Frequently Asked Questions about Power of Attorney

What is a power of attorney?

Simply put, a power of attorney used at a real estate closing is a legal document that allows another individual to act on behalf of a homeowner. In other words, a homeowner (known as the principal) can relinquish their right to sign at closing and give it to another person (known as the agent or attorney-in-fact) if they cannot be present to sign for themselves.

A power of attorney that’s used at a real estate closing shouldn’t be confused with other types of power of attorney. A durable power of attorney is used if a person becomes incapacitated and is valid until their death; these are created in advance, like a will. While a durable power of attorney does often grant permission for a person to sign legal documents, these often aren’t specific enough to be used at a real estate closing.

The power of attorney used at a closing is a limited power of attorney. This allows a person to act on behalf of another in a very specific financial role, such as closing on a home. This power ends as soon as the transaction is complete.

When should a client get a power of attorney for their closing?

Your client should consider getting a power of attorney anytime they cannot be present at a scheduled closing. While there are other options for a flexible closing, a power of attorney is often the easiest, most straightforward option.

Your client can use a power of attorney any time they are unable to be present at their closing, but some common situations include:

• COVID-19 quarantine or serious illness
• Hospitalization
• Travel for work or pleasure
• Military deployment
• Prior commitments, such as a doctor on call or an important meeting at work

You don’t need to ask your closing company for permission to use a power of attorney, but you do need to inform them of your plans and you do need to use it correctly.

What are some limits to using a power of attorney?

There aren’t many limits to using a power of attorney, but there are a few important rules to remember.

• A real estate agent cannot serve as power of attorney for their client. While this may seem like an easy option since the agent will already be at closing, most brokers don’t allow their agents to serve in this role. This is considered a conflict of interest. Clients who want to use a power of attorney should choose a friend or relative to serve in this role instead.
• You cannot get a power of attorney for closing if the principal isn't competent. If a party is deceased, the representative of the estate must sell the home. The estate representative can use a power of attorney, but you can’t get a power of attorney for someone who has already passed away. You also cannot use a power of attorney for someone who has been hospitalized with mental illness. In this situation, you need to contact your closing company for more information.
  
• You can't decide to use a power of attorney on the day of closing. Your power of attorney must be approved by the closing company and the lender, which may take a few days. A good rule of thumb is to have your power of attorney ready one week before closing.

Should you get a power of attorney even if you aren't sure you'll need it?

Since you can’t get a power of attorney at the last minute, it can be helpful to go ahead and get one if you think it might be needed, but you’re not certain. Some situations when it might be helpful to proactively get a power of attorney include:

• Travel: If a trip is scheduled to end right before closing, you may want to advise your client to get a power of attorney in the event that there are travel delays that prevent them from making it to closing.
• Pregnancy: If your client is closing on a home on or near their due date, it’s much easier to plan for a power of attorney than to get one at the last minute if they go into labor on closing day.
  
• Work: If your client works in a profession that requires them to be on call, a power of attorney is advisable if they’re scheduled to be on call on closing day.

If you get a power of attorney but don’t end up needing to use it, it’s helpful to go ahead and let the attorney-in-fact sign on behalf of the principal -- especially if it’s for the buyer. The closing company will prepare the closing package as if you are using a power of attorney, and it can be difficult to change this paperwork at the last minute.

What are some common mistakes people make when using a power of attorney?

While getting a power of attorney is a fairly straightforward process, you’ll want to make sure to avoid these common mistakes.

• Not getting the POA notarized. The role of a notary is to witness the signing, ensure that the person signing is who they say they are, and confirm that they aren’t signing a document under pressure. The power of attorney is invalid if it has not been properly notarized. Helpful hint: most closing companies will provide a notary for you in their office.
• Not telling the closing company that you're using a power of attorney. You cannot show up to closing with a power of attorney without informing the closing company, even if it has been notarized. Communication is key in these situations. Reach out to your closing rep if you’re planning to use a POA; they can ensure that you’re following the proper process and can answer any questions you may have.
  
• Not getting the power of attorney in time. If you try to get a power of attorney at the last minute, it can delay your closing. Your closing company should see a copy of the notarized power of attorney at least one week before your scheduled closing date. This gives them time to address any issues and will prevent any potential closing delays. You’ll often know at the time the contract is signed if you’ll need a POA, so don’t put this off until the last minute.
  
• Not getting lender approval. The lender has to approve the power of attorney used by buyers. This ensures that there are no issues with the power of attorney and covers the lender in the event of a potential foreclosure. For sellers, a power of attorney still needs to be approved by the underwriter. Your closing company should be able to handle all of these approvals for you.

How do you get a power of attorney for a real estate closing?

Whatever you do, don’t download a do-it-yourself form from the internet for your power of attorney. Every state has different rules for using a POA, and these DIY forms are never a good idea.

Every closing company is different, but if you’re closing at South Oak, the first step to getting a power of attorney is letting us know. If we’ve opened the closing file already, we just need to know the name of the principal and the name of the person they’re appointing as their agent. We’ll pull the legal description and prepare the power of attorney document. We can do this whether or not we are processing the title.

Once the form is ready for you, your client can come into our office to sign their power of attorney and have it notarized or we can overnight it or email it to them. If your client chooses not to come into our offices to sign, they’ll need to be sure to have it signed and notarized before closing. Once your power of attorney is ready, email or fax a copy of it to us so that we can ensure there are no issues.

On closing day, your client must bring the original power of attorney to closing. Without the original, we are unable to close. As soon as the closing is finished, we’ll record the power of attorney for you.

At South Oak Title and Closing, we make getting and using a power of attorney for your real estate closing as simple and straightforward as possible so that you can close on time. We’re here to support realtors and their clients, so feel free to contact us with your questions about using a power of attorney - or any other closing questions you may have.