Real estate closings and COVID-19. Electronic signatures and remote online notaries could assist with closings during the coronavirus pandemic if the system adapts.
Q: I’m in the process of closing on the sale of a home. I was able to do all the document review electronically, but as the settlement approaches (in a few days), I just had to leave our self-quarantined status to find a notary to have the many required signatures in the closing package notarized. Have you seen changes in industry practices that address this issue?
Real Estate Closings and COVID-19
A: Great question. The current situation with novel coronavirus COVID-19 has brought substantial change and disruption to the real estate industry. Some are for the better, while others are not. One thing that’s better is that all Fannie Mae and Freddie Mac-backed loans are now eligible for forbearance (contact your lender for details). On the other hand, nearly one-third of all renters failed to pay their landlords this month.
Let’s begin with a discussion of the paper documents you sign as a seller. By far, the most important document a seller signs is the deed that transfers title to the property from the current owner to the buyer.
You need some form of a written document to transfer your ownership of the home to a buyer. The document may be called by one of many names: warranty deed, special warranty deed, quitclaim deed, limited warranty deed, trustee’s deed, among many. Historically, the seller had to physically sign the document and a notary had to witness the seller sign it. The seller’s and the notary’s signature would be “wet signatures.” A wet signature is the old fashioned way of signing a document.
Electronic Signatures and Remote Online Notarization
Today, there are some states that accept electronic signatures and remote online notarization. This means that you could sit at home in front of a computer that has a microphone and camera, and electronically sign your sale documents before a notary. The notary will actually be elsewhere but through a secure electronic program, the notary can see you while you electronically sign the documents, verify your identity and identification and keep an electronic record of you signing your documents.
Sounds great, right? Well it appears that you live in a state where this system is not in place and your wet signature is still required for your sale documents. So, you have to sign the physical documents before a notary and then send those documents to your attorney, the settlement agent or title company.
Challenges for Remote Online Notarization
For remote online notarization to work, you need a system that can make sure you are who you say you are and have actually signed the documents to avoid fraud in the transaction. Remote online notarization companies today have a system in place that allows them to view the person signing the documents, review government identifications to ensure the person that is signing is who that person says they are and the system archives the video and exchange of documents for proper recordkeeping.
The second issue is that your government offices must be willing to accept electronic signatures. When you sign a document before an online notary, you are electronically signing the documents. Many recorders of deeds and courthouses require original documents with original wet signatures.
The third obstacle in the system is lenders that may require original documents and wet signatures on all documents. Lastly, some state laws require wet signatures on certain types of documents and courts may require wet signatures on documents before granting a judgement on a case.
Real Estate Systems and Closings in 2020
If you want real estate to get back to business in the age of coronavirus, the system needs to change. State legislatures need to pass laws allowing remote online notarization of documents, people and companies must be willing to accept electronic signatures, and government offices must be willing to accept not only electronic signatures but remote online notarization of documents. Lastly, you need mortgage lenders and Fannie Mae and Freddie Mac to step in and say that they too would accept electronic signatures and remote online notarization of documents.
You should know that the price to have an online notary take care of your closing documents runs around $100. As competition in the space increases, prices for these services may drop. But in any event, with the current stay at home orders, it would be helpful if sellers could sign their documents electronically, have the settlement agents accept those documents and allow closings to proceed with a verifiable and secure system.
We hope that the current market problems allow for an expedited review of the process by all of the big players in the real estate industry and allow progress in this area. Thanks for your question.