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Bernice Ross
Digital signatures have made signing the reams of transaction paperwork virtually painless. The ease of signing digitally, however, has created a whole set of different issues that agents, brokers, and lenders must monitor in order to keep their documents secure.
Long before digital signatures, buyers and sellers were executing documents without reading them. Today the problem has increased exponentially, especially in heated markets where there is little inventory and properties are being bid up well over asking price. Buyers rush to write an offer and are more concerned about being in the running for the property than the details of the purchase contract.
A second problem is that digital documents are not always secure, not necessarily due to issues with the digital signature platforms themselves, but due to how the people involved in the transaction fail to take the necessary steps to maintain security.
Who’s Really Clicking and Signing?
Earlier this year, my brother, my husband, and I jointly purchased a condominium. During this transaction, there multiple occasions where I could have digitally signed for my brother or for my husband on the transaction documents.
The first opportunity for a breach occurred when the listing agent sent my brother’s documents to be signed digitally. He was having trouble downloading them due to the age of his computer and the extremely slow connection speed where he was living.
I asked him to send me the documents to see if they matched the paper documents that took almost an hour for my husband and I to sign in person. Once I had matched the documents, it took him only a few minutes to click and sign.
When he sent me the email with the signing instructions, they were crystal-clear: Don’t share this link with anyone!
I now understand why. I already knew the answers to all the verification questions and was also on title to the home where he was living. It would have been easy for me to use that link to sign the documents for him.
A second opportunity occurred with a different set of lender disclosures. When I clicked to open my documents, my husband’s documents were linked in the same signing request. When I clicked on his name, I was able to open his digital documents and could have signed on his behalf as well.
Imagine the potential risks inherent in these situations, especially in a nasty divorce or a family dispute over a will or some other matter. A disgruntled spouse or family member could easily sign for another person if they obtain access to the signing app.
Best Practices to Reduce Risk
While agents are limited in what they can do to protect the digital security of their transactions, you can take steps to make sure your clients are reading their digital documents and that those documents are being properly executed.
First, provide a complete document package for clients to review when you first start working with them
For sellers, include the listing agreement, the agency disclosures, required property disclosures, as well as any retrofit or other state and local requirements. Also include a copy of a completed sample purchase agreement, relevant addenda that may apply to the listing, and multiple offer forms if you’re in a heated market.
For buyers, include the agency disclosure, the purchase agreement, and any relevant addenda. If multiple offers are common in your area, include a copy of the multiple offer documentation as well.
Strongly urge all your clients to read the documents, even if it means having to sit with them and answer questions as they read through them. If there’s any type of dispute, have escrow, title and mortgage send separate document packages to each party in the transaction.
The signing issues noted above resulted from mortgage and title sending only one set of documents to my husband and me. While this is generally not an issue if your clients are on the same page, if there’s any chance of a dispute such as in a divorce or a probate, ask for separate document packages.
Most importantly, never, ever sign anything for your clients. This happens more often than you may realize, especially if one of the principals in the transaction is traveling, is ill, or unable to sign for some other reason. In this case, encourage your client to obtain a financial power of attorney one either through their attorney or through a service such as LegalZoom. Also, if a client says, “I can email you’re the digital signature link and my password – take care of it.” Never do so. It can cost you your license.
Even though you do your best to urge them not to, chances are most of your clients will continue to sign their documents without reading them. Note the date that you gave clients their document package, that you encouraged them to read all the documents, and send separate packages to each client if there’s a potential dispute. That’s the best way to minimize the risk to you and your brokerage.
Bernice Ross is a nationally syndicated columnist, author, trainer and speaker on real estate topics. She can be reached at bernice@realestatecoach.com.
