A real estate power of attorney (POA) allows an authorized agent to sell, purchase, or manage property on the asset owner’s (principal) behalf. Choosing this agent carefully and defining their powers in the POA document is essential.
Consider factors such as trustworthiness, availability, and competence. Consult mortgage lenders, legal experts, and real estate professionals to make an informed decision.
What is a Power of Attorney?
A real estate power of attorney is a legal document that grants an agent authority to act on your behalf. It can be temporary or permanent and restricted to specific transactions or activities. Most states require that a signature by both the asset owner (also known as the principal) and the authorized agent be notarized before it becomes effective.
New York law allows you to use a statutory power of attorney to grant your agent the power to handle financial and business matters, including paying bills, filing taxes, and selling real estate property. However, it does not allow your agent to make decisions about medical care, which a healthcare proxy covers.
To protect yourself, you should select an agent carefully and include clear limitations in your power of attorney to prevent misuse of power. You should also periodically review your POA and update it if necessary. NerdWallet writers are subject matter experts who use primary, trustworthy sources, academic research, and interviews with industry professionals to inform their work.
How Does a Power of Attorney Work?
A power of attorney is a legal document that grants a trusted agent authority to act on behalf of the principal. Regarding real estate transactions, the agent is responsible for carrying out tasks and making decisions in the owner’s name, operating under the powers granted in the document.
The power of attorneys can be broad or limited, depending on the circumstances and needs of the person granting the power. A power of attorney may also be durable, meaning it continues to be in effect even if the person becomes incapacitated.
Generally, a Power of Attorney is adequate only when the person giving the power is of sound mind and can sign the document in person. The person you appoint as your agent is commonly known as your attorney-in-fact, and the document must be presented to the title company or other party for it to be accepted. You, the principal, can revoke or change your POA designation at any time if you are of sound mind.
Who Can Be Your Agent?
When drafting a power of attorney, the principal should carefully consider who they want to act on their behalf. The agent should be someone with integrity, competency, and trustworthiness. Generally, they should be an adult family member who can understand the role’s responsibilities and accept them willingly. If the agent is a professional, it’s recommended that they are a licensed real estate agent or legal expert.
The agent must sign the document before they can legally take action. They may need to be a notary or have two witnesses present for the signature to be recognized and validated. Including successor agents in the power of attorney, document is also a good idea, just in case the primary agent becomes unavailable or incapable of performing their duties.
It’s also essential to clearly define the scope of the agent’s powers within the POA. For instance, if you want them to be able to make significant gifts for family members each year, that should be clearly outlined in the document.
What Are the Limits of a Power of Attorney?
The scope of the power granted to your agent can be broad or narrow, depending on what you want. It may include the power to sell your property or be limited to managing a specific real estate transaction. You can also specify that the power of attorney is “durable.” This means that your agent’s authority continues even if you are incapacitated.
You’ll also want to consider carefully who you choose as your agent or attorney-in-fact. Your agent should be someone you trust and whose judgment you respect. Generally, people select a family member for this role, but that is not mandatory.
If your agent acts against your previously expressed decision, such as when you file a do-not-resuscitate or organ donor form, they can be removed by court order. Likewise, your power of attorney can be revoked, but that process requires notice to both the agent and others who relied on it.