Why You Shouldn’t Rely on Just any POA From the Internet for Your Closing
Powers of Attorney (POAs) are legal documents that allow an individual, the “Grantor,” to nominate an agent, their “Attorney In Fact,” to sign and execute anything that the Grantor chooses, on their behalf, as though they were doing it themselves.
This can include contracts, loans, deeds, stock purchase, applications for government services, sale of real property, medical forms and virtually anything else that can be contemplated.
In real estate transactions, a Power of Attorney or POA is commonly seen when a party to the transaction such as the buyer or seller is either unavailable because they cannot attend the closing, or they are too ill or unable to physically sign the closing documents.
Many states have laws which essentially require a POA to be accepted at face value, so long as there is no reason to suspect fraud or unlawful inducement in the use of the POA.
Unfortunately, because a POA can provide an Attorney in Fact with near-limitless powers to act on behalf of another person, fraud is a very real risk that must be taken seriously.
Therefore when a title underwriter or a loan officer is being asked to accept a POA, certain requirements and safeguards must be taken to ensure that the Grantor really intends for the Attorney in Fact to take the action that the document says they are permitted to do.
Below are a few things that are commonly required by title agents and loan officers when a POA is presented as part of a real estate transaction:
Ask Lots of Questions
Commonly, fraudulent use of POA can be seen where an elderly parent or ill family member entrusts their affairs to another family member to care for them.
Abuse of this trust can result in the Attorney in Fact selling off the Grantor’s assets or taking on debt for their own personal benefit.
Therefore, as much as it may seem like being nosey or prying, it’s very important for an agent who is presented with a POA to ask questions.
Why can the Grantor not attend the closing?
Are they personally aware of this transaction taking place?
Are they objecting to this transaction?
It is completely appropriate to ask to speak to the Grantor and confirm with them verbally that they approve of the use of the POA and have knowledge of the transaction which is taking place in their name.
Verify the Powers
Because a POA can be so broad, often times the document is written with the most vague language possible, on the theory that it is helping the Grantor to give expansive permissions to their Attorney In Fact.
However, frustratingly for the Grantor, in a real estate transaction, specificity is key! Powers of Attorney that are downloaded off the Internet or prepared by someone who is not familiar with the nuances of a real estate transaction may have language which is so vague that it cannot be relied upon for the transaction.
Such language as “any and all documents necessary for the real estate transaction” cannot be relied upon. Unfortunately, far too many POAs are rejected because of this verbiage, which can lead to frustrated customers.
Ideally, the POA is specific to the real estate transaction, lists the property that is being purchased or sold, provides a definite limit in time for the powers (POAs can expire!) and specifically lists exactly what actions the Attorney in Fact may take on behalf of the Grantor, such as “Sell, Purchase, Mortgage, Convey, Deed, Accept, and execute all necessary closing documents to complete the purchase or sale of the above listed real estate transaction.”\
Confirm the Validity
As mentioned above, a POA can expire. POAs are not valid after death and many states do not permit a POA to be valid once a person has been deemed to be incompetent (which is different than “incapacitated”). POAs also should have an expiration date which forces them to be renewed at a regular interval.
POAs also have specific requirements for execution, depending on the state. Most states require that for the POA to be valid, there must be two witnesses and a notary.
Some states only require one witness and if a POA is executed in a state that only requires a solo witness, additional evaluation is needed if the POA is trying to be used in a jurisdiction that requires two, or if the POA is executed outside the country with a foreign notary seal.
Record the Document
If a deed is being executed by an Attorney in Fact on behalf of the Grantor of the real property being conveyed, the POA must be recorded with the deed.
Often times, a POA is a personal document which could contain private information. The Grantor and the Attorney in Fact must be aware that this document needs to be recorded and if they object, options for either a specific power of attorney or the Grantor signing in person may need to be discussed.
Additionally, it is essential in order to reduce fraud that the original Power of Attorney is presented to the loan officer or the title agent for review and examination at or prior to closing.
A Power of Attorney is a powerful and convenient document for use in real estate transactions. However, it’s important to be familiar with the potential issues that can arise when being presented with a POA and to know how to quickly assess and address the concerns in order to allow for an efficient and pleasant transaction.