Services for Real Estate Pros with Brady & Kosofsky, PA

AH! ANOTHER UNHAPPY AND MISINFORMED SELLER-------------------------- you gotta love it....


This is perhaps the biggest idiosyncrasy of North Carolina Law. This sets the state apart from almost all other states. This subject also gets me yelled at by sellers and buyers more than anything else I do.... And I HATE BEING YELLED AT!!!!!!!!!



Good Funds Settlement Act, RPC 191 and Requirement of a "First Lien"

The ethical obligations of the attorney, IN MANDATORY CHRONOLOGICAL ORDER, have been long-established and must repeated as follows:

1. To receive "good funds";

2. To update the title to assure "first lien" status and record the documents, pursuant to implied or express representation agreements of clients (seller, buyer, lender) and title insurers;

3. Then, and only then, to disburse all proceeds.

Title must be updated and documents recorded immediately! N.C.G.S. 47-18 and 47-20 provide protection against the rights and claims of third parties as well as parties to the transaction by recordation of instruments vesting title in bona fide purchasers for value.

Chapter 45A of the North Carolina General Statutes, known as the "Good Funds Settlement Act" was enacted effective October 1, 1996, revised effective July 1, 2002 , to cover all closings of "real estate transactions involving a one- to four family dwelling or lot restricted to residential use," no matter by whom closed and disbursed. The key provisions of the statute are set forth below:

§ 45A-4. Duty of settlement agent. The settlement agent shall cause recordation of the deed, if any, the deed of trust or mortgage, or other loan documents required to be recorded at settlement. The settlement agent shall not disburse any of the closing funds prior to the recordation of any deeds or loan documents required to be filed by the lender, if applicable, and verification that the closing funds used to fund disbursement are deposited in the settlement agent's trust or escrow account in one or more forms prescribed by this Chapter. Unless otherwise provided in this Chapter, a settlement agent shall not cause a disbursement of settlement proceeds unless those settlement proceeds are collected funds. Notwithstanding that a deposit made by a settlement agent to its trust or escrow account does not constitute collected funds, the settlement agent may cause a disbursement of settlement proceeds from its trust or escrow account in reliance on that deposit if the deposit is in one or more of the statutorily prescribed forms.


In NC the closing is defined by the Contract as the time when the Deed is recorded. The contract also states that the risk of loss is on the Seller until Closing.... So.. when people sit around the table, that is the "Settlement". Ownership does not pass until the deed is recorded. This leads to some tense moments during and after a Settlement, especially when people are moving here from another state which defines Closing as the delivery of the Deed.


The risk of loss, good funds settlement act, and the Contract make my life as a closing attorney very interesting....  In my home County of Mecklenburg where I do most of my work, the Realtors have established the custom of allowing the buyers to move in before Closing.... This is not always a good thing. If I had a dollar for everytime I heard, "Why in the hell did YOU let the buyers move into my House before I get my money" . . .  being a politically correct attorney I fall on the sword, and explain we are doing everything we can..... I do not tell them that the listing agent should have not given the keys to the buyers. I also have a document signed at the table explaining this ideosyncracy.


Three years ago I wrote an addendum to the contract that is to be signed at the time of execution which indicates whether the seller will give possession at Settlement... GO TO MY WEBSITE, http://www.carolinareo.net/ download it and use it!!!! This will let everyone know what the rules are, and if the seller releases keys early, it is their own problem....


In this day when Banks and Brokers fail daily, or we are doing an REO or short sale, I strongly discourage allowing possession before closing... I have had too many loans not fund after execution, or short sales not get completed.... I always try to suggest, that possession before closing is NOT A GOOD IDEA.... IN THE CASE OF A SHORT SALE OR REO, I WILL NOT ALLOW POSSESSION TO PASS UNTIL RECORDING.....


Jaime A. Kosofsky, Attorney


3065B Senna Drive

Matthews, NC  28105

Phone - 704.849.8008  x 228

Fax - 704.849-8009



Licensed in North Carolina, South Carolina, and West Virginia


Comments (5)

Susan Haughton
Long and Foster REALTORS (703) 470-4545 - Alexandria, VA
Susan & Mindy Team...Honesty. Integrity. Results.
I enjoyed this post...LOL...five years ago we bought a beach house on the Outer Banks of NC.  We had never ending issues with the lender (the loan officer was fired just before our closing, we found out later), but we showed up for settlement, signed all the paperwork and were given the keys to the house.  We found out later the funds didn't arrive for 3 days after that!  Never did figure out how that happened, but I do occasionally think about it and think, "wow, we dodged a bullet."  It was a Friday afternoon and we had come from out of town...may have been staying in a hotel for a few days if things had not gone the way they did. 
Mar 13, 2008 12:52 PM
Eric Reid
Renaissance Realty Group of Keller Williams Atlanta Partners - Lawrenceville, GA

THANK YOU .. I am a bit of a law junkie I love learning how Real Estate is done in other states. This is interesting.. we sign the deed at closing. And keys go across the table only after the closing attorney has passed out funds to all.

Mar 13, 2008 02:34 PM
Karen Hurst
Rhode Island Waterfront!
Pretty similar here, yet I still find myself explaining to everyone why the keys cannot be turned over on a Friday afternoon. It has to be both funded and recorded.
Mar 14, 2008 09:44 AM
Darleen McCullen
Raleigh, NC
Broker - Raleigh, NC Real Estate
Jaime ~ This is great information to have on-hand. I am not located in your area, but I will probably use this addendum here in Raleigh. Thanks so much for sharing with us!
Mar 15, 2008 03:20 AM
Tracy Williams Pender
Carolina MaxRealty, Inc. - Raleigh, NC
MBA, Knightdale & Raleigh, NC Real Estate
Good post Jamie.  I've never understood why we work like that either.  It can be so risky, especially in this day and time.  I'm going to consider using that addendum too. 
Mar 21, 2008 10:18 AM