We looked at how technology and changes in the law are affecting real estate closings here and here. I discussed how remote real estate closings, that is, closings where the buyer, seller, and lender never have to meet at the same time in the same place, are becoming more commonplace. Recording the documents may now be achieved electronically, without the deed or mortgage having to be physically delivered to a register of deeds. The parties can can 'meet' for the closing via email and iron out last minute details, if need be, by telephone. The seeming irreducible minimum of the signer of documents required by law to be physically present with a notary is also being relaxed, with several states passing laws whereby the notary never has to be in the same room as the signer.
It seems like an enormous reduction in time and expense. The buyer/borrower remains in her home or office, signs in front of a Skype screen with the notary on the other side of the state, the signed documents are transmitted to the recording facility electronically, the lender funds the loan or sale with a wire transfer. Better than everyone rearranging their schedules to make the time and place for closing, having to shlep to the attorney's office, discussing, dickering, or fighting over the numbers, the condition of the property or any other any last closing details, sit there while everyone signs a pile of documents, wait the hours or even a day for the documents to be delivered, the title professional to check the status of title, record, and tell everyone the transaction is completed because the documents have been recorded.
Sure, electronic closings are great. Except when they aren't.
We conducted a commercial closing in our office last week that would have transpired much faster and more easily if the buyer, seller, lender and their attorneys had done one thing: all meet in one office at the same time, face to face, and conducted the closing.
In this closing, the lender required all documents to be signed in advance and delivered to their attorney's office, necessitating our office to visit the buyer's offices to obtain their signatures and deliver the signature pages to the lender's attorney for their review. All other documents had to be scanned and exchanged electronically prior to the closing date. Having all parties meet to close would have achieved the same thing and taken less time and effort (especially where the lender's attorney's offices are in the building next to ours) I couldn't help thinking we were so focused on scanning and emailing everything we did not see that the technology was not serving us, we were serving the technology.
Admittedly, there were problems that would have slowed down any closing, electronic or otherwise, such as the lender's failure to provide the loan proceeds for 4-5 hours, however, this delay shows that reliance on electronic transactions is only as effective as software and hardware involved. For example, many practitioners use electronic recording in only a few instances because of connection issues and long delays in documents being accepted for recording.
For the record, another large commercial closing I participated in was conducted electronically with the buyer in Pennsylvania, the buyer's attorney in Chicago, the title company in New York, and my office, counsel for the seller, here in Boston. It went very smoothly. Nevertheless, the speed and reliability of electronic closings is still not what it should be.