The Evolution of Homebuying Over the Last 40 Years

The last few decades have seen some significant shifts in how Americans make the transition from homebuyer to homeowner. This year, technology played a critical role in moving the closing table into the digital realm thanks to more states passing RON laws and other states granting emergency use of video/audio conferencing to notarize closing documents.

 In 2020, 63% of homebuyers made an offer sight-unseen. Recognizing the growing trend, Realtor.com announced its investment in more immersive 3D home tours. 

While we’re still years away from an end-to-end digital real estate transaction becoming the norm, the pandemic has accelerated the development of digital solutions to find and purchase homes, but the foundation began much earlier.

40 Years Ago, Homebuyers Depended On Their Realtor

We begin our look back on the homebuying process in 1981. At that time, 22% of homebuyers read newspaper ads to find a home and 8% used friends as an information source. Real estate agents would access the latest listings from the weekly release of the MLS book and were told not to share this information with clients.

Fast forward to 2019 and 44% of homebuyers began their search online, according to the same study conducted by the National Association of Realtors.

30 Years Ago, Listing Websites Changed the Conversation

Realtor.com launched in 1996, shattering the silos of home listings and giving homebuyers access to online home shopping. Nearly a decade later, Trulia.com (2005) and Zillow.com (2006) followed suit.

In 2009, the housing market was left anemic by the Great Recession. The drop in homebuyer demand lasted until roughly 2012, but having more information from these platforms helped homebuyers shop with confidence in a post-recession world. 

After the acquisition of Trulia.com in 2015, Zillow.com (along with the previously acquired HotPads.com and StreetEasy.com) merged to become the Zillow Group – furthering the competition with Realtor.com for the attention of real estate agents and homebuyers. 

As homebuyers had more access to information, their shopping habits changed and real estate agents had to adjust to match the new level of knowledge of their clients by providing additional insights and customer service the internet lacked. Real estate agents benefited, too, as more homebuyers were prepared to make an offer, knew the neighborhoods they wanted to buy in, and came ready to see the homes thus speeding up the process altogether.

20 Years Ago, The Closing Process Took a Digital Turn

Those new to this digital age of the closing process may find the jargon confusing, so let’s review some of the key terms you’ll encounter before diving in.

A few terms to know:

• eClosing: electronic closing; happens when either some or all of the closing documents have been signed electronically
• eNote: electronic promissory note; is sometimes used interchangeably with eMortgage
• eMortgage: electronic mortgage; defines a mortgage loan where the promissory note and sometimes other documents are created and stored electronically
• eNotarization: an electronic notarization; a notary applies an electronic signature and notary seal to an electronic document
• RON: remote online notarization; a form of eNotarization that uses video/audio conferencing technology to bring the signer and notary together to sign electronically
• eRecording: electronic recording; an electronic delivery of property-related documents like deeds, liens, mortgages, etc. to the document submitter and the respective recording office

In the same vein of using the internet to improve the homebuying process, eSignatures were developing as a way to accommodate online transactions and business agreements. The first use of one was in 1998 on a Joint Communiqué recognizing the growing importance of the promotion of electronic commerce signed by the United States and Ireland. The legal assurance of eSignatures in business transactions was bolstered when the ESIGN Act was approved by Congress in 2000.

eRecordings shortly emerged after eSignatures in 1999 as a vital element to digital transactions and the eClosing ecosystem. 

By 2015, eSignatures and eRecordings became widely accepted when every state had approved one or both of the following acts: the Uniform Electronic Transaction Act (UETA) or the Uniform Real Property Electronic Recording Act (URPERA). Vermont is the only state not accepting eRecordings, although they accept eSignatures as legally equivalent to traditional paper documents and wet-ink signatures.

As digital documents with eSignatures filed through eRecording became more popular, recorders began to overhaul their paper record systems and filing processes to support the demand. By the mid-2000s, recorders were moving their archives from analog to digital en masse. This effort has only increased during the pandemic as funding from the CARES act helped finance these costly measures. Thanks to these digitized records and eRecording, many title agents are able to continue their essential work without risking the health of municipal workers or their staff while also saving a trip to the recorder’s office.

A New Age of eNotes, eMortgages, and More

As other industries began to adopt eCommerce tools, the lending industry took steps to offer eMortgages to consumers. Fannie Mae partnered with a couple of lenders to launch a pilot program and bought its first eMortgage in 2003. Freddie Mac purchased its first eMortgage in 2005. 

In 2019, fully digital mortgages took another leap forward when Ginnie Mae launched its pilot program to accept eNotes. In December of 2020, Rocket Mortgage became the first lender to use an eNote on a Ginnie Mae-backed loan.

The eNote is one of the final documents signed at closing, and it presents one of the biggest challenges for lenders to overcome, but the industry has slowly made infrastructural changes to accommodate the creation, storage, and transfer of these documents.

The Mortgage Electronic Registration Systems reported approximately 19,000 eNotes were added to its registry in the first quarter of 2019 whereas only 17,000 eNotes were registered in all of 2018 alone. Even more shocking is that in the first quarter of 2018 just 375 eNotes were registered. This advancement is closely tied to the pandemic, but more importantly to the use of eNotes by non-traditional mortgage lenders like Rocket Mortgage in 2020. Traditional lenders are following suit as well to stay competitive.

Since the passing of the TILA-RESPA Integrated Disclosure Rule (TRID or TRID Rule) in 2015, lenders have improved their mortgage process in order to meet the requirements of the legislation. Estimated costs and fees were now clearly presented to borrowers upfront. Just as online listings on Realtor.com revolutionized the beginning of the homebuying processing by empowering consumers with knowledge, the TRID rule helped to give homebuyers that same kind of power in choosing the right home loan.

The Virtual Closing Table

In a traditional home closing, buyers, sellers, title agents, and attorneys gather around a table to sign and notarize the closing documents. In a digital closing, all the parties are brought together with video conferencing and remote online notarization or RON. While many states have already approved the use of RON. RON acceptance and standardization in all 50 states remains a final hurdle, although the SECURE Notarization Act is attempting to tackle that.

As the pandemic continues, the general sentiment on remote and digital closings has only improved. The competitiveness of the market, limits on in-person meetings, and an increase in homebuyers seeking out listings in more affordable cities have made it necessary for professionals across the mortgage and real estate industry to embrace modernization. 

With every transaction, real estate, mortgage, and title professionals are helping a homebuyer achieve their dream, and that’s why so many of them love what they do. Many may have apprehension about investing in and training their employees in new technology, but providing more options for your customers will only result in better experiences for them. 

Technology will never fully replace the human connection at the center of real estate deals, but it will help professionals manage their workloads better and provide a higher level of service to more clients while reducing human errors.