DRY CLOSING

Detailed Definition

DRY CLOSING is a term in real estate to describe a closing process that does not involve the immediate transfer of property title and funds between the buyer and seller. During a dry closing, both parties—buyer and seller—acknowledge their commitment to the previously negotiated sales contract but agree to delay the actual exchange of consideration (i.e., money and property title) to a later date. This usually happens due to unforeseen delays or issues that do not allow the immediate transfer of funds or other related instruments required to complete the transaction.

Example

A typical scenario to apply dry closing can be illustrated as follows:

• A home purchase contract was signed by both buyer and seller in June with the closing date set for August 1.
• An issue arises during the title search, which causes a delay in releasing the mortgage loan funds, though the loan itself has been approved.
• Instead of postponing the closing date, both parties conduct a dry closing on August 1 to reassure that the sale will be finalized as agreed once the title issue is resolved.
• By the end of August, after resolving the title issue, all funds were exchanged, and the property title was officially transferred.

Frequently Asked Questions (FAQs)

What causes a need for a dry closing?

Various reasons, including last-minute title issues, delays in fund transfer from a lender, or unresolved contingencies, can necessitate a dry closing.

Is a dry closing the final step in the home buying process?

No, a dry closing is an interim step. The final processes, such as the exchange of funds and property title, are completed at a later agreed date.

How common are dry closings?

While not as common as wet closings (where funds and property title are immediately exchanged), dry closings occur more often in states or conditions where legal, financial, or logistical issues delay the immediate exchange of considerations.

Are there any legal implications of a dry closing?

Each real estate contract and circumstance is unique. Parties should always consult their real estate attorney or advisors to understand any specific legal implications associated with a dry closing.

Related Terms with Definitions

• Wet Closing: The opposite of a dry closing, where the funds and title to the property are exchanged simultaneously, and the transaction is completed on the scheduled closing date.
• Escrow: A legal arrangement in which a third party temporarily holds money or property until a particular condition has been met.
• Closing Costs: The expenses, over and above the price of the property, incurred by buyers and sellers in transferring ownership of a property.
• Title Search: The process of retrieving documents evidencing the history of property ownership to ensure there are no disputes or legal issues associated with the title.
• Sales Contract: An agreement between the buyer and seller outlining the terms and conditions for the transfer of property ownership.

Online Resources

• National Association of REALTORS®
• American Land Title Association
• Consumer Financial Protection Bureau

References

• “Real Estate Law” by Marianne Jennings
• “The Book on Managing Rental Properties” by Brandon Turner and Heather Turner
• “Principles of Real Estate Practice” by Stephen Mettling and David Cusic

Suggested Books for Further Studies

• “Real Estate Law” by Marianne Jennings
  • Extensively covers laws and regulations in real estate, including various closing types such as dry and wet closing.
• “The Book on Managing Rental Properties” by Brandon Turner and Heather Turner
  • Observes practical aspects of rental properties and closing transactions.
• “Principles of Real Estate Practice” by Stephen Mettling and David Cusic
  • This manual is perfect for those who want a detailed understanding of the principles behind real estate practices.

Real Estate Basics: DRY CLOSING Fundamentals Quiz