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How do E-Closings Work?
A remote online notarization for a closing looks a lot like a Zoom Call or Go To Meeting with multiple people. If you weren’t familiar with those platforms prior to the Covid-19 outbreak, it’s likely that you are now because a lot of business is being conducted on those platforms. Like those calls, you use a camera and a microphone to communicate with the other parties over the internet and during that process you can get your documents remotely notarized. That means you can have a notary sitting in Florida, you can have your seller signing the deed from Michigan, you can have a realtor on vacation in Hawaii, you can have the lender in Tennessee, and the witnesses to the document can be their friends in California. Each party to the transaction can be in a different place and the only person that has to be in Florida is the notary themselves.Now, in the months since this was rolled out we have begun to identify certain challenges that come up during this process as well as some strategies to get around those challenges.
First, if you have a buyer in a transaction and they are obtaining a loan, the lender still has to agree to the use of online notarization. Prior to Covid-19, there were a relatively small number of lenders that would approve an online remote notarization and they were very slowly coming on board. Now we’re seeing lenders trying to pick that pace up. Unfortunately, some of the larger institutions move kind of slowly, but it is happening. We have more and more lenders that are willing to participate in the process.
Once you’ve got your lender willing to participate, the next thing you have to evaluate is if you have the right equipment. This is coming up more than you might expect. Some people think they just have to be on the phone and some people question why they have to have certain computer equipment available to them. Obviously, just like Zoom and Go To Meeting, the session depends upon someone being able to see you on camera and hear your through speakers so it will require you to have a functioning webcam and microphone. So, one of the first things that will happen in the session (and we’ll talk about those later) is that whatever company is facility the online remote notarization will send a test to the person intending to sign the document, as well as the other parties in the transaction, to ensure that the equipment on the other end is working correctly. If it does not, the session will be cancelled.
Another sticking point in this process is identification. One of the things we really like about the remote online notarization, or e-closing, is that it has a two-factor identification process. When you use the remote online notarization software (which must be used to comply with Florida law), you hold the driver’s license or other photo ID right up against the camera, front and back. This software then scans the ID right there and almost instantaneously decides if it is, in fact, a valid ID. That’s something that you can’t really do in person and it does provide extra security against identification fraud. That’s not the only form of identification that the system uses, though, and it’s the next part that sometimes causes the hitch. Once an ID is determined to be valid, a screen will pop up to ask the individual to identify certain information. Some of you will be familiar with this is in other contexts where it asks you things like, “Which of these three addresses have you not used?” or “Which of these loans is actually yours?” The software is able to access public information, almost instantaneously, about the person signing the document. If you can’t answer these questions and pass this part of the identification process then the whole thing fails. There is no way around this two-factor identification. This can be a problem for people that are forgetful OR for people that don’t have a lot of credit history.
Let us assume that you get through this identification process, the next step is reviewing the documents that you must sign. These documents are usually uploaded by your title company and these are what need to be notarized. In some instances, all of the documents in the transaction will be uploaded for you to review, including those documents that only need to have an e-signature. In any closing, there are always documents that need to be notarized but there are significantly more that only need to be signed. Those documents can be handled by the closing agent through docusign, like any other electronic signature. The online notarization process does not require those documents if they do not need to be notarized officially.
Once you are ready, you will be asked to read these documents and this is when the online notary and all other parties to the transaction will pop up on the screen in a kind of “Brady Bunch” lineup of faces. All of these people (your lender, notary, witnesses, realtors, etc) will be on the screen at the same time, all able to be seen and heard. Each of those people will have to have the basic equipment required to participate if they want to be present. When all of them are established and ready, the notarization proceeds much like you would expect.
The notary is in control of the document and clicks through it as it is reviewed and you, as the signer, will provide your signature electronically by clicking where directed. This signature is personalized to you and established at the very beginning of the process. You have the option to upload a graphic of your own signature or you can create one that is “electronic” to be used during the process. You also create initials in this same fashion. With your signature established, this becomes much like the docusign process (for those of you that are familiar with it) where you acknowledge that you have read the document and then click to sign.
When this process is complete, the document is electronically stamped by the remote online notary. One thing that is really cool about this process is that once a document has been digitally notarized, it’s nearly impossible to tamper with without being caught. We say “nearly” because the level of sophistication and technical skill required to do this is not very common. So, in some ways, because it requires two-factor authentication and is harder to tamper with, this online notarization is actually safer.
Once the notarization process is complete, every person that participated in the session will receive a digital recording of the closing and a copy of the document will be sent directly to the relevant participants to be downloaded. You can print this document out if you’d like but it will be sent digitally.
After the documents are sent to all relevant parties, you have the next step: recording. This is another problem that we sometimes run into with these remote online notarizations. If you live in a county that does not allow electronic recording, the e-closing process will not work. Where we personally practice most often, Lake and Orange County, this is no problem. As time goes on, more and more counties are likely to move to online recording. However, if this is something you are considering for yourself or your client for any reason, reach out to your closing agent ahead of time so that they can verify if this option will be available based on the location and the lender in the transaction. If the closing meets the requirements we have gone through, there should be no reason that the online notarization can’t take place.
We do get a lot of questions about the pricing of this process. The price is dependent upon the third party vendor that is used. Generally speaking, it’s about $175 per document. Sometimes if you have multiple documents they will give you a discount. Again, that’s something you are going to want to reach out to your closing agent ahead of time about, just so you know what price point you are looking at if your customer is considering if this process is right for them.
There have also been some questions floating around the internet about whether or not a party in the transaction can refuse to allow other parties in the transaction to participate in an online notarization. The answer to that, surprisingly, is no. It’s a legally recognized process in the Florida Statutes so there can be no objection, for example, by the seller if the buyer wants to sign their documents electronically. That would be like demanding that the other party use a black pen to sign their paperwork, it’s just not allowed. We have seen people try to make this argument and it boils down to a lack of understanding about how safe and secure the process is.
To wrap this up, we just wanted to say that we are excited to see this process roll out because we know it’s going to be convenient option for so many reasons moving forward.
If you have any questions about this or anything as it pertains to the closing process, please feel free to reach out to us at: 352-241-8629.