Remote Closing on a House: Here’s How It Works
EA
Summary:
As technology advances, the real estate industry has embraced the concept of remote closing. Pandemic travel restrictions sped the growth in remote closing, and the trend hasn’t slowed as restrictions have ended. Remote closing has enabled people to save time and money when buying a house. While specific procedures may vary based on local regulations, buyers can finalize a home purchase partially or entirely electronically.
Busy homebuyers everywhere rejoice! Remote real estate closings are time-saving and money-saving, but you must walk into them prepared. A recent study concluded that remote online notarization (RON) could save up to $444 per loan, and it’s no wonder that 87% of study participants predicted electronic closing could help close more loans with the same or fewer staff. RON is just one of a few available methods of remotely closing on a house. Keep reading to learn everything you need to know about closing on a house remotely.
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What is a remote closing on a house?
With much of our world adapting to increasing virtual capabilities, it should come as no surprise that you can close on a home remotely. A remote closing — also referred to as a digital closing, virtual closing, or e-closing — is the process by which a buyer closes on a home purchase electronically.
The process often includes digital identity verification, virtual notarization, and electronic signing of closing documents.
Remote closings may sometimes include in-person elements, such as notarization or signing and transferring physical closing documents by mail, depending on local laws, lender requirements, and buyer preferences.
Remote closing capabilities are significant because they open opportunities for buyers to make decisions and execute the purchase process without traveling. While it’s beneficial to see a house in person before deciding to make an offer, it’s no longer necessary to physically be there to close on the house.
Real estate investors favor remote closing because they can expand their portfolio nationwide while making fewer property visits, expending less time, and reducing expenses. In today’s competitive market, it enables buyers to move more aggressively through the buying process.
How does remote closing work?
No remote closing is identical to another. Local laws and lender requirements affect how a remote closing goes down. However, the general progression of closing stays reasonably consistent. The entire process generally includes the following elements:
- Communication and coordination: Remote closings require increased diligence in communication. The buyer, seller, real estate agents, lenders, and attorneys must all coordinate mainly through virtual means such as video calls, phone calls, emails, and texts.
- Submitting documents: The buyer and seller must gather and submit closing documentation, including purchase agreements, loan documents, title information, inspection reports, and other relevant paperwork.
- Reviewing and signing: Buyers and sellers may digitally sign documents, eliminating the need for physical paperwork.
- Notarization: In some jurisdictions, certain documents require notarization or witnessing. Remote closing platforms often offer these services, where a notary verifies identities and witnesses the signing of documents via video. This ensures legal compliance while keeping the closing process remote.
- Secure fund transfers: During this phase, the buyer transfers funds required for the purchase to the appropriate parties, including down payment and closing costs. Usually, a wire transfer or electronic payment system gets the job done securely.
- Recording and title transfer: At the end of closing, once all documents are signed, funds transferred, and all necessary approvals obtained, the closing agent or attorney will initiate the recording of the deed with the local government office. This finalizes the transfer of ownership from the seller to the buyer.
Depending on local and state laws, remote closings can go a few different ways. There are three most common models for remote closings:
The hybrid closing method
Only some states in the U.S. allow fully digital closings. Elsewhere, requirements like notarization may be gray areas. The hybrid closing method is handy where full digital closings aren’t allowed. This method works because only some documents require a notary. The following are notary-necessary documents in a house closing:
- Deed
- Mortgage, Deed of Trust, or Security Instrument
- Promissory Note
- Notice of Right to Cancel or Right to Rescind
In the hybrid closing method, you can electronically sign all the no-notary-necessary papers before the closing date. Once you’ve gotten that out of the way, all you have to do is meet with a real estate agent and a notary in person to sign the rest of the documents. Don’t fear — you can still do the physical signing in your local area and on your time before the closing date.
Remote online notarization (RON)
Remote online notarization is about as convenient as closing on a house gets. It involves hopping on a video conference with a notary, confirming your identity with your driver’s license or passport, and signing documents.
“RON technology is just one more step toward a fully digital home buying journey.” — Forbes Technology CouncilClick to Tweet
Although remote notarization is rising in popularity, not all 50 states allow it. Some states, including California and Connecticut, don’t. If you’re closing on a house in one of these states, the hybrid method or in-person e-notarization should work.
