The Special Power of Attorney in Real Estate

The Special Power Of Attorney

The Special Power Of Attorney is only one of many types of powers of attorney. The most common is a health care power of attorney, which grants another the authority to make health care decisions when you cannot. Others include the General Power of Attorney and the Special Power of Attorney. We will focus on the special type.

Unlike a general power of attorney which empowers someone to act on your behalf in almost all legal matters, a special grants someone the right to act in one specific matter and usually for a specified period of time. A Power of Attorney is often referred to as a POA.

Use In Real Estate Transactions

This type is often used for land transactions. With this document you grant someone the power to act in your behalf on all matters dealing with a specific piece of land. This would included buying, selling, mortgaging, leasing etc.

When a person is unable to attend their closing they may grant a special powers of attorney to their spouse or other trusted person. Banks and title companies often require this type of POA and require it to describe the specific property.

Durable Clause

A durable clause can be added to any type of power of attorney. It means the power of attorney is still in effect if the grantor (person giving power of attorney to another) becomes incapacitated or mentally incompetent. This incapacity includes Dementia, Alzheimer’s or a coma.

You should be cautious and grant this only to someone you completely trust. You can revoke a power of attorney at any time, unless you are mentally incompetent. The power of attorney then stays in effect while you are judged incompetent, which could be until death.

Void Upon Death Of Grantor

Upon the death of the grantor all powers of attorney are automatically and immediately void. Many times I have seen individuals try to use a power of attorney granted by a person who is now deceased. They did not understand that it is now void.

Cautions

Be careful in choosing who you grant power of attorney. You must trust this person completely and know they will act in your best interest and according to your instructions. You are giving them a great deal of power to make decisions and act on your behalf. Most of these decisions cannot be changed.

Revocation

To revoke a power of attorney you send a signed statement to the holder stating it is revoked. You also request the original document be returned to you. You should also notify anyone who has a copy, or has conducted any business based on the power of attorney, of the revocation.

When creating a POA it usually states it revokes all previous ones. The special may not have this wording as it is for a specific purpose.

Limits

The use of powers of attorney in real estate transactions is limited. Many banks and title companies will not allow their use. Often title companies will require a power of attorney they prepare. They are hesitant to use a general power of attorney or any power of attorney that is old.

Because the POA is the most forged document they will want to know why you are using it, may want to prepare it themselves, and will want to talk to and maybe meet the individual granting the power of attorney.

They will also insist on a Special Power of Attorney that specifically describes the land for which it is granted.

The Special Power of Attorney grants broad powers and should not be used if it can be avoided.

February 25, 2016

Reading a Real Estate Contract

Reading A Real Estate Contract

A Real Estate Contract, Real Estate Purchase Contract or REPC is the contract to buy land or other types of real estate. These contracts are created by the state real estate department and used by real estate agents. Individuals use the same or similar contracts.

The contracts vary from state to state but are similar. The main sections are listed and explained below. The first section lists the names of the buyers, sellers and realtors. The Real Estate Contract is about as boring as it gets, but necessary to understand when buying land.

Property

The property section describes the property included in the sale. This includes the real estate, any appliances included with a house and any water rights, mineral rights etc. Any items not included in the sale are also listed.

Purchase Price

The price section includes the purchase price and any financing. The financing might include bank loans, private loans or owner financing.

This section may also state the contract is subject to loan approval. The buyer will not be required to complete the purchase if their loan is denied. There also may be a appraisal condition which allows the buyer to cancel the contract if the property appraisal is lower than the purchase price.

Settlement and Closing

The settlement section covers items that must be completed before the closing. This includes documents to be signed, money to be paid, and required disclosures.

Possession

This section gives the date when the buyer can take possession of the property. This is usually a certain period of time after the closing occurs.

Agency Disclosure

Its very important to review this section. The realtor(s) disclose who they represent which is either the buyer or the seller. Keep this in mind when dealing with a realtor.

Title Insurance

Every buyer should demand title insurance when they purchase real estate. This section details the title insurance policy requirements and who pays for it.

