Introduction
The world of real estate has experienced a transformative shift in recent years, embracing innovative solutions that streamline and enhance the home buying process. One significant advancement is the advent of remote closings, revolutionizing how property transactions are finalized.
As technology continues to reshape our lives, the traditional notion of gathering in a conference room to sign stacks of paper documents is being challenged. Instead, the concept of remote closings is gaining momentum, offering convenience, flexibility, and accessibility for both buyers and sellers.
In this blog post, we will delve into the realm of remote closings in real estate, exploring their purpose, various types, key stakeholders involved, and the benefits they bring to the table. Join us as we navigate this modern era of remote closings and discover how they are transforming the way we seal the deal in the world of real estate.
What Does Closing Mean in Real Estate?
To understand what remote closing means we must first understand what closing means in real estate.
Real estate closing (also known as settlement or completion) is the final stage in a home purchase. At this stage, the ownership of the house is transferred from the seller to the buyer. However, to make the transfer of ownership a reality, certain legal and financial tasks and obligations must be fulfilled at closing. And the key stakeholders meant to execute and complete these tasks and obligations must be present at closing.
The type and number of stakeholders required to be present at closing can vary, depending on the type of transaction and local regulations. The following is a list of stakeholders who may be involved:
- Buyer
- Seller
- Lender
- Real Estate Agent
- Closing Agent
- Escrow Officer
- Closing Attorney
- Title Company Representative
- Home Inspector
- Notary public
- Surveyor
What is a Remote Closing?
Remote closing refers to a type of closing where all the stakeholders required at closing are not physically present in the same location. Remote closing is also known as:
- Virtual closing
- Digital closing
- eClosing
- Electronic closing
Example:
In this example, there are four key players required to carry out legal and financial tasks at closing:
- Buyer: Jane Doe
- Seller: Mary Jane
- Closing Agent: Joe the Plumber
- Lender Representative: Tom Frank
Jane Doe, who lives in Boston is trying to buy a house in Texas. Mary Jane, the seller, lives in North Dakota. Joe the Plumber lives in Texas.
The buyer, the seller, and the lender have all agreed to a remote closing.
At closing, Jane Doe, Mary Jane, and Tom Frank attend the closing virtually. Joe the Plumber, the closing agent for this transaction is in Texas. As such, Jane Doe and Mary Jane do not travel down to Texas to attend the closing.
How is Remote Closing Different from a Traditional Closing?
In a traditional real estate closing, all the key stakeholders required for closing gather (on the closing date) at a specific location, at an agreed-upon time.
| Remote Closing | Traditional Closing |
|---|---|
| All or some of the stakeholders required at closing attend virtually. | All stakeholders required at closing attend the closing in person. |
| Closing documents are signed electronically. | Closing documents are signed by hand. |
| Electronic documents | Paper documents |
| Electonic signatures | Handwritten signatures |
| Use of technology & virtual meeting platforms to facilitate the closing. | Closing meeting occurs in real time. |
Types of Remote Closings
There are four types of remote closings in real estate. All five types rely on technology to complete the required steps in the closing process.
- Remote Online Notarization
- Hybrid Closing
- Mail-away Closing
- Mobile Notary Closing
Remote Online Notarization (RON)
Remote Online Notarization (RON) is a type of remote closing where all the documents are signed and notarized electronically. A notary public facilitates the signature process over the internet.
A notary public is a public officer. Their job is to officially verify documents, document signings, and legal transactions.
In a real estate remote closing, a notary public will:
- verify all the participants identity, from the buyer to the seller.
- Purpose: To verify that everyone is who they claim to be.
- administer oaths and affirmations.
- Purpose: To emphasize the importance of all participants making truthful, reliable, and honest statements. These oaths and affirmations are also meant to be legally binding.
- serve as a witness to the signing of the digital documents.
- Purpose: The notary public’s presence, in the function of a public officer, adds a level of authenticity and credibility to the documents being signed electronically.
- affix an electronic notary seal.
- Purpose: The electronic notary seal provides proof that the electronic signing of the documents was performed in the presence of a notary public
RON is a relatively new concept that is gaining popularity in the real estate industry. However, it is important to note that the specific requirements and regulations for RON may vary by state. Please consult with a qualified professional to ensure compliance with all relevant laws and regulations.
Hybrid Closing
A hybrid closing is a type of remote closing that combines elements of in-person closing and remote closing. Some documents are signed electronically, while others are signed in person. The specific process and the specific documents that are signed electronically may vary depending on:
- the jurisdiction.
- the lender.
- local regulations.
Mail-away Closing
In a mail-away closing, the buyer and the seller receive the closing documents by mail and sign them at their convenience. Once the buyer and seller have signed all the necessary documents, they mail them back to the closing agent or title company or escrow officer for processing.
Mobile Notary Closing
In a mobile notary closing, a notary public is mobile, meaning they travel to the location of the buyer or seller to facilitate the signing of documents.
Profile of Buyers Who Choose Remote Closings
As a first-time home buyer, you’re probably wondering that if a house purchase is one of the most significant investment most people will make in their lifetime, why the heck would they want to close on their house remotely.
Well, there are a ton of benefits to closing on a house remotely. We’ll talk about those benefits in the next section.
