What Is Dry Closing And Why It Happens

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Caroline Soriano
April 08, 2024
5 minutes, 46 seconds
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Have you heard of the term "dry closing" before?

If yes, but you're not certain what it means or if it's your first time hearing it, then you're in the right place.

Dry closing is when all the papers are signed, and payment is sent, but the ownership transfer doesn't happen immediately because of an unfinished business. In simple terms, it's when a buyer and seller agree to close on a house before any money has been handed in. 

In this post, we'll discuss what dry closing is about, why it occurs, what makes the seller agree to this as well as other frequently asked questions about it.

What Is A Dry Closing?

A dry closing differs from a "normal" wet closing simply because the seller is paid after the buyer fulfills the mortgage criteria and the closing documents are signed. 

Dry closings occur only when the buyer and seller agree on the same thing. When events arise that ordinarily lead to a buyer or seller pulling out of the sale, they are designed to keep the transaction moving forward. Lastly, just a few states allow dry closings. 

real estate agent talking to family home buyers

Why Do Dry Closings Occur? 

When selling a house, people expect closing payments. Most states mandate a 'wet close' for all real estate transactions. 

Every closure should be wet, but the lengthy and challenging process may prevent the buyer from paying on closing day. The parties can wait two or three business days for the earnest cash rather than dissolve and fight over the deal.

The buyer or lender usually causes a dry closing since the buyer's finances to pay for the selling are delayed. This could be due to a payment glitch that takes time for the lender to fix, the buyer needing to meet an outstanding condition to get a mortgage, or the seller having a similar issue with their property that prevents a sale condition from being met. 

What Could Make The Seller Agree To A Dry Closing? 

Dry closings keep deals alive and ensure buyers get houses and sellers get money. Thus, dry closing may be preferable to wet closing, which fails if the seller doesn't obtain their money on closing day. 

Dry closings do not necessarily mean the buyer is untrustworthy. Deals sometimes need to be corrected, and funding arrives late. That means it will come so close first and retrieve your money a few days later.

Why Does A Dry Closing Need The Lender To Be So Important? 

To answer this, you must consider the role of the lender. Overall, they have a huge influence on real estate closing. A buyer seeking a home from a seller rarely has the money to pay. So they borrow money from lenders to be able to purchase the property.

The buyer puts the property as collateral for the loan, so the lender may repossess it and get their money back if things go wrong. Thus, the lender pays the seller, not the buyer. If the lender delays sending the loan to the buyer, a dry closing may be beneficial while the lender resolves its concerns. 

What Does The Seller Do In A Dry Closing Transaction? 

While the buyer and lender are typically the source of a dry closing in real estate, the seller may sometimes be the one to force a post-closure funding delay. 

After a dry closing, sellers should not relinquish their home's title. Keep the title and key until they have money. In the odd event that finance fails, it can be difficult to reclaim the title from the buyer if the transfer is already completed.

Conclusion

Dry closing is when a buyer and seller agree to close on a house before cash is exchanged, with the seller paid once the buyer meets mortgage requirements and signs closing documents. The seller's credibility is rarely involved in this situation, which usually requires buyer financing delays. 

Though it delays seller payment by a few days, a dry closing can keep deals alive and go forward. Providing funds and causing delays are vital to the lender. At a dry closing, sellers should keep ownership until payment is made to avoid financing issues.

One comment on “What Is Dry Closing And Why It Happens”

  1. I do agree with all the ideas you have introduced on your post They are very convincing and will definitely work Still the posts are very short for newbies May just you please prolong them a little from subsequent time Thank you for the post

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