Using a Power of Attorney in a Real Estate Transaction: What You Need to Know

A real estate transaction doesn't always happen under perfect circumstances.

Maybe a seller will be out of the country when documents need to be signed. A family member may be dealing with an illness or incapacity. Someone may need another person to handle a refinance or sale on their behalf.

That's where a Power of Attorney, commonly called a POA, may come into play.

But here's something many people don't realize:

Having a Power of Attorney doesn't necessarily mean it will automatically be accepted for a real estate transaction.

The document, the authority it grants, the circumstances surrounding its use, and title and escrow requirements all matter.

Here are some of the questions we commonly encounter.

What Is a Power of Attorney Used For?

A Power of Attorney is a legal document that gives another person authority to act on someone's behalf.

Depending on how the document is written, that authority may include the ability to handle certain financial or real estate matters.

For example, someone might need another person to sign documents because they're traveling, unavailable or unable to personally handle the transaction.

But when a POA is presented in connection with real estate, the title company will generally want to understand why it is being used and whether it provides the authority required for that particular transaction.

Can a Power of Attorney Be Used After Someone Dies?

This is an important distinction.

A Power of Attorney does not continue giving an agent authority after the person who granted that authority dies.

At that point, ownership and authority over the property may involve a trust, estate, probate proceeding or another form of legal authority.

That's why someone shouldn't assume that because they handled a person's affairs under a POA while that person was alive, they can continue signing documents after the person's death.

How Long Is a Power of Attorney Good For?

There isn't one universal expiration date for every Power of Attorney.

The answer depends on the document itself, applicable law, whether the authority has been revoked, and other circumstances.

And there's another distinction that's particularly important in real estate:

A POA can potentially remain legally effective while still requiring additional review before a title company will rely upon it for a transaction.

An older POA, for example, may lead to additional questions or documentation to confirm that it remains valid and hasn't been revoked.

So don't wait until the day before closing to find out.

Does the Power of Attorney Need Specific Real Estate Language?

This can be extremely important.

A title company needs to determine whether the document actually grants the authority necessary for the proposed transaction.

Depending on what's being done, that could involve authority related to selling, conveying, mortgaging or otherwise dealing with real property.

A general statement giving someone authority to handle my affairs” shouldn't simply be assumed to cover every possible real estate action.

The actual language of the document matters.

Will a Title Company Accept Any Power of Attorney?

No.

The existence of a POA doesn't automatically guarantee that it can be used in a particular transaction.

The title and escrow professionals involved may need to review the document, the circumstances surrounding its use and potentially additional supporting documentation.

If incapacity is involved, for example, additional requirements may apply depending on the type and wording of the POA.

This is one reason we strongly recommend providing the document as early as possible in the transaction.

Finding a problem early gives everyone time to address it.

Finding it at the closing table can create a very different situation.

Can a Power of Attorney Be Used When Property Is Held in a Trust?

This is another situation where you should never assume.

When property is held in a trust, authority to act is generally governed by the trust documents and applicable law.

If a trustee becomes unable to act, the trust may already provide a procedure for appointing or allowing a successor trustee to take over.

Whether an outside Power of Attorney can be used depends on the particular documents and circumstances.

Have the trust and POA reviewed before relying on either one to complete the transaction.

Are There Situations Where a Power of Attorney May Not Be Accepted?

Yes.

One area that can create particular concern is a transaction in which the person acting under the POA may personally benefit from the transaction.

For example, imagine someone acting as Attorney-in-Fact attempts to transfer the owner's property to themselves.

That should immediately raise additional questions about the authority granted by the document and the nature of the transaction.

Title companies have to evaluate these situations carefully because their job isn't simply to process signatures.

They also have to protect the integrity of the transaction and the chain of title.

The Biggest Mistake: Waiting Until Closing

If you think a Power of Attorney may be needed for a real estate transaction, don't wait.

Send it to your title and escrow team early.

That gives everyone an opportunity to determine whether the document can be used, whether additional documentation is necessary, and whether any issues need to be addressed before signing.

The worst time to discover a problem with a Power of Attorney is when the moving truck is loaded and everyone expects the transaction to close.

A little preparation upfront can prevent a major problem later.

We're Bobby Tarango and Mike Arias with Chicago Title, and part of our job is helping real estate professionals, buyers and sellers identify title and escrow issues before they become closing problems.

For title and escrow questions or a free title assessment, visit Chicagotitlepro.com or 

TitlesEverything.com.

This article provides general educational information and isn't legal advice. Power of Attorney requirements can vary depending on the document, transaction and applicable law. Consult the appropriate legal and title professionals regarding your

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