A carefully drafted power of attorney is crucial in a real estate transaction if one is needed. Powers of attorney that are not prepared by an attorney can raise questions on whether the principle had legal capacity or certification at the time it was drafted. Attorneys have a legal standard to make sure that when preparing the documents that they know the client and their capacity, and are assured that the principle understands what powers that are authorizing in the document.
The agent is the person that has been given the authority to act on behalf of a person, the one that is giving the authority is known as the principle.
In Virginia, powers of attorney must be enumerated. If it does not say you can do it, chances are you do not have the authority to do it. One example is picking up mail at the post office. The authority must be given to you specifically in the power of attorney.
Even though a power of attorney gives reference to an agent to have the authority to buy and sell real estate, it must also have specific information on the property that was owned at the time it was drafted. Without this information it could cause title companies to not accept the power of attorney. A strong power of attorney will have specific language in it that the principle acknowledges the specific property and the ability for their agent to act on their behalf.
Legal capacity is very different than mental capacity. This is another reason it is very important to work with an attorney to help distinguish a person’s capacity. They can make sure that the right language is drafted pertaining to the durability of the power of attorney. Durability language in a power of attorney means that it lasts throughout a principles disability, incapacity or incompetence if that is their intention.
If the attorney has questions concerning a person’s mental capacity they will refer the person to a doctor to make the decision. If the person does not have capacity to sign a power of attorney they must go through guardianship and conservatorship that will make decisions on their behalf. This is done through court and could take a long time.
Gifting under the power of attorney has guidelines also. The agent has a fiduciary responsibility to the principle. Letha pointed out that even if you are a married couple one party cannot gift to themselves (e.g. putting the house in just their name) without repercussions. Gifting authority must be given by the principle.
If there are questions about one it is very important to have an attorney review it as soon as you’re able to ensure that you have a proper power of attorney to complete the transaction. Powers of attorneys also need to be approved by the lender and the title company. If it is presented on the day of closing it could hold up the closing.
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