. In these cases, if the house is destroyed before closing, the buyer could theoretically argue the transaction is void and the buyer should not have to pay at closing. But the buyer will certainly be forced into the agreement to pay the full purchase price in the case where the property is damaged after the sale. To avoid this ambiguity, a comprehensive review of the contract is warranted prior to executing the agreement.

FAQs on Estate Sale Contracts

We have compiled a list of the common questions we get and have answered them below.
Should I ever sell property without a written agreement and any detailed description of the property being sold? No. No reputable estate sale company should ever sell someone’s property or your own personal property without a written agreement and a detailed description of the property being sold and the agreed upon compensation. At the minimum you don’t want to do business with a company that did not have an agreement. I would take that entire transaction as red flag because it leaves a lot of room for miscommunication and mistakes. Bottom line it’s not good business practice.
I’ve heard stories of people going to an estate sale and buying an item that had previously belonged to a deceased loved one and the estate sale company does not have the item or doesn’t know the half of it. Is this legal? An estate sale company is essentially a third party who is hired to liquidate property on behalf of the estate or family members of a deceased relative. All it means is that, whoever hired the estate sale company (the client), believes that the estate sale company will conduct the sale properly and keep them informed every step of the way. The estate sale company is legally obliged by their contract to do so. How transparent they are about their progress will be directly related to your level of communication with them and how much they feel you want to be in "the loop . " Communication, communication – that’s the key! It can be very nerve-racking when you don’t have all the information you need, but we can tell you no matter who’s estate sale it is the company will not knowingly sell you something that you think belonged to your loved one, if they know it belonged to your loved one, even if they do not know that it was not the deceased’s original furniture and belongings. That’s just good business practice.
What I am comfortable selling at my estate sale? This is entirely up to you. This is such a personal decision and there is no right or wrong answer. We have guidelines that our clients sign off on regarding the property that is to be included in the sale.
Are estate sales in bad taste? Estate sales partly involve selling your loved one’s belongings. It’s grueling work and can become a very emotional process when it’s not conducted well. So yes, some people think estate sales are in bad taste. And we say well I’m sorry your loved one’s belongings were sold by someone who did not care or treat your loved one with respect. Estate sales are not for everyone, but we will say this – it’s a great way to honor your loved one’s memory by giving property a second chance as other peoples’ property. We suggest to our clients that they can never go wrong by considering an estate sale. It’s a good option for your loved one’s remembrance.