Wednesday, July 18, 2018

Real Estate Closings Continue To Rocket Into the 21st Century - Part Deux

In our last episode, I talked about the effect of laws permitting documents to be notarized remotely, namely, where the notary is in a physical location separate from the signer, but connected electronically. Such laws altered previous laws imparting reliability to signing written instruments by requiring the presence of a government-authorized witness, or notary. This requirement is one of the last tethers confining a real estate closing to the physical presence of all parties in the same place at the same time.

Since only a few states allow remote notarizations, the question arises as to the enforceability of a remotely notarized document in a state that does not permit remote notarizations. However, as I did not explore in Part Un, there are many more variables at play, including but not limited to:

-What is the combination of state/remote notarization law that will render a remote notarization enforceable in another state? Does the signer have to be in the state allowing remote notarization? The notary? The land? The signer and the land? The notary and the land? What if the signer, notary and land are all in different states? Which state has to be the one that permits remote notarizations?
-Is the remote-notarization procedure is secure?
-Does the particular remote-notarization procedure allow the notary to adequately determine the identity of the principal and whether the principal is acting without duress or incapacity?
-How does a subsequent purchaser determine compliance with the technical requirements of a remote notary in a prior transaction?

I am writing this followup to my earlier post because I received an update from my title insurance company regarding remote notarizations. Insurance companies have great influence over the conduct of business, sometimes without reference to whether something is legally permitted or prohibited, and title insurance companies are no exception.

The title insurance company update reflects the continuing uncertainty surrounding remote notarizations. Depending on the circumstances, the update directs agents to take an exception from a title insurance policy if there is evidence of a remote notarization in the recent chain of title. An exception from a title insurance policy is like an exception for a pre-existing illness in a health insurance policy. If the insured suffers a loss from the exception from coverage, the insurance will not cover it. Lenders require title insurance on almost all real estate loans and such an exception might not be acceptable to most lenders. Until there is a legal determination and/or a generally accepted practical  means of resolving these issues, remote notarizations may not be acceptable in all transactions.

Remote real estate closings are unquestionably in the future. How fast they get here is an open question.

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