In-person e-notarization (IPEN)
In-person e-notarization is just what its name implies. With IPEN, you sign documents electronically but with all parties involved in the closing physically present. The main benefits of this method are security and sustainability. You’re saving paper and ink, and you’ll have instant copies of your signed electronic documents.
Wet signature: What is it, and when do you need one?
“Wet signature” refers to a physical signature signed with a pen on paper. As you might expect, an electronic signature is a dry signature. In most cases, dry signatures are legally acceptable. However, in a remote closing, some states require wet signatures for notarized documents.
How to successfully close a house remotely? Expert takes
Closing on a home remotely can save buyers time, money, and energy. Remember — it’s a legal process, often with a lot of money involved, so it’s important to know your stuff and be prepared.
We asked real estate experts what they thought were the most crucial factors impacting the success of a remote closing.
Take note of some of these expert tips for remote closing success.
A strong team of professionals
When buying and closing on a house, your team of real estate professionals will most likely include the following:
- Your real estate agent
- A real estate attorney
- A title or escrow company
- A notary public
- Your mortgage professional
Sebastian Jania, the owner of Manitoba Property Buyers, believes that having dependable professionals in your corner is one of the essential factors in a successful remote closing.
Good partners “admit mistakes, show up on time, and communicate clearly when updates come up; this keeps the process seamless,” says Sebastian.Click to Tweet
Location
Rinal Patel, the founder of We Buy Philly Home, suggests your state can help or hinder the success of remote closing. She reminds us that “some states favor remote online notarization, while others only recognize pen and ink.”
Communication
Real estate broker Denis Smykalov says that “having a reliable internet connection, using secure document-sharing platforms, and ensuring that all parties have access to the necessary documents and information” are key factors to the success of a remote closing. Denis advises, “Communication is also essential during a remote closing, and having an experienced real estate attorney can help mitigate any issues that may arise.”Click to Tweet
Timeliness
Marco Smith, licensed real estate agent with nationally recognized The Maryland & Delaware Group of Long & Foster Real Estate, addresses the importance of “having clearly established deadlines and meeting them”:
“A big reason to do remote closings is to save time. If these deadlines are delayed, it ultimately costs more money and time.” He highlights the importance of clear communication in an efficient closing, stating, “We want to make sure the transaction is solid the first time so we don't have to send it back and forth causing delays.”Click to Tweet
Pros and cons of remote closings
FAQ
What does it mean to close out on a house?
Closing on a house is the final step in a real estate transaction, during which the buyer completes the necessary paperwork and officially takes ownership of the property.
What is a hybrid closing?
A hybrid closing combines elements of both in-person and remote closings in compliance with local laws. You can complete some parts remotely, while others require being physically present for notarization procedures.
What is the fastest you can close on a house?
The timeline of closings on a house can vary, but with efficient coordination and preparedness, it is possible to complete the process in as little as 30 days.
What documents are typically required for remote closing?
Documents typically required for remote closings include purchase agreements, title information, loan documents, title information, inspection reports, and identification documents.
Is there any special technology or equipment needed for remote closing?
While specific requirements may vary, basic technology needs for remote closings usually include a computer or mobile device, a reliable internet connection, and a webcam or camera.
How is the signing and notarization process handled during remote closing?
The signing and notarization process in a remote closing happens via digital signature tools. In some, but not all, jurisdictions, you can use remote online notarization (RON) services, where a notary public witnesses the signing and verifies identities via video conferencing.
What are the potential advantages and disadvantages of remote closing compared to in-person closing?
Potential advantages of remote closings include saved time, saved money, and improved accessibility. Disadvantages may include a lack of personal interaction and technology or security concerns.
Key takeaways
- New technology and laws are bringing us closer to completing the entire home-buying process remotely. Remote closings allow for the electronic completion of home purchases, saving time and reducing waste.
- Remote closings occur on a spectrum, with possible closing methods including in-person e-notarization, hybrid closing, and remote online notarization.
- Success in remote closings relies on a solid team of professionals, clear communication, and meeting established deadlines.
An additional resource for first-time buyers
As a first-time home buyer, it’s normal to feel overwhelmed by the process and the new information you’re learning. Check out SuperMoney’s First Time Home Buyer Guide for an easy-to-digest rundown.
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