Electronic signatures in real estate industry simplify mortgage and real estate transactions, making it easier, cheaper and faster for sellers, borrowers, and buyers to carry out business. What used to take many days can now be executed in as little as 10 minutes.
On 30th June 2000, Congress passed the E-SIGN Act to change the manner in which people conducted online business transactions. The act recognized the authenticity of e-signatures. It confirmed that signing documents online has the same legal weight just as executing them using the wet-ink signatures. The fact that e signatures are now legitimate and acceptable has brought a sigh of relief to every real estate professional who is looking to reduce the overall efforts that are associated with closing a deal.
The strenuous process associated with typical real estate closing
Closing is the act where a property seller transfers the ownership of a property to the buyer, or where a mortgage borrower assumes some financing from a lending institution. For borrowers, sellers or buyers, the closing signifies the end of a tedious and long process.
Depending on where you reside, closing a real estate deal is handled by an attorney, escrow company, or title company, otherwise referred to as settlement agents. On the actual closing date, the relevant parties meet with agents to sign various agreements including disclosures and property transfer documents.
Sometimes, the sellers may not be present during the actual closing day but can pre-sign the agreements days prior. If there are errors, the settlement agent can try to locate the seller so that these errors can be corrected. In some instances, the agent will entirely prepare the documents from scratch, which results in a delay in closing the sale.
As if that is not enough, after closing, the attorneys or settlement agents are left with a lot of documents in their desks; which they must send some of them to the relevant authorities for recording. Then the documents and proof of recordings are then distributed to the buyer or any other relevant party entitled to a copy document.
Obviously, from the above process, the traditional closing process is costly, time-consuming, and labor-intensive to say the least.
Closing the real estate deals electronically
Via electronic closing methods, mortgage transactions, deed recording, and real estate sales can take place in real time without any of the relevant parties being physically present. Settlement agents and mortgage lenders can log into an electronic signature system to create and store real estate documents in digital forms. As a result, borrowers, buyers, and sellers can easily receive and review these agreements and contracts well before the closing.
By just clicking on the “I Agree” button, the borrowers, buyers, and sellers confirm that they are contented with the agreement and are then taken through an easy e-signing process. Once electronically signed, the system encrypts the agreements, so that they can be tamper-proof. Signing real estate documents online has the following benefits:
- Faster and more efficient – No need for rush deliveries to get the revised agreements signed, re-signed and delivered. Thus, the closing times and costs are considerably reduced.
- Conduct business on the go – E-signs relieves real estate agents from being tied to the office. They can get contracts signed while on the go.
- Parties can receive the agreements well before closing; therefore, there is plenty of time to review, seek clarifications, and understand what they are signing.
- Eliminates paperwork – Paperwork that borrowers, sellers, and buyers in the real estate usually receive at closing, is available in electronic form.
- Stay compliant and secure – With the help of digital signature solutions, you can easily fill out and sign various sensitive real estate agreements and guarantee compliance at every stage. More so, audit trails of all your documents are maintained to avoid malpractice.
- Virtually all countries deem e-signatures executed on real estate documents to be legally binding
Common uses for electronic signatures in real estate sector
All parties involved in a real estate transaction can utilize e-signatures to get a range of documents, disclosures, and agreements signed, such as:
- Offer to purchase
- Sales contract
- Pre-approval letters
- Floor plans
- Certificate of occupancy
- Name affidavits
- Seller’s affidavits
- Residential disclosure
- Rent agreements
- Closing disclosures
- Mortgage forms
Considerations for using e-signs to execute real estate paperwork
Parties considering the use of e-signatures should first examine the levels of security offered by various e-signature software providers. Different providers offer varying levels of security and authentication; and some even offer other security measures such as digital seals and audit trails, which prevent contracts from being tampered or interfered with, following an execution. Also, those initiating real estate transactions should ensure that the said documents show the parties’ approval to use of e-signatures, to avoid any doubts in regards to enforceability.
All said and done, e-signatures have already made a noteworthy impact on the real estate sector, and this impact will continue to grow as more and more real estate firms make the switch to the latest technology.