Mortgage closings — especially the notarization process — can be complicated and tedious because of the paperwork involved.
Notarization has historically required in-person meetings and the collection and submission of a number of physical documents. Sending and receiving this documentation is not only frustrating for consumers, but also time consuming and vulnerable to errors. The COVID-19 crisis exacerbated these frictions, as consumers were confined to their homes and forced to find ways to complete in-person activities remotely.
These reasons are driving a surge of interest in and use of remote online notarization (RON) services, according to James Schlimmer, managing partner of Naples, Florida-based notary firm Cottrell Title & Escrow.
“The COVID-19 crisis has been a catalyst for RON adoption in the United States,” Schlimmer said in an interview with PYMNTS.
The desire to digitize the real estate closing process is not new. Electronic real estate closings, or eClosings, have been available since the early 2000s. Notary services still required meetings and the exchange of physical documents, however, meaning that consumers who wanted to close online had to find ways to submit physical documents and appear in person, negating any digital benefits.
COVID-19’s spread and related lockdowns have highlighted the need for legal reform in this area. The surge in national interest and demand for digital alternatives to traditionally paper-based notary services led to greater consumer awareness and inspired a wave of legislation governing how those services should enforce digital notarization processes’ anti-money laundering/know your customer (AML/KYC) aspects.
States Implement RON Statutes
Cottrell Title & Escrow has observed the ways in which the COVID-19 pandemic has impacted interest in RON services and the adoption of laws regulating how they are used. Florida was one of the few states that had legalized RON services prior to the initial outbreak. The state legislature adopted such regulations in late 2019, permitting these services for use beginning in January 2020.
The state of Florida requires that RON sessions be recorded. Signers are prompted to answer questions to verify their identities during these sessions, according to the legislation. They must be able to answer five challenge questions with 80 percent accuracy within a given time limit and they must be recorded doing so. The notary is legally valid only if signers are able to do this on camera and if the video showing them doing so is available for access at a later date.
Cottrell Title & Escrow sources its RON technology from Boston-based RegTech firm Notarize, which is licensed to record and store all notary sessions the firm conducts, granting it a key role in enabling RON services and cutting down processing times.
“It’s amazing because we’ve been able to eliminate two full days from a transaction,” Schlimmer said.
He added that most states did not have any laws governing or permitting RON services until recently. Many consumers did not even realize RON services were available until the pandemic began.
“COVID-19 hit, and all of a sudden, everybody wants to execute their documents in an electronic way — and when I say everybody, [I mean] everybody — the whole entire country, the whole real estate industry essentially was looking for an alternative,” he said.
RON services were legal in 23 U.S. states in March and are now legal in 43. Such tools allow the entire closing process to be done online, enabling consumers to access the digital services they need while physical notary sessions remain restricted.
Great And Lasting Expectations
RON services have surged in popularity during the pandemic, but Schlimmer said he believes the demand will outlast the crisis. He argued that the pandemic did not create the market demand — it merely accelerated it.
“The bar that we’ve grown accustomed to, whether it be from Amazon or just the whole culture is that ‘I want it, and I want it now, and it should be convenient, and it’s going to be right,’” Schlimmer said.
It is only natural that consumers would expect the same ease of use and convenience in other areas of their lives as they have come to expect from retail shopping. Schlimmer said he believes RON services meet consumers’ expectations for convenience and ease of use and that this fact will entice consumers to keep using them, even after the pandemic is over.
RON services are not the only aspect of the real estate world that has been digitized in response to this demand. Schlimmer pointed out that RON services are just one of many real estate services that have gone online, and the drive to digitize them predates the COVID-19 crisis.
“If you were to really look at the kind of chess pieces across the board and the real estate industry nationwide — and when I say that, I mean your Zillow, your Redfin, your Opendoor — the chess pieces are moving across the board for … fully electronic closing,” he said.
Schlimmer said he expects that consumers’ demands for convenience will continue to propel the real estate sector to adopt newer, faster, easier and, above all, digital ways to manage real estate transactions. These services will require legal frameworks and regulations to support them, however. Digital real estate transactions could otherwise slip right back to being possible only on paper.