Real Estate: Why Paperwork Should Be Paper

real estate paper versus electronic documentsMillions of settlements will take place this year and a growing number of them will involve the use of electronic documentation, a development which will be cheered by those who hope to speed the closing process and save a few trees while we’re at it.

Unfortunately, and I don’t mean to dash anyone’s hopes, the increased use of electronic paperwork may not be such a good idea.

We usually applaud just about anything which is made electronic. The abacus has given way to the electronic calculator, the manual typewriter became the electric typewriter and the electric typewriter spawned computer keyboards. And while each of these transitions has been good for most people there are still some things which are better done in the old-fashioned way. There may well be an electronic fork but who cares? The manual ones do just fine.

This brings us to mortgage applications and real estate closings. Both involve a ton of paperwork and it seems obvious that both procedures can be made faster by replacing lots of paper and ink with a few electronic forms.

In fact, we already have a model which shows how electronic systems can replace vast mounds of paperwork: think about all the people who now do their taxes with computer programs and even file electronically.

Real Estate Documents and Electronic Paperwork

Unfortunately, mortgage applications and real estate closings have not reached that point. I know something about this because in the past week or so I have completed the purchase of a home and with it an attendant mortgage. To be polite the use of electronic documentation did not work out so well.

First, electronic mortgage documents were made available online on a secure site. That sounds reasonable but the site was so secure that the borrower – me – could not get access even with the provided passwords. The result was that the paperwork arrived the next day by overnight delivery.

Second, settlement turned out to be a do-it-yourself affair. For whatever reason more documents were placed on a secure Internet site and again the security was so strong that it was not possible to access the material. The solution this time was to send the documents by e-mail and then print them out, a system which does not suggest any paperwork savings at all. Happily, the notary at the bank was very helpful with the huge pile of documents which had to be signed before her.

At the end of the closing process the settlement agent asked if I would like a copy of all the paperwork on a disk, the implication being that a huge amount of paper and postage would be saved. The answer was sure, as long as I could get a paper copy as well.

Why is a copy of closing papers or mortgage documents on a disk such a terrible thing? The answer is it’s not terrible but it’s also not advantageous if you think about the future.

Electrons Versus Paper

Imagine that you had a settlement 20 years ago. The odds are overwhelming that your precious closing and mortgage documents would’ve been preserved with media that we no longer use today, perhaps a 5.25″ floppy disk or a 3.5″ disk which was not so floppy. The result is that paperwork you might very much need when you sell the home, need proof of title insurance, or for estate purposes will effectively be beyond your reach.

Alternatively if your mortgage or settlement documents were actually on paper they are as easy to retrieve as the morning mail.

Long ago Bill Gates — someone about as committed to modern technology is anyone you can find — said in his 1996 book, The Road Ahead, that we should “not sell paper documents short. The paper-based book, magazine, or newspaper still has a lot of advantages over its digital counterpart. A newspaper offers a wide field of vision, good resolution, portability, ease of use. A book is small, lightweight, high-resolution, and inexpensive compared to the cost of a computer or some other information appliance you need to read a digital document.”

In the end, if someone offers you a nice disk with all your closing and mortgage paperwork, say “yes, thank you, and please I would also like a paper copy as well.” You’ll be glad you did.

Technorati Tags: , , , , , , , , ,

Posted in: News

Post a Comment