Using a Power of Attorney to Close Your Real Estate Transaction
Friday Jul 02nd, 2021Share
- If you are buying or selling a property and you will not be able to sign the closing documents, you may need to use a Power of Attorney to close the transaction.
- Before deciding to use the Power of Attorney, legal advice should be obtained so that your lawyer can advise you of the consequences of giving a Power of Attorney. A Power of Attorney is a powerful document which gives the person you name as your attorney (the donee), powers to do things and act on your behalf. The importance of obtaining legal advice prior to signing a Power of Attorney cannot be overstated.
- When dealing with real estate, you may give a Power of Attorney for property. The donee of your Power of Attorney may use the Power of Attorney to make decisions concerning your property including buying, mortgaging or selling the property on your behalf. The problem is that you can go on a website or purchase a Power of Attorney kit without the benefit of legal advice. The form that you will use will likely be a continuing Power of Attorney with no limitations, conditions or restrictions. Many people fail to understand that such a Power of Attorney will give someone the ability to do things like write cheques on your bank account or mortgage or sell your property without you knowing it or approving of such actions. Signing such a Power of Attorney is very dangerous and can lead to disastrous results.
- By seeing a lawyer, he or she will explain the risks of signing a general Power of Attorney. When using a Power of Attorney for real estate, my practice is make the Power of Attorney restricted to the specific transaction so that it can only be used for limited purposes i.e. to sell, purchase and mortgage a specific property. That way, the donor of the Power of Attorney will be protected from the risk of the misuse of the Power of Attorney without the donor’s knowledge and consent.
Here are some other important matters to consider when using a Power of Attorney for real estate transactions:
- If you are purchasing a property and obtaining a mortgage, do not automatically assume that you will be able to use a Power of Attorney for the purchase transaction. Powers of Attorney are major source of mortgage fraud. As a result many lenders and title insurers may not allow them to be used. Check with your lender first before using a Power of Attorney for a real estate transaction.
- If using a Power of Attorney for a sale, keep in mind that the sale funds must be made payable to the registered owner and not the attorney. If you will be out of the country for the closing you will need to make prior arrangements for delivery of the closing funds to you following closing.
- Do not sign a Power of Attorney without first obtaining legal advice
- You should let your real estate lawyer know at the outset that a Power of Attorney will be used for the closing and give your lawyer a copy of the Power of Attorney if you already have one so that the lawyer can confirm that the Power of Attorney can be used for the transaction.
- You will need to provide your real estate lawyer with the original Power of Attorney for closing. A photocopy will not be accepted.
- There are formal requirements respecting the signing of the Power of Attorney. If the requirements are not met, the Power of Attorney may be invalid.
- If you are the donor of the Power of Attorney, you should provide your lawyer with your contact information such as a telephone number or e-mail address where you can be contacted so that the lawyer can verify that the Power of Attorney was signed by you, that you approve of it being used for the transaction and that the Power of Attorney has not been revoked.