One of the best things to ever happen in the real estate industry is the introduction of the digital signature. Digital signatures are used by real estate professionals throughout the U.S. and Canada. Signing real estate agency agreements, sales contract forms, disclosures, disclaimers, and other forms electronically provides a great benefit to both agents and clients. Unfortunately, there can be serious problems if a client or prospect doesn’t clearly understand how the online signing process works. A state real estate commission/board complaint may be filed against an agent and their broker for not properly managing digital signatures in a real estate transaction.
In my home state of Tennessee, our state law, as well as the rules of the Tennessee Real Estate Commission, are unambiguous on how a licensed real estate agent and broker should guide a client through a real estate transaction. Our “Broker’s Act,” the legislation established in 1973 creating the laws Tennessee real estate licensees must follow in their real estate practice, says explicitly “a licensee who provides real estate services in a real estate transaction shall diligently exercise reasonable skill and care in providing services to all parties to the transaction.” In my opinion, ensuring a client clearly understands the digital signature process is part of our “skill and care” responsibilities as professionals. Most states have similar rules or guidelines licensees must follow to make sure they clearly explain everything associated with a real estate transaction including digital signatures on paperwork.
Beyond the licensing law, our state REALTOR® association listing and contract forms specifically contain language concerning electronic/digital signatures. In the Purchase and Sale Agreement form, it states “the parties agree that signatures and initials transmitted by...digital signature as defined by State or Federal law will be acceptable and may be treated as originals.” I see other states incorporate similar language in their state contracts as well. It is imperative an agent explains this particular section of the agreement to the client so they will know what they sign or initial electronically has a binding effect on the legality of the contract.
A couple of years ago, I taught a class that had a section on digital signatures. I created a handout that contained a list of five crucial vital elements to discuss with a seller or buyer client before they participate in a digital signing. Each of these should be thoroughly explained to your client. You, as their agent, must be prepared to answer any question they might have about digital signatures.
1. Carefully explain the digital signing process with the client. Tell the client(s) as you work with him or her on their real estate transaction, he or she may receive one or more emails containing an invitation to review and sign electronic documents from a digital document signing system. Emphasize that by using digital signatures, real estate transaction documents can be processed more quickly and efficiently - especially when a particular deadline/performance date must be met in the sales contract. Include in your conversation, the digital signing allows the client to receive a complete, fully executed set of documents for their files when the signing is complete.
2. Inform the client that digital signatures are recognized to be legal and enforceable signatures. The Uniform Electronic Transactions Act (UETA) was adopted in 1999 and Congress passed the United States Electronic Signatures in Global and National Commerce (ESIGN) Act in 2000 grants legal recognition to electronic signatures. These two acts made electronic signatures legally binding and enforceable for nearly every business or personal transaction in the U.S. and around the globe. No agreement, signature, or record shall be denied legal effect solely because it is in electronic form. A contract relating to a real estate transaction cannot be denied legal effect solely because an electronic signature or record was used in its formation. The client should also be aware of the corresponding certificate and serial number assigned to each signing. They can be assured there is a “paper trail” associated with the signing.
3. Make sure you review each document with your client before they sign them. This can eliminate any confusion the client might have about a document, as well as ensure the signing is expedited so a transaction can move forward. Consider providing “blank” copies of all forms the client will electronically sign in advance. When I send a document, or set of documents, to clients for signature via my digital signing program, the experience is much smoother if the client has an opportunity to read the document before clicking the “sign here” button.
4. Tell the client they do have an opportunity to review the document by scrolling through it prior to signing it. Most online digital signing programs are designed to prompt the signer to go directly to the signature or initial blocks immediately after they hit the “begin signing” button. The lawsuit I previously referenced was based on the signee not knowing what they were signing because the signing program bypassed (or “flew by”) the content of the document and automatically directed the signee to the signature line. It is critical for an agent to tell their client they can read the entire document in a digital signing prior to signature.
5. Communicate with the client before and after the digital signing. Before sending a request for an electronic signature, call or text your client to let them know you are sending a document for them to sign via your digital signature platform. Then, after the signing has been submitted, follow-up with them to make sure they received it.
Most online signing platforms will communicate via email to the sender and the recipient(s) that a signing has been sent, reviewed, and signed by all parties. However, if you didn’t receive an email or text from your particular digital signing program that a signing action occurred, you should follow-up with the client to determine if they received the signature notification in their email. It could be in their junk mail or spam folder.
Also, make sure the client understands that when the system receives all of the necessary signatures, a final and fully executed document will be available for their records via a PDF document. This is a significant benefit of using digital signing as it saves a tremendous amount of time at the office copier or scanner.
Whether you like them or not, digital signatures are here to stay in the real estate industry. They have been a tremendous tool for agents, brokers, and clients by guaranteeing documents are signed and returned expeditiously. They have made my life much easier since I began using my electronic signature program several years ago – both as a managing broker and agent.
If you are not using digital signatures in your real estate practice, I encourage you to consider doing so today. Follow the key points I suggest, and your paperwork and transaction experience will be a better one for you and your client.
John Giffen is Director of Broker Operations for Benchmark Realty, LLC in Franklin, Tennessee. He is the author of “Do You Have a Minute? An Award-Winning Real Estate Managing Broker Reveals Keys for Industry Success.”