The world of real estate has significantly evolved in recent years, changing from a traditional business to one that benefits from all the advantages that new technologies bring, as is the case with the adoption of the digital signature. How is it used by real estate agencies and their respective agents?
The latest buzzword in terms of digital transformation of the real estate sector is ‘PropTech’ (Property Technology) or ‘ReTech’(Real Estate Technology), both of which reflect the adaptability of new technologies to this business model.
In Spain, proptech.es platform covers 238 companies with an investment of approximately 134 million euros in 2018 and employing about 5,500 people.
Although the digitization started years ago in the real estate sector, the coronavirus disease has boosted this process. For instance, real estate agencies can now take advantage of tools to be able to show houses via virtual reality, or using digital signatures to sign sales and rental agreements, etc.
From now on we will focus on how digital signatures can be used in different real estate-related procedures.
Business opportunities that have arisen from the coronavirus disease for real estate companies
The real estate sector isn’t doing great during the coronavirus pandemic. According to the General Council of Notaries, home sales fell by 37.5% this March compared to March 2019, and mortgage closings fell by 28%.
In addition, it is suggested to focus on properties located in large urban areas, since the second home market may run out of steam for not being considered a basic need.
Uses of the digital signature in the real estate market
We will now outline the main uses of the digital signature in different real estate-related procedures:
- Signing preliminary purchase agreements
- Signing down payment agreements
- Signing purchase-sale agreements
- Signing lease agreements
- Signing home insurance
- Signing SEPA payments
- Managing utility contracts
- Internal management operations
1.- Signing preliminary purchase agreements
This type of contract is the first step prior to the purchase-sale agreement of the property. It contains all the aspects that have been agreed between the buyer and seller, such as the details of the parties involved, the aspects of the property, the type of payment, the deposit or how the latter will be performed.
A key part of this contract is the obligation of both buyer and seller to carry out the transaction as agreed, which may only be cancelled if a specific clause is met.
Preliminary purchase agreements can be digitized remotely or face-to-face.
In the case of face-to-face signing of preliminary contracts, the seller can prepare all the documentation, send it to the customer to be read on his/her computer screen or tablet, and ask him/her to sign it on that device or on a signature pad connected to his/her computer.
2.- Signing down payment agreements
This agreement is signed to ensure the fulfilment of a sale obligation. In fact, in many ways it is similar to the preliminary purchase agreement. However, there is one basic difference between them: down payment agreements are regulated by the Spanish Civil Code (article 1.454), providing greater legal support by allowing its termination via indemnity. There are three types of contracts: penitential, criminal and confirmatory, the latter being the most appropriate for this type of real estate procedures.
Digital transformation can also be an important step forward here. This contract can also be signed in the same way as the previous contract, either face-to-face or remotely. For the latter, the signing process can be completed either from the buyer’s computer or from his/her mobile device, with strong authentication methods (robust authentication) to ensure the buyer’s identity.
3.- Signing purchase-sale agreements
By signing this document, the transaction is completed. The following information must be included:
- Details of the buyer and seller.
- Information on the property and the cadastral reference.
- Price and any differences with the appraised value of the property, if any.
- Expenses derived from the transaction (taxes, inscription in the Property Registry, etc.).
- Inventory with the belongings in the property, in case the property is not sold empty.
4.- Signing lease agreements
Through a rental or lease agreement we formalize the right to use a property for a set period of time in exchange for a fee. Based on the rental period agreed, Urban Rental Law 29/1994 sets out the following contracts:
- For those less than 5 years for individuals and 7 years for legal entities: if the lessee wishes to do so, the contract shall be extended every year until reaching 5 (or 7) years. Afterwards, and at the landlord’s discretion, the contract can be extended for 3 more years.
- With indefinite period: No specific duration is set, but the duration is considered to be a year with the possibility of extending to 5 years. After the 5th year, it may be extended for another 3 years.
- For those longer than 5 years: these will end on the date specified in the lease.
Digital transformation allows to automatically enter data into contracts via photo and OCR technologies for data capture (Optical Character Recognition).
5.- Signing home insurance contracts
Industries such as real estate and insurance usually go hand in hand as a result of signing home insurance policies. These are products which, although not compulsory, are indeed recommended to hire.
In addition, this type of insurance may be required at the time of signing a mortgage, which could even result in a reduction of the mortgage payment. On the other hand, in the event of a rental, the landlord may require the lessee to pay a home insurance.
For insurance companies, incorporating the digital signature can bring enormous advantages when managing clients, as well as for attracting new customers, with the possibility of signing insurance policies remotely, without being present in the building.
6.- Signing SEPA payments
The Single Euro Payments Area (SEPA) is intended to create a single financial area for Europe, as part of the European digital single market strategy.
SEPA simplifies direct debiting for rental payments, especially when the tenant and landlord live in different countries within the European Union, including the United Kingdom, Iceland, Liechtenstein, Norway, Switzerland, Monaco, Andorra and San Marino.
7.- Managing utility contracts
The digital signature can speed up sign-ups, cancellations, changes of ownership of contracts for water, electricity, telephone, internet connection, natural gas of the property, etc.
In this regard, another important aspect to highlight is the possibility to delegate the authority to sign a document.
Digitizing these documents is interesting for real estate companies, since there is a lot of paperwork involved when dealing with many homes, each one of them with its own utility contract. Therefore, going digital is definitely beneficial for optimizing archiving and searches, as well as for securing the handling of documents.
8.- Internal management operations
As many other companies, real estate agencies have to deal with a lot of internal documentation (financial, commercial, HR, legal documents, etc) on a daily basis.
By streamlining their internal paperwork real estate companies will be more productive, as they will be able to focus on getting new customers and therefore increasing profits. Moreover, the growth in telecommuting now offers the possibility to sign documents remotely from home or wherever, making digital signatures a valuable resource for those who work outside the office.
We hope that this article has made clear the versatility, agility and trust that digital signatures can offer when used in different real estate-related procedures where different players are involved. At Viafirma we develop solutions to make the most of these features, helping the real estate sector to become a leader in the field of business digitization.