Let’s take a simple test. Think back to the last document signed with an electronic signature. Were all documents read completely on the e signed docs? Or maybe did you just quickly look for the next place to click and e sign? Sound familiar? I hope not. Because, that would mean signatures are all over documents agreeing to terms which you don’t understand. Even worse, is not having a clue what it says! Ultimately, there is good and bad in electronic signed documents, but with some knowledge it can be all good.
Documents With An Electronic Signature
While buying a home, it is very common to esign purchase contracts, initial mortgage disclosures, and even the closing disclosures. It’s even possible that the insurance application requires an electronic signature.
Anyone that has gone through the home buying process knows this does not mean 2 pieces of paper. A purchase contract and the addenda could easily be 20 or 30 pages. Even worse is a builder contract for new construction as these may easily surpass 40 pages!
Mortgage closing documents for some companies easily surpass 100 pages! That’s a lot of documents for a borrower to understand. Sure, most are generic in nature. But, there are at least several that discuss key terms or requirements that borrowers must understand. Rushing through a closing package and clicking as fast as possible could come back to bite you one day.
Is An Electronic Signature That Bad?
No, AS LONG AS you read the document and allow your advisor to explain the documentation. In this case, esigning is very convenient .
When Realtors and Electronic signatures Work
Do not make an offer by just signing all spots real quick to beat another buyer! Sure you may know the price being offered. But have you discussed the following?
- What is the closing date & does it work for you?
- Are seller paid costs necessary and amounts correct?
- Correct loan terms
- The HOA dues & requirements
- Making an “As is” offer or requesting repairs
- Waiving inspections (Watch out for this one!)
- Unrealistic seller requirements
- Extra lots are supposed to be included or not
- Requests for prior flood elevation certificate or survey
- Property disclosures declaring property characteristics & condition
- Any sales contingencies (financing, sale of another home)
Some surprises are small but what if your necessary contingency sale is not mentioned? It could result in a lawsuit by the seller. Maybe your offer waives inspections or has a very limited due diligence period. What if you need a certain amount of seller paid closing costs? Any of these and more could cause major issues to a buyer’s finances, mortgage loan, and more.
Beware of the Mortgage Electronic Signature!
When a buyer signs mortgage documents, it ties a buyer to potentially hundreds of thousands of dollars and up to 30 years. So, reading the document, asking questions, and receiving a thorough explanation from a loan officer are key.
Closing is not the first place to learn about adjustable rates, prepayment penalties, much higher than expected payment, am I getting the down payment assistance, is the tax credit included, and higher cash to close.
Additionally, this is not the time to say “I didn’t realize it was that much”. The lender has your signatures all over the documents saying you understand.
So Who is at Fault for Not Understanding the E Signed Docs?
Both sides are at fault. Buyers and sellers should be working with professionals and professionals have a duty. That basic duty is to take care of their client by advising, explaining, and answering all questions. So, realtors and loan officers should thoroughly explain the documents being signed.
Buyers and sellers have an obligation too. They owe it to themselves to understand the documents. Even if you believe you understand, require your Advisor to explain the documents.
Misrepresented Loan Application Fraud
Typos or blatant removal of key information on loan applications such as properties owned, time on job, and inflated assets could be lurking in the background. Which could be fraud and it brings severe penalties. Saying, I did not read the document or understand what I am signing is not an option. Remember, an electronic signature is just like your wet signature!
Furthermore, do not let an online lender, inexperienced or too busy of a loan officer/realtor slip through your documents in 2 minutes. If they do, hire another one! Both the advisor and client must fully discuss strategies and confirm accuracy of information. The result is a more confident signor and definitely a better outcome.
Electronic Signature Benefits
Now, e signing is not all bad. If you remember the tips mentioned above, electronic signing has many positive factors. Examples of esignature benefits include…
- Immediate copy of signed documents for all parties
- Close quicker – Do not have to wait for mailed documents
- Easy – click and sign lots of documents (saves arm cramps LOL)
- Saves time – going out in traffic or waiting on the mail
Electronic Signed Docs Provide Security
The last benefit mentioned is huge. Electronic signed documents should include encryption which provides levels of security against cyber criminals. Especially more secure than traditional email. For instance, a lender may send documents to a borrower in an encrypted email. But, the buyer may not send them back that way. Borrowers just emailing the signed documents back creates opportunity for leaking private data.
Cyber crime is up dramatically and these criminals know that there is big money on the line in real estate transactions. So, logging into a electronic document, signing it within that portal, logging out, and then the recipient has to log in to receive the document creates a high level of security.
Remember, Remember, Remember!
Read before signing, ask questions, and require thorough explanations from your Advisor.