Real estate and technology have been closely associated with one another for quite some time, and it seems in the last five years, the two have been moving forward at breakneck speed. The arrival of digital lockboxes to drones to digital signatures solidified the real estate industry’s adoption of technology and didn’t show signs of slowing down before the emergence of the COVID-19 pandemic.
But technology and the real estate industry went into warp speed with the arrival of COVID-19 and Gov. Tony Evers’ “Safer at Home” order.
As an “essential business” under the order, real estate professionals are still permitted to provide services. However, all essential businesses must meet social distancing requirements, and they are also to use technology “to the greatest extent possible.” Thankfully, the real estate industry’s assertive adoption of technology over the years offered the industry a relatively smooth transition under the governor’s order.
For years, products like zipForm, Dotloop and others have allowed agents to draft forms, send forms to their clients and customers, and even allow parties to digitally sign forms. Further, for years now, virtual tours have offered buyers the opportunity to see a property without stepping foot into the home.
Historically, there were instances in the transaction that either didn’t permit a technological alternative — such as the remote notarization of documents, or were not a necessity to the same level they are today — like payment of earnest money electronically.
This article explores two of the ways that COVID-19 has thrust the real estate transaction further into modern technology.
Remote online notarization (RON)
On the list of the WRA’s legislative priorities was remote online notarization (RON), a way to allow for remote or e-notarization of documents in Wisconsin. Without RON in place, Wisconsin law would still require notarization to occur in person. For instance, a deed without RON had to be signed in person. However, social distancing related to COVID-19 created increased concern from people not wanting to go to a physical office to sign certain documents.
And in early March, Gov. Evers signed legislation allowing RON in Wisconsin. Essentially, RON allows consumers to have certain documents notarized remotely, including deeds and mortgage documents, rather than in person. The downside was the timing: the law was not effective until May 1, 2020.
However, due to COVID-19 and the potential inability of the consumer, notary and service provider to meet in person, the Wisconsin title industry worked with the Wisconsin Department of Financial Institutions (DFI) to enact RON effective immediately. Therefore, before May 1, 2020, RON became effective in Wisconsin.
The following is a brief summary based on communications with representatives from the title industry regarding how RON will be implemented:
Which sellers can sign with RON?
Generally, RON can be utilized by individual sellers who are U.S. citizens. As of March 18, 2020, RON is not necessarily available for power of attorney (POA) authority, trustees, personal representatives, and limited liability companies (LLCs). Title agents should consult with title insurance underwriters on this matter.
Are title companies and lenders set up with RON?
Title companies were the greatest driver in support to the RON legislation and, once the COVID-19 pandemic hit, worked diligently with the DFI to get the law enacted earlier than its original effective date. As long as there are no issues with the title insurance underwriters, there should not be any significant issues with the title companies’ ability to conduct a closing using RON technology.
At this time, some lenders may not have systems to permit RON, but it is the WRA’s understanding that a number of lenders are working quickly to get RON in place so loan documents can be signed using RON. In order to facilitate RON, lenders need a secured system called an “e-vault.” Buyers should work with their lender to determine which loan programs have “e-vault” capacity allowing paperwork to be conducted more remotely, which mortgage documents can be signed using RON and if any delays may occur.
The land title industry is working to find solutions for any remaining challenges that prevent transactions from closing due to title matters. The Wisconsin Land Title Association (WLTA) is continuously updating information about the register of deeds and RON at www.wlta.org/covid-19-updates. Agents should encourage their parties to work their lenders and title agents as to RON capabilities.
To learn more about RON, watch the Thursday Takeaways video, “COVID-19 and Remote Online Notarization,” with Knight Barry Title General Counsel Cheri Hipenbecker at www.wra.org/ThursdayTakeaways/Episode28.
Electronic earnest money and the trustfunds platform
Electronic earnest money is the opportunity for a buyer to pay his or her earnest money electronically rather than writing a check or obtaining a cashier’s check. Many consumers have moved away from having a savings or a checking account. For those who have Venmo and PayPal accounts rather than a traditional bank account, the ability to pay earnest money electronically through a platform provides an entirely new modernization to the real estate transaction.
