Can a Due Diligence Fee check be paid to only one of two sellers?

QUESTION: A listing of mine that’s owned by a couple recently went under contract. After they signed the offer, I emailed the signed contract to the buyer agent, and I explained to her that since the couple didn’t have a joint banking account, the Due Diligence Fee check should be made out to one of them individually. However, when she delivered the DDF check, it was made out to both sellers. I reminded her of our conversation, but she told me that her BIC insisted that the check had to be made out to everybody on the deed. I accepted the check and delivered it to my clients, but the individual seller’s bank won’t accept the check since one of the persons on the check isn’t on the account. When I requested a new check, the buyer agent refused, and stated that the sellers would have to open a joint bank account. Is that right? Does a DDF check have to name all persons on the deed?

ANSWER: There is nothing that requires a DDF check to be made to all people who have an ownership interest in the property; however, since the Offer to Purchase and Contract (Form 2-T) provides that the DDF will be “made payable and delivered to Seller,” the check should include all persons named as “Seller” in the contract unless the parties agree otherwise. Assuming the couple are both named as sellers, it was appropriate for the check to be made payable to both. Although you requested that it be made payable to only one of them, since that was not reflected in the contract itself, we don’t think the buyer would be in breach of contract if they refuse to make a new check to only one of the sellers. We don’t understand why the bank would not permit the account holder to deposit or cash the check if the other person endorses the check to the account holder, but if it won’t, your clients may have no choice but to establish a joint account so the check can be negotiated.

In hindsight, it would have been best for this issue to have been addressed in the contract. There isn’t currently a form in the NC REALTORS® forms library to handle a change of this nature, but in our opinion, it could be accomplished by simply striking the word “Seller” in paragraph 1(d) where it says “BY DUE DILIGENCE FEE made payable to Seller,” inserting the name of the person to whom the DDF will be paid, and having all parties initial and date the change. And, in addition to their initials on the contract, it would be a good idea for you to get something in writing from both your clients confirming that the arrangement is acceptable to them.

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