In June 2022 the North Carolina Supreme Court handed down a decision that changed the math on walking away from a home purchase. Reynolds-Douglass v. Terhark held that the standard Offer to Purchase and Contract is an evidence of indebtedness under N.C.G.S. § 6-21.2. The result: when a buyer breaches, the seller who wins a suit to recover the earnest money deposit can also recover reasonable attorney’s fees under the contract.
What happened in Reynolds-Douglass v. Terhark?
The case started with a $250,000 contract in Wake County. The buyer signed the standard Offer to Purchase and Contract, agreeing to a $2,000 due diligence fee and a $2,500 additional earnest money deposit. Three days later she demanded a $5,500 price cut, never paid either fee, and the deal collapsed. The seller sued, won the due diligence fee in small claims, then amended to add the earnest money deposit and attorney’s fees. The trial court awarded $18,343.92 total, including $13,067.70 in attorney’s fees. The buyer appealed all the way to the state Supreme Court.
Why did the court call the contract an evidence of indebtedness?
North Carolina’s general rule is that each side pays its own attorney’s fees unless a statute says otherwise. N.C.G.S. § 6-21.2 creates an exception for notes, conditional sale contracts, and other evidence of indebtedness. The buyer argued a real estate purchase contract is not that kind of instrument. The Supreme Court disagreed, holding that an Offer to Purchase and Contract is a written instrument, signed by the parties, that on its face evidences a legally enforceable obligation to pay money. That is the test the Court set in a 1980 case, Stillwell Enterprises v. Interstate Equipment, and it applies here. The Court also confirmed the prevailing party can collect attorney’s fees for defending the judgment on appeal.
What did the dissent argue?
Two justices dissented. They argued the statute’s fee formula would cap attorney’s fees at 15 percent of the outstanding balance, which here would mean 15 percent of the $2,500 earnest money deposit, or $375, not the full $13,067.70 awarded. They also argued the statute was written for commercial transactions, not residential sales contracts. The majority rejected both points: nothing in the statute limits it to commercial deals, and the contract’s own language authorized reasonable attorney’s fees for the prevailing party.
How does this play out in Tyrrell County?
Tyrrell County is North Carolina’s least-populated county, around 3,000 residents, and Columbia is the only incorporated town. The market is thin, and many deals involve pocosin wetlands, conservation-restricted land, and property near the Alligator River and Pocosin Lakes refuges where flood zones and buildability are the real diligence questions. USDA 100 percent financing is available on eligible rural properties, and for many buyers it is the path that makes the purchase possible. With so few deals, closings are often handled by attorneys from neighboring counties, and every contract decision is heavier because there is less local precedent to lean on.
Where do Tyrrell County closings actually happen?
The offices that matter in a Tyrrell closing are small but specific. The NC Association of Registers of Deeds lists the county’s elected Register of Deeds in Columbia, and the office’s records are searchable online. Civil matters run through the Clerk of Superior Court at the courthouse in Columbia. Property tax bills can be paid online, by phone, by mail, or in person at the Tax Department, and the county publishes building-inspection permit fees. The county’s public parcel viewer pulls property inventory from recorded plats and deeds, a free way to check parcel boundaries during diligence.
A local example: Columbia
Picture a buyer who signs a contract on a riverside lot near Columbia, pays a $500 due diligence fee and a $1,500 earnest money deposit, then learns during diligence that the lot sits in a flood zone that makes the planned build impractical. The buyer walks after the diligence period. The due diligence fee is gone, and the seller keeps the deposit as liquidated damages. If the seller sues to recover the deposit, the 2022 ruling means the buyer can also owe reasonable attorney’s fees. In a county with as few closings as Tyrrell, the contract is the whole game.
The bottom line
Read the contract before you sign it, and know which fees are at risk if the deal falls through. The due diligence period is the time to do your inspections, your financing work, and your second-guessing. Once you let it expire and the contract is firm, walking away can cost you the deposit, the fees, and the other side’s legal bill on top.
If you are in a dispute over a contract, a North Carolina real estate attorney is the right person to talk to. This article explains what the court decided, not what any particular contract says, and every contract should be reviewed by a lawyer before you sign it.
