The Future’s So Bright, I Gotta Wear Shades - What are eClosings?

by Heather James

With all fondness for our industry, we admit real estate is notorious for moving slowly. While everyone else was going digital, we were happily chugging along in the analog world. Now that all those early adopters are up in the cloud, most real estate closing platforms are still server-based and limited in their ability to transition and grow. 

Some people in the industry are content with the status quo, but at Cook & James, we enthusiastically embrace new technology because we know this bright future can benefit us and our clients. Today I continue the mini-series about tech: last time we discussed Blockchain, here, we’ll talk about eClosings. Subsequent posts will cover eNotes, eVaults and eNotaries. So, get your eye protection ready, the future’s so bright, we’re gonna need shades!

What are eClosings?

Just like Apple has cornered the market on “i” with the iPhone, iPad, iTunes and iWatch, today’s real estate pros are tagging the “e” prefix onto a plethora of words to signify the move towards electronic transactions. The train has definitely left the station for the Land of “e” and people need to get on board because it is fast approaching a state near you!

I’ll interpret some of the basic definitions and practices here about the four kinds of closings in today’s real estate arena: the traditional closing, the hybrid closing, the eClosing and the remote closing. Each has distinct differences and which kind you’ll use depends on the laws of your jurisdiction. You typically can’t simply select any preference.

We all know about the traditional closing because this is how it has been done since...well, since forever. All parties come to the closing table and “wet” sign the documents in person with an actual ink pen and paper. Cue the hand cramps and bad penmanship! A hybrid closing is when the parties still come together for the signing, but a portion of that signing is done via electronic signature, including the eNote. The only documents that are wet signed are those requiring notarization.

An eClosing goes a step further from the hybrid closing. While the parties still must meet face to face for an eClosing, all the documents are signed electronically, even those that must be notarized. The recording of the documents happens electronically as well.  A remote closing is the most drastic departure from a traditional closing.  In this scenario, the parties are able to meet virtually on their own personal devices and documents are all electronically signed, notarized and then recorded.  Your attorney, real estate agent and loan officer will all be there.  It’s like an eHug.

The future’s getting bright; better get those shades ready!

As of earlier this year, only two states -- Virginia and Montana -- allowed remote closings. Texas and Nevada enacted laws that went into effect this summer -- July 1, 2018 – bringing the number of states to four that allow remote closings. Ten other state legislatures and the District of Columbia are considering or have pending bills to allow online notaries to perform notarizations across the U.S. and/or anywhere in the world.  Minnesota and DC have bills pending that would restrict remote notarization to signers outside of the United States only. Florida, Indiana, Kentucky, Nebraska, Oklahoma, Pennsylvania, South Dakota and Tennessee have legislation that would allow remote notaries anywhere in the world.

What are the Benefits of eClosings?

There are a variety of perks of eClosings over traditional ones. Errors are reduced, because the eClosing system will not allow the transaction to conclude until each and every one of those pesky i’s are dotted. In many cases, consumers have more time to look over the documents because they’re typically completed for review prior to the signing appointment. Additionally, there’s an educational component to eClosings since there are plentiful hyperlinks to click through to learn definitions and explain any unfamiliar lingo.

Most importantly, eClosings are incredibly secure. Identity theft and wire fraud have become huge issues - heck, we’ve done not one, but two blogs on the topic - but research continues to show that the eClosings provide significantly more protection against cyber threats than their traditional counterparts.

Really? More Secure?

I know what you’re thinking… “Come again? How can an electronic closing be more secure than one where I physically sign the paperwork? I’m worried hackers can see all that stuff up there in ‘the cloud.’”

Well, I’m glad you asked! The leading companies that facilitate eClosings -- like our preferred partner, Pavaso - do a comprehensive job of confirming identification before they allow a closing to commence, much less complete.

In addition to the standard driver’s license check, multiple levels of verification add protection including email/text authentication threads and knowledge-based authentication. With knowledge-based questions, in addition to a portion of your date of birth or social security number, the software asks a series of questions that only the real you should be able to answer. These are prompts from your personal life that come from a credit or background report like what car did you own in 1997, the address at which you lived in 2006 or which states have you not lived in.

With more and more legislation passing in favor of eClosings and the added benefit of extra security I can confidently say our industry is becoming firmly planted in the Land of “e.” That’s not to say we have 100% evolved.  Practitioners will need to know and understand the availability of eClosings or remote closings in their jurisdiction to better offer products and serve the needs of consumers. 

As real estate professionals and leaders, we need to continue to be vigilant and keep our eyes open for new and improved products, options and procedures as they become tested and vetted.  At Cook & James we will never stop looking and learning. It’s getting really bright out here.

Next up in this mini-series on tech will be blogs about eNotaries followed by eNotes and eVaults and why those terms are so important to the lenders. Feel free to email us any comments, suggestions or questions. We love to hear from our pals in the industry!