What is a Dry Closing & How Do They Affect You
A Dry Closing occurs when a buyer and seller actually execute all of the paper work required by the lender and attorney in order to conclude a closing. The only problem is funds can not be dispersed. This results in leaving closing with no keys if you are the buyer, and no money if you are the selle
When you stop to think about the effects of Dry Closings, it may not be pretty. If you are the Buyer this means you will not receive keys until funding takes place. This may mean that you may need to change when the movers show up, when utilities are activated in your name, and when you move. NOT PRETTY.
As a Seller this may mean that you will need to post pone the closing on your next home and when you move, due to the fact you have not received your proceeds. NOT PRETTY.
Causes for Dry Closings
In today’s real estate market there are a number of factors that may contribute to a Dry Closing. One of the most common, especially with all of the foreclosures that are being purchased, is delays in receiving documents back from the seller (in this case the bank). In most cases the seller is not even present at closing and has to have necessary paper work approved internally prior to authorizing the attorney to release title.
This also triggers a delay on the Buyers side due to the fact that the Buyers lender will want to see copies of all required documents prior to authorizing the attorney to disburse funs. Sound like a Catch 22? Well sometimes it is.
Another cause of Dry Closings is delays in wire transfers. The Buyers lender fails to wire the required funds to the attorneys trust account so that they arrive in time for closing. With out the money the attorney can not fund.
How To Avoid Dry Closings
One of the best ways to avoid Dry Closings is to avoid scheduling your closing to early in the morning. This will provide the Buyers lender, who is probably under staffed and over worked time to get the funds wired the day of closing. You know… the JUST IN TIME method. This may cause all parties to return later in the day to conclude the closing.
Additionally don’t schedule your closing late in the day for the same reason. If the lender is running behind; which is generally the case, the wire may not arrive until after hours, thus causing the funding of the Buyers loan to be delayed until the following day.
Finally, try not to schedule your closing at the end of the month. This is the busiest time for lenders, banks that are selling property and the law offices that close them. Try to schedule your closing near the middle of the month and you will greatly decrease the possibility of a Dry Closing.
If you are faced with a Dry Closing you may want to have your Broker/Agent draw up an amendment reflecting a change in the closing and possession date. JUST A SUGGESTION.
Van Purser is a licensed real estate broker in Georgia. Since1981 he has successfully purchased and renovated over 400 homes. His expertise is in the area of foreclosures, rehabs and fixer uppers. Additionally, he has represented hundreds of clients over the years as a broker with Metro Brokers, RE/Max and now with his own firm. He and his wife, Jeanne, who is also a broker, have been married since 1977. Van can be reached at 770-623-3313 or by email VanPurser@VanPurser.com