Before the year 1500, real estate transactions were sealed by “livery of seisin”—the ceremony surrounding conveyance of a property. Closing the deal required the physical transfer of a piece of ground, twig, key, or other symbol on the premises in the presence of witnesses.
Following that custom, paper became the modus operandi and the wet ink signature has been the standard for more than 500 years.
That is until now—the era of technology—when electronic signatures promise easier, speedier, safer transactions for REALTORS® and consumers.
Congress tried to help this along by passing the ESIGN Act of 2000. Its purpose was to support and promote electronic commerce through the use of electronic records and signatures by ensuring the validity and legality of contracts entered into electronically, while preserving consumer protection laws.
Since then, electronic signatures have become much more widely accepted by most financial and lending institutions. E-vendor DocuSign reports 65,000 new users per day (not just in real estate) and expects that number to be one per second by the end of the year. ZipLogix is reporting a 102 percent increase in 2012.
Yet, despite huge growth, many REALTORS® continue to experience problems submitting forms with electronic signatures to servicers of Fannie Mae and Freddie Mac loans, particularly relating to short sales and Real Estate Owned, or REO, properties.
In markets where distressed properties are emerging as the dominant share of the market, completing a transaction under threat of possible default or foreclosure is not unusual. In these instances, the speed and flexibility provided by electronic documents is critical.
I recently took part in a summit, hosted by NAR in Washington, DC, to examine obstacles to increased acceptance of electronic signatures. The meeting brought representatives from government, banking, lending, real estate, and electronic signature providers together for an open discussion.
It was a great opportunity to exchange ideas, and our goals moving forward are twofold. One is to enact government policies that will facilitate implementation of the ESIGN Act. The other is to continue the dialog among all sectors to promote examples of best practices and find additional strategies for eliminating obstacles to full acceptance of E-signatures.
In addition to hosting the summit, NAR has also requested the Acting Director of the Federal Housing Finance Agency, Ed DeMarco to clarify and align Fannie Mae and Freddie Mac’s policies on the broad acceptance of electronic signatures.
The ability to reduce records and documents to digital form and transfer them electronically, when coupled with the Internet, is transforming the commercial world in general, including the real estate world. Not only have electronic sources provided better data faster, but they are an indicator of the need to reduce all documents to digital form.
We believe that, if done correctly, E-signatures can do more than ease transactions. They also offer greater protection against fraud than traditional wet ink signatures.
We’ve come a long way from exchanging dirt and twigs. There is no doubt that electronic signatures are the wave of the future. Catch the wave!