Wet Vs. Dry Loans In Various States

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Believe it or not, within the real estate business, these terms do not involve the sale or distribution of alcoholic drinks. It refers to the period where a new buyer can take ownership of a property as soon as a new mortgage is regarded as closed.

Depending on the laws of the specific state where the loan occurred, “wet settlement laws” need lending banks to distribute funds as soon as a certain period of time has passed from the closing date of the mortgage. Laws vary and disbursement period can range from the day of settlement to within two days of closing. Once the necessary papers have been signed, these laws shield the consumer by stopping lending banks from delaying payment.

Slang terms, “wet funding” and “dry funding” refer to the state in which the funding started. “Dry” states refer to those states where the paperwork needed to officially close a loan does not need to be concluded on the day of closing. All the necessary documents needed to close the loan must be in place and approved at the time of closure when dealing with wet funding rules.

Alaska, Arizona, California, Hawaii, Idaho, Nevada, New Mexico, Oregon and Washington are regarded as dry funding states and all the others are as wet as they come. A dry closing takes place for the benefit and convenience of both the buyer and the seller and is actually not a closing at all. Signing documents is the only activity at dry closings and no money ever changes hands.

The legitimacy of the sale is certain with dry funding and no fraudulent activity can occur. There is more danger with a wet loan as the transaction moves along at a quicker pace and the seller gets money very fast after the closing of the sale. With the sale occurring before the paperwork is completed the convenience and speed must be weighed against the distinct possibility of real estate fraud. With a wet loan, after the funds have been transferred, the bank then gets the loan documents for evaluation, putting the cart before the horse, in other words.

Doing a study is essential to the comprehension of the disparities between wet funding and dry funding. When it comes to home loans, always proceed at your own risk and remember that a knowledgeable consumer is the best defense against fraud.

Planning to move or relocate in Colorado? Receive helpful information about Erie CO real estate or real estate in Breckenridge CO. Also, find detailed MLS real estate data on specific homes or properties for sale and receive help from real estate agents with the knowledge and expertise of the area.

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Dan Edward Phillips
Dan Edward Phillips - Eureka, CA
Realtor and Broker/Owner

Good Morning, good explination of how funding works. Thanks for posting it.

Oct 20, 2010 03:58 AM #1
Cathy McAlister
Cathy Ashley McAlister, GRI CDPE - Broker / Sacramento - Sacramento, CA
Sacramento DRE#00648507

Thanks for bringing up one of the lesser known topics in real estate.   As I understand it, both methods work quite efficiently for each coast, as the laws fall into two main catagories.   On the west coast, our law states that transfers are effective at recording (hence dry funding).  On the east coast, I believe law states property transfers at closing/signing.  Hence, the two differences of the same word.    It would be interesting to know the history of how they evolved in separated directions.

Oct 20, 2010 04:22 AM #2
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