As children, many of us dreamed of having superhero powers, such as the power to fly, the power of X-ray vision, or the power to run faster than a speeding bullet. While these powers are of the fantasy realm, there is nothing unrealistic about the legal term, power of attorney (POA), which is so commanding and impressive, not even Superman holds its power.
In the title insurance and real estate world, we see POAs daily, raising many questions as to the type, execution, necessary language, scope, and validity. Navigating POAs is one of the most challenging aspects of title work. Here are some answers to frequently asked questions (FAQs) about POAs.
By definition, a POA is a written, legal document where a person (known as the “principal”) grants another person (for our purposes, an agent or attorney-in-fact) the right, authority, or power to act on their behalf to make certain decisions and execute documents. While these powers can be related to property, medical, or financial decisions, we focus on real estate in this article.
It is important to scrutinize the terms and scope of the POA document in advance of any real estate closing and determine the type of power granted: Durable, special, or general. Like most real estate matters, local laws, regulations, and customs apply here. Some states only require a reference to their statute to give the necessary powers to the agent. Others require specific language for the powers to be granted. For example, the words “sell and convey” may be necessary for an agent to execute a deed to transfer title. Some courts have held that the word “sell” by itself only gives the agent the power to negotiate the terms of sale.
You should also review the POA to determine if it was drafted under the laws of a different state than where the real estate is located, or if it was just executed and acknowledged in a different state. For example, if your property is in Illinois, but the POA was drafted under the laws of Florida, then all the Florida laws for execution, language, and validity would be applicable to the POA. But if it was an Illinois POA and only executed in Florida, then Illinois’ POA laws control the transaction. However, a validly executed Florida POA would be acceptable for use in an IL transaction.
We can’t emphasize enough how critical it is to read the POA in advance of your closing. The following example – whether myth or reality – is part of title insurance lore, and should be heeded:
There once was a husband who had a POA from his wife to buy their home. The husband proudly came to the closing with the wife’s written POA ready to execute all the documents and mortgage. The title agent had to stop the closing when they read the POA for the first time because it was a limited POA with ONLY one power granted to the husband: The authority to pick out the new drapes for the house! A power of drapery?
Most states have statutes that govern and outline the proper signing of a POA. Some states only require the principal to sign the POA with their signature acknowledged before a notary. Others require a witness to also sign the POA, and some even require two witnesses to sign.
At the time of the execution of the POA, the principal must be of sound mind and not acting under duress.
Although using a POA is not uncommon in real estate transactions, it is not the usual or customary way to transfer or encumber title to real property. Use of a POA requires a title agent to look at matters and facts outside of the immediate transaction. POAs are often associated with elder abuse or fraud, so a deeper dive into the facts of your closing is critical.
Threshold questions agents should consider and investigate include:
Best practices for use of a POA include:
The answer to this question depends on the type of entity involved.
The answer to this question, in all cases, is NO, NEVER, NEGATIVE, NYET!
While an agent, spouse or other relative may believe or hope that the POA is still is valid, the authority granted in the POA immediately terminates upon the principal’s death. The same is true even if the instrument in question is a so-called durable POA. If the principal is deceased, a POA may not be relied upon, and the title agent must refuse to close and insure. There are no exceptions.
If the POA is used to execute a recordable document (most commonly the deed, or deed of trust/mortgage) then it shall be recorded immediately prior to the documents executed using the POA. Some states have statutes requiring that the POA be recorded. Even without a statute requiring recordation, it is best to always keep the chain of title clear by recording the POA. This avoids title clouds on the back end when there is no recorded proof of authority for the agent or attorney-in-fact.
There is frequent confusion about how to execute the document when using a POA.
If the principal is Clark Kent and the attorney-in-fact is Bruce Wayne, the documents should be signed in one of the following ways:
While having a POA may not be a superpower you’ve dreamed about, it is a power not to be taken or given lightly. If a POA is to be used in your real estate or title transaction, you should stop and carefully review the language and manner of execution. Question its use for your transaction. Is it necessary, or only convenient? Doma Title Insurance agents can contact local Doma underwriting counsel with any questions at [State Abbreviation][email protected].
“The most important part of this rapid response plan is the word rapid,” Schreiber said. “You have a limited window to recover the funds. Fraudsters are not going to leave the funds in the bank where you wired them to, which makes recovery all the more difficult. In most instances, the money is unrecoverable within a matter of hours, or at most, two or three days.”
Terry S. Prillaman, Jr., is Vice President, Midwest and Mid-Atlantic Regional Underwriting Counsel for Doma Title Insurance, Inc.