Selling a home: closing day and funding

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When you’re selling a home, it might surprise you to know that the exact moment the money hits your account is unpredictable. Whether your buyer is paying cash or using a mortgage, your home sale can’t close until the purchase funds. That means the transfer of money from the buyer (or lender) to the escrow account.

1. The buyer with a mortgage may have to bring in the down payment and costs at closing
2. The lender’s “closer” may audit the file, draw the final documents and set up the money transfer
3. The escrow agent or attorney distributes funds in accordance with closing instructions from the lender

If it’s a cash deal, there will be no lender audit, so closing may proceed faster. But you’ll still have to sign a final set of documents, and the title company or attorney must record the transfer with the local government. Only then can your property and money change hands.

Funding facts

If your buyer is paying all cash, congratulations. You won’t have to worry about mortgage lending rules. Once your property is deemed insurable and the buyer’s funds verified, you can close.

Otherwise, you’re dealing with funding from a mortgage lender. Not all mortgage lenders fund their loans in the same way, and these differences can affect you, the seller.

Related: What happens when I'm "clear to close?"

Some states require “wet funding” rules. Others allow “dry funding.” Knowing what this means and entails is important.

Selling a home: wet funding

Wet funding means that the lender needs to verify that all documents required are submitted and approved by the closing date. Then, the lender contacts the title or escrow company to alert them that the funds will be coming.

The lender orders the wire ahead of the designated closing day, ensuring that the money is disbursed on or close to the agreed-on day. Only then do you, the seller, receive your proceeds.

Most states in the US require wet funding.

Selling a home: dry funding

Dry funding is less common, only practiced in Alaska, Arizona, California, Hawaii, Idaho, Nevada, New Mexico, Oregon and Washington. Here, you and the buyer meet to sign your mortgage documents on the loan closing date.

However, all the required paperwork may not yet be submitted, and your funds are not necessarily waiting for you.

Instead, the lender transfers the money as soon as possible after the closing (sometimes several days later). If you’re expecting a check or transfer on your official closing day, you’ll probably be disappointed. Keep this in mind if you need the proceeds to close the purchase of another home. It won’t be exactly simultaneous.

Related: Mortgage underwriting (what are conditions, and how to I satisfy them?)

There could still be hitches. The buyer may need to answer an eleventh-hour underwriting question. Dry funding keeps the closing open until all concerns are settled, and all parties legally protected.

For most sellers, the funding process occurs without their knowledge or assistance. You sign your documents, you get your money, end of story. But it’s good to know that the transfer of funds can rarely be timed to the hour.