Understanding Power of Attorney

By Kurt Real Estate Jul 15, 2021

Power of Attorney (POA) is commonly used in real estate transactions when one of the principals is either mentally incapacitated or will not be available at closing. While it is a powerful document for helping in these situations, it is also easily misused. It’s important to understand what power of attorney is and how it should be used.

What is it?

A POA is a written document in which one person, the principal, authorizes another person (the attorney-in-fact) to perform certain actions on their behalf. The POA may be “general” or “special,” durable or not. When it is used in real estate transactions, a title agent will carefully review it to see what specific powers are being conferred and if they are sufficient for buying and selling real estate and executing deeds, mortgages, or deeds of trust.

A general POA enables someone to act on the behalf of someone else in a variety of situations
A special POA outlines specific circumstances where one is authorized to act on the behalf of someone else (such as selling a home)
Durability

If a POA is durable, mental capacity of the principal is not an issue – though there needs to be proof that the principal was competent when they executed the POA. If competency issues are involved, a physician’s statement may be necessary.

POAs in Question

Sometimes, the POA document meets underwriting guidelines, but the use of it is questionable. This may occur when it appears the attorney-in-fact is using the principal’s property for their own benefit. An example of this would be conveying the principal’s property to themselves. When such misuse is suspected, an investigation is undertaken.

Validity Verified

When a general or universal POA is more than six months old, a title agent will check to confirm that it is still valid and has not been revoked.

POAs for Military

Military POAs are established by federal law. They may be used as a durable POA for real estate, even though the form may not be identical to the form used in a given state.

A Final Word

A POA ends when a person dies. It is not a substitute for a will.

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