Much in the world has changed in 2020 and closing a real estate transaction in Massachusetts is no exception. Gone are the closings where buyers, sellers, their attorneys, the closing attorney and the brokers all convened at the Registry of Deeds to sign the papers that would transfer ownership of the home to the excited buyers. Since early March the Registries have been largely closed to the public.
We had already begun to see less sellers at the closings, with their attorneys coming in their stead or simply mailing the signed documents to the closing attorney. Brokers would often show up with the paperwork and leave with the checks. Today transactions are being closed in yards, on picnic tables and in large conference rooms with each of us at opposite ends of a table and everyone with masks.
We look for ways to handle the transaction as simply and safely as possible. This naturally leads to thinking about virtual solutions. Just as the company meeting has gone from the boardroom to Zoom, so too can the real estate closing. Almost every state has a law in place (many only temporary) that would allow for some type of virtual real estate closing. Massachusetts has its own version that was signed at the end of April by Governor Baker dealing with the issue of virtual notarization of closing documents – most importantly the deed and mortgage. Until April, Massachusetts law did not allow for virtual notarization of any kind. Even after passage of the law there were questions, and still are, as to what Registries and lenders will accept such notarizations and in what form. There still appears to be no universal consensus amongst each group.
Before we can understand what their trepidations might be in accepting such documents, one needs to examine the Massachusetts law in comparison to other state laws. The most comprehensive and fully electronic closing and notarization laws in some other states allow for Remote Online Notarization (RON). These are similar to using DocuSign to have the parties execute the purchase and sale agreement. No one is meeting, personally or virtually, and the signing and notarization are all accomplished online. Some states allow for this, but Massachusetts is not one of them.
The next form of virtual closing is the Remote In-Person Notarization (RIN). This is where the parties meet via video, the notary conducts the closing and then notarizes the documents once sent back to him or her. Massachusetts has adopted this system, but it is cumbersome. The process is as follows:
The notary initializes a recorded video conference with the buyer or seller, has the parties physically show the front and back of two forms of identification and has them swear that they are physically located within Massachusetts. Once the parties sign, they overnight the original documents and copies of their IDs to the notary. When received, the notary initiates a second recorded video conference with the parties and notarizes the documents. The notary must prepare an affidavit regarding the closing, put a statement on his or her notarization indicating it was done remotely, and retain a copy of the ID’s, affidavit and recording of the session for ten years.
The issues with this system include relying on the borrowers to send the documents back to the notary, using a video conference system that is safe and can record, and maintaining these records for ten years. In addition, some lenders are not allowing this type of transaction for their mortgages. Add to that the potential Registry of Deeds or Land Court rejection and we see that this isn’t a universal solution.
There is also what is referred to as the Hybrid Closing, where the parties meet via video or by phone, they view the documents online via DocuSign or other similar service while the closer explains the documents to them. They electronically sign most of the documents and a notary comes to them to obtain their signatures on hard copies of the documents that require notarization. A good solution because there is no chance of Registry rejection but, again, not accepted by all lenders.
Today the drive by closing, where the notary goes to the home of the buyer and hands them the closing package and either sits in the car and explains the documents via phone or video chat, or simply watches through a door as the buyers' sign has the greatest adoption as a contactless solution. At Equity/O’Donnell, unless we are meeting in our office or the buyers are comfortable meeting outside of or in their homes, we have found this method that we call DoorSide Closings to be the most effective and least fraught with issues than the other options for contactless closings
There is no doubt that the full virtual closing is in the near future for Massachusetts. The requirements and form will be set over time. We have become comfortable with not meeting physically to close the purchase transaction and that usually means that we won’t go back to the ways we once transacted even when the pandemic ends.
I will think fondly of the days that we all dressed in business attire, met in a crowded conference room and closed the purchase with handshakes, hugs and best wishes. A tradition that had already faded has now been shoved to the ash heap by the times we live in.
Michael Krone is a practicing attorney with over 35 years’ experience in real estate transactions. He is Senior Vice President of Equity National Title and Massachusetts Counsel for O’Donnell Law Group. He can be reached at email@example.com