Settleware ‘No Brainer’ blog

If you bought or sold a home within the past year you certainly understand the challenges around the implementation, processing and closing this high-valued transaction. You also might have concluded that in this day and age ‘there must be a better way’? You may not have realized that there was and is  a ‘better way’ - which would have eliminated most, if not all, the stress and friction you just experienced with this paper-intensive process.

Less than 5% of the today’s real estate agents (most responsible for getting the deal started) have taken their business to the next level and have incorporated electronic signatures into their workflow, contracts and agreements. An E-signature is the ‘glue’ that connects all parties and documents over the Internet-100% paperless with secure real-time execution. There is no longer the need to drive all around town to chase down signatures or to find a fax machine (95% of consumers have Internet access and only 5% have fax machines at home) or to pay for expensive overnight deliveries. As a long time real estate veteran I can recall those calls late on a Wed aftrenoon that all parties must meet at 10:30am Friday in some office typically 20 miles away from no where in order to close the deal (on the East Coast still deploys face-to-face sit down closings-which in reality become a long winded 11^th hour art of negotiation session). Buyers, Sellers, their agents and all the ‘suits’ –personal attorneys plus the banks attorneys and title attorneys had to re-arrange all their schedules – crazy. Talk about stress – last minute day off at work for principals, running around finding  last minute baby sitters, running to banks to get cashier’s checks, etc..

Imagine if all you had to do was open your email, type in your name on contracts, click consent and submit? I think we would all agree that this would definitely be the ‘better way’. Although the E-Sign Act was signed into law by President Clinton back in June, 2000 it has taken many years of collaboration and ‘buy-in’ for all the Industry participants to get on board with a complete electronic and paperless transaction: Agents, Title, Escrow/Settlement/Closing agents, County Recorders/Registrars, Lenders, Attorney Generals, District Attorneys, Secondary Investors, MERS e-Registry, Desktop Title Lien Search and Secretaries of State. The sense of those of us that were  trying to solve ‘the pain’ in this high-liability transaction is that we needed to sit down with all these folks and get them to agree to accept these legally binding documents. As you can imagine, this was not an easy chore and has taken twice as much time than we expected.

As the Industry continues to ramp adoption it is important to understand most vendors were started by ‘technologists’ in search of an opportunity while others, solving the pain, compliance issues, garnering Industry wide certification, brought to the table extensive domain expertise, know-how and collaboration skills to have all parties to raise their hand  - “I’m In”. Welcome to the future – the all digital real estate transaction.

After more than a decade of the passage of the e-Sign Act we’re pleased to announce that the Escrow/Settlement Industry is poised to adopt electronic signature technology into their paper intensive processes. In our recent Escrow Survey an overwhelming majority of respondents (67%) stated that they would be adding e-Signatures to their escrow workflow, contracts and agreements within the next 12 months.

Seems like the rapid acceptance and adoption of electronic signatures by real estate agents, buyers and sellers may be the primary cause for this recent change of priorities. Escrow officers and settlement/closing agents generally carry out the instructions from the principal parties and are not particularly known to be ‘early adopters’. Buyers/Sellers/Borrowers, who are becoming more comfortable with e-Signing upfront purchase and counter offers, instructions and agreements, will now be able to complete their transaction over the Internet (anytime, anyplace-even at the airport on their mobile phone) removing most, if not all, the friction associated with current paper-based processes. No paper, no faxing, no scanning, no expensive overnight FedEx or UPS shipping charges and most importantly, no more chasing down missing documents, pages or signatures!
Removing the stress for all parties, especially the overworked escrow officers and closing agents, will be very much appreciated!

It all started with a vision to ‘streamline the escrow process, both real and personal property’ and as we celebrate our 10th Anniversary I thought it might be a refresher to define the exact purpose of Escrow.  Escrow is sometimes known in other parts of the US as Closing, Settlement, etc and the information presented here was taken from a pamphlet prepared by the Escrow Institute of California to be handed out by escrow companies to their clients. We decided to present it pretty much as written because escrow companies very rarely get to explain what goes on in escrow in their own words. Usually your lender or Realtor explains the function of escrow to you:

Prepared by the Escrow Institute of California

Escrow: What is it?

Very simply defined, an escrow is a deposit of funds, a deed or other instrument by one party for the delivery to another party upon completion of a particular condition or event. The California Escrow Law: Section 17003 of the Financial Code: provides the legal definition.

Why Do I Need an Escrow?

Whether you are the buyer, seller, lender or borrower, you want the assurance that no funds or property will change hands until ALL of the instructions in the transaction have been followed. The escrow holder has the obligation to safeguard the funds and/or documents while they are in the possession of the escrow holder, and to disburse funds and/or convey title only when all provisions of the escrow have been complied with.

Escrow: How Does it Work?

The principals to the escrow: buyer, seller, lender, And borrower: cause escrow instructions, most usually in writing, to be created, signed and delivered to the escrow officer. If a broker is involved, he will normally provide the escrow officer with the information necessary for the preparation of your escrow instructions and documents.

The escrow officer will process the escrow, in accordance with the escrow instructions, and when all conditions required in the escrow can be met or achieved, the escrow will be “closed.” Each escrow, although following a similar pattern, will be different in some respects, as it deals with your property and the transaction at hand.

The duties of an escrow holder include; following the instructions given by the principals and parties to the transaction in a timely manner; handling the funds and/or documents in accordance with the instruction; paying all bills as authorized; responding to authorized requests from the principals; closing the escrow only when all terms funds in accordance with instructions and provide an accounting for same: the Closing or Settlement Statement.

Over the past several years we have provided electronic escrow and e=Closing services and will continue to assist moving the Industry towards a complete electronic and paperless Real Estate escrow transactions – from Opening through Closing. We applaud our ‘early adapters’ customers for sharing our vision!