Dec182025
Real Estate Q&A Series

What is a directive for disbursement of real estate funds and why is it required at closing? – North Carolina

Short Answer

In North Carolina, a directive for disbursement is a written set of instructions that tells the closing attorney (the settlement agent) exactly who gets paid from the money held for the closing, how much, and when. It is required because the settlement agent holds closing money in a trust or escrow account and must disburse it only as approved by the parties as part of the settlement agreement. It also helps prevent mistakes and reduces the risk of wire and payoff fraud by creating a clear, signed authorization for each outgoing payment.

Understanding the Problem

In a North Carolina real estate closing, can the closing attorney disburse sale proceeds, lender funds, payoffs, and other charges without a clear written directive that identifies each payee and the amounts to be paid? The issue usually comes up right before closing, when the settlement agent is preparing to send wires and checks and needs confirmation that the money will be released exactly as the parties agreed. The question also often includes how the directive must be delivered to the law firm and what format is acceptable for the file and for disbursement approval.

Apply the Law

North Carolina generally treats the closing attorney as the “settlement agent” who receives and holds “closing funds” in a trust or escrow account and then disburses them according to the parties’ approved settlement terms. State law requires the settlement agent to handle and disburse those funds in a fiduciary capacity and to pay the funds to the parties or entities identified for payment under the settlement agreement. North Carolina’s “good funds” rules also restrict when the settlement agent may disburse, including limits on disbursing before proper deposits and recording steps are completed.

Key Requirements

  • Clear payee-and-amount instructions: The directive should identify each payee (for example, a lienholder payoff, HOA, brokers, taxing authority, seller, or contractor) and the amount and method of payment so the settlement agent can disburse consistently with the settlement agreement.
  • Approval by the parties to the transaction: The disbursement plan must match what the parties have agreed to at closing (often reflected in the signed settlement statement and related closing documents).
  • Proper timing and handling of trust funds: The settlement agent must follow North Carolina’s rules on when funds can be released (including “good funds” restrictions and recording-related sequencing) and must disburse only from the settlement agent’s trust or escrow account when allowed.

What the Statutes Say

Analysis

Apply the Rule to the Facts: Here, a law firm handling a North Carolina closing asked for a directive for disbursement before sending out money. That request fits the settlement agent’s duty to disburse trust/escrow closing funds only to the correct payees and in the correct amounts under the approved settlement terms. Because the directive helps confirm the exact payoff and wire/check instructions before funds leave the trust account, it also serves as a practical safeguard against last-minute changes and misdirected payments.

Process & Timing

  1. Who files: Usually the seller (for seller proceeds) and sometimes the buyer/borrower (if the buyer is bringing funds or directing a specific payment). Where: Delivered to the closing attorney/settlement agent handling the closing in North Carolina. What: The settlement agent’s “Directive for Disbursement” (often provided as a firm form) and, in many closings, a signed settlement statement showing the same payees and amounts. When: Typically before the settlement agent sends any wires/checks, and often requested 1–3 business days before closing so the settlement agent can confirm payoffs and reduce last-minute changes.
  2. Verification step: The settlement agent compares the directive to the settlement statement, payoff statements, and lender instructions, and then confirms that the funds meet “good funds” requirements and that recording-related steps are satisfied before releasing non-recording disbursements.
  3. Disbursement: After conditions for disbursement are met, the settlement agent releases funds to the identified payees and produces a final closing package showing the disbursements.

Exceptions & Pitfalls

  • Changing wire instructions at the last minute: A late change to payoff or seller-proceeds wiring is a common fraud tactic. Many settlement agents require verbal confirmation using a known phone number and may reject instructions sent only by email or text.
  • Mismatch between the directive and the settlement statement: If the directive lists a different payee, different amount, or different account details than the closing documents, the settlement agent will usually pause disbursement until the discrepancy is corrected and approved.
  • Delivery format issues: A scanned PDF is commonly acceptable for review, but some settlement agents require an original (“wet”) signature or use secure portals/e-sign tools for final authorization. Email and text can be high-risk channels for payment instructions; the settlement agent may require secure delivery or independent confirmation before using them.
  • Good funds timing: If the buyer’s funds arrive by a method that does not qualify for immediate disbursement under the statute, disbursement may wait until the deposit becomes collected funds.

Conclusion

A directive for disbursement is a written authorization that tells the North Carolina closing attorney (as settlement agent) exactly how to disburse closing funds from the trust/escrow account under the parties’ approved settlement terms. It is required in practice because the settlement agent must send money only to the correct payees, in the correct amounts, and only when “good funds” and recording-related conditions allow disbursement. The next step is to deliver the signed directive to the settlement agent before disbursement, ideally at least 1–3 business days before closing.

Talk to a Real Estate Attorney

If you’re dealing with a North Carolina closing and were asked to sign or submit a directive for disbursement, our firm has experienced attorneys who can help explain what the form covers, how to deliver it safely, and what timelines apply before funds can be released. Call us today at (919) 341-7055.

Disclaimer: This article provides general information about North Carolina law based on the single question stated above. It is not legal advice for your specific situation and does not create an attorney-client relationship. Laws, procedures, and local practice can change and may vary by county. If you have a deadline, act promptly and speak with a licensed North Carolina attorney.

Category: Real Estate Q&A Series

Author: jpierce

Attorney Jared Pierce is the founder of Pierce Law Group in Raleigh, North Carolina, a firm he established with a dedicated focus on probate administration and estate planning across North Carolina. Born and raised in the Republic of South Africa, Jared moved to Durham with his family in 2001, bringing with him a rich cultural background and a distinctive accent that often serves as a conversation starter.