How Digital Platforms Undo Paperwork In Real Estate

How Digital Platforms Undo Paperwork In Real Estate Industry Worldwide

All the time, the real estate realm has been associated with a huge amount of paperflow. Indeed, property title papers are among the oldest written documents in history. However, this millennia-old tradition is rapidly becoming a thing of the past, as an increasing proportion of real estate transactions globally is already conducted online via new digital services. In fact, buying a new property without leaving home is not essentially more difficult than ordering a pizza delivery.

Pandemic Legacy

In many countries, an explosive growth of remote real estate transactions occurred in 2020-2021 amidst the COVID-19 pandemic, as face-to-face contacts between people were restricted by authorities. Meanwhile, the property markets were booming at this time, as many city dwellers were looking to move out to quiet suburban areas or profitably invest their spare cash while in lockdowns, not to mention the funds many governments injected into the real estate development support.

The globally biggest and most advanced US real estate market led the way. As early as November 2020, The New York Times acknowledged that real estate transactions went virtual, with the traditional real estate closings with a room full of people and stacks of documents becoming a memory, as much of the process is going online.

According to the American Land Title Association (ALTA), in 2019 only 14% of companies offered digital closings. Just two years later, ALTA’s 2021 Digital Closing Survey showed that 46% of 300 title professionals offered this kind of services, with the number of remote online notarizations for real estate transactions grew by 547%.

In those countries relying on attracting foreign investment in real estate similar trends have unfolded as well. For instance, in May 2020, Dubai Land Department (DLD) in the UAE allowed purchases or sales of properties remotely via online services as a countermeasure against the influence of pandemic on the emirates’ economy. The UAE Electronic Transactions Law published on 20th September 2021 provided that any person may use any form of electronic authentication.

This shift from paperwork to digital transactions went hand in hand with other remote techniques in the industry. As social distancing measures during pandemics prevented real estate agents from hosting conventional in-person tours, they started to use augmented reality (AR) tools, providing clients with 360-degree views of the property. Currently, such virtual tours have become as routine as closing deals online.

One-Stop Desks Against Paperocracy

Anyone who has ever bought or sold a house surely remembers a pile of papers to be collected in advance and signed on closing the deal, not to mention the time wasted in queues at lawyers offices, notaries, banks, government agencies and the like. Fortunately, now most of these annoying procedures could be skipped thanks to the various cloud-based platforms, offering their customers a drastic reduction in the time once used to be spent on paperwork.

E-signature services are at the core of a digital transformation of real estate transactions globally, with Adobe Inc., DocuSign, and PandaDoc acting as “the big three” players in this segment.

Adobe was one of the first companies to enter the e-signature market. In 2011, long before the current remote services hype, Adobe Systems announced its acquisition of the electronic signatures company EchoSign which would become the basis for the Adobe Sign product. In 2016, Adobe Sign was introduced as a way to request, receive, and submit e-signatures. In October 2020, Adobe signed a deal with online notarization provider Notarize to integrate the company's remote online notarization capability into Adobe Sign.

DocuSign, a San Francisco based major in electronic agreements management, provides a cloud-based real estate software solution for brokers and agents that offers total transaction management. According to the company, digital transformation makes turnaround time on agreements 25x faster, while 82% of documents sent for signature are completed in one day.

Evaluating the efficiency of DocuSign Rooms for Real Estate, Deborah Soland from Camden Property Trust says that there has been a positive response from everyone in her company.

"Nothing is more important to the real estate market than ridding the process of paperwork, to make buying a home more transparent and seamless. DocuSign is leading the way,” Brad Inman from Inman News adds.

PandaDoc, an American provider of SaaS software for document automation including built-in electronic signatures, workflow management, document builders etc. offers a range of opportunities from remote lease agreements and rental applications, to purchase/sale agreements as well as inspection reports. Thanks to its services, the company reports, about a 50% decrease in document creation time, 87% increase in completed documents per month, and 23 minutes as an average time to receive signatures have been achieved.

There are a number of alternative e-signature providers to “the big three” including such services as Signaturely, Zoho Sign, DotLoop, HelloSign, and Zegal. The latter platform, for instance, has more than 2,000 documents customized for the legal systems in Hong Kong, Singapore, New Zealand, Australia, and the UK.

Institutions and Practices

According to the Indian research company Markets and Markets, in 2020, the global digital signature market size reached $2.8 billion and is expected to expand to $14.1 billion by 2026. Experts from Statista.com project the e-signature market to grow to $43.14 billion by 2030 worldwide.

