Home closing process adapts to COVID-19 with help from new tech

On any regular day, jumping through the hoops of closing a real estate transaction can be a handful — there’s paperwork to sign, lawyers to meet with, and mortgage appraisals to be had. Like many other aspects of the Canadian real estate industry, and our daily lives, COVID-19 has thrown the typical process of closing deals out the window.

“Things that we used to take for granted before, so for example, having to meet with a lawyer to sign paperwork, is no longer even a possibility,” said Reuven Gorsht, co-founder and CEO of Deeded, a tech company that specializes in supporting and digitizing the real estate closing process. Deeded provides secure signing, document and closing support to clients through its online assistant platform.

To comply with newly implemented social distancing standards, which restricts the amount of face-to-face interaction transactions typically require, some closing processes have been adapted or moved online. By making property closings paperless and completely functional through new technology, Deeded is helping ease this transition.

According to data from the Canadian Real Estate Association (CREA), over 88,000 homes were sold in Canada in the first two months of 2020. With two parties on all transactions, this means that roughly 176,000 individuals and families are expected to close on a property in the coming weeks and months. While real estate, land registry and legal services have been deemed an essential service and remain open in Ontario, the COVID-19 pandemic is still making the closing process fraught with uncertainty.

“Residential closings involve a lot of different pieces coming together, and that could be anything from mortgage, to the availability of lenders, the appraiser, the appraisals, the availability of law firms and lawyers being open, [and] land registry,” said Gorsht. “Things literally keep changing by the minute.”

Job loss and fear over temporary unemployment related to COVID-19 has hit Canadian households hard during the last few weeks. In mid-March, the federal government received 500,000 applications for employment insurance benefits. As Gorsht explained, for those buyers and sellers who have made mortgage commitments, a sudden job loss may throw the mortgage lender’s ability to honour that commitment into question. In some transactions, lenders may include additional conditions requiring reverification of employment, which Gorsht said has been a cause of concern for some clients trying to close.

“Of course, that changes everything and that throws a lot of deals into a state where clients have a very high level of anxiety and want to close a lot faster and want to move up their closing dates, so we’re seeing that,” he said.

Even in the event of a COVID-19-related job loss, or other extraordinary circumstances that impact the buyer or seller, existing deals must still close, explained Gorsht. Standard real estate agreements in Ontario do not include a force majeure clause, a provision that would relieve both parties from obligations in a contract in light of an unforeseen event that stops the parties from fulfilling their contractual responsibilities. Other delays such as self-isolation, Gorsht explained, have an influence on the entire closing process.

“Let’s say you’ve got folks that are quarantined and they’re not able to sign anything, it now impacts everybody else,” he said. “It impacts if they’re selling, then you’ve got their buyer expecting to move in, and, of course, it impacts the buyer’s ability because they’ve probably sold their place as well, or notified their landlord.”

For those buyers and sellers who aren’t currently required to close, but are looking to make a sale, there may be actions they can take to gain more control over their future transaction. Gorsht said some lawyers have suggested including a COVID-19-specific clause in new contracts to cover any unforeseen situations arising as a result of the disease.

“There are a bunch of clauses being employed to be able to prevent future deals from delay,” he said.

Closing on a real estate transaction traditionally involves in-person meetings and signings, but in an era of strict social distancing, there’s no business as usual. One Deeded client who recently closed on a property is a nurse; as an essential medical worker, signing in person is not an option. To accommodate remote closings, regulatory and licensing bodies like the Law Society of Ontario (LSO) have changed their processes on how transactions can legally be completed.

For example, the LSO recently altered their interpretation of the Commissioners for Taking Affidavits Act, which normally requires that “every oath and declaration shall be taken by the deponent in the presence of the commissioner or notary public,” according to the LSO’s website. Now, lawyers and paralegals are not required to be physically present, and alternative means of commissioning are accepted, such as video meetings.

While technologies that support virtual showings, video-walkthroughs and e-signatures have existed for some time, Gorsht said that they are shining in this time of social distancing and widespread business shutdowns. Digital identity authentication has improved and online conferencing has made remote signings possible. Another Deeded client who couldn’t make it back in time from Latin America was able to close on a property via video.

“Now, technology has come such a long way, especially over the last few years where we’ve got digital identity technologies that are able to do a much better job than you can physically identifying your driver’s license on whether that is a legitimate document or whether it’s active,” said Gorsht.

While we aren’t certain what a post-COVID-19 world will look like yet, Gorsht believes that some of the virtual changes being deployed across the real estate industry will become permanent fixtures.

“Now that people are actually experiencing this new technology and being able to do things remotely, those behaviours, I believe, will stick,” said Gorsht. “We’re going to see such a massive change in the way that people are transacting on real estate.”