Michael Russer, a.k.a. Mr. Internet®, is CEO of Russer Communications. He is a leading speaker and author in the real estate industry and has been writing about Internet marketing and virtual outsourcing since the dawn of the commercial Internet.
Finally, e-Closings More Than a Pipe Dream
The pieces are in place for paperless transactions to go mainstream. But in order for it to catch on, all parties on the transaction must be on board.
November 1, 2006
Imagine your buyers’ delight — not to mention yours — when they spend less than 15 minutes at the closing table and have to sign only once. Sound like science fiction? Well, it happened in June for a client of Stephanie Evelo of The Evelo Team at RE/MAX Advanced Teams in Indianapolis. “Our team couldn’t believe just how easy and quick the whole closing process was,” she says.
Evelo’s closing was completed using eClosingRoom, a product of Stewart Transaction Solutions of Houston. The company says 15 minutes is an average for an electronic closing and the cost to the consumer is the same as a traditional closing.
How Paperless Transactions Work
The most critical element in making a paperless transaction possible is a secure online transaction coordination and closing system that allows practitioners, lenders, and title company representatives to store legally binding documents, including all title, deed, and loan instruments, in digital form. In addition, the system must allow the parties to the transaction to review and approve these documents through a secure password-protected Web site well in advance of the closing.
A digital transaction management system also should allow the buyer and seller to affix a signature or its equivalent through an electronic pad or other method. It’s also vital that once a document is signed, the system automatically encrypts it so that it can’t be altered.
Several companies, including Stewart, First American Residential Corp. (Transaction Manager), SettlementRoom, and Real Estate Business Technology (Relay), which is owned by NAR, provide real estate practitioners with a way to digitize actual signatures on the Web, although only Stewart currently allows for paperless closings.
Another e-signature option is ZipForm’s Esign. This program allows clients to “sign” a document by using an electronic signature stamp authorized by the signer. ZipForm products integrate with the Relay transaction management system. Other TM programs also can be linked to third-party providers of electronic signature software, including the U.S. Postal Service, says First American’s Senior Technology Officer Chip McAvoy.
Stewart Title’s transaction management system SureClose, of which eClosingRoom is a component, is part of the package of services the company uses in closings, so costs are negotiated between the parties. The costs for the other TM programs vary. Brokerages can also license Stewart’s software for use at their own title companies on a sliding scale of $15 to $5 per transaction, says Travis Wright, president of Stewart Transaction Solutions.
Relay, which is designed to allow brokers to manage documents online, but which doesn’t have an e-signature component, is priced at $149 per agent per year for REALTOR® members.
Everyone Must Be On Board
A secure online process for document storage and manipulation will work only if you get all transaction participants — including lenders — to buy into this digital domain. In the case of Stephanie Evelo’s deal, the forward-looking lender was David Richey, co-owner of First Republic Mortgage Corp. in Indianapolis. Richey spearheaded the idea that both his company and Fannie Mae, which buys First Republic’s loans, participate in an e-closing.
With online transactions loan documents can be stored in a secure online vault and then accessed easily by the secondary mortgage buyer, so there’s no need to print, scan, or store reams of paper. Online document access also decreases the likelihood that the loan package will be incomplete, says Richey. “These savings could translate into lower loan rates and fees to the buyer because we don’t have to lock in the rate for as long,” he adds.
So where’s the downside? The biggest problem now is how long it may take before electronic closing will be available in your area. According to Stewart Title District Manager Tom Fickle, “Regional differences in the way closings are conducted and in the real estate terminology used are the main factors in slowing widespread adoption. In addition, an e-closing requires lenders, recorders, and notaries who can accept secure digitally signed documents. This acceptance will take time to extend across the country.”
Although e-closings may not be widely available just yet, they’re coming. The benefits to all the parties involved are just too great to stop this innovation train.