Times are changing...are you changing too? Position yourself for success in a new marketplace - by Ashley Sadler

The only constant in life is change. As the real estate market evolves and more tech-savvy homebuyers enter the market, there is a push to create more digital closing products. In 2017, millennials continued to drive the real estate arena, comprising the largest segment of home buyers for the fifth consecutive year. (1) It’s safe to assume that as younger generations enter the housing market, the demand for more digital products will only increase. So what does this mean for real estate professionals?

Real estate agents, lenders, settlement agents, and real estate attorneys all need to consider how they can modify their business practices to remain competitive in a marketplace where innovation is celebrated and expected. 

One change that will certainly hit the New England marketplace in the immediate future is the implementation of eClosings. We are all familiar with the traditional, in-person, wet-ink-signed closing transaction. An eClosing is a transaction that replaces some elements of a traditional closing with electronic processes. Closings that include some electronically executed documents combined with some traditionally executed documents (a wet-ink-signed note, for example) are known as hybrid eClosings. A fully electronic closing is one in which there are no paper documents at all. 

There are a few impetuses for moving to an eClosing model. Studies have found that consumers feel more empowered and better understand their closing documents in an eClosing scenario compared to a traditional model.(2) Electronic processes can also bring efficiencies and cost reductions. With electronic forms, real estate professionals can instantaneously deliver digital copies of documents to consumers for review without pricey printing and postage fees. 

Adopting an eClosing process presents its challenges as well. A major hurdle to going fully paperless is the lack of infrastructure. Before embracing a fully digital closing process, real estate professionals must first consider whether there is the legal support for such a change. The federal E-SIGN Act (3) affords electronic records the same enforceability as hard records. However, this legislation fails to address other aspects related to using electronic documents for closing transactions. For example, E-SIGN lacks guidance as to whether some instruments are transferable, giving rise to concerns that electronic notes may be denied enforceability. To fill the voids in E-SIGN, many states have adopted a version of the Uniform Electronic Transactions Act (UETA); however, it is imperative to review your state’s law to determine how UETA is applied to real estate transactions.

Moving to a digital process also requires that your real estate partners are able to produce and accept digital documents. In order to have a fully paperless transaction, it is crucial to determine whether your local recording office can accept digital documents for recording. 

Whether documents can be electronically notarized is another consideration. The majority of states permit notaries to electronically notarize a document, enabling the document to be executed digitally. Some states go a step further and authorize remote online notarizations (RON), which permit notaries to notarize documents while in a different location than the signer. To date, both Virginia and Montana permit remote notarization and an additional seven states have passed legislation that would allow them to follow suit. (4)

The introduction of RON raises unique legality concerns. Questions as to whether a remotely notarized document by an out-of-state notary will be afforded the same legal protections as a traditional in-person notarization have yet to be addressed. While there are laws in most states that acknowledge a validly executed notarization done in another state, there is uncertainty as to whether that recognition will be extended to remotely notarized documents executed under processes vastly different from well-established notarial procedures. 

There are also concerns that a remotely notarized document is more susceptible to security issues, including fraud, forgery, undue influence, or misappropriation of documents. With RON sweeping the nation by storm, it is time to start collaborating with stakeholders about how to address this issue.

A natural consequence of all the change permeating the real estate industry is evolving interactions between real estate professionals and consumers. A promising takeaway is that, despite these changes, consumers still desire personal interaction with trustworthy advisors to assist them throughout their closing process. (5)

Technology can do many amazing things, but there are limits to its application. It’s critical to think about how you can continue to serve your clients while adapting to changing processes. By accepting the developments happening in our industry, real estate professionals can position themselves for success in a new marketplace. Though your role in the closing process may look different over time, remember that the value you provide to consumers is irreplaceable. 

Ashley Sadler is business and compliance strategist with CATIC, East Providence, R.I.

1. National Association of Realtors. 2018 Home Buyer and Seller Generational Trends Study. https://www.housingwire.com/articles/42748-millennials-lead-all-other-generations-in-buying-homes 

2. Consumer Financial Protection Bureau. Leveraging technology to empower mortgage consumers at closing: Learnings from the eClosing pilot. August 2015.

3. Electronic Signatures in Global and National Commerce Act, 15 U.S.C. 96, et seq.

4. The states that have passed legislation permitting remote online notarization are: Texas, Nevada, Indiana, Tennessee, Minnesota, Vermont, and Michigan.

5. Ellie Mae. Homeowners Seeking Both a High-tech and Human-touch Mortgage Experience, Ellie Mae 2017 Borrower Insights Survey Finds. https://www.elliemae.com/about/news-reports/press-releases/homeowners-seeking-both-a-high-tech-and-human-touch-mortgage-experience-ellie-mae-2017-borrower-insights-survey-finds