Picked a Date, Ready to Close… But, You Can’t be There

It’s probably one of the most stressful scenarios when buying a home: you’ve spent months searching and have finally finding the perfect home; you’ve worked with your agent and lender for weeks getting all the documents needed for you to qualify and lock in your loan at a great interest rate; then you get the unexpected news that you cannot be here for your planned closing date. What now?  

There’s a relatively simple solution:  you can appoint someone to sign your documents on your behalf using a Power of Attorney. However, the use of a power of attorney must be approved by your lender and the form needs to be approved by the closing attorney and title company.  So it’s imperative that you contact your lender, your agent and your closing attorney and let everyone know right away… and don’t delay!

The person you appoint to sign documents on your behalf is formally called the “attorney-in-fact.”  The person giving the power to someone to sign for them is known as the “principal” - that's you. The establishment of the Power of Attorney agency agreement can allow, among many other things as defined in Chapter 32A of the N.C. General Statutes, the sale, purchase or refinance to move forward in the physical absence of the principal.

For the attorney-in-fact to be able to operate in the principal's stead, he/she must be appointed by a satisfactory Power of Attorney document. The general requirements for the appointment include an adequately signed and notarized power of attorney authorization. The appointment may be specific, meaning it only authorizes the attorney-in-fact to exercise limited powers.  Specific Powers of Attorney are often used in real estate transactions. They give the attorney-in-fact authorization to sign necessary documents to complete a sale or purchase a specific property. The power of attorney can also be made more specific to include the maximum purchase price, loan amount and interest rate the attorney-in-fact is authorized to commit the principal to. A general power of attorney, which gives the attorney-in-fact "general” permissions to buy, sell or mortgage any real estate, is sufficient to complete the transaction as well, but most lenders require a specific power of attorney if it is being used by their borrower.  

For the power of attorney appointment to be used in a particular transaction conveying or mortgaging real property, the instrument must be recorded in the Register of Deeds office in one of the counties in North Carolina. Preference is that it is recorded in the county where the property is located, but it can be recorded in a different county. If your power of attorney has not yet been recorded, the original power of attorney must be given to the closing attorney no later than the time the documents are signed by the attorney-in-fact. The closing attorney is responsible for making sure the power of attorney is recorded. If the power of attorney is not recorded in the county where the property is located, the conveyance document that is signed by the attorney-in-fact must identify the county and book and page of the Power of Attorney’s recording.  

Also, the power of attorney must be “in effect” at the time of the conveyance. Therefore, instruments that limit powers to only be effective upon incompetence could be problematic as outside verification would be required. Further, for a power of attorney to be currently in effect, the principal granting the power of attorney must still be alive at the time of closing. If the principal dies, the agency relationship established under the power of attorney terminates. Therefore, documents executed by an attorney-in-fact after a principal has deceased will not be effective to convey any interest in real property owned by the principal. Because of this, the principal will need to speak with the closing attorney or the lender on the day of closing to confirm that they are still alive and well and that the power of attorney has not been revoked. If the principal is not available to speak with the lender or attorney because of military training or deployment for example, the lender or closing attorney can confirm with the principal’s commanding officer that the principal is alive and well.

When these provisions and others noted in Chapter 32A are met, a properly signed, and acknowledged Power of Attorney appointment can be used to facilitate a real estate transaction in the absence of the necessary party. Documents in the real estate transaction signed by an attorney-in-fact acting under a properly executed power of attorney have the full weight and authority as if the principal himself/herself has executed the same. Individuals who deal with the attorney-in-fact will not be held responsible for misapplication of monies or property transferred by the attorney-in-fact.

Some lenders are not comfortable with allow closings to be done under power of attorney as there is some aspect of risk associated with these transactions. For instance, principals or heirs of principals may seek to contest the validity of the authority of the power of the attorney-in-fact involved in the transaction and seek to set the transaction aside. However, under the guidance of an attorney familiar with these types of transactions and when due to personal circumstances this type of closing is necessary, the use of a power of attorney to close a real estate transaction can be an appropriate tool.

Now if you are the attorney-in-fact and will be the one signing the documents for the principal, be prepared. Maybe do some hand exercises before going to the attorney's office. Most likely you will be required to sign the principal’s name, your name and write "by attorney-in-fact" on every document you sign on their behalf. If you and your principal have short names this may not be such a big deal but imagine signing something like “Victoria Elizabeth Homebuyer by Bartholomew Montgomery Homebuyer, her attorney-in-fact” on 45 documents.