eClosing 101: What It Is And How It Works
Carey Chesney4-MINUTE READ
January 03, 2022
eClosings (sometimes referred to as remote closings) allow for buyers and sellers to finalize the purchase of a home from anywhere. Remote closings have been around for a while and have mostly been reserved for sellers or buyers located far from the property being purchased.
This may seem a little foreign if you are used to the traditional in-person closing process, but knowing what to expect at an eClosing can help ease any concerns you may have.
What Is An eClosing?
An eClosing uses technology to gather parties to a home sale/purchase instead of bringing everyone around a table to sign all of the necessary closing documents. An eClosing can be beneficial, depending on the specific needs and preferences of any given buyer and seller.
Convenience and eliminating the need to travel are just a few of the obvious benefits. However, it is important for home buyers and sellers to know if the laws of your state allow you to eClose, whether in whole or in part.
Is eClosing The Same As Remote Closing When Buying A House?
These terms are pretty much used interchangeably, as are “virtual” or “online closing.” However, these terms mean different things in different states, as closing requirements are determined by regulations and the policies of your lender. Your real estate agent or attorney can answer any specific questions about how things work and what the terminology is in your specific state.
How Do eClosings Work?
There are three main models of eClosings: hybrid method, in-person e-notarization and remote online notarization. Each of these methods can save time compared to traditional in-person-only closings.
Let’s cover all three.
A hybrid closing takes place when a portion of the closing documents are e-signed and a portion of the documents are notarized in-person with a notary signing agent. This method has been used for some time for remote closing when participants can’t be near the property they are buying or selling.
In-Person E-Notarization (IPEN)
This type of closing occurs when using a notary public that is permitted to perform notarial acts electronically without the use of paper, but all parties are required to be physically present per state law.
Remote Online Notarization (RON)
Take the in-person part out of the equation completely and you have a remote online notarization (RON) in order to complete the closing process. Documents are signed and notarized in an electronic form and the signer appears before the remote notary using online audio-visual technology. This allows for greater convenience and it could prevent missing signature oversights, but RON isn’t allowed in all states.
Our friends at Record Mortgage® currently don't offer RON on purchase closings.
What Is A ‘Wet Signature’ And When Is It Required?
This term refers to physically putting a pen to paper when signing in-person. For legal reasons, some documents, like title or deed transfers, must be done with a “wet signature.”
Pros Of eClosings
Let's take a deeper dive into some of the pros of virtually closing on real estate.
More Convenient And Less Expensive
The convenience and reduced expenses of not having to gather in person, especially if the buyers and/or sellers live away from the property, are a huge advantage.
More Time To Review
eClosings mean documents are sent electronically prior to the closing, so all parties have an opportunity to review them before signing. It can be comforting to know you have had the time to thoroughly review everything, instead of signing on the spot.
eForms cannot be submitted unless they’re completely filled out, so there’s less opportunity for the missed or improper signatures that can occur at in-person “paper pushing” closings.
Cons Of eClosings
While eClosings have their benefits for many buyers, they can also have their drawbacks.
Reliable internet service or a lack of familiarity with using technology are a few of the barriers that can prevent an eClosing. Education and training can help clear these obstacles.
Why Are eClosings Relatively New To The Real Estate Industry?
There are many moving parts when closing on a house, and the most important thing from the local government’s point of view is the actual transfer of deed, which is done in a very particular way for a variety of obscure and time-tested reasons.
Because of this, everything related to the transfer, including verification of signatures, is dictated by law, and laws can lag far behind technological advances. If not for these old rules, eClosings would likely have come to real estate transactions much sooner.
Will eClosings Become The New Standard?
As with many things in life, mortgages are, over time, trending toward being done more digitally. It's a process, but eClosing should become more prevalent with the modification of existing regulations and lenders increasingly rolling out new technologies.
The Bottom Line: Technology Makes The eClosing Process More Convenient For Everyone
eClosings can provide incredible convenience and speed for home buyers and sellers looking to complete the closing process on a new home. It’s also important to familiarize yourself with what can go wrong at closing, whether it’s in person or remotely, to make sure you are prepared.
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