Elite AgentReal Estate Tech & Social

Electronic Signatures: Dragging the Disruption Chain

Electronic signatures remain an important part of the disruption chain and from what we are seeing accomplished in foreign markets, like the U.S., the capability to sign real estate documentation across distance and time zones, at speed, represents significant economies and efficiencies for the property industry.

Australia -wide, the validity of electronic signatures remains foggy for many agents. Whilst pregnant with some incredible potential, the topic is met often with hesitation by many due to some regulatory hurdles, software integrations, and some of the more special quirks of the Australian Federal system.

In discussing what modern customers want, Phil Harris of Harris Estate Agents in Adelaide articulated our vulnerability to technology precisely when he said that our challenge wasn’t so much competing with each other any more but that “[our customers] compare us to tech platforms, online shopping and other big retailers”. Yes, they expect speed and they expect our technology to deliver it.

Greg Troughton, CEO of REISA also sees electronic signatures as a customer-centric response for agents to the modern era. He says, “I think “wet ink” process is dead or at least dying and soon, in this very busy lifestyle we all lead, that more and more agents and clients will opt to use remote digital signing.  What could be better than dealing with a property client the way they wish to be dealt with and if that client chooses to review the document from the comfort and time in their own lounge room or office before signing (as opposed to trudging across multiple suburbs and into the agents office) then they should be entitled to do so!”

Let us unpack the hesitation that could be dragging the electronic signature, in some parts.

Firstly, the question everyone wants answered: Is an electronic signature binding?

It might be surprising that the first time an electronic signature was challenged and accepted by a court was in the The Hampshire Supreme Court in the US said in Howley v. Whipple, 48 N.H. 487, this:

“It makes no difference whether [the telegraph] operator writes the offer or the acceptance in the presence of his principal and by his express direction, with a steel pen an inch long attached to an ordinary penholder, or whether his pen be a copper wire a thousand miles long. In either case the thought is communicated to the paper by the use of the finger resting upon the pen; nor does it make any difference that in one case common record ink is used, while in the other case a more subtle fluid, known as electricity, performs the same office.”

Translation from Victorian-fancy-legal-English to English: for almost 150 years, electronic signatures have been recognised as valid.

In the 1980s, the most innovative businesses were using fax machines to obtain signatures, and these contracts were also held to be valid, and these signatures by electronic transmission, or facsimile were widely endorsed as normal business transactions, including for the sale of land.

The upshot of the history clears up an important point about signatures on contracts. The signature itself is not the agreement, it is merely evidence that the party intended the agreement.

Tim McKibbin, CEO of REINSW summed up the issue concisely stating that, “the validity of an e-signature is an evidentiary issue”.

The key question is this: If called into question, is there enough evidence of the signature to support that there was an intention of the party to agree to the terms laid out in the document.

Evidence of validity of signatures isn’t a burden limited to an electronic signature. In a paper document, there may be times where the validity is called into question such as in the case of stolen identity, duress, or mental incapacitation. In those instances, evidence outside of the document would be used to affirm or support the agreement of the party. It might be that witnesses are asked to provide evidence of a written signature or a doctor may be consulted about the state of a person at the point in time when the pen was put to paper.

Some opposed to the progress of the electronic signature believe that this additional evidence (witnesses and so forth) might be lacking in the case of a digital signature, though many on the side of progress would argue that the additional protections of digital logs and tracing offer an enhanced and more objective type of evidence to affirm the intent of the signer.

Are ‘we’ ready to go digital?

That depends on whom you mean by ‘we’.

If you mean ‘we’ as real estate agents, that depends on where you live.

One of the more interesting aspects of the electronic signatures topic is in relation to Australia’s Federated States and Territories. The Federal System and constitutional arrangement means that the States and Territories work under different legislation, and there are a few anomalies from Commonwealth legislation, particularly with regards to Corporations entering agreements by electronic signature.

It also depends on what part of the transaction.

While there may be enabling legislation for the contract of sale, there remains regulatory hurdles in that government forms in relation to Transfer, Stamp Duty, and Purchaser Grant Applications are still required to be wet signed. Even though contracts of sale and leases, as agreements, may be capable of electronic signature – there are other documents required by Government in wet signature format.

So, to varying extents (depending on where you live), from an end to end perspective, while the contracts can be electronic, the government forms cannot and governments make the rules about what they do and do not accept. From the perspective of a client, electronic signatures at the front line on the contracts will go a long way towards less-paper, but we are waiting on regulators before we can anticipate being paperless throughout a full conveyance and exchange.

The REIs across Australia work with government and many have been incredibly engaged to try and drive the case of electronic signatures. Want to know where your state is up to? See the state by state round up.

And finally, it depends on what forms builder you are using.

Of critical importance, notwithstanding whether there is an enabling law for the use of electronic signatures, there is the important tactical concern of a software product that make e-signing, a legitimate reality at the coal face of property contracting.

Both the electronic forms software exists, and electronic document signing exists – but it is the middleware and integration of these two pieces of technology that is slowing some States down.

Once these issues are solved, the world is going to become very fast indeed.

Provided we can get over these hurdles, the end-to-end property exchange could one day be handled in its own digital ecosystem. Platforms such as Rundl and Adobe Transactions Rooms are waiting, just around the corner, for us to solve these remaining hurdles and they offer ways for all stakeholders in a transaction to collaborate with pace and transparency throughout an entire property transaction.

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