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What is a Wet Funding or Dry Funding?

Coral Springs Title Insurance CompanyCoral Springs Title Insurance Company Talks Funding Law

Our Coral Springs title insurance company does more than perform title searches and provide title insurance. With our legal expertise, we can also assist with paperwork preparation, closings, and escrow. That’s why we’re knowledgeable about the different funding requirements for property transactions.

There are two types of funding used to close property transactions: wet funding and dry funding.

What’s the Difference?
The differences between wet and dry funding have nothing to do with liquor! Instead, these terms refer to the laws that determine when closing funds are paid to the seller, and when the buyer takes ownership of the property.

With dry funding, the closing payments are made after all the prerequisite paperwork has been completed and reviewed by the mortgagee. Money does not change hands until the lender has determines that the paperwork is in order and that the sale is legitimate.

Wet funding, however, does not require a waiting period for the payment to be finalized. The seller receives their payment, and the buyer receives the title to the property, before the paperwork is completed and reviewed. All monies are collected and disbursed on closing day.

Wet funding is a result of Wet Settlement Laws in certain states. These laws prevent lenders from delaying the transfer of loan funds to the closing agent, and require that loan payments are made on or before closing day via cash, wired funds, or check. However, some wet funding states may only require that funds are paid out within 2 days of closing – so the seller can leave closing with a check but only deposit or cash it later.

Pros and Cons
Dry funding is slower but safer. Because the lender checks all the paperwork before the sale is finalized, the seller is guaranteed their payment, and the buyer is guaranteed their property. The mortgagee is also at less risk when disbursing the loan funds. Of course there may be issues with the paperwork, but dry funding allows for these problems to be resolved before any payments are made.

Wet funding is quicker but potentially riskier. The property and funding transactions are completed on the day of closing, but the lender must be able to put forward the mortgage loan on that same day. If the lender then discovers issues with the paperwork, it can be difficult to renegotiate the sales contract after the fact. This is why wet funding is sometimes open to abuse and an increased chance of loan default or fraud.

How it Works in Florida
Florida is a wet funding state that makes use of table funding. With table funding, someone other than the mortgage broker or lender supplies the funds in order to finalize the sale quickly. Table funding practices also vary from state to state.

Here in Coral Springs, table funding means that the buyer provides the funds prior to closing, and the settlement or closing agent holds those funds in an escrow account. Before closing, the agent prepares disbursement checks for the seller, broker, insurance companies, and anyone else who is owed an outstanding payment. Only closing day, once all the paperwork is signed, the agent can then distribute the checks to the relevant parties.

If you’re a realtor looking for a reliable title company and attorney to assist your clients with real estate closings, or simply want more information about wet funding practices in Florida, contact Florida Home Title Company today.