From financing and due diligence to title work and legal documentation, commercial real estate transactions involve many moving parts. One of the final steps in the process is the closing. The closing is when ownership officially transfers from the seller to the buyer. Some might be surprised to learn that not every closing follows the same process; there are actually two primary types. In this blog, we will explain wet closing vs. dry closing. Here’s what you need to know, why each is used and how a trusted title company helps ensure the transaction moves forward smoothly.
What Is a Wet Closing?
A wet closing occurs when all required documents are signed, funds are available and the transaction is completed on the same day. Once every party has fulfilled their obligations, the lender releases funds, the title company records the transaction and ownership officially transfers to the buyer.
This is the closing process most people picture because everything happens in one coordinated event. A wet closing generally includes:
- All closing documents are signed by every party
- Loan funds are available and disbursed immediately
- The deed and other required documents are recorded
- Ownership transfers the same day
Because every requirement must be satisfied before funding occurs, wet closings require careful coordination among buyers, sellers, lenders, attorneys and the title company.
What Is a Dry Closing?
A dry closing is different because the documents are signed before all funds are available or before every closing condition has been satisfied. Although the paperwork may be complete, ownership does not officially transfer until all remaining requirements are met. Those remaining items might include:
- Final lender approval
- Verification of documents
- Receipt of loan funds
- Resolution of title requirements
- Recording of legal documents
Once these final conditions are complete, the lender releases the funds, the title company records the transaction and the sale officially closes. In other words, signing documents during a dry closing does not necessarily mean the transaction is complete.
When is a Dry Closing Necessary?
Dry closings are often necessary when timing or logistics prevent every piece of the transaction from coming together at once. For example, a commercial buyer may sign loan documents while the lender completes its final funding review. In other cases, the title company may still be waiting for a required payoff statement, recording approval or other necessary document before ownership can legally transfer.
Dry closings are more common in commercial real estate because transactions are often larger, involve multiple financing sources or require increased legal review. Rather than delaying the document signing, the parties can complete a portion of the process while waiting for remaining conditions to be satisfied.
Wet Closing vs. Dry Closing: Key Differences
Although both methods ultimately accomplish the same goal, the biggest difference comes down to timing.
Wet Closing:
- Documents are signed and funded the same day
- Ownership transfers immediately
- Funds are disbursed at closing
- Transaction is fully complete when signing ends
Dry Closing:
- Documents are signed before funding occurs
- Ownership transfers after remaining conditions are met
- Funds are released after final approval
- Transaction remains pending until funding and recording occur
Neither option is inherently better than the other. The appropriate closing method depends on lender requirements, state regulations, transaction complexity and whether all closing conditions have been satisfied.
Commercial Real Estate Closings
Commercial real estate transactions often involve additional complexities that can influence how and when a closing takes place. Larger loan amounts, multiple ownership entities, corporate approvals, extensive due diligence and multiple lenders or investors can all add steps to the process. If certain funding or approval requirements are still outstanding after documents are signed, a dry closing may provide additional time to complete those final steps before the transaction is officially finalized.
The Title Company’s Role
Whether a transaction involves a wet or dry closing, the title company plays a crucial role in the process. This can include conducting the title search, addressing title issues, managing escrow funds, coordinating with buyers, sellers, lenders and attorneys, and recording necessary documents. In a dry closing, the title company also helps ensure that outstanding requirements are satisfied before funds are disbursed and ownership officially transfers.
Preparing for a Smooth Closing
Preparation and communication can help prevent unnecessary delays in any commercial real estate closing. Buyers and sellers should submit requested documents promptly, review closing materials in advance, confirm funding timelines with their lender and address potential title issues as early as possible. Understanding whether a transaction will involve a wet or dry closing can help all parties better prepare for the final stages of the transaction.
Partner with an Experienced Title Company
While wet and dry closings follow different timelines, both ultimately serve the same purpose: completing the transaction and transferring ownership to the buyer. The closing method used will depend on factors such as lender requirements, applicable regulations and the complexity of the transaction. Landmark Title Assurance Agency works closely with buyers, sellers, lenders and real estate professionals throughout the commercial closing process. With experienced professionals coordinating the details, all parties can move toward closing with greater clarity and confidence.