It’s time to conduct house closings online
Recently, we had a closing take place in our office, and as is typical fashion in our industry, everyone was scrambling around, trying to get those last minute tasks completed. After all of the paperwork was ready, we took a deep breath and started signing documents. While we were putting pen to paper, one of the buyers asked me a great question: “I have purchased many homes, and no one has really improved on the process. Can’t they do it better?”
I really thought about his question, trying to get an understanding of where he was headed. I told him that most people do not like change; we are comfortable with sitting down together, signing papers, cutting checks.
But if you look at the process, there is a lot of room for improvement. I have been a huge advocate for using electronic signatures in residential real estate closings. In Massachusetts, they are legal on certain documents, including many real estate papers. But most of us, whether we know it or not, sign things electronically each and every day. Using our debit cards or purchasing an item online, for example. Why not real estate documents?
In speaking about electronic signatures over the years, I often hear the following concerns: 1) How do you maintain the security and integrity of paperwork? 2) How do you notarize a document that has been electronically signed? 3) Will my data be vulnerable to hackers?
If you looked at the life cycle of a piece of paper and the safeguards used to protect it and compared this with what’s in place for digital images, you would be pleasantly surprised. Knowing the life cycle of paper and electronic images, I would prefer electronic hands down; it’s more secure and cost effective.
In my opinion, a terabyte of data is better than a vault of documentation.
Although we have a law authorizing electronic signatures on real estate documents, the industry is still paper-driven. We sign page after page, overnight them somewhere, and keep records for ourselves. I told the buyer this, but he wasn’t accepting the “old habits die hard” logic. “Well, it’s complicated,” I said, but then I did my best to explain. For starters, there is a strong possibility that whoever gave you your mortgage probably doesn’t own it anymore. Does the new owner accept documents that have been electronically signed? Despite the Massachusetts law making them legal, some mortgage purchasers don’t accept documents with electronic signatures. These are typically large banks.
Various government agencies have been slow to act. On June 30, 2000, President Clinton signed the federal law that has been the basis for the electronic signature, but only recently has the Federal Housing Administration authorized its use.
If we tout how convenient electronic signatures would make the process and how much cost savings they provide — and how safe they are — I believe there will be widespread adoption.
You can buy things online. You can file your taxes online. Why not close on a house online?