What is a Dry Closing?

Malcolm Tatum
Malcolm Tatum
A dry closing occurs when a buyer has signed documentation for a house sale but funds have not yet been released.
A dry closing occurs when a buyer has signed documentation for a house sale but funds have not yet been released.

In real estate, a dry closing is a situation in which the buyer has signed all documents relevant to the sale, but has not yet received the funds from the sale. Often, a dry closing arises when there is some type of delay in delivery of the funds from a lender, but there is expectation that the funds will be released shortly. In the interim, the seller may choose to allow the buyer to take possession of the property, or withhold that privilege until the funds are dispersed and the sale is considered complete.

A delay in the seller signing necessary paperwork from the lender may lead to a dry closing.
A delay in the seller signing necessary paperwork from the lender may lead to a dry closing.

A dry closing can also occur when there is the need for the seller to interact with the lender on the approval of the loan. This can sometimes happen when the buyer is attempting to fund the purchase through a government program. The seller must be willing to accept the terms associated with that program, typically signing paperwork to that effect. Even if the buyer has been approved by the program, the funds are not released until the seller has indicated in writing his or her approval of the funding arrangement.

Real estate professionals will react to a dry closing in different ways. When there is assurance that the buyer has been approved for a mortgage through a mortgage banker or other type of finance company, the realtor may be willing to move forward with the escrow, since the funds are likely to be in hand in a matter of days. Other realtors are wary of moving forward with escrow and transferring title until the funds are actually received and payment has been rendered to the seller. This is because regaining control of the title in the event that the funding is reversed or denied for some reason can be somewhat difficult to manage. For this reason, realtors will often recommend that sellers continue to hold possession of the property until the funding is received.

It is important to note that a dry closing does not automatically mean that the source of funding is suspect or that the buyer will not be able to follow through on the purchase. A dry closing can occur for many reasons that have nothing to do with the actions or the creditworthiness of the buyer. In most cases, the delay is due to a glitch in the processing of the payment. Once the origin of the delay is identified, the lender can resolve the issue and complete the transfer of funds to the seller or the seller’s agent.

Malcolm Tatum
Malcolm Tatum

After many years in the teleconferencing industry, Michael decided to embrace his passion for trivia, research, and writing by becoming a full-time freelance writer. Since then, he has contributed articles to a variety of print and online publications, including SmartCapitalMind, and his work has also appeared in poetry collections, devotional anthologies, and several newspapers. Malcolm’s other interests include collecting vinyl records, minor league baseball, and cycling.

Malcolm Tatum
Malcolm Tatum

After many years in the teleconferencing industry, Michael decided to embrace his passion for trivia, research, and writing by becoming a full-time freelance writer. Since then, he has contributed articles to a variety of print and online publications, including SmartCapitalMind, and his work has also appeared in poetry collections, devotional anthologies, and several newspapers. Malcolm’s other interests include collecting vinyl records, minor league baseball, and cycling.

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    • A dry closing occurs when a buyer has signed documentation for a house sale but funds have not yet been released.
      By: ldprod
      A dry closing occurs when a buyer has signed documentation for a house sale but funds have not yet been released.
    • A delay in the seller signing necessary paperwork from the lender may lead to a dry closing.
      By: inga
      A delay in the seller signing necessary paperwork from the lender may lead to a dry closing.