Over the last few years, my team and I have seen a major increase in the number of listings we represent on behalf of the children of the home-owners.
Now, when you think “children,” that doesn’t necessarily mean kids!
In fact, some of the “children” we represented earlier this year were in their late-70’s, as their father, who owned the home they were selling, was 102-years-old!
Throughout the work that we have done, we’ve noted that there are many different ways in which the “Power Of Attorney” can come into play. Sometimes it’s necessity and sometimes it simply makes the process easier, but we noticed that there are a lot of misconceptions about how a Power of Attorney plays a role in the sale of a home.
- What is a Power of Attorney?
- How can the Power of Attorney be used to your benefit?
First, let’s discuss four quick points about the “POA” that can shed some light on the use of the document before we move on to exactly when, why, and how the document can come into play:
Before we dive in, did you know we have a podcast? Listen to the Last Honest Realtor right here or wherever you get your podcasts.
1) There’s a difference between a Power of Attorney for the estate and a Power of Attorney for the home owner.
When a home-owner passes away, there is often a lengthy process that must be worked through before the heirs of the home are able to sell it.
Even in cases where there is one clear heir to the property, as outlined in a legal will, the “probate” must still pass, and that can take time.
During the COVID-19 pandemic, this process went from several weeks to upwards of a full year, as we witnessed in one particular case.
And while it is possible to sell a home for which probate has not passed, we do not recommend it.
Why?
Consider that obtaining the probate certificate that allows an inherited property to be legally sold is a process that can take any amount of time. While we can estimate the time at, say, three or four months, there is uncertainty at hand.
The buyer of a home that has not passed through probate must accept that the closing date is not fixed and can continuously be pushed back, depending on the probate process.
This means that the purchase of the home is less attractive, and thus will result in fewer buyers considering it. All this is to say that we firmly believe the leverage that a seller has and the price that a seller will ultimately obtain in this situation is weakened significantly.
The Power of Attorney for the estate can sell the property either before probate has been obtained or after, but this is not to be confused with the Power of Attorney for an existing home-owner who is still alive.
Looking for more tips on selling a home in a specific situation? Here are a few other posts that might apply to you:
- Should You Sell Your Home Now or Leave it in Your Will?
- How to Sell Your Parents’ House
- Can You Sell a Condo with a Special Assessment?
- How to Sell Your Home During a Separation
2) A Power of Attorney can be agreed upon or court-enforced.
Anybody can authorize a Power of Attorney.
In its most basic form, it simply requires a document, a couple of signatures, and a few moments of time.
However, there are situations where a Power of Attorney is enforced through the court system, and this would be noted in the document itself, which is often viewed by many parties in a real estate transaction.
3) A Power of Attorney does not need to be notarized and does not need to result in a significant capital expenditure.
Contrary to popular belief, a Power of Attorney doesn’t need to be signed in a courtroom, a lawyer’s office, or in front of a notary public.
A Power of Attorney does not need to cost a significant amount of money either, or in many cases, any money at all.
4) A Power of Attorney is easy to obtain.
Simply Google the words, “Power of Attorney boiler plate” and you’ll find several easy-to-download documents which would be legally-binding once signed by the requisite parties.
There are situations in the course of a real estate transaction where a Power of Attorney simplifies the process to the benefit of all parties, and this is why
Looking for an in-depth guide to selling your home? Download our Seller’s Guide for free right here.
Why would one use a Power of Attorney in a real estate transaction?
When does this come into play?
And how is it used?
Throughout our experiences over the last couple of years, we have identified the following situations where the POA most commonly comes into play:
1) To simplify the process for home-owners who don’t want to take on the burden.
Perhaps the most basic use of the POA in a real estate transaction is when two home-owners tell their child or children, “Can you just sell this for me and let me know when it’s done?”
That was the situation we encountered last summer when clients of ours asked for help to move their elderly parents.
We found a condominium for the parents that was near their children – our clients, and helped them purchase the unit and subsequently move into it.
When it came time to sell the house, however, the elderly parents wanted no part of it – even thought hey were the legal owners!
So they signed a Power of Attorney that authorized their two children to make all the decisions with respect to the sale on their behalf as well as sign all the necessary documentation.
This simplified the process immensely and allowed the younger, more able children, who were in their 50’s and had a lot of experience buying and selling real estate, to handle the entire process on behalf of their parents, who were now living an easier, carefree lifestyle in the new condo.
Keep reading these selling blogs next:
- Should I Renovate My Home Before Selling It?
- Should I Price My Home Under Market Value?
- Do You Need an Open House to Sell Your Home?
2) To assist home-owner(s) who are incapacitated.
In the case where the home-owner has not passed away and the POA is not on behalf of the estate, but the home-owner isn’t able to make a decision on his or her behalf, the POA can help simplify the process for everybody involved.
Whether this is a court-appointed POA (ie. where a child of the home-owner has sought a POA) or whether this is agreed upon by the home-owner and the child, if the home-owner is in a hospital, palliative care, or supportive housing, it’s often impossible for that home-owner to make a decision on the sale of the property.
We’ve experienced this several times over the last couple of years, and we’ve seen both cases where the POA was court-appointed and where the home-owner was in good enough condition to legally provide the POA to a family member.
3) To overcome technological issues.
It should come as no surprise that some people in their 80’s or 90’s aren’t familiar with DocuSign or Authentisign, right?
In many cases, we’ve seen older home-owners offer a POA to their children simply because they can’t use electronic signature programs, and/or don’t want to be disturbed at home in order to sign papers.
In the case of a sale where multiple sign-backs and/or signatures are needed, a POA can often alleviate the elderly home-owner of five or six meetings in person to sign documents.
4) To overcome geographic barriers.
Last year, we represented the sale of an estate where there were four children and thus four legal heirs, and the four of them were spread out across the globe.
While electronic signatures have made it possible to have all four of the heirs sign the requisite paperwork for a sale, given the geographic barriers, different time zones, and sheer number of signatures that could be required, the four heirs agreed to give a Power of Attorney to one of the group who would make all the decisions and do all the signing necessary.
This heir happened to be in Toronto where the property was located and thus it simplified the process significantly.
Is it a good idea to hire your friend or relative to sell a home? You might be surprised. Read more here.
There Are More Ways to Use POA Than You Think
When most people hear the term “Power of Attorney” in a real estate context, they assume that a home-owner has passed away or are incapacitated.
As we’ve demonstrated above, that’s not always the case.
In fact, understanding how to use the Power of Attorney in a real estate transaction can often assist family members with simplifying the sale process, removing obstacles, and identifying potential issues and snags before they arise.
For more information on selling your parents’ home, we recommend a fantastic two-part blog series that was provided on Toronto Realty Blog:
- Selling Your Parents’ House: The Trials & Tribulations
- Selling Your Parents’ House: The Trials & Tribulations (Pt2)
Do you have questions about selling real estate on behalf of a loved one? Please reach out at any time by calling 416.642.2660 or emailing admin@torontorealtygroup.com. We’re always happy to chat!
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