Power of Attorney pitfalls

Written by Todd Ewing Monday, 04 January 2010

[Editor's note: Fannie Mae recently issued new restrictions on use of Power of Attorney. Please read this article and contact our office with any questions.]

If you must use Power of Attorney, please contact our office.


In my 18 years as a settlement attorney, I can point to an improper Power of Attorney (POA) form as one of the most common causes of a delayed closing.

You have no doubt encountered clients who are too busy or physically unable to make it to closing. You’ve heard "My mom gave me Power of Attorney," "I gave my husband Power of Attorney," "Grandma is in the nursing home – I have Power of Attorney."

Simple enough – right? Wrong.

So often, clients find POA documents online or stationary stores. We are frequently presented with general "checklist" POA forms and clients are dismayed to learn that we cannot accept them for the purpose of insuring title.

When it comes to conveying or encumbering real property by Power of Attorney, make sure your client has the proper legal authority well before the closing date. Many states specifically address, by statute, the use of Power of Attorney and impose very specific requirements.

Title insurance underwriters go beyond the state’s statutory requirements with even stricter guidelines for Power of Attorney usage. I think it’s helpful to first understand the definition of an "attorney."

Attorney

A person legally appointed by another to act as his or her agent in the transaction.

It’s also important to understand the two specific parties in the Power of Attorney.

1. The PRINCIPAL is the person granting another the power to act in their stead; the one who signs the POA document.

2. The ATTORNEY-IN-FACT is the receiver of the power from the Principal.

In order to satisfy most title insurers, a POA form to be used for the purpose of conveying or encumbering real property must meet the following requirements:

Recent

The document needs to have been executed by the Principal within a year of the transaction at which it is being used. While exceptions are made on a case-by-case basis, it is rare that a title insurance underwriter will accept an aging POA because of risk of fraud or marketability issues.

Specific

The document must grant the Attorney-in-Fact the powers required to effect the transaction and should recite the specifics of that transaction (i.e., property address, convey or encumber). A document giving the Attorney-in-Fact the ability to “handle real estate transactions” is too vague and too general.

Durable

The document must state that the Power of Attorney will not terminate upon the disability of the Principal. It is not acceptable for the document to be entitled “Durable Power of Attorney” and not recite the above durability language specifically with the text.

Original

The document must be an original. A copy of the POA is not acceptable. The POA must be recorded with the clerk’s office and the clerk requires original documents to be recorded. To be absolutely certain that your client’s Power of Attorney is acceptable, please forward to our office for review prior to closing. If you would like to have sample POA forms recommended by our office, please feel free to contact us and we will gladly provide those forms.

About the Author

Todd Ewing

Todd Ewing

Todd Ewing founded Federal Title & Escrow Company in 1996. He's also a partner with the law firm Tobin, O'Connor & Ewing and co-founder of closingquotes.com, the first online marketplace in the U.S. for real estate closings. 

He received his law degree from Drake University Law School and his undergraduate degree from Iowa State University. Mr. Ewing has practiced real estate law in the DC metro area since 1991 and he's a member of the DC Bar and Maryland & Virginia Land Title Associations. 

Comments (0)

Leave a comment

You are commenting as guest.

REAL Credit™

Did you know? Hombuyers who close with Federal Title can instantly save up to $750 on their closing costs.

Learn more

 

Order

This site contains general information only and is not intended to be relied upon as, nor a substitute for, specific professional advice. We accept no responsibility for the loss occasioned to any purpose acting on or refraining from action as a result of any material in this site.