Attorney in Fact
An Attorney in Fact is an agent authorized to act on behalf of another person, known as the principal, typically through a legal document called a Power of Attorney. It is a common misconception that this person must be a licensed attorney. In reality, it can be any competent adult, a spouse, family member, or trusted associate, whom the principal designates to handle their affairs. In the real estate sector, this individual effectively steps into the shoes of the principal, possessing the legal authority to execute binding documents and make decisions as if the principal were present themselves.
Purpose and Function
The primary purpose of appointing an Attorney in Fact is to ensure that the principal’s legal and financial affairs can proceed smoothly, even when they are unable to manage them personally.
- Ensuring Continuity: The role is a safeguard against stagnation. If a principal is traveling, deployed, ill, or incapacitated, the Attorney in Fact ensures that critical transactions do not stall.
- Fiduciary Responsibility: The Attorney in Fact operates under strict fiduciary duty. They are legally obligated to act with the highest degree of honesty and loyalty, prioritizing the principal’s best interests above their own at all times.
- Delegating Authority: It allows for the specific delegation of power. A principal can grant broad, sweeping powers to manage all assets or limit the authority to a single specific transaction, such as selling a particular property.
How It Is Used
In practice, the Attorney in Fact is the operational arm of the Power of Attorney document, executing tasks that the principal cannot perform physically.
- Execution of Documents: The most common use in real estate is signing closing documents. If a seller has already moved out of state or a buyer is overseas, the Attorney in Fact signs the deed, mortgage note, and settlement statements on their behalf.
- Specific vs. General Authority: In real estate, this role is often limited by a “Specific Power of Attorney.” This restricts the Attorney in Fact to acting only regarding a specific property (e.g., “123 Maple Street”), rather than having control over the principal’s entire financial life.
- Asset Management: Beyond closing, an Attorney in Fact may be used to manage rental properties, sign leases, contract for repairs, or pay property taxes from the principal’s funds.
Importance in Real Estate Transactions
The role of the Attorney in Fact is critical for maintaining the velocity and validity of real estate commerce.
- Preventing Delays: Real estate closings are time-sensitive. The ability to use an Attorney in Fact prevents deals from falling apart due to logistical challenges or unexpected life events that keep a party from attending the closing table.
- Scrutiny and Verification: Title companies and lenders place immense importance on verifying the Attorney in Fact’s authority. Because the potential for fraud is high, the Power of Attorney document is rigorously reviewed to ensure it is valid, current, and specifically grants the power to sell or encumber real estate.
Chain of Title Integrity: When an Attorney in Fact signs a deed, the Power of Attorney document is typically recorded in the public land records alongside the deed. This creates a clear legal trail, proving to future owners that the transfer was authorized and legitimate.
