eClosing 101: What it is and how it works

In today’s world, so many in-person activities and duties are being done remotely. Especially after the COVID-19 pandemic, many individuals and companies are broadening the scope of how to do business virtually. The process of closing on a house is no different. So, what is eClosing?

What is eClosing?

An electronic closing, or eClosing, allows parties involved in a home sale or purchase to sign all the necessary closing documents without having to physically be together. Depending on the unique needs and preferences of the home buyer and seller, eClosing can offer several benefits, including convenience and the elimination of travel during the closing process.

However, eClosing may not be available in every state or may only be partially permitted. So, it's important for home buyers and sellers to understand the laws of their state regarding eClosing before opting for this approach.

What is remote closing?

Remote closing enables home buyers and sellers to complete the closing process without being physically present in the same location. These are all-digital closings. Home buyers and sellers don’t meet in person. Instead, they sign documents electronically or complete the closing with a mobile notary.

The terms “remote closing” and “eClosing” 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 state 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.

Types of eClosings

There are three main models of eClosings: hybrid signing, in-person e-notarization and remote online notarization. Each of these methods can save time compared to traditional signing.

Pros and cons of eClosings

Let's take a deeper look into some of the pros and cons of virtually closing on real estate.

Pros

• More convenient and less expensive. The convenience and lowered expenses of not having to gather in person, especially if the buyers and/or sellers live away from the property, make scheduling these closings much simpler.
• More time to review. For eClosings, documents are sent electronically before the closing, so all parties can have an opportunity to review before signing. It can be comforting to know you have had the time to thoroughly review everything, instead of signing on the spot.
• Fewer mistakes. eForms can’t be submitted if they’re not completely filled out, so there’s less opportunity for signature errors that can occur at in-person paper closings.

Cons

• Technology challenges. 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 some of these obstacles.
• Legal requirements: eClosing may not be legal in every state, or the state may have specific rules regarding the use of electronic signatures or remote online notarization.
• Lack of personal interaction: eClosing eliminates face-to-face interaction, which can be difficult if any issues or concerns arise during the process.

eClosing FAQs

Here are a couple more questions you may be asking yourself about eClosing.

Will eClosings be the new real estate standard?

Similar to many other things in life, mortgages are trending toward being done more digitally. It's a process, but eClosing should become more popular with the modification of existing regulations and lenders increasingly rolling out new technologies.

Can closing documents be signed electronically?

Yes, in many cases, closing documents can be signed electronically. The use of eSignatures is increasingly common in real estate transactions, and many lenders and title companies now offer eClosing options.

The Electronic Signature in Global and National Commerce Act (E-Sign Act) allows closing documents to be signed electronically. Discuss eSignatures with your real estate agent because your state may have additional home loan and mortgage closing requirements.

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 behind technological advances. If not for these old rules, eClosings would likely have come to real estate transactions much sooner.

The bottom line

In general, an eClosing is faster and more convenient than a traditional closing. Remember to do some research and make sure you know the rules and regulations of eClosing in your area. If you’re ready to start your homebuying journey, get started with an application today.