What is Power of Attorney?
A power of attorney (POA) is a legal document that authorizes one person (the agent or attorney-in-fact) to act on behalf of another person (the principal) in legal and financial matters. In real estate, a POA allows someone to sign contracts, attend closings, and make property decisions when the property owner cannot be present.
Types of power of attorney
General POA: Broad authority over all financial and legal matters. Rarely used for real estate specifically because it gives too much power.
Special (limited) POA: Authority limited to specific actions, such as signing closing documents for a particular property. This is the most common type used in real estate transactions.
Durable POA: Remains in effect even if the principal becomes incapacitated. Important for estate planning and situations involving elderly or ill property owners.
When POA is used in real estate
Military deployment (service member cannot attend closing), out-of-state investors closing remotely, elderly or ill property owners who cannot physically attend, investors with multiple simultaneous closings, and probate situations where a personal representative needs to manage property.
Requirements and limitations
Most title companies require that a POA be notarized, recently executed (some require within 6-12 months), and specifically reference the property or transaction. Some title companies and lenders will not accept a POA at all, particularly for purchase transactions, because of fraud concerns. Always confirm with the title company before closing that they will accept the specific POA.
In wholesaling
Wholesalers occasionally encounter sellers who want a family member to handle the transaction via POA. This is legitimate in situations like probate, relocation, or health issues. However, a POA on the seller's side can complicate title work and some buyers will be wary. Ensure the title company is comfortable with the POA early in the process.