Jan252026
Real Estate Q&A Series

How do we split the proceeds from a house sale when there’s a written loan agreement tied to the property? – North Carolina

Short Answer

In North Carolina, co-owners usually split net sale proceeds based on the ownership shares shown in the deed, but the closing statement can also reflect valid liens and court-ordered credits. A written “loan/investment agreement” only changes the split automatically if it is enforceable and, in many cases, properly documented as a lien (for example, a recorded deed of trust) or reduced to a court order that can be paid from the proceeds. If co-owners cannot agree, a partition sale case can let the court determine credits (like taxes, insurance, repairs, and some improvements) and then distribute the proceeds accordingly.

Understanding the Problem

In North Carolina, when co-owners sell a jointly owned house and one co-owner claims a larger share because of a prior written loan or investment agreement tied to the property, the key question is whether that agreement must be paid out of the sale proceeds before the co-owners split the remaining equity. The decision point is whether the written agreement functions like an enforceable debt against the property (or against the other co-owners) that can be satisfied at closing, or whether it is a private side agreement that requires separate proof, negotiation, or a court order to affect the split.

Apply the Law

North Carolina starts with the ownership interests shown in the recorded deed. From there, the law recognizes that certain payments and benefits among co-owners can be “trued up” through contribution, reimbursement, and accounting—often in a partition proceeding—so the final distribution reflects both (1) title ownership and (2) legitimate credits and charges. A separate written loan agreement may be paid from sale proceeds if it is treated as a lien (commonly by being recorded) or if the parties sign closing instructions that direct payment; otherwise, the party claiming repayment may need to pursue a court determination.

Key Requirements

  • Start with the deed: The baseline split is the ownership percentages shown on the deed (for example, 50/50 or 1/3 each), after paying normal closing costs and any recorded liens.
  • Identify what must be paid at closing: Recorded liens and encumbrances that attach to the property generally must be paid or otherwise resolved to deliver marketable title.
  • Account for co-owner credits and charges: North Carolina allows contribution/reimbursement for certain carrying costs (like taxes, insurance, necessary repairs, and some loan payments to acquire the property) and may allow a credit for improvements, typically limited to the lesser of cost or value added, depending on the setting and proof.

What the Statutes Say

Analysis

Apply the Rule to the Facts: Here, co-owners want to sell, but they disagree about whether a prior written loan/investment agreement with one co-owner changes the split. Under North Carolina practice, the starting point is the deed’s ownership shares, but the claimed “loan” may still affect distribution if it is (a) a recorded lien that must be satisfied to convey title, or (b) a provable co-owner credit that a court would recognize (often in partition) and order paid from the proceeds. If the agreement is only a private writing and not recorded or otherwise clearly payable at closing, the co-owners often need either a signed settlement/closing direction or a court order to avoid a disputed distribution.

Process & Timing

  1. Who gathers the documents: Any co-owner (often through counsel). Where: the county Register of Deeds where the property is located (for the deed and any recorded liens) and the closing file/title work. What: deed showing ownership shares, the written loan/investment agreement, proof of payments (taxes, insurance, repairs, mortgage/loan payments), and any rent records.
  2. Try to resolve at closing (if possible): If all co-owners agree in writing, the closing attorney can often disburse proceeds according to that agreement, including paying one co-owner back first. If there is no unanimous written direction and the “loan” is not a recorded lien, the closing attorney may not be able to safely pay it out of proceeds without risking a dispute.
  3. If there is no agreement, use court process: A partition proceeding (typically filed as a special proceeding with the Clerk of Superior Court in the county where the land sits) can result in a sale and a court-supervised distribution that includes contribution/reimbursement claims under North Carolina’s partition statutes. The court can also address accounting issues tied to rents/profits and certain expense credits.

Exceptions & Pitfalls

  • “Written loan agreement” does not always equal “lien”: If the agreement was never recorded as a deed of trust or other lien instrument, it may not be something a closing can automatically pay from sale proceeds without everyone’s written consent or a court order.
  • Proof problems: Contribution and reimbursement claims usually rise or fall on documentation (cancelled checks, bank records, invoices, insurance declarations, tax receipts) and a clear timeline of who paid what and when.
  • Improvements are not always reimbursed dollar-for-dollar: In partition-related contribution, improvement credits are commonly limited (often to the lesser of cost or value added) and may require evidence of value added as of the start of the proceeding.
  • Exclusive possession can change credits: Some reimbursement rules treat expenses differently when one co-owner had exclusive possession during the period the expenses were paid.
  • Recording and priority issues: Even a valid agreement can lose practical leverage if it was not recorded and a third-party lien or purchaser is involved, which is why recording rules and lien priority matter.

For more background on how proceeds are typically handled in a court-ordered sale, see how a partition sale process works and how proceeds are divided and how equity division and expense credits are handled in partition.

Conclusion

In North Carolina, sale proceeds usually follow the ownership shares on the deed, but valid liens and legally recognized co-owner credits can change the final distribution. A written loan/investment agreement affects the split most cleanly when it is documented as a lien that can be paid at closing or when a court orders it paid from the proceeds. If co-owners cannot agree, the next step is typically to file a partition proceeding with the Clerk of Superior Court in the county where the property is located and assert any contribution/reimbursement claims during that case.

Talk to a Real Estate Attorney

If there’s a disagreement about splitting house sale proceeds because of a prior written loan or investment agreement, a real estate attorney can help sort out title, lien status, and what credits can be claimed (and proven) under North Carolina law. 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: Pierce Law

Pierce Law Group is a North Carolina law firm focused on probate administration, real estate partition matters, and surplus funds claims across North Carolina. We know these situations often come with stress, family dynamics, and time-sensitive decisions—so we prioritize clear communication, steady guidance, and a practical plan from day one. Our goal is to make a complicated process feel manageable, while protecting what matters most to you.