When it comes to online lease-ups, multifamily companies have always taken their fair share of knocks for failing to deliver a seamless point-and-click experience for prospective residents and property managers alike. But the industry is done dipping its toes in the waters and has leapt into something that could amount to a tidal wave of change in this area: accepting electronic signatures online. With several pilots, trials, and beta runs of the technology currently nearing completion, industry observers say a legally binding lease signed electronically over the Internet should be achievable by the end of the year.
“It is something that makes perfect sense,” says David Cardwell, vice president of capital markets and technology at the National Multi Housing Council in Washington, D.C. The trade group initially examined the issue in 2003, Cardwell says. “Now, I'm hoping to revisit it,” he adds.
Cardwell isn't alone. With all types of Internet transactions becoming routine in the personal lives of residents and apartment executives alike, the concept of consummating the online leasing process with an electronic signature has developed a why-can't-we following. “If I can open a brokerage account online and transfer $50,000 electronically without having to put anything in the mail, why shouldn't I be able to sign a lease online?” asks Art Dramby, director of systems strategy at San Diego-based ConAm Group of Cos., which has approximately 52,000 units under management. Dramby adds that developing the ability to accept electronic signatures is a paramount focus of ConAm Group's current tech strategy. “It's inevitable; this is going to happen,” he says.
BETA-TESTING THE WATERS For some, that time has arrived, albeit in beta-test form. Bill Sugino, director of portal services at Yardi Systems, a multifamily software provider in Santa Barbara, Calif., says that some systems will be live and offering complete online leasing this fall. “We're prototyping two different technologies with clients right now,” including one with San Francisco-based REIT BRE Properties, Sugino explains.
RealPage, the Carrollton, Texas-based software company, says it's working with customers to beta test the electronic signature component of its online leasing software. At its annual users' conference this summer in San Antonio, president Michael Fortinberry demonstrated how RealPage's CrossFire system could authenticate a user; affix a unique, legally binding seal to a PDF-generated lease; and then store the document in a secured system that would withstand the most rigorous legal challenges. It was a definite crowd pleaser, though the demo generated more questions than answers: Attendees wondered aloud how judges in their home jurisdictions would view such leases, as well as how other key aspects of the application process—such as employment and rental history verification—would be completed. The overall conclusion was property managers would still need to pick up the phone, and that firms shouldn't sign their side of a lease until verification is complete.
Issues like that still give pause to some multifamily tech pundits. Mike Mueller, CEO of Scottsdale, Ariz.-based Realty Data Trust, whose VaultWare software provides online unit availability and pricing information, is skeptical on whether the industry is ready to sign on the digital line. “A number of steps have to happen before electronic signatures come into play,” Mueller says. “At some point, the leasing agent needs to physically verify that you are who you say you are with a driver's license.”
Still, several multifamily firms are moving forward, knowing that verification can be completed after a resident has signed a lease, but before operators have affixed their own seal of approval. At Camden Property Trust in Houston, which owns more than 64,000 units, vice president of business services Kristy Simonette says the firm plans to run a pilot to accept electronic signatures using RealPage's system during the fourth quarter of 2007. “We are 100 percent committed to electronic signatures and the complete execution of lease documents online,” Simonette says. “We see the value in it not just for the convenience of our customers, but through the efficiency we'll gain by not having reams of paper clogging up our offices.” Simonette says that, currently, 12.5 percent of Camden's residents are already completing lease applications online; 1 percent of them are doing so sight unseen.
TAKING A CUE While the multifamily world continues to test the concept, other industries are already accepting electronic marks from customers. “There are thousands of electronic mortgages out there in the real world right now that were executed and signed online,” says Dan Szparaga, senior director of industry technology at the Mortgage Bankers Association in Washington, D.C. “The first mainstream, non-pilot electronic transaction occurred in 2005, and they've been going strong ever since.” Szparaga says member firms such Wells Fargo and Countrywide engage the technology.
At DocuSign, a Seattle, Wash.-based technology firm that helps companies accept electronic signatures, vice president of marketing Lambert Jemley says the company has enabled more than 5 million electronic “signature events” since 2005, in industries that include student lending, financial services and residential real estate. In fact, clients who have used DocuSign's service have seen closing rates nearly triple.
“If our customers were seeing close rates of 30 percent when they were using paper to get contracts signed, it has been upwards of 80 percent when they do so electronically,” Jemley says. “That's a pretty compelling difference.” Costs to implement the technology range from just $4 to $8 per signature, Jemley says. “For an apartment lease where that investment is going to generate an additional $12,000 per year, that's pretty good ROI.” DocuSign's customers include Microsoft, Re/Max and Great Lakes Educational Loan Services; meanwhile, Yardi has been exploring partnership possibilities with the firm.
Lawyers say that legally, the validity of electronic signatures is no different than those signed with ink, as long as criteria such as user notification and authentication are met, and secure document storage standards are maintained. RealPage says its technology does just that, and is modeled after requirements spelled out in the Electronic Signatures Act, which President Bill Clinton signed into law in 2000. When those standards have been met, lawyers say users haven't been able to wiggle out of contracts they entered into just because they were signed electronically. DocuSign, for instance, says none of its signatures has ever been found invalid.
“We've had people try to repudiate contracts that they've entered into,” says Ken Moyle, general counsel at DocuSign. “But once they found out the different steps we went through to validate and protect the data, and the audit trail we created, they backed down. As an attorney, it's almost disappointing. Every once in a while, you like a good fight.”
Joe Bousquin is a freelance writer in Auburn, Calif.
ACTION ITEMS BEFORE YOU SIGN UP
- Don't fret over legal issues. Electronic signatures have been binding since 2000, when President Bill Clinton signed the Electronic Signatures Act. As long as your process is in line with established benchmarks, lawyers say you should be on solid legal ground.
- Do it for your business. It's not just convenient. Letting residents sign leases online may also increase your close rates. In industries such as financial services, signing rates more than doubled after companies began accepting signatures online.
- Confirm the facts. You'll still need to verify a resident's information manually. Although you will be able to receive a resident's signature electronically, your property managers will still need to pick up the phone to verify employment and rental history. That's just good business.