Real Estate Transactions Go “Green”
By Brian Johnson
Our cars, our appliances – even our houses – are “going green” these days. And it would appear the next “green” opportunity is … our real estate transactions. Real estate deals are notorious for being paper-intensive. Purchase agreements and their amendments, mortgage documents, appraisals, title commitments and other necessary documents require reams of paper – particularly if those documents are reviewed and revised by attorneys – and historically have required multiple parties to be in the same place at the same time for a closing. Even closings “by mail,” which allow parties to be in separate locations, are still paper-intensive.
Get In the (Dot) Loop
A movement is afoot, however, both locally and nationally, to reduce the paperwork necessary for the typical real estate transaction. As reported by the New York Times, a cloud-based platform called Dotloop has been developed to streamline the process and reduce the use of paper for the realtor portion of the transaction. Dotloop is used nationally by approximately 17 million people, including about 1.2 million real estate professionals and 3,000 real estate offices.
Real estate agents who have accounts can access Dotloop from their desktop, tablet or phone. For every deal that’s in progress, known as a “loop,” the parties involved – buyers, sellers, title agents, mortgage and insurance brokers, appraisers – are invited to join that loop. Those parties are then able to review, sign and edit contracts and other documents electronically. All parties are notified when a particular document is reviewed or signed.
Locally, Dotloop and a similar program, DocuSign, are being put to use, providing paper-free real estate transactions. Local realtor Brett Nichols, with Re/Max Bayshore Properties, has used DocuSign to eliminate all paper from several real estate transactions, and expects the trend to continue.
Not So Fast … On The Closing Side
While the realtor portion of the transaction is well along the way to becoming truly paperless, the closing has not caught up yet. Local title companies have long been providing preliminary title work to attorneys electronically, and attorneys, for their part, have become more adept at reviewing, highlighting and suggesting changes to documents without resorting to printing those documents. One local attorney office has closed several real estate transactions recently where one party electronically signed all documents, including the forms traditionally signed at the closing table, without ever putting pen to paper. However, the other party behaved more traditionally, signing and scanning paper documents, and printed copies of all transaction documents were ultimately distributed following the closing.
An admittedly unscientific poll of local title agencies reveals that no closings have actually occurred that were truly paperless. The issue, of course, is that documents that must be recorded – mortgages, easements, deeds – by necessity require paper copies. Or at least, recording used to require paper documents. Michigan’s Uniform Electronic Transactions Act, enacted in 2000, specifically allows documents to be signed electronically (and, in conjunction with Michigan’s Notary Act, even notarization can happen electronically). In 2010, Michigan enacted the Michigan Uniform Real Property Electronic Recording Act (MURPERA), based upon the standardized legislation of the same name agreed upon at the 2004 meeting of the National Conference of Commissioners on Uniform State Laws. MURPERA sets forth that, if a law requires as a condition of recording that a document be an original, or on paper or another tangible medium, that the requirement will be fully satisfied by an electronic document. The law also authorizes county registers of deeds in Michigan to accept electronic documents for recording, providing that they do so in compliance with recording standards to be established by the Michigan Electronic Recording Commission (MERC), a state commission established by MURPERA. The Michigan Recording Standards were adopted on August 27, 2013, and became effective on January 1, 2014.
It is important to note that a county register of deeds is not required to accept electronic documents for recording. At this time, Grand Traverse County is starting to accept electronic documents, although only those with no stated consideration. Leelanau County has accepted only a limited number of electronic documents through defined sources; Benzie County does not accept electronic documents at all. As such, while a true paperless transaction has yet to occur, Michigan law, and the expectations of those in the real estate industry, have laid the groundwork for a transaction that occurs merely as a digital data stream.
Brian L. Johnson, a partner in the law firm of Dingeman & Dancer, PLC, in Traverse City, is an estate planning and transactional attorney practicing in the areas of estate planning and wealth transfer planning, real estate and business matters, and land use and development.