In today’s world, a mouse click can accomplish nearly everything. And real estate is no different.
In Maryland, buyers can digitally sign a sales contract and apply for a mortgage. As a result, some buyers assume they do not have to attend settlement; however, buyers must physically attend a real estate settlement for most real estate settlement purchases in Maryland. Attendance is not a requirement of the title company but rather the buyer’s lender and the clerk of court.
We find that more buyers are unprepared to attend settlement in person and seem surprised that they are required to attend their closing physically, leading to last-minute scrambles, rearranging of schedules, or arranging for a power of attorney.
The lending world has made a lot of progress, allowing some electronic signatures during the application phase. In addition, some lenders now offer “hybrid” type loan signing where the buyers sign a portion of documents online, with the more important documents and affidavits left to be signed pen to paper, in person.
So why do buyers have to attend settlement? There are many reasons, and some reasons and exceptions depend solely on the details of the transaction. For example, most lenders’ investors cannot sell the loan without a wet signature, and they must adhere to Fannie Mae and Freddie Mac guidelines. In addition, most clerks at the recording offices require affidavits accompanying the deed must be wet signed.
Many loan documents require notarization in front of a public notary on the day of closing. If the buyer is out of state, the title company will schedule a mobile notary or make arrangements at a title company or attorney’s office in the state where the buyer is currently. The lender’s loan documents are date sensitive, meaning signatures must record on the closing date. In addition, you cannot have two separate signature pages on loan documents. For example, if you have one buyer in TX and one in MD, they cannot sign the loan papers separately.
As a buyer getting a loan, your options are to attend the closing, get a power of attorney that needs prior approval by your lender, or sign via a mobile notary that will physically travel to the buyer’s location.
You may be hearing about Remote Online Notarization (RON), where the buyer signs electronically. This option is currently available for a small niche of cash buyers purchasing a property that will not be their principal residence and even for some sellers. RON providers have specific requirements to prove security, including ID verification, recorded video storage, and knowledge-based authentication. This option is not available to most buyers purchasing a principal residence with a mortgage loan.
If you find you have a client who cannot attend closing in person, it is best to notify your title company as far ahead as possible. Then, with enough time, your title company can put together a comprehensive plan to give your transaction the best chance of success and not have any issues at the last minute.
This article originally ran in the June 2022 Chesapeake Real Producers.