How to Work With Clients Who Are Using a Power of Attorney

By Deborah Kearns

Under extenuating circumstances, buyers or sellers may need a Power of Attorney authorizing someone else to act on their behalf in a real estate transaction. It’s critical for agents to understand how to process a transaction when the buyer or seller can’t physically be present to sign documents at or before a closing.

So what exactly is a “Power of Attorney,” or POA? It’s a legal document that grants authority for someone to act as an agent (or “attorney-in-fact”) on behalf of someone else who is incapacitated or unable to be present to sign legal documents (a military deployment or business trip overseas, for example). In a home purchase or sale, an attorney-in-fact under a POA may sign certain transactional paperwork on behalf of the buyer or seller.

When working with clients who intend to use a POA in a transaction, you should have the principal provide a copy of the POA form to the title company immediately for review and approval; it is possible that it could take a few weeks to review the documentation and do the legwork to confirm its validity.

As a closing agent, it is our role to ensure the POA form complies with the title underwriter’s guidelines. Each lender also has its own policies and criteria for using a POA, so it’s important that you provide the POA as early in the process as possible to remedy any issues that might arise and ensure a smooth closing.

Anytime a POA is presented you should ask whether or not the principal is incapacitated. Understanding the reason why a POA is being used will help determine whether additional evidence is needed to evaluate the legal competence of the principal and the necessity for a POA. The principal’s physician will typically provide a signed letter to confirm incapacity, and you’ll need that documentation (dated within six months) for approval of the POA form.

In a majority of cases, the principal should sign deed documents in person if they’re available, rather than having someone else do so. If a seller, for example, is leaving town prior to closing, you should make arrangements for them to sign the deed before they leave. 

Generally, a POA should list the property being sold or mortgaged, and it should be dated within the last six months in order to meet underwriting regulations. You’ll want to look at the POA form to ensure there are no limitations on the power to act, and for any date of termination.

Don’t forget that a POA must be recorded in the appropriate Recorder’s Office. If you have a POA that is expired, or if the scope of the powers does not include the transfer of real estate ownership, call your escrow officer for assistance.
 
Deborah Kearns is an award-winning writer based in Denver with more than a decade of experience in corporate communications and news journalism. She has covered the real estate industry for more than seven years.

This material is not intended to be relied upon as a statement of the law, and is not to be construed as legal, tax or investment advice.  You are encouraged to consult your legal, tax or investment professional for specific advice.  The material is meant for general illustration and/or informational purposes only.  Although the information has been gathered from sources believed to be reliable, no representation is made as to its accuracy. 

Century 21 AA Realty Long Island

Reprinted with permission from RISMedia. ©2017. All rights reserved.

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