A number of Wisconsin MLSs are now allowing members to use TrustFunds, an electronic earnest money payment platform. With the COVID-19 pandemic, consumers and agents are looking for more innovative ways to maintain social distancing while honoring the contract terms. TrustFunds offers the perfect solution.
Is electronic earnest money legal in Wisconsin?
Yes. Current Wisconsin law does not prohibit the payment of earnest money electronically. Moreover, to further clarify the ability to pay earnest money electronically, the WB-11 Residential Offer to Purchase with a January 1, 2020, mandatory use date references electronic delivery earnest money on line 59.
Can any buyer use TrustFunds?
Yes. Electronic earnest money is available to any buyer, regardless if the buyer has a traditional checking or savings account.
Why should buyers use TrustFunds?
Nothing encourages social distancing more than the ability for buyer clients and customers to pay earnest money electronically from their home.
Why should real estate firms want to use TrustFunds?
Other than compliance with social distancing, moving forward using TrustFunds removes some of the challenges associated with utilizing hard-copy checks, such as buyers writing the wrong name of the listing firm, the cooperating firm’s name or the wrong title company; or as an agent, having to remember to give the check to the designated person to deposit the check or having to worry about misplaced checks, like the one that slid between your car seats.
Another benefit touted by TrustFunds is the payment of earnest money electronically protects against wire fraud. Wire fraud is an international problem, specifically in the real estate community. In 2017, $969 million “was diverted or attempted to be diverted” from real estate purchase transactions and wired to “criminally controlled accounts,” per The Washington Post. In 2016, the number of wire fraud cases reported by title companies jumped 480%, per the FBI.
To learn more about wire fraud and how to protect both your firm and the transaction, see, “This Is Not a Test,” in the December 2018 Wisconsin Real Estate Magazine at www.wra.org/WREM/Dec18/Cybercrime.
How does TrustFunds work?
When the buyer wants to pay earnest money electronically, the agent logs in to his or her MLS and clicks a link to TrustFunds.
In an over-simplified example:
The agent goes through a secured process confirming the property, the buyer and the amount of earnest money the buyer has agreed to pay. The buyer is then provided a secured email with a link where the buyer will make the payment by entering his or her account information for a one-time payment of the earnest money amount. This is a similar process to when someone is signing up for an automated clearing house (ACH) withdrawal from a savings or checking account.
The buyer’s earnest money is then placed in the trust account of the firm designated in the offer to purchase to hold the earnest money. In order to have the money placed in the firm’s trust account by way of TrustFunds, the firm must be a TrustFunds paying subscriber. That link then takes the agent out of the MLS and into the TrustFunds platform.
To learn more about TrustFunds, visit www.trustfunds.us.com and also watch the Thursday Takeaways video, “Electronic Earnest Money” with TrustFunds founder Lynn Leegard at www.wra.org/ThursdayTakeaways/Episode29.
Do the earnest money rules apply if the money is paid electronically?
Yes. Wis. Admin. Code chapter REEB 18 at docs.legis.wisconsin.gov/code/admin_code/reeb/18 addresses the handling of earnest money. Wis. Stat. Chap. 452.13 at docs.legis.wisconsin.gov/statutes/statutes/452/13 addresses trust accounts.
RON and TrustFunds are technology tools that will help during the unprecedented and uncertain time of the COVID-19 pandemic as well as illustrate another way that real estate has embraced new technology.
“Essential Business” Under Emergency Order #12 Safer at Home Order
13. Essential Businesses and Operations. All entities described in this section shall meet Social Distancing Requirements between all individuals on the premises to the extent possible. Essential Businesses and Operations shall, to the greatest extent possible, use technology to avoid meeting in person, including virtual meetings, teleconference, and remote work (i.e., work from home). For the purposes of this Order, Essential Businesses and Operations means Healthcare and Public Health Operations, Human Services Operations, Essential Infrastructure, and Essential Governmental Functions,
and the following:
u. Professional services. Professional services, such as legal or accounting services, insurance services, real estate services (including appraisal, home inspection, and title services). These services shall, to the greatest extent possible, use technology to avoid meeting in person, including virtual meetings, teleconference, and remote work (i.e., work from home).
Cori Lamont is Senior Director of Legal and Public Affairs for the WRA.