Wet close finance, sometimes called wet funding, refers to a real estate transaction where the funds for the mortgage loan are disbursed to the seller immediately upon the completion of the closing. This stands in contrast to “dry close” finance, where there’s a delay between the signing of the closing documents and the actual funding of the loan. Understanding the nuances of wet close finance is crucial for buyers, sellers, and real estate professionals alike.
The defining characteristic of a wet close is the swiftness of the funding. Once all the necessary documents are signed, notarized, and recorded (depending on local requirements), the lender transmits the funds directly to the title company or escrow agent. This entity then distributes the money to the seller, paying off any existing mortgages and other liens, and disperses the remaining funds according to the closing statement. This process typically involves a wire transfer for larger sums, ensuring security and speed.
Wet funding is often preferred, and in some states legally mandated, because it allows all parties to immediately fulfill their obligations. The seller receives their proceeds promptly, enabling them to move on to their next purchase or other financial endeavors. The buyer takes immediate possession, without the anxiety of waiting for funds to be released. Real estate agents and other professionals involved in the transaction also benefit from a quicker resolution, facilitating smoother operations.
However, wet closing relies heavily on the lender’s ability to thoroughly review and approve all loan documents before the closing date. This requires efficient underwriting and a robust quality control process. Any delays or errors in the loan documentation could prevent the lender from releasing the funds at closing, causing significant disruption and potential financial penalties.
Because of the need for impeccable preparation, wet closings often involve higher upfront scrutiny from lenders. This might translate to stricter documentation requirements or more thorough appraisals. Borrowers should ensure they provide all requested information promptly and accurately to avoid last-minute hurdles. Title companies and escrow agents also play a critical role by ensuring all necessary title searches and insurance policies are in place well in advance of the closing date.
While the immediate funding aspect of wet close finance offers convenience and speed, it’s essential to remember the responsibilities it places on all parties involved. Open communication, meticulous preparation, and a thorough understanding of the process are key to ensuring a successful and stress-free wet-funded closing.
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