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Monday, June 5, 2017

Factors to Consider When Utilizing a Power of Attorney in a Real Estate Transaction from the Title Insurer’s Standpoint

( Ed. - This is a guest article that was written by Renee Cooper, a local attorney who works as legal counsel for Title Connect, LLC, which is a local title company. In the article, Renee discusses the use of a Power of Attorney from the perspective of the title company. Power of Attorney documents are used often in real estate transactions when one or more of the parties involved cannot be at the closing and desired to have someone else sign for them. It is also used in cases where the selling party is no longer physically or mentally capable of handling their own affairs.)

Factors to Consider When Utilizing a Power of Attorney in a Real Estate Transaction from the Title Insurer’s Standpoint

Commercial Counsel
Title Connect, LLC

The definition of a Power of Attorney (“POA”) is when a natural person (the Principal) provides written authorization to another person (the Attorney-in-Fact) to act as his/her agent for a certain limited action specified a written document. Although a POA is certainly not uncommon in the context of a real estate
transaction, you may wonder what the title insurance company assesses when a POA is presented.

The Michigan Title Standards provide the following limited guidance regarding a POA:
Michigan Title Standard 3.17:

“An interest in real property may be conveyed or encumbered by an instrument executed pursuant to a power of attorney only if the power of attorney specifically authorizes the attorney in fact to convey or encumber the interest on behalf of the principal.”

In addition to reviewing the Power of Attorney document, here is a list of some factors to consider when determining if a POA may be utilized in a real estate transaction:

1. What is the reason for the POA? The purchase and sale of real property is a significant event in most people’s lives. Determining that a POA is absolutely necessary is a good starting point in the underwriting process.

2. What is the relationship between the Principal and the Attorney-in-Fact? This piece of information is important in the review of the POA and allows the title company to approve the POA or in some situations, request additional documentation or information. In general, a POA being used to convey title to the POA is generally not acceptable to title companies.

3. When was the POA executed? Although the Michigan Title Standards do not require the POA be executed within a certain timeframe, most title insurance
companies will require the POA be executed within one year of the transaction.

4. Is the Principal’s signature valid? One of the most common issues with Powers of Attorney is forgery. As such, the title company may request a copy of the
Principal’s driver’s license or passport. Additional documentation may be required.

5. What is the difference between a general POA and Durable POA? A general/limited POA is only for the purpose specified in the POA document and terminates when the principal dies or becomes incapacitated. Michigan has adopted MCL 700.5504, which allows the use of a durable POA. A Durable POA confers authority to the attorney in fact and remains notwithstanding the principal's subsequent disability or incapacity.

6. What is Military Power of Attorney? As long as the Principal is in active military service at the time the transaction closes, you may permit use of a Military POA. This type of POA is exempt from individual state law requirements and should be reviewed by an attorney or underwriting counsel.

7. What should be included in the POA? The POA should be executed by a notary public and recorded with the deed or mortgage document. In addition, the POA should include a description of the property being transferred or encumbered.

In conclusion, the use of a POA does raise additional issues that the title company will need to review. However, by providing notice as soon as possible of the intent to use a POA will help assure that your transaction will not be unnecessarily delayed.

Title Connect, LLC is a full service title insurance agency with headquarters located in Farmington Hills, Michigan. Title Connect also has offices in Bay City, Brighton, Clinton Township, Detroit, Taylor and Florida.

(ED. - As a Realtor, I often see the use of a POA in cases of elderly home owners who have given the POA to one of their children to allow them to handle their affairs. The other common thing that I run into with a POA is a spouse who has been given the POA, so that he/she can sign for the other party when the missing spouse is out of state, or even out of country on business or for a job. It is important to have the POA reviewed and approved by the title company well ahead of the closing, in case there needs to be corrections or clarifications made. In some rare cases, even a durable power of attorney may be challenged by other heirs, especially in cases of estranged children who may object to how the estate is being handled. Very few things are as straightforward as you might think that they would be.)


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