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E-Sign on the Dotted Line

By NAR 2013 Vice President Leslie Rouda Smith

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!

Comments
  1. The economy and real estate are artificial. We will see a significant drop in housing and the stock market around 2015. Make sure you invest carefully, buy real estate frugally and taking advantage of the mortgage debt forgiveness act while it is still here. It may not be in the next 18- 24 months. Now is the time to settle your second mortgage or short sale your home.

    Click the link to find out more http://babilaw.com/shortsale/

  2. Colin Mullane

    Thank you for sharing this update Leslie, this is a significant issue right now in understanding which sellers/institutions will accept digital signatures. It’s not helpful to go thought the process only to have you clients have to re-sign with wet signatures and perhaps missing the opportunity on that sale with the resulting delay. I hope there is a good resolution to this soon, as digital signatures are undoubtedly the wave of the future.

  3. In all honesty this is an excellent detailed article nevertheless as with all wonderful freelance writers there are many points that may be labored after. But in no way your less it had been exciting.

  4. Thank you Leslie for this uodate and hope the acceptance of e-signature by all parties involved in real estate transactions become a reality soon. This not only helps the REO and short sale transactions, it also helps a lot for those clients that are out-of-town or not readily available all the time.

  5. bottom line….are we moving forward?…..you got me excited about your blog ONLY to be disappointed that “there was a meeting”….big deal…I want to hear something was actually accomplished! People in Washington can meet all day long without accomplishing anything! Come on now!

  6. I’ve been using Docusign for about 5 years.
    Banks will not accept electronic signatures from the buyer but sends an addendum that the buyer must accept digital signitures from the Bank/Seller.

  7. Margie

    Leslie, thank you so much for bringing this to light! Fax machines and wet-ink signatures are a thing of the past! E-signatures are certainly more secure and can be password protected when sending the documents and you get a certificate of proof that even shows the IP address of the computer it was signed on….you dont know who is really signing on the other end of a fax machine.

    Yes, Short Sales and Foreclosures are still a big percentage of Sales and Banks Need to get on Board with E-Signatures! If NAR and the Real Estate Boards across the country are on Board, we should be able to use it.

  8. If each lender simply adopted the BofA model of triple authentication and a wet signed disclosure the industry as a whole would make more headway with this issue. Its always a concern with fraud and this puts that issue to rest. Docusign offers this authentication and I use it 100% of the time with my clients.

    Leslie thank you for a great article.

  9. Leonard Rowe

    Although electronic signatures seem to be an more efficent way to work there are far to many REO listing contracts and other REO electronic contracts and web sites that are already using this process to commit a user into a “no comments, questions or addendum to that contract” It promotes a take it or leave it document, that in many cases are in conflict with State Real Estate Law.

  10. I started using Authentisign about a year ago, and the first client I used it with was selling her parent’s condo in a seniors community in Nashville after they had moved to assisted living. She lived in rural Colorado, off the grid, where all of her power was supplied by wind or solar. She only turned on her computer once a day to check her email, so when I had a document I needed her to sign, I would email it to her and text her to let her know it was there. She then would logon, esign, and the document would return to me. The ease with which this transaction was facilitated by this technique made me a firm advocate of this technology. I now use it on all transactions. My clients also love it, as they can sign docs using their smartphones..

  11. Jim

    I all but gave up on digital signatures last year since nearly 80% of my transactions were short sales or REO’s. I got tired of listing agents or the lenders kicking contracts back for wet signatures and just decided to send wet signatures in the first place.

    That being said, our market here in San Diego has turned and is improving. A majority of our sales are now regular equity sales and I am back to using digital signatures. If we can get all the banks on board it would make things a lot easier, but in my humble opinion, the banks really don’t care about making anything easy for us.

  12. matt nelson

    Not much info here

  13. BD

    I don’t think they were really inviting your advertising and hijack of the article Babi.

  14. dennis

    This discussion does not look at the big picture of why Realtors enter into contracts. Legitimate signatures can be done as speedy and with the same flexibility, if a real estate agent carries a portable printer/scanner, the cost of these items are not enough to even be involved in the discussion. There is no way to ratify a contract when the original password protected electronic signature is in place with out removing the password protection or printing out the contract. In order to ratify a contract the Benefits of Security of the electronic signature have to be removed and what is left over is worse than an image of a legitimate wet ink signature. Again as Realtors we need to look at the whole picture. Not just one group trying to promote their agenda!

  15. Were there any outcomes to this summit?

    It sounds like other than dialog, nothing has moved forward and nothing concrete is on the horizon that will increase acceptance of e-signatures…

  16. Karyn Davidson

    I use the accepted Docusign documents. They are as legal as wet signed documents. They are individually protected by password. Only the signer knows their own password, which is more legal than fax delivery & safer than mail.
    I am hoping that Government Insured Loans will soon comply with the Real Estate Industry & adopt this timely and accurate method of signature.
    Karyn Davidson
    Remax Thousand Lakes
    Grand Rapids, MN 55744
    218-244-6143

  17. I am happy to hear about the summit Leslie. I have been using the e-signature through Dotloop since they began and customers really love the freedom it gives them to sign documents at work, at home or on the go. Colin is absolutely right though..many times the lending institutions and their investors will refuse them and create multiple work for all of us!

