Can You Use A Power of Attorney in a Real Estate Closing? What You Should Know
Published by admin posted in
Estate Planning, POA, Power Of Attorney, Wills
on August 16th 2020
It is not unusual for a party to a real estate transaction to be unavailable to personally execute the voluminous number of documents required at closing. In some cases, the signatory is out of the State or Country, in others the signatory may be hospitalized or otherwise not competent to personally execute a conveyance or purchase of property. In each of these, a power of attorney (”POA”) may be used to allow another person to execute for the principal. However, there are important issues to understand which may impact the ability for a POA to be used.
Types of POAs
There are two forms of POAs that are seen in a real estate transaction, a General Durable POA and Specific POA.
General Durable Power of Attorney
The General Durable POA allows the agent to execute and act for the principal in virtually all instance in which the principal could act. This is usually created in the context of planning one’s estate or in the event the principal fears that some event will occur that will cause him or her to be disabled or injured to the extent they would not be able to act. It includes the word “Durable” because it states that the POA will continue to be in effect even if the principal is disabled or not otherwise competent to act.
Specific Power of Attorney
A Specific POA specifically limits the authority to a specific task or tasks. This is commonly used for those instances where the principal is simply giving the agent authority to execute the closing documents for a real estate conveyance or purchase.
Step One – Talk to the Settlement Agent
In the context of conveying land, the Settlement Agent is responsible to ensure that all signatories are authorized to execute the documents from the contract to the Deed. Their authority to accept or reject the POA is absolute.
This is because in addition to having an independent legal duty to perform their own due diligence, they are answerable to their title insurance underwriters who have their own requirements for issuing title insurance to the new purchaser and his lenders.
Consequently, if you present a POA that is more than 3-6 months old or is unacceptable in form you may be required to produce a new POA.
Settlement Agents will want to speak directly with the principal to ensure they understand that their POA will be used to sell their interest in the property. If that is not possible, they will ask that a letter from their attending physician be provided to confirm the principal is unable to communicate directly with the settlement agent.
Unacceptable in Form and Principal Incapacitated
The most problematic situation is where the POA that had been prepared is unacceptable and the principal is no longer able to execute a new POA. In that instance it would be necessary to have a guardian appointed by a Court to authorize the guardian to execute for the principal.
If the POA is provided to the Settlement Agent and it is not accepted, you should have an attorney prepare a new POA and have it executed before a Notary Public.
Specific POA for Sale/Purchase of Real Property
In addition to limiting the scope of an agent’s authority to act on behalf of the principal, a Specific Power of Attorney for Real Estate will include the address of the property, tax id, the legal description from the vesting deed and the county’s abbreviated legal description.
It is also common to place a time limit on the authorization so that it naturally expires at a certain time, though any POA may be revoked if the revocation is delivered in writing.
Finally, consideration should be made to determine if there is a need to make the Specific POA effective in the event the principal is incapacitated. It may be that the principal may not wish for the transaction to occur if some accident occur which may alter the financial situation of the principal.
The Firm of Fox & Moghul has decades of experience helping the purchasers and sellers arrange for use of Power Attorney. Please keep us in mind if you require such services.
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