How to handle real estate transactions involving a power of attorney or an estate

Written by Elizabeth H. Feather and James L. Goldsmith

There are situations when a title owner is unable to participate in the listing and sale of his or her property. Infirmity, incapacity, overseas service and death are the frequently encountered circumstances. In lieu of an owner, you will likely deal with an executor, court appointed guardian, or one who holds a power of attorney or other special power. Understanding the terminology and legalities is essential.

A power of attorney is a document by which an owner (principal) appoints another person (agent) to act for the owner. It is used when the owner is living but unable to act for himself. Do not confuse the use of the word “agent” with real estate agent. The agent named in the power of attorney is usually a relative, loved one or someone who holds a position of trust with the principal.

Only a competent person can sign the necessary document to create a power of attorney. If an owner signed a properly drafted “durable” power of attorney before becoming incompetent, the power is effective and the agent may act for the owner. The Pennsylvania legislature has dictated what constitutes a properly drafted form. Do not assume that any power of attorney form has been properly drafted.  Pass it by counsel or your title company to see if it comports with law.

If an owner becomes incompetent before signing a power of attorney, then only a guardian appointed by the court can act. Obtaining a court order requires the filing of a petition, publication of legal notices, costs money and takes time. Hopefully your seller did some estate planning.

Another limitation of a power of attorney document is that it may only be used when the principal is living. After, the power of attorney is no longer effective and an estate must be opened with the county court where the principal resided. A representative is then appointed by the court to handle the principal’s assets including real estate. If a person died with a Will, the representative(s) named in the Will is appointed by the court and referred to as an executor(s). A person who dies without a Will has an administrator(s) appointed by the court. The administrator is usually the next of kin. If the person appointed is female, the court will use the terms executrix and administratrix.

When asked to list a property by an executor or other non-owner, your job is to obtain a copy of the correct documentation before taking any other action. You cannot operate on word alone. In a power of attorney situation, you must obtain a copy of the power of attorney document and keep it in your file. An original will have to be recorded at the county’s recorder of deeds. Read the document carefully to ascertain who has been named as the agent. This is the person you must communicate with about the real estate. If there is more than one person appointed, then all the named agents need to make decisions and sign all documents. Second, you want to know the scope of the power of attorney. Does it give the agent(s) the ability to engage in real estate transactions? If it does, you are in business.

The documentation that is required for the representative of an estate is referred to as the Short Certificate. It is given by the Register of Wills and names the representative(s) of the estate who has the power to list the real estate. Like the power of attorney, if there is more than one representative appointed, all must make the decisions and sign documents.

An agent(s) under a power of attorney or a representative(s) in an estate has certain duties: (1) exercise the powers for the benefit of the principal (owner) (2) keep personal assets separate from those of the principal (3) exercise reasonable caution and prudence and (4) keep a full and accurate record. An estate representative’s duties are similar to that of an agent under a power of attorney include responsibility for preserving the assets of the estate and liquidating the assets if necessary. The representative is responsible for using the estate assets to pay the final debts and inheritance tax before distributing the proceeds to the beneficiaries. A representative(s) has the power to sell or lease the deceased person’s real estate as long as the real estate has not been specifically devised to someone in a Will. Accordingly, it is a good idea to take a look at the Will to make sure the real estate was not given to someone before you list it.

After you have the defined the situation, determined the correct person(s) of authority, and have received and reviewed a copy of the appropriate documentation, you are ready to proceed. Remember that all of the authorized agents under the power of attorney or representatives in an estate must sign the listing agreement, disclosure documents, etc. For example, when there are two executors in an estate, then they both must sign the Listing Contract. If only one executor signs, the document is not effective.

The Real Estate Seller Disclosure Law exempts an estate representative from completing the Seller’s Property Disclosure Statement except for material defects known to the representative. How an agent under a power of attorney completes a disclosure form is a matter that requires its own article.

Knowing how to operate in the absence of an owner not only minimizes the likelihood of problems; it enhances the likelihood of your acquiring listings that you might not otherwise come your way. Be the expert!

Elizabeth Feather and James Goldsmith are attorneys with Caldwell & Kearns, which serves as counsel to PAR. A substantial portion of their practice is dedicated to providing advice and counsel to real estate licensees and representing and defending real estate salespersons and brokers in civil lawsuits and licensing claims across the Commonwealth.  Ms. Feather also counsels clients on estate planning and estate administration matters. Mr. Goldsmith routinely counsels employers on employee relations issues. Both Ms. Feather and Mr. Goldsmith are two of the voices of the PAR Legal Hotline.