    E-signature capability is the future and has already been a big “game-changer” for my business. Increasing the service levels and speed of the transaction is one of the things which will make us all more productive in our own businesses…and as a country.

    Godspeed to a uniform platform and acceptance!!!

    Darren Burke
    Cleveland Ohio

  18. Perhaps Fannie Mae, Freddie Mac, HUD and Shortsale loan servicers do not want to embrace electronic signatures because it removes their options to take their absurd time and always have the ball in their court. The day will come though and at some point common sense and technology will prevail.

  19. Hello. I recently ran into a situation where an Auction house did things electronically (even though their inhouse administative is a MESS). No sooner did we “hurry up and sign” all the paperwork that they insisted we get back to them within 24 hours, they then turned around an told us, “Oops! BOA doesn’t accept e-signatures. So, we were back to having to resign everything. My business partner and I live an hour apart from one another. Needless to say, e-signing is the way to go. It’s one of the big reasons I chose KW as the place to hang my license. They are totally paperless and are big proponents of e-signing whenever possible. I’m a new agent and still learning the system, but loving it thus far!! Thank you for the information!
    Sheila

  20. Leslie, I’m happy to know this is being discussed at the highest levels. I use electronic signatures when necessary and when possible, but to be honest, I do not see how they are safer than wet signatures. For example, when I have to use the same email address for both husband and wife to sign electronically, how do I know that each of them have done it, not just one of them signing for both? Or, even worse, if the other party doesn’t have an email address so I email the docs to their agent, how do I know the party is even aware of the documents? I can guess that these are some of Fannie and Freddie’s issues. Where is the current thinking going on signature security?

  21. Thanks for the encouraging info.

    Bank of America Short Sale dept has SAID they are ok with Esign. and have forms galore to fill-out if you want to do business electronically… however, every time I submit a short sale package in DocuSign, they reject it. I am yet to get a SS lender to allow Esignatures, very frustrating. It would greatly reduce the processing time frame if they would all catch up to today’s technology. Also, all lenders are requiring Wet Ink on FHA transactions… the ones I have dealt with anyway.

  22. I’ve used electronic signatures – primarily Docusign due to the safeguards it has – for many years now. The process seems to be so much safer than wet signatures – and you cannot beat the documentation of who signed what when. The only possible objection is the safety of the signature – but trillions of dollars of financial transactions are processed electronically every year safeguarded only by passwords and other IT security measures, so I cannot treat such an objection with credibility. Protection from alteration of documents is sublime in an electronic signature world. People poorly understand what may or may not qualify (i.e. does a signature on a tablet with a finger count as much as one via Docusign) – and that hurts acceptance I believe. Settlement procedures need to be updated as well – physical in person signing hasn’t prevented fraud so far – so that should not be an obstacle. The biggest problem seems to be lawyers – they are all so afraid of something they don’t understand – there needs to be education and direction to the legal profession.

  23. JohnCap

    Yes, John, the sky is falling, the sky is falling. What exactly do your comments have to do with electronic signatures?

  24. JohnCap

    The barriers to electronic signatures are simply a four letter word: bank. It’s okay for THEM to sign electronically, but not us or our clients.

  25. For years, offers for HUD-owned homes have required original signatures in blue ink. Not only is it a pain but it’s expensive. I could buy a small car with the FedEx fees I’ve spent. This is ridiculous! This is needs to be changed immediately. Come on, it’s 2013. :)

  26. Mary Jamison

    I am experiencing this at this very moment on a short sale. Had to go back and get the listing agreement wet signed! Had a full price offer the first day of listing and had to wait to get all signatures back! However I would like to see another measure of security on e-signed docs, seems anyone’s email address you add could e sign anything!

  27. I direct broker for Fannie Mae and electronic signatures are acceptable. We do all our contracts through a secure website, http://www.homepath.com. I see this as a wave of the future. Documents are directly downloaded from the site, can be filled in on the site by the buyer’s agent, and signed by the buyer client very easily and securely. This is a large time saving vehicle. All local associations need to offer this training to their members and support this transition. Our local board just did away with printed contracts so we have to download all our forms now through the web. The NAR can help the body by supporting and encouraging the local boards to train their members. Small “boutique” companies such as mine will be left in the “dust” if we don’t begin to offer this as a service to our clients. Our business has seen massive changes since the days of the dial up modem, and the printed MLS books we picked up once a week at our local boards! We need to keep up with the swift moving current of change which is our business and embrace what technology is offering.

  28. EManuel Alvarez-Sandoval

    Thank you for the new information.

  29. Gary

    What are the objections? What has to be done to overcome the objections?

  30. Since I was introduced to one of the digital products endorsed by my board nearly six months ago, I now ask myself How did I do without this product. Now if we can get Fannie and the other banks on board, life will be so much easier. I have been able to reduce the amount of paper I print onto, also, ink now last longer, so overall I am saving money and making the process seamless.