National legislation on digital signatures, which is being adopted in a wide range of countries, is contributing to this impressive growth. At the moment, in addition to the world's biggest economies, the US, China and the European Union, this list includes such countries as Argentina, Brazil, India, Israel, Mexico, Japan, South Africa, Singapore, etc.

Along with the general expansion of digital signatures, the number of remote real estate transactions, including cross-border transactions, will also grow. Greece, Cyprus, Bulgaria, Montenegro, Turkey, UAE, Thailand, Indonesia, and some other countries popular with international investors, are already in a list of jurisdictions offering an opportunity to purchase properties without turning away from the screen.

Will this practice ever become truly global, i.e. will it be possible to purchase properties remotely in any country in the world? Technically, it’s quite a real option right away, but one has to take into account political considerations: how open a given country to foreign investment in real estate?

Ranked third in the World Digital Competitiveness report-2023, Singapore is a good illustration of a property market with high barriers for foreign investors:

• On the one hand, the government of Singapore has introduced a series of initiatives, such as the Electronic Transactions Act, which aims to encourage the use of electronic transactions and provide legal recognition for electronic signatures. Electronic Stamp Duty system allows for the electronic submission and payment of stamp duty for property transactions.

• On the other hand, the purchase of real estate in this city-state by non-residents is a multi-step process that is very difficult to fully implement online. Foreigners are allowed to purchase landed properties only with special permission from Singapore Land Authority which implies personal presence of

  the investor and contains no guarantees. There are also restrictions on foreign ownership of state-provided apartments (HDB), which shape a bulk of residential properties in Singapore, and villas with their own land.

  
  

Private apartments and condominiums are quite available for non-residents to be purchased, but a face-to-face meeting between the buyer and the seller, agents and lawyers is considered an unspoken rule given the myriad of nuances and complex structure of the transaction. Cultural references still matter even in a totally digitized environment.

While a lot can be done online, the purchase process is not entirely remote, say experts from Bamboo Routes, a portal for Americans buying real estate abroad. You'll need to engage a property agent or lawyer in Singapore to handle the legal aspects, they add, plus, physical presence might be needed at some point, for instance, for property viewing or finalizing the sale.

A Comprehensive Solution

Dubai, UAE, appears to be a long-term benchmark for those countries aspiring to make their real estate markets truly digital both for domestic and foreign investors. In this emirate, almost all real estate transactions are integrated into a single smart platform Dubai REST, embracing all property operations including sale, purchase, lease, and mortgage performed by all beneficiaries and stakeholders of the market. Electronic payments are provided through fintech platform Noqodi based in Dubai.

A standard online transaction procedure includes a few simple steps. After getting the complete set of documents from the buyer and the seller, the real estate agent sends its digital copies to the registration manager by special e-mail. Once the documents are handed over, the person in charge registers the transaction and uploads it to the online system of emirates’ land department (DLD).

As a further step, DLD initiates a video conference with the parties involved to confirm their identities and signatures on the contract. After verification, a payment link to the DLD escrow account is sent to the buyer. Once the funds are received, the transaction is deemed approved and a new title deed is issued in the buyer's name; hard copies of the documents to be sent via ordinary mail.

When It All Just Works

Is it possible to scale such a platform solution for other countries? In theory, the sky is the limit, but in practice one will definitely face a number of obstacles.

In addition, it’s quite easy for such artificial locations like Dubai to create a total digital real estate cadaster, since all land plots for development were distributed by the state. Combined with a long-term digital strategy and large-scale government investments in innovative infrastructure, this made it possible to make most real estate transactions online.

The case of the UAE seems to be ideal, as the authorities' thrust to promote digital services absolutely coincides with politics of attracting foreign investments. Nations struggling for capital injections into real estate from abroad have something to think about. At the same time, for the countries lacking the financial capacities of the Arab monarchies, it is necessary to go step by step, creating their own practices for digital transformation of the real estate market and thoroughly protecting the rights of foreign investors.

It’s also important to understand that Dubai is a fairly new city. It's a modern city where people with modern perspectives reside, who comprehend how technologies operate. It's a city poised for a genuine digital revolution at the national level.

Whether other countries are ready for coordinated legislative changes, and therefore, for ensuring the rights and protection of their citizens, as well as how long this process might take, remains an open question.

by Pavel Polovinka & Nikolay Protsenko at Iber.