How can I make sure my agreement clearly states that seller expenses will be deducted from the sale proceeds rather than paid out of pocket? – North Carolina

Short Answer

In North Carolina, you can do this by writing into your agreement that all seller-side items (taxes, liens, special assessments, and mortgage payoffs) will be paid by the settlement agent directly from the sale proceeds at closing. State that the seller has no duty to bring cash to cover those items unless the net proceeds are insufficient, and authorize the closing attorney to obtain payoffs and disburse from the purchase price. Disbursement occurs only after recording and receipt of collected funds under the Good Funds rules.

Understanding the Problem

You’re selling North Carolina real estate and want your settlement agreement to say clearly that seller expenses will be taken out of the sale proceeds at closing, not paid out of your pocket. You also have to pay a fixed sum to other parties within a set period, with those funds held in trust until closing, and you plan to include a mutual release tied to the sale price.

Apply the Law

North Carolina closings run through a settlement agent (usually a closing attorney) who holds money in a trust account and disburses only after the deed (and any deed of trust) is recorded and funds are collected. Your agreement can allocate costs and direct the settlement agent to satisfy seller obligations from the gross purchase price before any proceeds are paid out to you. To avoid ambiguity, the agreement should say the seller has no obligation to pay those items out of pocket unless the net proceeds are insufficient, and it should include escrow/trust instructions for any fixed-sum payment to ensure those dollars are applied at closing.

Key Requirements

• Clear allocation: State that seller taxes, liens, special assessments, and mortgage/payoff amounts will be satisfied from the sale proceeds at closing.
• Authority to disburse: Give the settlement agent written authority to obtain payoff statements and pay them from the seller’s side of the settlement statement before releasing proceeds.
• Funding source: Specify that any fixed sum due under the settlement is funded first from the purchase price and held in the attorney trust account pending closing.
• Shortfall plan: Address what happens if proceeds are insufficient (for example, the seller pays only the difference by a stated date or the parties renegotiate or terminate).
• Closing conditions: Confirm that disbursement occurs only after recording and receipt of collected funds, consistent with North Carolina’s “Good Funds” rules.

What the Statutes Say

• N.C. Gen. Stat. § 45A-4 (Good Funds Settlement Act – Disbursement) – Settlement agents disburse only against collected funds.
• N.C. Gen. Stat. § 47-18 (Recording – Connor Act) – Recording protects transfers; closings customarily disburse after recordation.

Analysis

Apply the Rule to the Facts: Your contract already says the buyer pays closing costs and the seller’s taxes, liens, assessments, and mortgages are deducted from proceeds. Mirror that in the settlement agreement and add an explicit disbursement instruction directing the closing attorney to pay those items from the sale proceeds before any funds go to you. For the fixed sum due to other parties, state that it will be funded from the purchase price, held in trust, and disbursed at closing; add a shortfall clause if proceeds won’t cover the full amount. Tie the mutual release to the completion of these disbursements at closing.

Process & Timing

1. Who files: The seller (through counsel). Where: Private agreement plus written instructions to the settlement agent/closing attorney in North Carolina. What: A settlement agreement with a “Proceeds-Deduction and Payoff Authorization,” escrow/trust instructions for any fixed sum, and a release. When: Before closing; deposit any required escrow into the attorney trust account by the deadline stated in the agreement.
2. The closing attorney obtains payoff letters, prepares the settlement statement showing seller debits paid from proceeds, records the deed (and any deed of trust), and disburses after funds are collected; timeframes can vary by county and lender.
3. Final deliverables include a recorded deed, lien satisfactions/releases, and a final settlement statement reflecting that seller expenses were paid from the sale proceeds.

Exceptions & Pitfalls

• Insufficient proceeds: If the net price won’t cover liens, taxes, assessments, and the fixed sum, your agreement must say how to handle the shortfall.
• Expired payoffs: Payoff statements expire; require updated payoffs and allow the settlement agent to adjust disbursements accordingly.
• Mismatched paperwork: Ensure the settlement agreement, payoff authorization, and settlement statement all say the same thing about proceeds funding.
• Trust/escrow terms: State when escrowed funds can be released (for example, upon recording) and what happens if closing fails.
• Release scope: Make the mutual release specific to price and closing-related claims to prevent later disputes.

Talk to a Real Estate Attorney

If youre finalizing a property sale and want airtight language that seller expenses come from the purchase price, our firm has experienced attorneys who can help you understand your options and timelines. 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.