What Is a Dry Closing? How It Works, Risks, and State Rules

A dry closing is a closing where all documents are signed, but the transaction isn’t funded on the same day. The lender typically wires the funds the next business day, after completing final reviews. Until the money arrives, the buyer doesn’t legally take ownership and the seller doesn’t receive payment. 

Dry closings are allowed in some states and prohibited in others. While they can prevent delays when lenders need more time, they also introduce risk and logistical challenges for both buyers and sellers. Whether you are closing in Dallas, TX, Atlanta, GA, or Sacramento, CA, learn how a dry closing works, how it compares to a wet closing, what states allow it, and how to prepare if you’re facing one.

How a dry closing works

A dry closing is typically very similar to a standard closing, with the key difference being the movement of funds. The process usually proceeds in the following manner:

1. Paperwork signed and loan approvals in place

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 has been conditionally approved, pending final lender checks. The escrow or title company holds the signed documents until the funds are released.

2. Funds are delayed due to processing

The lender has not yet released funds, often due to last-minute verifications, underwriting backlog, document review, or banking cutoff times. Until the wire arrives, the title or closing agent cannot disburse funds.

3. Closing proceeds on paper

The signing appointment still occurs, and from a documentation standpoint, the transaction is complete. However, ownership does not legally transfer and the seller does not receive payment until the funding occurs.

4. Funds transferred and disbursed later

Once the lender releases funds (commonly 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

Why do dry closings occur?

Dry closings happen for several 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 need additional certifications or payoff figures

Dry closing vs. wet closing

While both dry and wet closings involve signing the same paperwork, they diverge in one crucial way – the timing of the funds being disbursed and the transaction becoming legally complete.

Risks and considerations for buyers and sellers

A dry closing can keep a transaction moving, but it also introduces unique risks for both buyers and sellers that are important to understand upfront.

Buyer risk and move-in logistics

Before funds arrive, buyers sit 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 for any reason, the deal may fall through.
  

For buyers planning a tightly timed move, a dry closing can create significant challenges.

Seller risk and downstream transactions

Sellers may also face meaningful risks:

• They don’t receive proceeds until funding arrives.
• They may be unable to close on their next home or pay moving costs.
• If the buyer’s loan stalls or is denied, the seller must re-enter the market.
  

Because of these uncertainties, many sellers prefer wet closings, where funding happens the same day, minimizing delays and financial risk.

Where are dry closings legal? State rules and practices

Dry closings are not legal in every state. Many states require wet funding, meaning funds must be present before or at 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.

Important: State rules can change, and some markets allow both wet and dry closings depending on lender, title company, and local custom. Always confirm with your closing agent, attorney, or title company.

What to do if you’re facing a dry closing

If your lender or agent says your closing could end up being a dry closing, taking a few proactive steps now can help keep the process smooth and predictable.

1. Stay in contact with your lender

Check in regularly about:

• Funding status
• Any outstanding conditions
• Estimated funding release time
  

Daily check-ins during the final week are common.

2. Coordinate with your Redfin agent

Your Redfin real estate agent can help:

• Manage expectations with the seller
• Negotiate possession timing
• Clarify who holds keys and when

3. Plan for delays

Prepare backup plans in case funding or logistics are delayed:

• Flexible moving truck scheduling
• Storage for belongings
• Temporary housing for one or two nights

4. Be ready for a wet closing if needed

Some lenders push to fund same-day if all conditions are met so be sure to keep the following handy:

• Updated financial documents
• Government-issued ID
• Cash-to-close funds ready to wire early in the day

When does funding occur after a dry closing?

After a dry closing, the big question is how long it will take for the funds to arrive and the transaction to officially close. Funding typically happens:

• Next business day for most transactions
• Same day if delays are minor and resolved quickly
• 2–3 days later if lender conditions require additional review

FAQs: What is a dry closing?

1. Why would a lender delay funding at closing?

Funding can be delayed by last-minute employment checks, 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 require same-day funding (“wet funding”). Your title company, closing attorney, or lender can confirm your state’s rules.

3. Can a dry closing delay my move-in date?

Yes. You cannot take possession until funds are disbursed and the transaction officially closes, so move-in plans may need to stay flexible.

4. What happens if the loan never funds after a dry closing?

If the lender cannot release funds, the transaction does not close. The seller keeps ownership, and next steps depend on your purchase contract.

>> Read: What is a Purchase and Sale Agreement?

5. Can a seller refuse a dry closing?

In states that allow both wet and dry closings, a seller can object or negotiate. In states that require dry funding or when lenders trigger it due to delays, the seller may have limited ability to decline.

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