In the meantime, I want to call out that while traditional closings are the norm (a high percentage of closings are traditional closings), this is mostly because most home buyers borrow money from a lender to complete their purchase. And most lenders are not comfortable with remote closings. These lenders consider in-person closings more secure than remote closings. Following this logic, most lenders consider remote closings a financial risk.
Remote closings only started gaining momentum during the COVID-19 pandemic. There are three main types of buyers who go through remote closings:
- Out of state buyers
- All cash buyers.
- These buyers are not limited to the preference of a lender since they are paying for their house in cash.
- Investors
Factors to Consider
Before deciding if a remote closing is right for you or not, it is important to weigh the pros and the cons. You also want to weigh how comfortable you are with closing on such a huge deal remotely. If a lender does not limit you to a traditional closing, then choosing to go with a remote closing is a personal decision.
Benefits of Remote Closings
- Convenient
- Saves Time & Money
- Eliminates the need for travel.
- In some cases, the distance between where a buyer lives, and the chosen closing location might be significant and require a long commute. It could even require air travel if the buyer lives out of state. Closing remotely means you don’t have to spend money on gas or a plane ticket or a hotel to get to the chosen closing location. Additionally, a number of closings tend to occur during regular business hours on workdays. When I bought my first house, I had to take a few hours off work to attend my closing. If your time off is not paid, then you would be forfeiting your paycheck. Remote closing means you can at least cut down the amount of time you need to clock out of work.
- Eliminates the need for travel.
- Accessible & Flexible
- Remote closing means you can complete the closing process wherever you want. You can attend the closing at your house, at your local coffee shop, in a pod at your office. You can be overseas in say Japan, closing on a house in Chicago. Remote closing also reduces scheduling conflicts as it is easier to find a time that works for everyone. Finding a time that works for everyone can be challenging and cause delays in the closing process. Remote closing cuts down on all that noise.
- Streamlined Transaction Management
- I remember the day I closed on my first house. I walked out with a large bundle of documents. Because I personally prefer to have digital copies, in case something was to happen to the physical copies, it was a painstaking process for me to scan all those documents. Remote closing means your paperwork is available digitally.
- Environmentally Sustainable
- In the world we live in today, environmental sustainability is taken seriously by a lot of people. Remote closing reduces or eliminates the use of paper usage and of travel-related emissions.
- Allows for Easy Collaboration
- Because everything is done digitally, it is easier for all the parties involved to collaborate, share and view documents easily. Closings involve a lot of paperwork being passed around. With remote closing, everyone involved can review the same document in real time. This will translate to effective communication during the signing process.
- Comfortable
- Closing on a house can be stressful, especially for first-time home buyers. This is such a crucial stage where you almost have the keys in your hand. Your nerves are probably shot. Your palms are probably sweaty. You’re anxious to close the deal, to hear the confirmation from your closing agent that the funds have been disbursed, that all the check boxes have been checked. Closing at a location you’re familiar with, such as the comfort of your own home can help alleviate some of this stress and anxiety.
Drawbacks of Remote Closing
While remote closings offer many benefits, there are also some potential drawbacks to consider. These include:
- Technical difficulties: Remote closings rely on technology, and technical difficulties can arise that can delay or even derail the closing process. If you’re not technologically savvy, I recommend sticking to a traditional closing. You don’t want to accidentally check the wrong boxes or sign in the wrong places or lose the documents or even be unable to log into the virtual meeting. Any mistakes or errors in the documents could delay the closing process or even result in the cancellation of the sale.
- Lack of face-to-face interaction: Some buyers and sellers may prefer in-person closings as they provide an opportunity for face-to-face interaction and can be seen as more personal. Remote closings may not provide the same level of personal interaction.
- Limited lender options: Some lenders may not offer remote closing options, which can limit a buyer’s options when it comes to choosing a lender.
- Limited availability: Not all states permit remote closings, and those that do may have specific requirements and regulations that must be followed. This can limit the availability of remote closings in certain areas.
- Security concerns: While remote closings may be more convenient, they also pose potential security risks, particularly when it comes to the transfer of sensitive financial information over the internet.
It is important to carefully consider these potential drawbacks before deciding whether a remote closing is the right choice for your particular transaction. It is also important to work with a qualified professional to ensure that all legal requirements are met and that the closing process goes smoothly.
Conclusion
In conclusion, the concept of remote closings in real estate has gained prominence, offering convenience and efficiency for buyers and sellers. While traditional in-person closings remain prevalent, remote closings provide an alternative that leverages technology and allows parties to complete the closing process from different locations. Remote closings can take various forms, including Remote Online Notarization (RON), hybrid closings, mail-away closings, and mobile notary closings. Each method has its own benefits and considerations.
Remote closings offer advantages such as convenience, time and cost savings, accessibility, flexibility, streamlined transaction management, environmental sustainability, and improved collaboration. They provide the opportunity to complete the closing process in familiar surroundings and reduce stress for buyers. However, potential drawbacks include technical difficulties, limited lender options, lack of face-to-face interaction, state regulations, and security concerns.
Ultimately, the decision to opt for a remote closing should be carefully considered based on individual circumstances, the availability of lenders and notaries, and compliance with local regulations. Consulting with professionals such as real estate agents, attorneys, or closing agents is crucial to ensure a smooth and successful remote closing experience. With advancements in technology and evolving practices, remote closings offer a modern approach to completing real estate transactions, providing convenience and flexibility for buyers and sellers alike.
Sincerely,
Your Mortgage Minister
