From virtual showings to online notaries, the homebuying process is finally going digital

Boston-area realtor Melony Swasey was in the process of closing on a home when the spread of COVID-19 forced state courts to close without notice. Court buildings hold many registries and deeds needed to record the sale of a house.

“We weren’t sure as of first thing in the morning whether we were going to be able to complete the closing,” she said. “We were able to record the closing electronically because our attorney has that technology. The state was allowing limited electronic recordings yesterday so ours got through.”

Situations like this are playing out all over the country. With much of the United States under shelter-in-place orders, real estate professionals are having to find innovative ways to finish transactions that were already underway and create a path forward for future sales.

The traditional real estate transaction is an antiqued process that relies on redundant paperwork and in-person meetings for things like notarizing paperwork, appraisal, inspection, and final walkthroughs. None of those elements allow for easy social distancing.

Fortunately for the real estate industry, digital technology can solve these problems. The industry has been slow to adopt these technologies, relying on old methods, but COVID-19 has turned digital technologies from a novelty into a necessity, and it could end up being what finally forces the real estate industry into the digital age.

“We’ve been working on a lot of these technologies and integrating them into our business [prior to the pandemic],” says Phillippe Lord, chief operating officer of homebuilder Meritage Homes. “We always felt like this was where the industry was going long term. I think this situation has just created a catalyst to move forward even more aggressively.”

Virtual 3D home tours have become a staple of home shopping since the outbreak of the pandemic. Zillow allows sellers, agents, landlords, and property managers to create 3D home tours using a panoramic photo taken on a smart phone. The company reported a near doubling of the number of 3D tours created in the week after the pandemic took hold, and a one-day jump of 326 percent on March 20.

Meritage Homes has digital tools for people buying a custom home. Customers can design their home using a digital tool, look at a map of where their house falls in a community, and watch videos of the construction site as the build progresses.

Swasey says realtors in Boston are doing initial showings over video chat services like FaceTime or Zoom, and in-person visits are still happening, just with more precautions and fewer people.

But the real challenge coronavirus poses to homebuying isn’t shopping for a home—it’s closing on one.

Many documents in the closing process require a notary, and notarization is normally required to be done in-person. Remote online notarization (RON) exists, but it’s not legal in every state. Wisconsin, Maryland, and Iowa have adopted RON in response to the pandemic. Other states where it’s not currently legal may follow.

Appraisals and home inspections are other parts of the transaction where having a person at the house is critical to accurate and quality work. In response, the Federal Housing Finance Agency—the government regulator of mortgage facilitators Freddie Mac and Fannie Mae—is allowing “alternative” appraisal methods.

According to Jonathan Miller of appraisal firm Miller Samuel, some appraisers are resorting to “drive-by” appraisals, where they drive through the neighborhood and walk around the house but don’t go into it. They’re also doing “desktop” appraisals, using public information and data to generate a value for a house. Swasey says inspectors are still working, but with nobody in the house and stakeholders dialing in via video chat services.

“Even though you’re not going in the house [in a drive-by appraisal], you’re driving through the neighborhood,” Miller says. “You can see the housing stock. You can see the sides of the house, you can walk around the outside. You’re just not in the house.”

Closing on a mortgage is also requiring an adjustment without the presence of notaries and the ability to conduct business through paperwork. eOriginal, which provides digital transaction solutions for mortgages and mortgage securitization chain, launched a division that specializes in closing on a mortgage in 2018.

The company already serves clients that are among the largest mortgage originators in the country. CEO Brian Madocks says interest in digital solutions on the closing side has piqued since the outbreak of the pandemic.

“We’ve fielded I don’t know how many calls from existing clients and new clients about their desire to go to 100 percent digital and RON closing,” he says. “It’s a big task for everybody.”