Dec202025
Real Estate Q&A Series

What options keep my buyer in place while we resolve the lien, such as escrow or a holdback at closing? – North Carolina

Short Answer

In North Carolina, keeping a buyer in place while a lien issue gets resolved usually requires a written agreement that either (1) delays closing with clear deadlines or (2) closes on time but holds back enough money in the settlement agent’s escrow/trust account to cover the lien and related costs. Whether a holdback works depends on the buyer’s lender and the title insurer, because they often require liens to be cleared before they will fund or insure the sale. The safest “buyer-retention” tools are a contract addendum extending closing, a post-closing escrow (holdback) with strict release terms, or a negotiated payoff/bonding solution that clears title at closing.

Understanding the Problem

In North Carolina, can a seller keep a homebuyer under contract when a recorded lien clouds title and threatens the scheduled closing? Can the parties use an escrow or closing holdback so the deed can still be delivered while the lien gets corrected or terminated? The practical decision point is whether the buyer, the buyer’s lender, and the title insurer will accept a closing that leaves any lien issue unresolved, or whether the transaction must be extended until the public records clearly show the lien released.

Apply the Law

North Carolina closings typically run through a settlement agent (often a North Carolina attorney) who receives and disburses closing funds through a trust or escrow account under a written settlement agreement. The settlement agent must follow “good funds” and recording-before-disbursement rules, and must disburse funds only as authorized by the settlement instructions the parties approve. That framework makes a lien holdback possible in some deals, but only if everyone agrees in writing on what gets held, where it is held, and exactly when it gets released.

Key Requirements

  • Clear written settlement instructions: Any escrow/holdback needs a signed agreement that states the amount held, who controls it, what proof is required to release it, and what happens if the lien is not resolved by a set date.
  • Title and lender approval: Even with an escrow, many lenders and title insurers require lien clearance in the public record before they will close, fund, or insure. If they do allow a holdback, they usually require the holdback to fully cover the risk.
  • Proper handling of funds by the settlement agent: The settlement agent must keep closing funds in a trust/escrow account, confirm “good funds,” and generally record required documents before disbursing sale proceeds.

What the Statutes Say

Analysis

Apply the Rule to the Facts: The home is under contract, but a lien is blocking a clean title update, and the lienholder has suggested a UCC-3 termination that has not been successfully filed. A holdback escrow can keep the scheduled closing more realistic only if the buyer’s lender and the title insurer will accept coverage conditioned on the escrow terms, and only if the settlement agent receives written instructions for how to hold and release the funds. If the lender or title insurer will not accept any unresolved lien risk, the more reliable option is an extension addendum that keeps the buyer committed while the lien gets cleared in the public record.

Process & Timing

  1. Who files: The seller and buyer (through their real estate agents and closing attorney/settlement agent) sign a written addendum and/or escrow/holdback agreement. Where: The settlement agent’s office in the North Carolina county where the closing is conducted; lien releases or terminations are filed with the county Register of Deeds or other appropriate filing office depending on lien type. What: (i) Contract addendum extending closing and setting a lien-resolution deadline; and/or (ii) an escrow/holdback agreement that becomes part of the settlement instructions. When: Before closing if the deal is to close with a holdback; otherwise before the current closing date to avoid default disputes.
  2. Operate under the written instructions: If the transaction closes, the settlement agent receives “good funds,” records required instruments, and disburses proceeds per the settlement agreement, including holding back the agreed amount in the trust/escrow account until the lien is released or a deadline hits.
  3. Resolve and release: Once recordable proof shows the lien has been terminated/released (or another agreed cure occurs), the settlement agent releases the escrow funds as the instructions require, and the parties exchange any final documentation (like a written accounting if requested).

Exceptions & Pitfalls

  • Lender/title insurer refusal: A buyer paying cash may accept more risk than a financed buyer, but many financed closings will not proceed with any unresolved lien clouding title unless the title insurer and lender sign off on a specific holdback structure.
  • Holdback amount too small or vague: If the escrow does not clearly cover the lien payoff plus foreseeable recording/cure costs (and does not clearly define proof required to release funds), it may fail to protect either side and may still derail funding.
  • Wrong filing path for the “lien”: Not every title problem that is called a “lien” is actually fixed by a UCC-3. A mismatch between the lien type and the release method can cause repeated rejection and delay.
  • Unclear authority among co-owners: When siblings inherit and sell together, missing signatures, mismatched names, or unresolved estate/title administration issues can prevent recordable cure documents and can make an escrow solution impractical.
  • Informal side deals: Any promise to “pay later” outside the settlement agent’s written instructions can create disputes and may be rejected by the lender or title insurer.

Conclusion

In North Carolina, the main ways to keep a buyer in place while a lien gets resolved are (1) a written contract addendum extending closing with a clear lien-cure deadline or (2) a closing that uses a written post-closing escrow/holdback administered by the settlement agent under the settlement instructions. A holdback only works if the buyer’s lender and title insurer agree and the settlement agent can hold and disburse funds from a trust/escrow account consistent with the settlement agreement. Next step: sign a written addendum or escrow/holdback agreement before the current closing date.

Talk to a Real Estate Attorney

If a home sale is at risk because a lien has not been released and the buyer may walk, our firm has experienced attorneys who can help evaluate whether an extension, escrow/holdback, or another cure approach is realistic under North Carolina closing practices. 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.