Real estate plays catch-up with e-signatures

Paperless progress: Who's winning, who's losing
By Glenn Roberts Jr.Inman News

Editor's note: More big companies, trade groups and entrepreneurs are investing in technology platforms, back-end systems and software to automate the real estate transaction, but most consumers are still closing deals the old-fashioned way. In this three-part series, Inman News eyes progress on the paperless front.

The pen may be mightier than the sword, but the mouse is a mighty force, too. Take e-signature technology: you can electronically sign the documents to close a deal on a house with your mouse, even if you're in Taos or Laos.
The technology is typically noninvasive -- it doesn't require X-rays, thermal imagery, a retinal scan, or a sci-fi-esque genetic test to confirm your identity and conform with state and federal laws. Digital signatures are still new and scary for some real estate professionals and consumers alike, and adoption is more of a trickle than mainstream.
"I never trusted faxes," said Leigh Brown, broker-owner for RE/MAX Signature Properties in Charlotte, N.C. Faxing and re-faxing can degrade the readability of real estate documents, and verifying the identify of the fax sender or recipient is far from an exact science.
Brown began to use an e-signature system called DocuSign about six months ago and has gradually increased her usage. "My clients could not be more ecstatic with the ease of the transaction. Even with people who are not the most technology-savvy ... realize what a time savings that is," she said. "I use it with a lot of out-of-state clients. It makes it so easy for me, it saves paper -- it is very environmentally friendly."
A traditional non-electronic signing process could require mailing, re-mailing and gas costs, and an agent's time and effort throughout this signature-gathering process.
When it is not possible to physically meet with clients to explain documents, Brown said she speaks with clients on the phone as they view the electronic documents.
"I'll wager my guess that by this time next year at least half of the transactions we see are going to have more e-signatures," she said. There is a better "paper" trail for e-signatures because there is a digital time and date stamp associated with every signature, she said, and digital signature technology is more secure than faxed documents.
Some agents associated with other companies sometimes question the legality of the signatures, and Brown says she explains that the e-signatures are legally binding.
In 2000, the U.S. Congress enacted federal Electronic Signatures in Global and National Commerce Act, or ESIGN legislation that establishes criteria for legally binding electronic signatures. California passed its own law, the Uniform Electronic Transactions Act, earlier that year.
DocuSign boasts at its Web site that the company's e-signature process is "100 percent legally binding," and ZipForm, the official real estate forms software for the National Association of Realtors, offers an Esign tool in partnership with DocuSign. There are other companies, too, that offer e-signature systems, such as EchoSign.com and VREO.
While the technology is readily available for e-signatures, Peter Hickey, broker-owner for Windermere Real Estate Northeast in Kirkland, Wash., said that his company prefers in-person meetings with clients when signing transaction documents.
"I believe in face-to-face where possible. For first-time home buyers I would not recommend a non-face-to-face meeting," he said.
But his office has used e-signature technology to complete deals that were complicated by out-of-town clients and conflicting work schedules.
In one e-signature deal, Hickey said he had a client who worked at a county jail. "It was prohibitive for me to get to my clients. It was very difficult to get documents in and out to her" because of the complications in physically getting access to his client's workplace, he said.
"So I gained her permission to do this via DocuSign. I simply presented the offers to her over the phone. She chose the offer she wanted to go with. I scanned the offer, turned it into an (Adobe Acrobat) PDF and then processed it using DocuSign," he said. The technology allows users to electronically specify on the electronic document where a signature is required.
"She was able to review the contract with me on the phone, agree to it, click where DocuSign would insert her signatures ... and it came back to me." His client had formally accepted the offer.
"If people are separated by bars or geography, it's just a phenomenal way to do (a transaction)," he said, adding that he views e-signature as useful for documents that would traditionally be faxed but not for "high-value, high-important documents that need to be notarized. I think it's a great tool that should supplement our business but not replace going face-to-face when possible."
Hickey said he would not be comfortable using e-signature technology unless he had met a client in person, recognized their voice over the phone, or "have had enough of an online or telephone relationship with them to feel comfortable that they are who they say they are."
Tom Gonser, executive vice president of product strategy for DocuSign, said the company has perhaps 1,200 to 1,300 accounts related to the real estate industry, and the company serves a broad range of industries. The real estate industry's adoption of DocuSign is moving beyond the tire-kicking stage, Gonser said.
"Some of the (accounts) it looks like they use it for everything," he said, with about 20-25 percent using it for many transactions, while other accounts are using the e-signature platform on a limited basis.
The adoption curve is normal, he said, as real estate professionals realize that e-signature technology is not intended to eliminate them but rather to free up their time to focus on other services for their clients. "This isn't going to replace you as a Realtor -- it's going to make you more effective as a Realtor," he said.
Kevin Boer, a Realtor for 3 Oceans Real Estate in California's Silicon Valley who uses DocuSign technology for most of his transactions, said he earlier planned to purchase digital signature pads similar to the ones used at some retail stores. His plan was to loan those devices out to clients for use during the transaction process.
That solution, he said, "would have been very cumbersome. It wasn't adding a lot of convenience to the process." He discovered DocuSign as he was weighing his options and decided to go with that system. Boer employs an assistant who prepares electronic documents for signature by his clients, and he reviews the placement of those electronic signature stamps before sending the signature version to his clients, he said.
Also, he sends a non-signature version of the documents to clients prior to the final version to give them time to review and digest the documents, he said.
In the past two years, "I have yet to have a client use a piece of paper and a pen or a fax machine while doing a transaction. The only exception to that is mortgage documents at the closing table, which by California law still has to be signed by ink," Boer said.
For agents on the other side of the deal, Boer said he gives them a courtesy call in advance to explain the electronic signature process. He said he was surprised the technology hasn't caught on with more agents. "Adoption has been very slow. I'm very surprised. I've been preaching the gospel of electronic signatures in my office for two years now." Adoption may come in stages, he said, adding that he believes the industry will move toward broader adoption. He noted that most disclosure documents are now available online.
The technology is not a concern for his clients, he said -- he works in a very tech-savvy market and his clients seem comfortable with the concept.
That is not the case in every market area, though.
Janet D. Patrick, a Realtor for Crystel Patrick Realty in Norcross, Ga., said she is still weighing her options with e-signature technology and hasn't tried it out with her clients yet.
"I have clients who do not use e-mail -- (e-signature) would be pointless" for those clients, she said. "I deal with so many agents who still to this day don't have Web sites. For people who are intimidated by technology it might create a problem. I always have to have a pen -- I have to have that in a back pocket."
Some people still express fears, she said, about the "Big Brother" aspect of digital technologies, whether it is real or imagined.
But she believes more agents will warm up to e-signature technology, as it can cut down on the legwork associated with transaction paperwork. "Everybody could benefit from it," she said.