How And When To Use A Real Estate Power Of Attorney

Carey Chesney

6 - Minute Read

UPDATED: Feb 2, 2024

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When it comes to real estate, the paperwork can be a bit overwhelming. Between offers, addendums, title documents and everything in between, there can be a lot to read before signing to make sure you can successfully buy or sell property.

In addition, this can often entail signings and communication across large distances with strict deadlines to meet. One way to simplify the process and cut down on the time you spend reading and signing is to use a legal tool called power of attorney (POA). Having a good understanding of what this legal tool is and how it’s implemented can help you weigh the pros and cons to make the best decision for your individual situation.

Let’s take a deeper look at what a power of attorney in real estate is, as well as how to execute one if you decide to sell your home.

What Is A Power Of Attorney (POA) In Real Estate?

A real estate power of attorney (POA), also known as a “limited power of attorney,” is a legal document that grants a person of your choice (such as an agent or the attorney-in-fact) the right to buy, sell or manage your real estate on your behalf. Real estate powers of attorney can be beneficial to both the buyer and seller during a sale, as well as those who need someone to manage their properties outside of a transaction.

Instead of needing to coordinate signings with their clients for every single document that comes up during a real estate transaction, the agent can simply sign for them. This can be especially useful if you live far away from a second home you’re buying, or if a recent medical diagnosis might make you incapable of making decisions in the future, among many other similar situations.

POA Real Estate Terms To Understand

A few key terms you may hear in regard to POA are “principal,” “authorized agent” and “attorney-in-fact.” Let’s break them all down.

  • Principal: The principal is the person giving the POA to their agent. In a real estate transaction, the principal is usually the buyer or seller of a property.
  • Authorized agent: The authorized agent is the person to whom the principal is giving the POA to so they can make decisions and sign relevant documents on behalf of the principal.
  • Attorney-in-fact: “Attorney-in-fact” is essentially just another term for the authorized agent.

Types Of POAs In Real Estate

Property owners and buyers have a number of different types of POAs to choose from in real estate. Let’s take a look at the different types so you can decide which options will work best for you.

Limited Power Of Attorney In Real Estate

This is a document that allows a landlord (the principal) to delegate leasing, selling or managing powers for a property to someone else (the agent). It’s a good tool for investors looking to purchase income properties, but who don’t want to manage them after the sale.

Real Estate Durable Power Of Attorney

This gives the agent specific powers to sign for the principal in a real estate transaction where the exact name and description of the property is indicated in the document. This is a good option for a one-time sale or purchase of a specific home.

Real Estate Nondurable Power Of Attorney

Providing limited authority, a nondurable POA is typically only directed to last for a specific period of time for a particular transaction. Like durable power of attorney, this is a good option for a one-time sale or purchase of a specific home but adds the element of a specific time period or limit.

Medical Power Of Attorney For Real Estate

A medical power of attorney designates an individual to make medical decisions for you when you no longer have the ability to do so. The medical power of attorney in real estate refers to having an agent make real estate decisions for you if you lose that ability.

How To Execute A Real Estate Power Of Attorney

Let’s go through the steps on how to executive a POA in real estate.

1. Document The Property

If your POA is specific to one property, you should start by defining the property that you’re buying or selling with both the common address as well as the legal description.

It is critically important to document the property before finalizing a POA so everyone is clear about the subject and scope of the POA services the agent is providing for the principal.

2. Assign Your Agent

Carefully select the agent to whom you’d like to grant POA and assign them in the document. Make sure you’re choosing an agent that you can fully trust and understands your needs and wants.

3. Select Your Agent’s Authorized Powers

As the principal, the POA you’re giving can be as broad or narrow as you desire. Just be sure to define the boundaries of your agent’s authorized powers clearly, so all parties involved are on the same page. Let’s go over some assignments of authority.

  • Selling: The selling assignment of authority gives the agent the authority to sell a specific property or all of the principal’s real estate holdings, depending on the definition of the scope of power.
  • Managing: This refers to the legal tool that allows you to give someone the authority to manage all or some of your financial and/or real estate affairs. This may include the management of a property you own.
  • Refinancing: Refinancing assignment of authority describes the power given to an agent by the principal to sign documents related to refinancing a loan.
  • Purchasing: The purchasing assignment of authority gives the agent the authority to buy a specific property or any property for the principal, depending on the definition of the scope of power.

4. Follow State Requirements

As previously mentioned, there’s a lot of paperwork for buying or selling a house. One important thing to keep in mind is that this paperwork can vary from state to state. Researching and abiding by specific state requirements is critical as you fill out all the necessary forms for a POA.

5. Notarize And Sign The Document

To ensure that the power of attorney form will be considered a legally recognized document, you must have it signed by both parties in front of a notary public and two witnesses. While this document helps reduce the number of signings the principal must participate in throughout a transaction, the first signing is one that can’t be avoided.

6. Retain Copies For Safekeeping

Both the principal and the agent should keep their own copies of the agreement. This ensures that if the POA needs to be reviewed or produced later, both interested parties will have a copy to reference.

7. Consult Local Professionals Along The Way

When it comes to drafting and executing a POA, you are not on your own, as there are a number of different types of professionals that can help guide your decisions. Consider consulting with mortgage lenders, real estate agents or legal experts to make sure you’re making the best decision for your specific needs.

Real Estate Power Of Attorney FAQs

Below are a few frequently asked questions regarding a real estate power of attorney.

Who should I choose as the power of attorney?

Start with your gut feeling about trustworthiness and choose a person you believe will make the best financial decisions for you. This is especially important for people who develop medical incapacities and need to move out of their homes. In this case, the client (or principal) needs to give POA to someone (an agent) whom they feel would make the same decisions they would if they had the ability and time.

It’s a big decision, so if and when you bring up this conversation with a potential agent (attorney-in-fact), you’ll need to come prepared with plans, and let them know which decisions they will be able to make on your behalf – and perhaps more importantly, which decisions they won’t be able to make for you.

How do I use a power of attorney to sell a house?

If you’re looking to use POA to sell your house, there are some extra steps you may need to take in order for your agent to actually retain the authority to do so. These steps can vary, so the best thing to do is make sure the agent meets with the title company and mortgage lender to iron out all the details in the beginning of the process.

What should I know when using a power of attorney agreement?

It’s important to know that there are some considerations that can end, negate or revoke the terms set forth in a POA document. For example, the agent loses all powers – such as the ability to transfer the property deed – upon the death of the principal. In addition, if there are errors in the document, the entire agreement could be void.

Above all, you should always remember that if you are the principal, you can revoke the POA using a power of attorney revocation form.

The Bottom Line: Put Your Property In The Right Hands With A Real Estate Power Of Attorney

Real estate can be complicated, and having someone take the lead on decisions and signings with POA can be a great way to add some ease to the process. Always remember to choose wisely, though, as the trust you’re placing in an agent with POA is immense.

Interested in selling your home but not sure if you should sell with a POA? Reach out to a Rocket HomesSM Partner Agent for more advice and guidance throughout your home selling process.

Headshot of Bryden Kellam, homeownership, finance, and lifestyle author for Rocket Mortgage.

Carey Chesney

Carey Chesney is a Realtor® and freelance writer that brings a wealth of experience as a former Marketing Executive in the fields of Health Care, Finance and Wellness. Carey received his Bachelor's in English at University of Wisconsin-Madison and his Masters in Integrated Marketing & Communications at Eastern Michigan University. You can connect with Carey at https://www.linkedin.com/in/careychesney/.