eClosings, or digital closings, skyrocketed in popularity during the pandemic. Aside from helping homebuyers and real estate professionals meet social distancing recommendations, eClosings can also offer increased flexibility, security, and reduced physical paperwork. These benefits make them increasingly appealing to consumers and title professionals.
If you’re not familiar with eClosings, this type of closing can be confusing due to the many different types of digital transactions involved. In this resource, we break down the basics of eClosings as well as the latest consumer expectations around the closing process.
What are eClosings?
An eClosing is a property closing that is completed electronically as opposed to one that is completed 100% in-person and with all paper documents. eClosings do not necessarily mean that the entire closing process is completed digitally. Instead, there are various types of eClosings that allow you to leverage technology to complete some or all of the closing process digitally. Doing so can provide additional flexibility for clients, decrease the time it takes to close on a property, and streamline the closing process to create a better experience for all parties involved.
The reality is that most transactions still involve some form of paper processing, but eClosings are continuing to grow in both acceptance and adoption. By implementing technology solutions to improve manual and paper-intensive processes, title companies can use eClosings to offer increased closing options based on the needs of their clients and partners.
Types of closings
The various closing options can be categorized into four main types of closings ranging from traditional, paper-intensive closings to completely digital eClosings—known as remote online notary (RON) eClosings. By offering multiple closing options, title companies can customize their offerings to meet client expectations and deliver a closing experience tailored to each individual client.
- Traditional “wet” closing: Traditional closings are typically held in-person at the office of a neutral third party, such as the title company office or escrow company. Documents are signed using wet signatures (as opposed to digital signatures) on 100% paper documents.
- Hybrid eClosing: Hybrid closings feature a mix of in-person and digital elements. The closing itself often takes place in-person, but documents may be printed or in digital form. Documents are then signed with either “wet” signatures or eSignatures and notarized in-office or at a “mobile notary.”
- In-person digital eClosing: This type of eClosing occurs in person but features 100% digital documents and signatures. Adding these digital elements to the closing can help streamline the process and also allow for documentation to be securely stored, shared, and accessible for your clients.
- Remote online notary (RON) eClosing: With an online notary eClosing, everything is done digitally. The closing is conducted remotely with 100% digital documents, eSignatures, and eNotary. This practice increased in popularity during the pandemic due to social distancing recommendations, and since then, many states have adopted more permanent legislation allowing for remote online notarization.
Learn more about how to evaluate closing options in our guide, “Untangling the Complexities of eClosings.”
Benefits of eClosings
Regardless of the type of closing your client requests, adding eClosings to your offerings can benefit your clients, team, and partners. Here are some of the top benefits of offering eClosing options:
- Shorter closing times: Electronic documents allow homebuyers to sign documents ahead of their closing day. These efficiency savings can reduce the number of documents homebuyers need to sign on closing day and can significantly reduce the time agents need to spend at the closing table.
- Simplified coordination: For in-person notarizations, a homebuyer must often coordinate with a notary to sign documents in-office. With RON, this process is simplified and eliminates any travel requirements by performing the notarization remotely.
- Reduced errors: Missing signatures on closing documents can prolong the closing process. With eSignatures, blank signatures are flagged to ensure that each document is properly signed.
- Mitigate security risks: With secure digital information exchange, title companies can control access to private information and ensure that highly sensitive information is not shared or altered.
Consumer expectations for eClosings
The closing process can be a stressful and confusing time for homebuyers—especially first-time homebuyers. In our Summer 2021 Homebuyer Sentiment Index, 60% of future homebuyers said they would like face-to-face communication prior to the closing. Communication with clients can help reduce closing day nerves by expertly guiding clients through the process. Whether clients ask for an entirely digital closing or a traditional in-person closing, discussing expectations and options with homebuyers can help deliver a differentiated closing experience.
According to our recent survey, 25% of recent buyers said that the amount of paperwork was the most challenging aspect of the closing process. With this knowledge, agents can look for ways to reduce paperwork with digital touchpoints. Even when a client would like an in-person closing, technology can help reduce the amount of physical paperwork at the closing table.
Over the past year, interest in RON eClosings has grown tremendously, leading many mortgage lenders and title companies to increase their investment in eClosing platforms. Although interest is there, our 2021 survey found that only 13% of homebuyers experienced a fully-digital closing. This finding is identical to the results from our previous Homebuyer Sentiment Index conducted in 2020. Overall, there is a sizable gap between the level of technology homebuyers expect during the closing process and what they use when they close on a home. Our recent survey found that while 51% of future homebuyers anticipate using a digital signing platform to eSign closing documents, only 40% of recent homebuyers report using this type of platform during their closing process. Being aware of this technology gap can help businesses that have invested in eClosing technologies (such as eSigning platforms and RON platforms) use those investments to their full potential and offer consumers more digital touchpoints throughout the closing process.
Technology considerations for eClosings
Offering a range of closing options with both in-person and hybrid options allows clients to create the closing process they desire based on their busy schedules and level of comfort with technology. For title companies looking to deliver a premium closing experience and offer greater flexibility, eClosings can be a game-changer. That being said, homebuyers must be fully prepared to access closing technology and navigate digital documents. For example, not all RON platforms are mobile-friendly, so homebuyers must be informed ahead of time about any technology requirements or limitations.
Another technology consideration is cybersecurity. Security threats must always be top of mind for you and your clients. While digital transactions are often considered more secure than paper transactions, there are still some variables that can open your business to security threats. Establishing a culture of security at your company and educating your clients about security protocols and recommendations can help mitigate these risks throughout the closing process.
Additionally, operating within a single system to exchange documents and communicate can help reduce security risks. In our recent survey, 45% of future homebuyers anticipate using a secure mobile app or web-based portal during the closing process. A secure communication portal allows all parties to stay on a single platform throughout the transaction. For example, parties can handle all communication and document exchanges through Qualia Connect. This can help avoid common security pitfalls involved with email communication.
The path to eClosing adoption
At the Future of Real Estate Summit (FORES21), eClosing experts discussed hurdles to eClosing adoption. Clayton Collins, Founder & CEO of HousingWire Media, stated that real estate is still in the “early innings” of eClosing implementation. While eClosing tools are available, the next hurdle is eClosing adoption among title & escrow companies and mortgage lenders.
Homebuyers expect a closing process that is transparent, easy to access, and streamlined. For eClosings to make it over the adoption hurdle, eClosing technology must work for title companies, lenders, and homebuyers. In other words, eClosing technology can’t operate in a bubble and must integrate with the core systems on both the title company and lender side of the equation.
For more insights into homebuyer expectations around the closing process, download a copy of our 2021 Homebuyer Sentiment Index. This survey, conducted by third-party research firm Savanta, gathered responses from over 1,000 recent and future homebuyers across the United States to understand how technology, a competitive market, and the homebuying process influenced homebuyer decisions, expectations, and experiences.