At times, it is inconvenient or impossible for individuals to attend a real-estate closing or sign the documents needed to purchase, sell, or refinance property. To address such situations, the law has developed to allow one person to sign documents and represent the interests of another individual. This is possible through the creation of a document called a power of attorney or “POA”.
While getting a POA may be the most convenient option, there are several things to consider when pursuing a POA to ensure a smooth experience.
Who are the parties? Before diving into a discussion of POAs it is important to understand a few terms. The parties to a POA are referred to as “Principal” and “Agent”.
The Principal: The principal is the individual who is granting authority for another person to act on their behalf. Under the Uniform Power of Attorney Act in Virginia, only individuals may grant authority under a POA. This means that no corporations, trusts, joint ventures, etc., may be a principal for POA purposes.
The Agent: An agent is the person who has been granted authority by the principal to act under a POA. In Virginia, the “person” who is granted authority to act under a POA may be an individual person, or a corporation, trust, joint venture, or other legal or commercial entity. The agent under a POA acts as the attorney in fact in a transaction representing the interests of the principal.
Who might need a POA? Any person who is unable to sign documents may need a POA. Examples include the principal’s disability, the remote location of the principal, or just convenience. yes
How to create a POA: The first step in creating a POA is determining who will act as agent. This should be someone who can be trusted to faithfully and diligently represent the interests of the principal. When choosing an agent, principals should also consider the capacity and convenience of the agent. For instance, would the agent’s employment prevent them from attending a real-estate closing during business hours? Is the agent able to drive on their own? Does the agent understand the nature of the transaction in which they would be representing the principal?
After an agent is chosen, the POA must be drafted and signed by the principal in the presence of a notary. It is important to keep in mind that it may take up to a few days for an attorney to draft a POA. In addition, if the principal is outside of the United States, it might be challenging to find a notary to witness the principal’s signature. In some countries, a principal is required to visit a United States Embassy, which may require an appointment, in order to properly sign a POA.
What can be done with a POA? The terms of a POA are completely up to the principal. The power granted under a POA may be limited to vest power in an agent for only a specific transaction, or the POA may grant general powers to an agent. A POA may be drafted to only be effective as long as the principal is not incapacitated. However, POAs can also be drafted to only become effective once the principal is incapacitated. These options are completely up to the principal. A principal may limit, or grant, as much power as they like to their agent.
With that being said, in the context of real-estate transactions, a lender may have specific requirements for the terms of a POA. For instance, lenders may require that the POA specifically give authority for the agent to represent the principal in the specific real-estate transaction in question (a general POA allowing an agent to represent the principal in all real-estate matters may not be sufficient).
In addition to any lender requirements, settlement companies such as Vesta Settlements also require that a POA be effective even if the principal becomes incapacitated (this is called a durable power of attorney).
If agents sign recorded documents under the authority of a POA, such as a deed or a deed of trust, the original POA must also be recorded. This means that the original POA must be provided at, or before, the settlement. Principals should be sure to allow enough time to mail in their original POA if they are out of the country.
How is a POA terminated? It is important to remember that death of the principal will immediately terminate an existing POA. By the same logic, a POA cannot be created for a deceased individual. Termination can also occur automatically under the terms of the POA.
For instance, a principal may include a specific end date in the terms of the POA or provide that an event will trigger its termination. A POA will also terminate immediately if the principal revokes it or once the purpose for which the POA was created is fulfilled. yes Although death of the principal automatically terminates a POA, the death or incapacity of the agent does not. As long as the principal has designated a back-up agent in the POA, the POA will remain in effect, and the authority under the POA will transfer to the new agent. In the situation where spouses are the principal and agent under a POA, the POA will terminate by law if one of the spouses institutes divorce, legal separation, child custody, or visitation proceedings against the other spouse. yes
Summary: To summarize, creating a POA can be a helpful tool. If a principal determines that a POA will be necessary, they should leave plenty of time for drafting, signing, notarizing, and delivering the POA to the settlement agent before closing. The principal should also speak with the title company involved in the transaction, as well as any lender, prior to drafting to ensure that the required terms are included in the POA.