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Don’t Expect a Complete Digital Home Closing Just Yet

This piece originally appeared in the July 2022 edition of MReport magazine, online now.

The pandemic did result in one silver lining: the widespread adoption of technology. Anyone can order food delivery in seconds, buy a car with a click of a button, or pay your taxes in the comfort of your own home.

However, as with any industry, change is hard no matter how positive the result may be. Technology, though, has become the one constant that has staying power, and there’s no going back.

This is true for the housing industry, too. The pandemic forced a major uptick in technology adoption, notably because of emergency use authorizations that made buying or refinancing a home easier and faster—and it’s starting to translate into permanent change. For example, the Federal Housing Finance Agency (FHFA) and Government-Sponsored Enterprises (GSEs) granted temporary desktop appraisals during the pandemic, and this has officially become a permanent option for new home loans. Ultimately, this means that instead of a physical person coming to a home to inspect the ins-and-outs to determine value, eligible appraisals are completed remotely “at the desk,” using available third-party data such as number of rooms, size, or comparable neighborhood statistics.

Soon we will forget what it was like to have a physical appraiser take a walking tour of our future home. Desktop appraisals will be a preferred alternative and something that future homeowners cannot live without—there’s no going back.

While the appraisal process embraced change, technology’s staying power does not hold true for the entire closing process just yet. For one, digitization of the homebuying process still looks different in each state. Where some states eagerly adopted essential technology such as digital signatures, some never implemented that option (i.e., California). Additionally, many states are still working to enact permanent options following the expiration of temporary emergency use measures over the past two years. So, why all this push-back for a solution that has proven to work? What is holding the industry back? The answer is pending legislation. Until there is uniform acceptance of technology’s benefit to the home closing process, not all homebuyers will have access to an easy closing solution and are still at the mercy of their state’s laws.

To be clear, there are still necessary steps to take for you to be able to call your new house your home regardless of technology. One such step is notarization, or more simply, signing on the dotted line. Technology does not remove the notarization process, but it can make the experience more seamless and what consumers will come to expect, just as with appraisals. Until we get out of this legislative rut, there are three ways that you can finalize the home closing process with notarization: traditional, remote, and hybrid.

What Is the Traditional Notarization Process?
What is understood as the traditional notarization process in the U.S. has been established seemingly forever—even predating the established United States—and it is still the most common, accepted process. So, what is a notary, and what is their role in the traditional process? The basic definition of a notary is an authorized professional legally able to verify certain acts, most commonly witnessing a signature (e.g., mortgage, deeds, etc.). Basically, the notary is the original two-step verification process.

The traditional, more well-known process requires the notary to meet face-to-face with the homebuyer (or approved signer) to verify identities and put pen to paper. Even before the pandemic, while essential, the requirement for a physical notary to meet with a homebuyer in-person added time and frustration for all parties involved, with issues arising such as continued rescheduling or even obscure meeting locations—places such as the hood of a car in a store parking lot. Now, due to the pandemic, the traditional process is shifting more rapidly towards the digital, but this traditional method still ends up winning much of the time.

Notarizations and the Digital Age
What’s the ideal? As consumers shift to a more digital future, remote online notarization (RON) has become the industry’s alternative for signing the final closing documents. In simple terms, RON is the ability to literally “meet” the potential homebuyer where they are—at home, at work, you name it—to be able to securely sign their closing documents electronically, saving time, money, and reducing stress for everyone involved. This is the 21st century closing.

Where the traditional method of notarization is centuries old, RON is its modern ancestor. RON is by no means new to the industry, however. The pandemic just enabled RON to become a more viable option as most states requested emergency use. Overall, RON was granted emergency use in almost all 50 states (excluding California and South Carolina) and usage grew by 547% in 2020, according to the American Land Title Organization (ALTA).

Recognizing the benefits of remote notarizations, a permanent law, the SECURE Notarization Act, was introduced in Congress in 2020 and is scheduled for a vote this year to achieve permanent RON acceptance across the United States.

It goes without saying that the change did not come without direct challenges from the traditional side of the industry on the not-so-new topic of cybersecurity. However, accepting that there are risks with any digital technology, the argument of abnormal identity fraud is almost nonexistent, once again nudging the notarization process to further adapt to the 21st century consumer.

Be as “E” as You Can Be
While RON is the ideal closing method with minimal risk, there’s no surprise that there are still bureaucratic roadblocks preventing complete acceptance across the United States. But it’s not all bad news. The improved adoption pace by the pandemic and increased state acceptance enables a hybrid model to help move notarizations, and the industry, into the digital age.

A benefit of the hybrid model provides the option to review documents digitally prior to closing and then complete and sign a smaller set of closing documents in person. The combined “wet” and digital signing is not ideal from a customer service perspective, but it is a step in the right direction as the homebuyer is able to view and understand the closing package before they get to the signing table.

It is clear that first-time homebuyers value a “clear explanation of closing documents,” and the hybrid model provides peace of mind and control when RON is not yet a universal option.

Progress Not Perfection
The pandemic upended the housing industry’s adoption of technology and consumers have come to expect an easier, stress-free option for closing on a home—but the future is still uncertain. Many organizations involved in the real estate transaction are already offering digital choices in the near term to meet consumers’ shifted demands.

And while the hybrid model is not the ideal, it is a move in the right direction. Keeping in mind that each state still has different notarization laws, here are a few actions to take in the meantime to help you move closer to the 21st century closing experience:

  • Understand local notary options to determine if your state, county, or municipality allows remote notarizations.
  • Research hybrid closing options to make a portion of your experience digital.
  • Engage in local (or national) campaigns to support the adoption of technology as called for in the #SECURENotarizationAct (e.g., letters to your senators).

Like with any industry disruption, what is clear is that there’s no going back to what used to be. Can you imagine if you couldn’t, in under an hour, order and be eating your favorite meal with just a few clicks? No one can. Regardless of national digital adoption stuck in limbo, current and future homeowners expect and will expect the same—there’s no going back once you’ve experienced what it can be.

About Author: Dominic Fahey

Dominic Fahey is VP of Strategy for Doma.

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