A dry closing occurs when all documents are signed, but the transaction is not funded on the same day. The lender typically wires the funds the following business day after final reviews are completed. During this time, the buyer does not legally take ownership, and the seller does not receive payment.
Dry closings are permitted in some states and prohibited in others. While they can help prevent delays when lenders need more time, they also present risks and logistical challenges for both buyers and sellers. Whether you are closing in Dallas, TX, Atlanta, GA, or Sacramento, CA, it is important to understand how a dry closing works, how it differs from a wet closing, which states allow it, and how to prepare if you encounter one.
How a dry closing operates
A dry closing is typically similar to a standard closing, with the main difference being the timing of funds. The process usually follows these steps:
1. Signing of paperwork and loan approvals
All closing documents are signed by both parties, including the buyer’s loan paperwork, disclosures, and the seller’s deed transfer documents. The buyer’s loan is conditionally approved, pending final lender checks. The escrow or title company holds the signed documents until the funds are released.
2. Delay in funds due to processing
The lender has not released the funds yet, often due to last-minute verifications, underwriting backlog, document review, or banking cutoff times. The title or closing agent cannot disburse funds until the wire arrives.
3. Closing proceeds on paper
The signing appointment still takes place, and from a documentation perspective, the transaction is complete. However, ownership does not legally transfer, and the seller does not receive payment until funding occurs.
4. Funds transferred and disbursed later
Once the lender releases the funds (usually the next business day), the closing agent disburses them:
- The seller receives their proceeds
- Any liens or mortgages are paid off
- The buyer’s loan is recorded
- Keys or possession can be transferred
Reasons for dry closings
Dry closings occur for various reasons:
- Lender delays: Underwriting conditions, last-minute verification of employment, document review
- Wire cutoff times: Banks may stop processing same-day wires in the afternoon
- State practices: Some states prefer or require dry funding
- Holidays or weekends: Loan funds can’t be released outside banking hours
- Title or document issues: The closing agent may require additional certifications or payoff figures
Comparison between dry closing and wet closing
While both dry and wet closings involve signing the same paperwork, they differ significantly in one aspect – the timing of fund disbursement and the legal completion of the transaction.
| Dry closing | Wet closing |
| Funds are not disbursed on the same day | Funds are disbursed during the closing appointment |
| Buyer signs but does not own the home until funds arrive | Buyer becomes the legal owner immediately |
| Seller does not receive payment right away | Seller receives proceeds at closing |
| Mainly used in states allowing delayed disbursement | Required in ‘wet funding’ states |
| Risk of delays and uncertainty for both parties | More predictable closing time |
Risks and considerations for buyers and sellers
A dry closing can facilitate a transaction but also introduces unique risks for both buyers and sellers that need to be understood upfront.
Buyer risk and move-in logistics
Before funds arrive, buyers are in a legal “in-between” stage:
- They cannot take possession or receive keys.
- Movers may need to be rescheduled.
- Travel or storage plans could be disrupted.
- If the loan fails to fund, the deal may fall through.
For buyers with tightly scheduled moves, a dry closing can pose significant challenges.
Seller risk and subsequent transactions
Sellers may also encounter significant risks:
- They do not receive proceeds until funding arrives.
- They may be unable to close on their next home or cover moving costs.
- If the buyer’s loan stalls, the seller must re-enter the market.
Due to these uncertainties, many sellers prefer wet closings where funding occurs on the same day, reducing delays and financial risk.
Legal status of dry closings: State regulations and practices
Dry closings are not permitted in all states. Many states mandate wet funding, requiring funds to be present before or during signing.
- Common dry-funding states: California, Oregon, Washington, Nevada, New Mexico, Utah, and certain Midwest states where escrow closings are common.
- Wet-funding states: Much of the South, Northeast, and Midwest, where same-day disbursement is required.
Note: State regulations may change, and some markets permit both wet and dry closings based on lender, title company, and local practices. Always verify with your closing agent, attorney, or title company.
Steps to take if facing a dry closing
If your lender or agent mentions the possibility of a dry closing, taking proactive measures now can help ensure a smooth and predictable process.
1. Maintain communication with your lender
Regularly check on:
- Funding status
- Any outstanding conditions
- Estimated funding release time
Daily updates during the final week are common.
2. Coordinate with your Redfin agent
Your Redfin real estate agent can assist with:
- Managing expectations with the seller
- Negotiating possession timing
- Clarifying key holding arrangements
3. Prepare for potential delays
Have backup plans in place in case of funding or logistical delays:
- Flexible moving truck scheduling
- Storage for belongings
- Temporary housing for a night or two
4. Be prepared for a wet closing if necessary
Some lenders aim to fund on the same day if all conditions are met, so ensure to have the following ready:
- Updated financial documents
- Government-issued ID
- Funds for closing ready to wire early in the day
Timing of funding after a dry closing
Following a dry closing, the key question is how long it will take for funds to arrive and the transaction to officially close. Funding typically occurs:
- Next business day for most transactions
- Same day if delays are minor and swiftly resolved
- 2–3 days later if lender conditions necessitate additional review
FAQs: Understanding dry closings
1. Why might a lender delay funding at closing?
Funding delays can result from last-minute employment verifications, unresolved underwriting conditions, missing documents, or bank wire cutoff times.
2. Is a dry closing legal in my state?
Not all states allow dry closings. Some mandate same-day funding (“wet funding”). Your title company, closing attorney, or lender can confirm your state’s regulations.
3. Could a dry closing impact my move-in date?
Yes. Possession cannot be taken until funds are disbursed and the transaction officially closes, potentially affecting move-in plans.
4. What happens if the loan fails to fund after a dry closing?
If the lender cannot release funds, the transaction will not close. The seller retains ownership, and next steps depend on your purchase agreement.
>> Read: What is a Purchase and Sale Agreement?
5. Can a seller reject a dry closing?
In states permitting both wet and dry closings, a seller can object or negotiate. In states requiring dry funding or when lenders trigger it due to delays, the seller may have limited ability to refuse.