What is Dry Close?
The Short Answer
Dry Close explained simply
A Dry Close happens when all the paperwork for a business sale is signed by both the buyer and the seller. However, the deal isn’t officially closed yet because the funds haven’t been transferred. The signed documents are held by a third party, like an escrow agent or attorney, until the buyer’s money is ready to be released to the seller. This approach is often used when there are still conditions to be met, such as securing financing or getting final approvals, before the sale can be completed.
Real-World Example
The Coffee Shop Dry Close
Imagine a buyer wants to purchase a coffee shop. They’ve agreed on a price, but their bank loan isn’t fully approved yet. To keep things moving, both the buyer and seller sign all the necessary legal documents for the sale. These documents are then given to an escrow agent. The deal won’t officially close, and the coffee shop won’t change hands, until the bank loan comes through and the funds are transferred from the buyer to the seller. If the loan falls through, the deal can be unwound without the documents ever being filed.
Why this matters
A Dry Close gives both parties confidence that the deal is moving forward, even if there are still some steps to complete. It locks in the terms and conditions, reducing the risk of either side backing out while waiting for final approvals or funding. This method helps streamline the closing process once all conditions are met.
A Dry Close can be a good way to manage timing in a deal, especially when financing is involved. It ensures everyone is committed without fully transferring ownership until all conditions are met.
A Dry Close can be a good way to manage timing in a deal, especially when financing is involved. It ensures everyone is committed without fully transferring ownership until all conditions are met.
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