The Growing Need for Electronic Signatures and Remote Online Notarization in Real Estate
Q: I’m in the process of closing on the sale of a home. I was able to do the document review electronically, but I had to leave our self-quarantined status to have the many required signatures in the closing package notarized. Have you seen changes in industry practices that address this issue?
A: The situation with the coronavirus pandemic has brought substantial disruption to the real estate industry. One change to help borrowers is that all Fannie Mae- and Freddie Mac-backed loans are now eligible for forbearance (contact your lender for details). On the other hand, the number of people paying rent in March slipped 12 percent, according to the National Multifamily Housing Council.
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, including warranty deed, special warranty deed, quitclaim deed, limited warranty deed and trustee’s deed. 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 signatures would be “wet” signatures, the old-fashioned way of signing a document.
Today, there are some states that accept electronic signatures and remote online notarization for real estate transactions and the recording or filing of documents. 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 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.
But it sounds like 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 the title company.
For remote online notarization to work, and to avoid fraud in a transaction, you need a system that can make sure you are who you say you are and that you have signed the documents. Remote online notarization companies today have a system that allows them to view the person signing the documents and to review government identifications to ensure the person signing is who he or she claims to be. The system also archives the video and exchange of documents for proper record keeping.
For the system to work, 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.
Some lenders may require original documents and wet signatures on all documents. Additionally, 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.
If we want real estate to get back to business in the age of the 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 also remote online notarization of documents. Also, we 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.
But 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 all the big players in the real estate industry to expedite a review of the process and seek progress for buyers and sellers. For more information about how to stay in the now with RON, please feel free to call FRONA or visit our website https://www.frona.org