Should you sign for your clients?

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04/27/2015 | Author: Editorial Staff

Suppose a client is unable to sign the documents at closing because he is out of town. Ideally, the client has a person he trusts to sign on his behalf. But what if the only person available is the REALTOR®? Can a licensee act with power of attorney when that licensee stands to benefit from the closing of the transaction? 

Yes. There is no TREC rule or statute that prohibits this from occurring. There are legal requirements, though, for properly using a power of attorney with real estate transactions. In fact, there are many lenders who will not accept a power of attorney at a closing. 

There may be no prohibition against this activity, but there is potential liability. You could be responsible or legally liable for transactions, mistakes, or negligence that you weren't even aware of. For that reason, choose carefully when and in what capacity to act with a power of attorney. 

If you do decide to act with a power of attorney for your client, here are some pointers that will ensure you limit risk for yourself and your brokerage. 

  • Make sure the power of attorney is in writing, signed by an adult, and names who has the authority to act on behalf of the client so that it's fully enforceable. 
  • Keep in mind that title insurance underwriters go beyond the state's statutory requirements, with even stricter guidelines for power of attorney usage. A real estate power of attorney is only valid if the original, notarized document is recorded in the real property records where the property is located. Additionally, it is prudent to have the document reviewed by the title agency or lawyer conducting your closing, as their approval is required before they will rely on it for transfer purposes. 
  • Try to limit the discretion available to you, the licensee. Make sure the language is used to complete a specific task or transaction only, with no additional permissions. The less discretion you have, the less exposure you will have to a claim that you exceeded your authority or that there was a conflict of interest. 

Originally published in the March 2015 issue of Texas REALTOR® magazine. Visit texasrealestate.com/magazine for more digital magazine content.

Categories: Legal
Tags: legal, magazine, texas realtor magazine, closing


Comments

Barbara Gremillion on 04/28/2015

I represented a buyer several years ago where the listing agent signed the contract for his clients who were out of the country.  When I questioned it, he went ballistic saying he had been in the business for 30+ years and I couldn’t question him. He didn’t have a POA.  When I took the contract to the title company, they called him and questioned him.  Since they had done prior business with him, they just asked that he have the sellers call them.  He wasn’t happy that I brought it to the attention of the title company.  Long story short, his clients realized they were $30K short a week before closing.  The listing agent sent me a termination of contract. Just proved what an ignorant agent he was in many ways.  Whether it’s legal or not, an agent should not sign for their clients.  It puts themselves and their broker in a liable position.

Micah Harper on 04/27/2015

There are two main situations that I come across where a POA is necessary: (1) US buyers living overseas and (2) foreign national buyers.  Most foreign countries do not have US notaries except at the US Embassy, of which there are usually only a handful in the entire country, so it is not possible to email documents and have them notarized and sent back.  Military buyers can sometimes get documents notarized on base but not always.  In these cases a POA can be a great alternative to having the client fly in for closing.

Carleen Hardin on 04/27/2015

There is NO REASON in this day of electronics and email for a REALTOR to sign for their client.  Documents can be emailed any where in the world.  There are mobile notaries almost everywhere.  The client can print out, sign, and send back by fax or overnight mail.  I have been using DocuSign for over 5 years.  It works on most smart phones.  I have used with clients from age 20-80.  Everyone loves it.  Although lenders have not yet accepted electronic signatures for closing, there will be a time in the future where it will be accepted.  The problems where we don’t get closing documents from lenders in a reasonable time before closing is what causes agents to try to figure out “how to fix” the problem.  We are not the problem.  Don’t put that monkey on your back. 
Work with lenders and mortgage officers that do a good job for your client and you.

Micah Harper on 04/27/2015

I am an attorney as well as a broker and I have encountered this situation many times.  I have a policy against signing on behalf of clients in any transaction where we are receiving a commission because it is just too easy for someone to make a claim later that you overlooked something detrimental to them because you wanted to get paid.  What I have done instead is encourage them to find a local family member or friend to sign on their behalf.  When that was not an option, I found another attorney who was not involved in the transaction who charged the client a minimal fee to sign on their behalf under specific written instructions.

If you are going to sign for a client, despite the risks, here are some ways to minimize your exposure:

1. Have the client review all closing documents including the settlement statement and approve them in writing prior to closing.

2. Have the POA reviewed and approved by the title company and the buyer’s lender prior to closing to ensure it meets their guidelines.

3.  Have the client review and ratify in writing all actions taken under the POA immediately after closing.

Judy McKee on 04/27/2015

When you tell licensees it is permissible to do something and it has huge liability, you are not helping the broker or our industry. Yes they can sign, but should they, NO!!!
I know your article says this, but once you open the door to okay an issue, that is what will be practiced.  Please review your articles before you print to be sure you are not encouraging behavior that can cause a broker liability and heartburn.


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Legal disclaimer

The material provided here is for informational purposes only and is not intended and should not be considered as legal advice for your particular matter. You should contact your attorney to obtain advice with respect to any particular issue or problem. Applicability of the legal principles discussed in this material may differ substantially in individual situations.

While the Texas Association of REALTORS® has used reasonable efforts in collecting and preparing materials included here, due to the rapidly changing nature of the real estate marketplace and the law, and our reliance on information provided by outside sources, the Texas Association of REALTORS® makes no representation, warranty, or guarantee of the accuracy or reliability of any information provided here or elsewhere on texasrealestate.com. Any legal or other information found here, on texasrealestate.com, or at other sites to which we link, should be verified before it is relied upon.

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