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From home searches to purchase contracts and loan applications, many aspects of a modern real estate transaction are now conducted electronically and online. But until recently, the actual closing has remained a stubbornly paper process in an increasingly digital world. Over the past several years, with the rapid expansion of remote online notarization, fully online digital closings have arrived.
Online closings can turn the most cumbersome part of a real estate transaction into a client-friendly online meeting that clients can complete from anywhere. They also dramatically reduce post-closing processing times, speeding up final fund transfers and commission payments.
While online closings will soon be a key part of every practitioner’s toolkit, they’re not yet available in every state, and most underwriters require use of approved online notarization platforms. Here’s an overview of how they work:
What are the major steps in a remote online closing? Documents are prepared by the title company and uploaded to an online remote notarization platform. Buyers and sellers can log on and review the documents and discuss any questions with their agent and others. When ready, signers return to the platform and connect with an online notary. Agents and others can connect in, too. Signers electronically sign and the notary electronically notarizes each document as required. As a security measure, each completed document is then “tamper sealed.”
To deter identity fraud, each signer’s identity is validated to a much higher standard than in a traditional paper-based notarization, using -database-driven tools such as knowledge-based authentication and software-based analysis of the client’s photo ID. In addition, the audio-video session is recorded. Encrypted data records of the transaction are maintained for the periods specified in law or applicable contracts.
The key feature of remote notarization is that while the notary must be commissioned and physically located in a state that authorizes its notaries to use online tools, the property and signer can be in another state.
Where are online closings available?
Virginia, Florida, Texas, Ohio, Michigan, Minnesota, Arizona, and Utah, among other states, have enacted laws authorizing their remote notarization, and legislation has been introduced in about 15 other states. But in the real estate context, two other factors can affect whether you can use remote notarization to close your transaction: title insurance underwriter guidelines and e-recording rules in the county where the property is located. Online real estate closings currently can be completed in more than 35 states, with the list expanding regularly. Check with one of the leading national remote notarization platforms, including notarize.com (where I work), to see if your state is on the list and to ensure that your online notarization platform has been approved by your underwriter.
What about cost?
Online closings require a computer or mobile device with a camera and an internet connection. The per-transaction cost is about the same as a mobile notary: roughly $75 to $150 or so depending on the complexity of the transaction.
When will I still use paper notarization?
Traditional notarization isn’t disappearing yet. A client may prefer paper or may not have access to internet service. Or the property may be in a county that doesn’t yet accept electronic records for recording purposes. Even in those cases, you can benefit from partially online closings, called “hybrid” closings, where many key documents are reviewed and signed by the client online, while a subset of documents is ink-signed in front of a traditional notary.
