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The leaves on the trees may be changing colors and the temperatures dropping, but it does not quite feel like autumn. It is hard to notice the change of seasons these days as we continue to distance ourselves from the outside world and each other. Since March of this year, our lives have been altered by the coronavirus in ways that we could have never imagined. For the first time in our careers, many of us are working remotely and learning to adapt to our home office routine. For those in the office, we are adjusting to wearing masks and maintaining a safe distance from others. Yes, the last six months have presented new challenges, but the real estate industry has performed surprisingly well and certainly better than anyone could have probably predicted.
Our industry cannot take sole credit for its performance during this pandemic. Several factors played in our favor. Heading into 2020, our U.S. economy was strong and stable with record low unemployment. The Federal Reserve continued to support historically low interest rates which helped ignite a strong refinance market. Overall, mortgage applications have been up for both new home purchases and refinances from comparable time frames last year. Interestingly, another contributing factor was the quick response by state governments to extend emergency measures. Executive orders were issued by most states that allowed businesses to continue to operate under more flexible conditions, including real estate, which in many states was deemed “essential.” These factors all came together to help boost the real estate industry as the virus spread.
Along with favorable outside influences, internally the real estate industry was more prepared for a pandemic than it probably realized. Over the last decade or so, our industry began implementing more efficient, effective and secure ways to deliver our services while leveraging technology. We understood that as people relocated, we needed to have the ability to conduct real estate transactions without the requirement of the physical presence of people or paper. The notion of a digital closing where parties could execute documents from any location was envisioned and so began the journey towards developing systems that could handle such things as E-closings, E-notarization and E-recording. Of course, we had no idea that these developments in real estate would also help us survive our first pandemic.
As the pandemic hit, many facets of the real industry had already integrated at least some portion of digital closing technology into its day-to-day practices. For example, 49 of 50 states were e-recording pre-pandemic with Vermont being the lone holdout. Due to the fact that e-recording was so prevalent, the recording of real estate documents in most jurisdictions could continue even in areas where courthouses were forced to close. Without the ability to e-record, real estate transactions would have effectively shutdown until systems could be implemented on both the recording entity side and the closing side. The economic toll this would have taken on our industry is immeasurable. Needless to say, one can only assume Vermont will not be a hold out for much longer.
While e-recording is almost universally implemented, Remote Online Notarization (RON) is not. Although electronic notarization is legally authorized in all states under E-SIGN and UETA, not all states have given their state notaries authorization to act as electronically enabled notaries. RON allows documents to be executed and notarized in front of a notary via a secure remote video conference while the notary and signer are in two separate locations. Electronic signatures and seals are affixed to the electronically signed documents. As of July 2020, there were 27 states that were authorized for RON. The majority of these states were actively engaged in RON prior to the pandemic so there was no downtime in getting systems in place in order to have documents executed remotely for about half of the country.
For those states that did not have RON approved, they were aided by executive orders and guidance that temporarily adjusted the requirements surrounding legal document execution. One variation known as Remote Ink Notarization (RIN) removed the requirement for documents to be signed in the physical presence of a notary or witness, but still required the documents to be signed in ink before the notary and witness via an approved audio/video platform. The particular requirements vary by locale, but without these measures, the states without RON would not have had a viable means to have real estate documents executed, especially at the onset of the pandemic when stay at home orders and curfews were in place. Again, our industry for the most part was able to integrate these changes relatively quickly and real estate closings were able to proceed.
With no immediate end to the pandemic in site, states are continuing to extend these emergency measures, but these measures will have an end date at some point. Before that time comes, states need to start evaluating or re-evaluating proposed legislation that allows for RON. Many states that were hesitant to pass such legislation due to concerns of fraud, privacy, record retention issues or other reasons, may be more willing to do so in light of COVID-19 and the fear of the economic impact of a similar event in the future. The option to sign documents in person may always be available, but the pandemic has shown that we must have alternatives in place. It is this area of the real estate transaction where we will likely see the most change in the coming years as result of this virus.
Our industry has been fortunate to have fared well so far this year, certainly more so than other sectors of the economy. Whether it’s outside influences, our own preparedness or a combination of both, real estate has persevered through this pandemic. However, as a group we must continue to evolve and adapt. This virus not only reminded us of the importance of being able to connect remotely to sustain our business, it also showed us areas of vulnerability. Introduction of new legislation, upgrades to our software systems, and integration of more technology into our day to day practices are transformations we should not be surprised to see and be a part of in the near future.
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