The Pros and Cons of E-Sign in the Real Estate Transaction

In the world in which we live in today, if you haven’t been asked to electronically sign something, you’ve been hiding underneath a rock.  Our comfort level with E-sign has rapidly evolved in the last ten years. Electronic signatures in real estate transactions are fast becoming the norm instead of the exception.

For purposes of simplicity in this post, I am going to refer to electronic signatures and digital signatures as one in the same, although they are different.  Digital signatures are used in the real estate business and are much more secure than electronic signatures.  If you’re geeky and want to read about the differences, click here to learn more.

Before we touch on the pros and cons of e-sign, a common misconception needs to be cleared up.  I often hear from consumers and agents alike, “Are they legal?”  The short answer, “Yes.”

The Uniform Electronic Transactions Act (UETA) was introduced in 1999 and has been adopted by 47 U.S. states (Pennsylvania is one of them), as well as the District of Columbia and the U.S. Virgin Islands.  UETA allows electronic signatures in real estate transactions as long as the parties to a contract agree to proceed electronically.

The ESIGN Act is a federal law passed in 2000 and grants legal recognition to electronic signatures and records if all parties to a contract choose to use electronic documents and to sign them electronically.

UETA and the ESIGN Act solidified the legal landscape for use of electronic records and electronic signatures in real estate transactions by confirming that they carry the same weight and have the same legal effect as traditional paper documents and wet ink signatures.

Now that they boring legal stuff is out of the way, here are the pros and cons: 

PRO

  1. Convenience – In the old days (i.e. 10+ years ago), in order to sign a real estate contract, you or your agent more than likely had to travel.  Either you drove to your agent’s office or they came to you.  Time, gas, traffic, stress, uggh!  Today, while you’re at your kid’s soccer game enjoying some family time and soaking in the rays, your e-signing an offer on your home on a smartphone that fits in your pocket or purse.
  2. Speed Kills – The real estate market today changes in the blink of an eye.  When homes hit the market, alerts are instantly sent out to thousands of potential buyers and agents.  Buyers can walkthrough your home via Matterport or other virtual programs five minutes after a sign goes in the front yard.  Agents can now put together all the documents and have you e-sign them within a couple of minutes.
  3. Accuracy – It is not unusual for a buyer or seller to have to sign and initial multiple documents and disclosures when making or responding to an offer.  Prior to e-sign, it was not unusual for consumers to skip over or miss a spot where they should have acknowledged something.  If you’re e-signing a document today and accidentally miss an initial, the program notifies you prior to completing the document and tells you that you missed a spot.
  4. Cleaner, Clearer Documents – When changes in terms are proposed by parties to a contract, the change needs to be initialed and dated so that all parties know what they have just agreed to.  If multiple changes are made to a contract, the pages start looking a bit dicey.  With the use of e-sign, the document is much clearer.
  5. Security – When you e-sign a document, the signature links a digital fingerprint of the document to your identity.  That information is then permanently embedded into the document and becomes virtually tamper proof.  In addition, most e-sign programs used by real estate brokers provide a comprehensive audit trail that shows when a buyer or seller e-signed a document and on what device.

CONS

  1. Consumers’ Comfort Level – There are still consumers out there that are uncomfortable with e-signing anything.  I get it.  They’re concerned with identity theft, authenticity issues, hacking, etc.
  2. Consumer With No Email Address – This does pose a problem.  One of the requirements for e-signing something is that the person have a verifiable email address.  No email address – no e-sign.  This also becomes an issue when a couple shares the same email address.  Each party must have their own separate account.
  3. Comprehension of the Document Being Signed – When you take a legal document that fits on an 8½” x 11″ piece of paper and shrink it to the size of a smartphone screen, the font becomes virtually unreadable.  Sure, you can blow it up to have the words fit your screen but now you’re scrolling, swiping, scrolling, swiping, (repeat).

If you’re a consumer and you’re about to get involved with a real estate transaction, talk to your agent about e-sign.  Ask questions.  If you’ve never e-signed legal paperwork before, perhaps suggest that your agent send you a sample document so that you feel comfortable with the process.  Remember, a real estate transaction (buying or selling) is a big deal.  If you aren’t comfortable with e-signing something, let your agent know that you would prefer to ‘wet sign’ documents.  Just take comfort in knowing that either way you choose is legally acceptable.

All the best!

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