Entries in power of attorney (1)

The Power of Attorney: Its Proper Use

Power of attorneys are abused often and the abuse creates enormous problems for the real estate industry each year. 

Definition: A power of attorney is a legal document by which a person (the grantor) authorizes another (the attorney-in-fact) to make decisions or contract for the grantor. 

Facts:

  • Many title claims, and much  litigation, wouldn’t exist were it not for the casual approach taken by some towards the use of a power of attorney.
  •  Power of attorneys are frequently used (abused) by fraudsters to commit real estate and mortgage fraud.

Some tips to stay out of trouble:

  • Real estate agents, loan officers, and title agents should NEVER agree to act as the attorney-in-fact  for a buyer or seller.  NEVER!
  • Ask why a power of attorney is being used.  A power of attorney presents many unnecessary risk factors.  It’s use is not intended for the sake of convenience.
  • Personal representatives, trustees, and guardians cannot delegate powers through the use of a power of attorney. REO transactions are an exception to this rule.  Foreclosed properties are often vested in trusts and later conveyed by trustees using a power of attorney.  An agreement allowing this to happen was reached between the lending and title communities years ago.
  • A power of attorney should be as transaction specific as possible.  Involve the lender as soon as you learn that a borrower will be unable to attend closing.  Most lender’s have guidelines determining the information that’s required in a borrower’s power of attorney. 
  • Whenever possible, avoid the use of a power of attorney by forwarding closing documents for signatures.  Keep in mind: All military installations and foreign embassies have the ability to legally notarize documents.  
  • Your buyer or seller will need to provide the original and notarized power of attorney at closing.  A court certified copy will work if the document has been properly recorded in another county or state. 
  • All power of attorneys become invalid when the grantor dies.  State probate rules become applicable at that time.
  • State laws determine if a power of attorney is effective (durable) should the grantor become mentally incapacitated.  It varies.
  • Always obtain the address and phone number of the grantor named in the power of attorney.  Call that person to introduce yourself and discuss the transaction.  Make arrangement for the grantor to review and sign the settlement sheet by fax before funds are disclosed.  Don’t ever make assumptions or take chances with funds belonging to someone else … even when a power of attorney is being used … Especially when a power of attorney is being used!

A power of attorney is the weakest link in any real estate transaction.  It should be used only when absolutely necessary. 

Why take chances?

Posted on Sunday, September 9, 2007 at 10:25AM by Registered CommenterEd Rybczynski in , | Comments1 Comment | EmailEmail | PrintPrint