  31. We have used DocuSign for 6 months and in our market where many properties are getting multiple offers and selling as soon as they come on the market, being able to use electronic signatures is a HUGE strategic advanatage to allow you to submit offers faster than others.

  32. I understand even the military is using electronic signatures these days. I hope we can get this done!

  33. Paula J. Miller

    Thank you Leslie for your continual work to make our jobs easier. I use electronic signing and was so dismayed when Fannie and Freddie would not accept it. I am happy to report that shortly before Christmas, as i was working on a foreclosure sale, we were notified that electronic signing would be accepted. It is an invaluable tool to keep the transaction neat and clean and to avoid the constant printing and reprinting of documents that diminish the quality of the document and force the client to be available at a fax or scanner. The signing is proprietary and comes back with a certificate of authenticity which can be saved and sent onto all parties along with the documents. I love it! and I am so happy NAR is fighting for it’s continual use!

  34. Ariadne Henry

    What do you say to buyers/sellers who are uncomfortable with e-signatures and won’t agree to use tham in a contract? What concrete reassurance/evidence can you give them that the e-sig of the other party is authentic?

  35. Paul Leiser

    Are you aware that credit card companies still do not recognize electronic signatures as being valid and legal for leases or rental agreements, and will charge back to the merchant (Realtor) a valid rental payment made by the tenant on his credit card, if the tenant complains to the credit card company, even after the term of the lease has passed?

    This needs to be addressed quickly!

  36. What amazes me is that most bank won’t accept an electronic signature for a foreclosed property, and then you get forms back from the back that were electronically signed by them.

  37. Manya Medrala

    I have experienced problems with both Wells Fargo and Bank of America on this point.
    The other most concerning point is authencity of signer. How many times has there been people especially in divorce cases playing the other party at settlement.
    We need to be very careful as it is hard to undue…costing more to undue mistakes
    than it is worth the trouble.

  38. Bobby Lovelace

    What were the objections to using e-signatures?

  39. It amazes me how most Realtors, on this or other blogs, talk about speed, ease, less to do etc while no one mentions the process that must be followed in order to insure that the transaction is sound and we protect our clients. First: do we have the necessary documentation in place fully executed by all parties saying that e-signatures are accepted? Second: is there a third party (notary?) that can attest, if the contract is challenged by either party, that the e-signatures are the ones of the parties and that everything in that contract reflects what the parties agreed to at the time of the e-signatures? Finally, was it in a PDF format? This is just a quick recap; however, it would be so nice to have NAR give more details for all to follow!

  40. I am seriously opposed to electronic signatures. Once that incorrect signature is out on the ether, you can’t pull it back. How do you prove which signature is correct when you are in a court of law fighting a forgery charge or identify theft? Why put yourself and your assets at risk by signing these electronic signatures, just to cause greater convenience to those who are not at risk by this request of you? We got along fine with wet signatures or faxed signatures or scanned signatures. Don’t take the risk. This is from a person who has been fighting a forgery battle on my signature for yrs at significant cost in legal fees and aggravation.
    I refuse to sign electronically & I warn my clients not to put themselves at risk.

  41. We have been using these for years and every once in a while come across a client that is very wary. It’s back to the drawing board but I appreciate the determination that the NAR is demonstrating on making this the norm and setting minds at ease.

  42. George Chaney

    I think e-signatures are very helpful, saving time, money, fuel, convenience and probably many other benefits as well.

  43. It is incomprehansible that GSE’s and even HUD, a department of the same government that passed the Esign Act of 2000 can’t get with the program. It’s been the law for 13 years for crying out loud.

  44. Not all eSignatures are equally verifiable. I hate to see the use of “font” (typeface) signatures instead of people signing with their mouse by hand or finger. Would you like to be able to buy a computer at Best Buy and, instead of signing with a stylus, click on a box and have your name appear in some script typeface? How verifiable is that? So why are we letting people choose a type font for their name to appear in a signature box for the biggest purchase of their lives? Make them sign with their hand or finger. How lazy are we that we don’t ask for that effort? It may be ugly and dissimilar from your pen & ink signature, but YOU did it, and no one else could come close to that scrawl! I can imagine people denying a typeface signature after the fact and saying their spouse or their agent clicked on that font, they didn’t. How would you prove them wrong?

  45. I have used dot loop but have found an issue with other realtors not using it and having issures there are a few quirks in dot loop mostly to prevent fraud. Wish more agents, banks and businesses would get on line with e-signitures. My clients have thought it was great. I have an Estate and brother and sister are in two different states they have had a few times it would not let them sign but we got it figured out and I sent them the help line number. I am new to it so some of the issues are due to my lack of knowledge. But all in all it should be used more and signitures should be accepted.

  46. I see this as a wave of the future. Documents are directly downloaded from the site, can be filled in on the site by the buyer’s agent, and signed by the buyer client very easily and securely. That sounds great :)

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