Are you for or against the use of the electronic signature?
While surfing the Internet today, I saw a blog post about the benefits of using electronic signatures in contracts. For those unfamiliar with the process, companies that provide electronic signature and contract execution services provide a quick and efficient way for buyers and sellers to execute a contract without a face-to-face meeting. It’s a great way to get things done quickly. In this day and age, it is all about getting things done quickly. Electronic signature and contract execution services are perfectly legal and eSign law compliant, but there are definitely some potential perils and pitfalls.
First and foremost, I pose the following question: Is it okay to send a client a contract electronically for them to sign without mutual discussion?
Personally, I like to sit with clients and review the contract, point out the main features, and discuss issues that may arise. I suppose that can be done over the telephone while the client is reviewing the contract electronically. Now, I have no problem with that. I also have no problem with a savvy real estate investor who has written hundreds of contracts reviewing the contract sans agent. But, what about the first time home buyer or a novice buyer? Just because that individual is tech-savvy, is it okay to zip them a contract for signature without mutual review?
My second concern and the motivation for this post is that pitfall of an electronic signature in the short sale transaction.
Despite the fact that electronic signatures are eSign law compliant, most of the mortgage lenders do not like ‘em. When working on a short sale package, the mortgage lender usually wants to see an original signature. If the seller is the one using electronic signatures, than the bank has a tough time verifying that the signature is authentic. After all, the seller’s signature is on the note and they usually like to compare that signature to the signatures that appear in the short sale package.
When approving short sales, many mortgage lenders also prefer ‘wet’ (handwritten) signatures from the buyers. In a recent submission of a short sale package a week or so before a foreclosure date, the bank actually refused to postpone the sale until they received a fully executed contract with original (and not electronic) signatures.
Personally, I could argue with the mortgage lender about this until I am blue in the face. But, is it worth it when I could use those very same five minutes that I spent arguing to obtain the original signatures? When working short sales, you want everything to go smoothly, quickly, and efficiently. One way to do that would be to avoid using electronic signatures on short sale transactions.
