Digital documentation makes many parts of life easier. Most Internet users use technology to pay bills online and get electronic receipts. Many workers are paid electronically. The Social Security Administration has been paying recipients online for years. And now... the evolution of digital closings.
Now, the real estate industry is beginning to benefit from digital transactions. Buyers can apply for mortgages online. Now, new laws and new software are making handling mortgage loan closing and real estate closings possible online.
Traditional real estate closings
In a traditional real estate closing, all the following people need to be in the same room at the same time.
- The buyer
- The seller
- The broker for the buyer
- The broker for the seller
- The lawyer for the buyer
- The lawyer for the seller
- The title company clerk
- A notary
Buyers go to the closing where, if all goes well, they’ll get a set of keys to the home or building. Sellers got to the closing expecting to get a check.
During the closing process:
- The buyer signs a stack of paperwork, after reviewing each document with their lawyer. These documents include the promissory note, the loan application (if it hasn’t already been signed, numerous regulatory documents, the mortgage documents, other documents, and finally the settlement sheet.
- The seller will sign the settlement sheet and possibly other papers so the title can be cleared.
- Any open issues such as funds that need to be placed in escrow for repairs will be reviewed between the clients and their Vero Beach and Sebastian Florida real estate lawyers.
In-person traditional closings have been mandatory until recently - to verify the buyers and sellers and to verify their signatures. Additionally, a notary must personally observe and verify the signatures in a traditional closing.
How digital closings work
Digital closings are also called e-closings. They are meant to make the closing process faster by handling much or all the paperwork through a secure online portal and through software that all the participants use.
The main advantage of a digital closing is that buyers and sellers don’t need to be present at the title company site. They can sign the paperwork by going to their individual lawyer’s offices and use their software. This means there’s no need to adjust everyone’s schedules. There’s no need to lose half or a whole day from work. There’s no need to travel.
Digital closings are especially ideal for Florida sales because often the buyer is from another state or even another country. Likewise, many sellers put their property on their market so they can move to a different state or country.
Why choose Lulich Attorneys and Consultants
Our Florida real estate lawyers have the necessary software for clients and for all the parties to the closing to use. At Lulich Attorneys and Consultants, we’ve pre-determined which software works best for the needs of our clients. We’ve trained our staff on proper usage.
Typically, the digital part of the closing requires several key parts
- A software process such as DocuSign so that the buyer, seller, and any other parties can sign the paperwork electronically.
- Videoconferencing software, such as FaceTime, so that the identity of the parties can be verified and so that the parties can interact with others at the same time.
- A software process to allow the notary to see that the buyers and sellers are signing their documents and so that the notary can also notarize the necessary items. Generally, the notary is present during the e-closing.
Additional advantages of a digital closing
Some of the added benefits of an e-closing are:
- Savings on photocopying
- Savings on mailing and shipping documents
- Avoiding the need for storage fees because most everything can be stored in the cloud or a computer database
Types of closings
There are three main types of digital closings
- The first is the traditional closing
- The second is the digital closing
- The third is called a hybrid closing. In the hybrid process, there’s a mix of both paper and electronics. Some documents, like the mortgage security interest and the promissory note, are signed by the buyer in person in pen (called a wet-signing). Even here, the buyer can usually sign the papers at his/her convenience – instead of arranging a time to sign when the seller is present.
How the traditional closing compares to the digital closing
The main difference between a digital closing and a traditional closing is the need to arrange a physical meeting of the buyer, the seller, the lawyers, the brokers, and the title company. Now, each of the parties can sign on to the software at a lawyer’s office, for example, at their own convenience. They can also access our law office’s software, for example, through their own computer desktop, smartphone, or tablet.
Advantages of an e-closing
The main advantage is that everyone has more control over their time. In most cases, the technology requirements are minimal. A digital closing is cost-effective in many ways.
Digital closings often are better at checking for missing signatures and missing documents.
Disadvantages of an e-closing
For some buyers and sellers, there can be a technology barrier. That’s why law offices like ours offer technology to our clients and title companies, lenders, and banks.
Some buyers and sellers may be more inclined to rush through the process instead of taking the time to review their documents. That’s why it’s important to work with a Florida attorney who will review each document with you.
Until recently, Florida did not allow notaries to notarize documents online. A new law now allows online notary documentation – effective January 1, 2019.
If closing is with a buyer or seller in another state, that state must also allow online notary signings. Many states are moving to legalize the use of an online notary. So far, about half of the US states permit notaries to do their work online.
Currently, Fannie Mae lenders generally do approve digital closings. In some cases, prior approval must be obtained.
To understand more about how digital real estate closings work and how they save you a lot of time, please contact our office. We’re ready to answer all your questions.