Selling a house in North Carolina: excise tax, disclosure forms and the clerk's hearing

Selling a house in North Carolina costs the seller an excise tax of $1 for every $500 of the price, paid to the register of deeds before the deed is recorded, which is $700 on a $350,000 sale. State law also makes you hand the buyer two disclosure statements, not one, no later than the time the buyer makes an offer. If the house is in foreclosure, North Carolina runs the sale through a hearing before the clerk of superior court, and the bidding stays open for 10 days after the sale, which changes the calendar you are working against.

The excise tax, and the seven counties that add to it

G.S. 105-228.30 imposes an excise tax on each instrument conveying an interest in real property at the rate of $1 on each $500, or fractional part of $500, of the consideration or value of the interest conveyed. The statute puts the tax on the transferor, who pays the register of deeds of the county where the property sits before the instrument is recorded. Where a parcel lies in two counties, the tax goes to the county holding the greater part by value. Half the proceeds stay with the county and half goes to the Department of Revenue.

Seven northeastern counties, Camden, Chowan, Currituck, Dare, Pasquotank, Perquimans and Washington, hold local authority for a land transfer tax on top of the state excise tax. The local rate is capped at $1 per $100 of the consideration or value, which is one percent, and the General Assembly granted it by local act rather than in the general statute. If your house is in one of those counties, check the county’s own rate before you build a net sheet, because one percent on a $400,000 sale is $4,000 the state rate does not predict.

Two disclosure statements, not one

The Residential Property and Owners’ Association Disclosure Statement

G.S. 47E-4 sets what the statement covers: the water supply and sewage disposal system; the roof, chimneys, floors, foundation, basement and other structural components; the plumbing, electrical, heating, cooling and other mechanical systems; present infestation of wood-destroying insects or past infestation whose damage is unrepaired; zoning laws, restrictive covenants, building codes and other land-use restrictions; and the presence of lead-based paint, asbestos, radon, methane, an underground storage tank, or hazardous or toxic material.

For each item you have a choice the statute gives you: disclose what you have actual knowledge of, or state that you make no representations. Answering “no representation” is allowed on the form and it is not a way to bury something you know about, since a misrepresentation is a different claim from a missing form.

The mineral and oil and gas rights statement

G.S. 47E-4.1 requires a separate mandatory disclosure, conspicuous and in boldface, about mineral rights and oil and gas rights. Those rights can be severed from the surface title by an earlier deed or reservation, and whoever holds them may have a perpetual right to drill, mine, explore and remove the resources. The statute lets the owner make no representation only as to a previous severance.

Timing, and the buyer’s three days

G.S. 47E-5 requires delivery no later than the time the purchaser makes an offer. Deliver late and the purchaser may cancel the contract without penalty and get the deposit back, a right that expires at the earliest of the end of the third calendar day after the purchaser receives the statement, the end of the third calendar day after the contract was made, settlement, or occupancy. Handing the forms over at the start is cheaper than handing a buyer a cancellation right in week three.

Sales the act exempts

G.S. 47E-2 exempts transfers ordered by a court, including in the administration of an estate; transfers to a deed of trust beneficiary where the debt is in default; transfers by a fiduciary administering an estate, guardianship, conservatorship or trust; transfers among co-owners; transfers to a spouse or a lineal relative; transfers between spouses from a divorce decree or an equitable distribution; transfers for unpaid taxes; and transfers to or from the State or a subdivision. A separate subsection covers first sales of a never-occupied dwelling and lease-purchase arrangements.

Power of sale foreclosure runs through the clerk

North Carolina does not hand the trustee a free run at the sale. On a home loan, the servicer must first mail the borrower a pre-foreclosure notice at least 45 days before filing the notice of hearing, listing the past due amounts, the other charges, the options besides foreclosure, and HUD-approved counseling agencies in North Carolina.

The trustee then files a notice of hearing with the clerk of superior court. G.S. 45-21.16 requires service at least 10 days before the hearing and requires the clerk to find a valid debt held by the party seeking to foreclose, a default, a right to foreclose under the instrument, and notice to those entitled to it. The clerk’s act is a judicial act, and either side may appeal it within 10 days, heard de novo.

After authorization, G.S. 45-21.17 requires the notice of sale to be posted at the courthouse for at least 20 days before the sale and published once a week for at least two successive weeks, with the last publication no more than 10 days before the sale. After the sale, G.S. 45-21.27 keeps the bidding open: an upset bid may be filed by the close of business on the tenth day after the report of sale or the last upset bid, and each new bid starts another 10 days.

What still stops it

G.S. 45-21.20 terminates the power of sale when payment of the secured obligation and the expenses of the sale is made or tendered before the time fixed for the sale, or before the upset bid period expires after a sale or resale. Separately, G.S. 53-244.111(21) makes it a prohibited act for a mortgage servicer to refuse to reinstate a delinquent loan on a timely tender sufficient to pay all past due amounts and overdue charges, though a borrower gets that no more than twice in any 24-month period.

Selling before the sale works the same way it does anywhere: the closing pays the loan from the proceeds and the foreclosure ends, provided the house is worth more than the payoff plus the cost of selling.

If the sale brings less than the debt

G.S. 45-21.36 gives the borrower a defense against a deficiency judgment: showing that the property was fairly worth the amount of the debt at the time and place of sale, or that the amount bid was substantially less than its true value, defeats or offsets the deficiency in whole or in part. The price at the sale is worth caring about even when you are losing the house.

Running your own numbers

Start the net sheet with the price, subtract the excise tax at $1 per $500, any local land transfer tax if you are in one of the seven counties, the loan payoff, the attorney and title charges, the property tax proration and any agreed repairs. Our cash offer vs listing page compares the two routes with the carrying months included, and how we calculate an offer shows the subtraction behind a cash number. We buy across North Carolina as well as Tennessee, for our own account, and we may assign the purchase contract to another buyer, disclosed in writing before you sign.

This is general information, not legal or tax advice. Talk to a North Carolina attorney or CPA about your situation.