In your real estate career, you will hear the term power of attorney, and attorney-in-fact plus it shows up on your exam, so understanding the terms is essential.
What is an Attorney-in-Fact?
Definition: Someone authorized to act on behalf of another person, typically in business or for some sort of business transaction.
So what exactly does that mean? Well, when it comes to business, financial or personal matters, an attorney-in-fact can represent someone else’s interests. This is incredibly helpful for many people and can save massive amounts of time. Business people can authorize an attorney-in-fact to do things like sign checks, do tax returns, enter contracts, and of course, buy or sell real estate.
It’s worth noting. Contrary to how it sounds, an attorney-in-fact is not necessarily a lawyer. An attorney-in-fact can be a family member, friend, business associate, and more.
So how does someone become an attorney-in-fact? Well, that’s where power of attorney comes into play.
What is a Power of Attorney?
Definition: A legal document that authorizes someone to act on behalf of another person, typically in business or for some sort of business transaction.
You heard that right for someone to be an attorney-in-fact, they must obtain a legal document called a power of attorney. See the difference? The two terms typically go hand and hand, which is why we are talking about them today!
A power of attorney can end for numerous reasons, such as if a principal dies, revokes it, or the courts find any reason to invalidate it. Once a power of attorney ends, that person that was an attorney-in-fact is no longer.
Attorney-in-Fact and Power of Attorney Example
Let’s say a man named Jake lives in Boston, but owns property across the U.S. He owns property in cities like Pittsburgh, Philadelphia, and D.C. Jake decides he wants to sell his property in D.C. Instead of traveling all the way to D.C. to complete all the paperwork, he calls up his buddy Matt. Jake authorizes Matt, who lives in D.C., to sell his property for him. Jake gives Matt power of attorney and is now acting as his attorney-in-fact.
What to Know for the Real Estate Exam
Well, understanding the difference between the two terms is essential come exam day. Remember, an attorney-in-fact is someone authorized to act on behalf of another person, the legal document that authorizes that person is called a power of attorney.