Q: Marsha, I’m currently in a contract to purchase a home in Santa Barbara. The good news is all the paperwork is being signed electronically. The bad news is there is so much of it! Just when I think I’ve signed everything I possibly could, my agent emails me another stack of documents. Why all this overkill for signatures?
A: In today’s real estate world, files for one transaction are at least two inches thick and often larger. According to the Statute of Frauds, real estate contracts must be in writing. Contracts must identify the property, state the terms of the agreement, and be signed by both parties. The large files are primarily disclosures. Unfortunately, they are necessary and vital in today’s litigious world. They protect the principals, the agents, and the brokerages.
However, “What is a signature?” is the real question in today’s world.
This topic is constantly evolving. I’m not an attorney, so don’t take what I say as anything more than my own observations and thoughts. Please consult a real estate attorney for advice and information.
In the 17th century, England determined that some transactions and contracts were vital to public policy. The English wanted orderliness and peaceful transfer of property. It was not in the public’s best interest to have hearsay and confusion when deciding who sold what, to whom, when and for how much. The statute they passed became known as “A Statute for the Prevention of Frauds and Perjuries.”
A version of the Statute of Frauds exists today in 48 states. The statute applies to real estate in many ways. Dilemmas occur when deciding how to interpret 17th-century doctrines in the 21st-century world. The last two decades of the 20th century saw universal acceptance of fax machines in real estate followed by email, texts, e-signatures, and multiple platforms of communication.
In 2000, the 106th Congress passed the Electronic Signatures in Global and National Commerce Act, commonly known as E-sign. Courts began to be deluged with cases questioning whether a signature in writing really occurred. More and more courts accepted e-signatures in many different formats as valid as “wet” or handwritten signatures.
A fascinating case was discussed in Lexology, a newsletter for business and legal professionals. A 2016 article titled “Texts that Bind: Text Messages May Form Binding Real Property Contract” discussed that a Massachusetts Land Court judge found that text messages between two commercial real estate brokers formed a binding legal contract for the principals.
That’s right, I said text messages! When agents exchange emails and discuss terms and price, an email “contract” is formed. If a dispute occurs, one may deny the emails’ validity (Statute of Frauds) and try to renege on the email contract. Courts have been upholding these email contracts. Now it’s text messages that appear to be binding as well, at least in Massachusetts for now. Be aware of not only what but how you put business discourse in writing. It’s a brave new world we are living in.
Marsha Gray, DRE #012102130, NMLS#1982164, has been a real estate broker in Santa Barbara for more than 20 years. She works at Allyn & Associates, real estate services and lending. To read more Q&A articles, visit MarshaGraySBhomes.com. She will research and answer all questions submitted. Contact Marsha at (805) 252-7093 or MarshaGraySB@gmail.com.