Seller Disclosures

Seller disclosures often include the following:

Property condition disclosure
Commitment for Title Insurance
Any leases not expiring before closing
Any environmental liens or issues
Any building or zoning code violations
Other issues seller is aware of that affect the property

Buyer’s Right To Cancel

Conditions allowing the buyer can cancel the contract may include:

Buyers approval of seller disclosures
Buyers inspection of the property
Buyers approval of a land survey
Buyers ability to get home owners insurance
Other test and evaluations as listed

Seller Warranties

The Seller guarantees the property will be in good condition with a clear title and be broom clean. This includes all appliances work, there are no roof leaks, foundation cracks, or other problems not disclosed to the buyer.

It also discloses if the seller will provide a home warranty and what coverage will be included in the warranty.

Walk-Through Inspection

The Buyer is entitled to inspect the property before the closing. The Seller agrees to correct any problems found during that inspection within the limits described in this section, and to allow buyer to enter the property for the inspection.

Changes During Transaction

Seller agrees none of the following will occur without buyers consent:

No changes to existing leases
No new leases shall be entered into
No substantial improvements or alterations made to property
No loans or other encumbrances placed on property

Complete Contract

Buyers and Sellers agree that this contract and the attachments and addendum’s is the complete contract. This precludes any claims of verbal agreements or other buyer said/seller said issues.

Dispute Resolution

This details how any disputes will be resolved. Often the parties agree to a mediation instead of court.

Default

Both buyer and seller may default (not complete) this contract. This explains the remedies in a default, which may include retaining the earnest money or filing a lawsuit to force contract completion.

Contract Deadlines

There may be separate completion deadlines for parts of the transaction or contract. These could include:

Buyer Loan Application deadline
Seller Disclosure deadline
Property Inspection deadline
Loan Denial deadline
Appraisal deadline
Settlement deadline

Not meeting any of these deadlines by the responsible party (buyer or seller) allows the other to cancel the contract.

Offer And Time For Acceptance

Either the buyer or seller could make the original offer to the other, although the buyer more commonly makes the offer. This states how long the other has to accept, reject, or make a counter offer.

Nothing is more boring than a Real Estate Contract. I know because I read them all the time. However, if you are buying or selling real estate you better read it and understand it. There is too much money at stake to sign this contract without fully understanding it. You may also want to have your attorney review the real estate contract before you sign.

February 24, 2014

Real Estate Closing Documents

Real Estate Closing Document

If you are involved in land you should understand the basics of real estate closing documents. They may not be exciting, but they are the method used to transfer land and secure loans on real estate.

Conveyance Documents

Conveyance documents are those that transfer (or convey) ownership of land. The most common is the Warranty Deed but there are others such as Special Warranty Deeds, Quit Claim Deeds, Grant, Bargain and Sale Deeds.

Each is different in certain ways but each transfers real estate from sellers to buyers. If buying you always want a Warranty Deed, as it transfer the land to you with the greatest guarantees from the seller.

Loan Closing Documents

Loan documents are used to secure the loan. The most common are the Trust Deed and Trust Deed Note. These two go together and are used by lenders nationwide.

Older loan documents include Mortgages and Real Estate contracts. Both are now rarely used, and are not recommended.

HUD 1 Settlement Statement

In buying or selling land the HUD-1 Settlement statement is the most important. All transaction costs are included on this closing statement. Although it looks similar, this is not a balance sheet nor does the bottom figure show the cost of the transaction.

The bottom lines show the amount of cash to be brought in or paid by the buyers and sellers.

Most Important Documents

There are many closing documents involved in a real estate closing. Many of these documents are to gather or disclose information. While all the documents are important a few are the most important and should be reviewed carefully.

These are the HUD1 Settlement Statement, the Warranty Deed and the Trust Deed Note. You should review all figures on the the HUD-1 to assure you are not overcharged and all items are paid correctly.

The Warranty Deed is reviewed to assure that your names are spelled correctly and vesting is correct. If there is a loan involved in the transaction review the Trust Deed Note to insure the terms of the loan are correct. This would include loan amount, interest rate, payments, and payments dates.

Recording Of Documents

After closing, several documents are recorded to transfer ownership to the new owner and secure the interest of the lender. These are the Warranty Deed and the Trust Deed (or Deed of Trust).
The original deed is mailed to the new owner after the closing, although the most important step is the recording at the local County Recorder’s Office.

Review Documents At Closing

A mistake often seen at closing is the buyer or seller rushing through the documents, instead of reviewing them and asking questions. While many of the documents are routine and less important, those listed above is reviewed carefully and you should ask any questions necessary to fully understand them.