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E-Signatures in the California Real Estate Journal

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Email agreements are legally binding but have caused legal disputes.

Two e-commerce firms have recently teamed up to hope that the fax machine can one day become to real estate brokers what an 8-track player is for Apple executives.

Many commercial real estate transactions involve millions of dollars, and it takes a dozen people to negotiate a deal. SettlementRoom president Jonathan Cutler said that this can lead to upwards of 150 phone calls and the exchange of 100 pages of documents for one deal.

Cutler began developing technology in 1999 to reduce back and forth. Cutler stated that the goal was to move the closing process away from being a paper-based and phone-based system to one that is centralized online. Cutler, who was a former homebuilder and title company owner as well as a commercial real estate investor, developed a software program that allows parties to negotiate to access documents electronically through his website.

eSignly users receive notifications in the same manner as if a document was sent through the U.S. Postal service. An electronically recorded server-to-server dialogue acceptance message is folded into a registered-receipt mail and returned to the sender to verify delivery and the content. eSignly software is able to capture server-to-server dialog for the sender, verify the content and times of transmission, as well as interpret the code from the transmitted message for a non-technical individual. SettlementRoom and eSignly came to an agreement in October. Settlement Room clients will be able to use the eSignly Registered email(TM).

Time Kills Deals

In the ten years since Kitty Wallace, Senior Vice President at Sperry Van Ness first entered commercial realty, technology has made a huge impact on the way brokers do business. She is a multifamily broker specializing in Los Angeles, where almost 80 percent of the owners of multifamily homes are moms and dads. This means she has to deal with different levels of technology comfort.

Wallace stated that he just signed a $26million deal with a man who didn't have email or fax. We had to use signatures whenever I needed him to sign anything. However, she does have clients who prefer to fax to email. Wallace stated that some people are not comfortable with technology. "Most mom-and-pops aren't able to do as many deals." They might sell one or two buildings every few decades.

Wallace closes approximately 40 transactions per year, totaling $150,000,000. It is crucial that she manages transactions efficiently, so she uses all kinds of technology.

Sperry Van Ness created a similar software program to SettlementRoom's. Wallace stated that these types of programs make all the difference in this world. All of the required documentation is already available on the website when listing a property. Brokers can also change rents by clicking a button, rather than sending them again, which saves both time and money. Wallace stated that you want deals to be closed as fast as possible. You never know what tomorrow will bring. It could be the next earthquake." The Internet has made it easier to communicate long distances, especially as the global real estate investor pool grows.

"Now, anyone can get real estate information from anywhere in the world," stated Michael Yoshiba, a shareholder of Richards, Watson & Gershon's litigation department. It's much easier to share information and conduct transactions. It's easier for brokers to market properties and share information.

Wallace was involved in a deal that had a buyer from Los Angeles, an Orange County seller, and a New York money partner. She would have needed to use FedEx to send the agreement to Los Angeles, then Orange County, then New York, for signatures in order to close the deal. Wallace stated, "Now, it's all possible to do it via email." "I can do it all in 45 minutes."

To ensure that wet signatures were not lost, she sent a hard copy to all participants via Fed-Ex. Wallace stated that e-signatures are not used by more than 10% of her clients. Those who use them are mostly her institutional clients. Although some players accept e-signatures to be contractually binding, Deborah ThorenPeden, a Pillsbury Winthrop Sharp Pittman partner, stated that it was important to have the agreement on non-cyberspace papers.

Thoren-Peden stated that "I believe a lot of contracts don't get done in person." Thoren-Peden stated that there has been a significant shift in the way contracts and contract negotiations are handled over the past few years. She also mentioned that the federal Uniform Electronic Transaction Act (introduced in 2000) states that no one can assume that a contract is invalid simply because an electronic signature was used. Khan stated that Registered Email(TM), which is a FedEx letter, is also covered by the statute.

Let's take the example of selling an office building. All documents can be sent electronically through eSignly because it is possible to confirm that the recipient has received them. This situation is critical because millions of dollars are at risk. It's also important to choose the right timing. Khan stated that documents could be sent as an attachment to an email. The receiver cannot dispute having received them. He added that the buyer can always claim that he or she did not receive the document, and can opt out of the deal if Registered Email(TM) is not used.

However, eSignly will not prevent certain deals from reaching court. Thoren-Peden stated that "I am fairly certain that courts will continue evaluating whether e-signature validity is valid." "There will always be situations where people claim things they did not agree to. It will end in court.

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