Power of Attorney For Your Real Estate Agent

The first step to take to mitigate the risk of fraud is to decide which type of power of attorney you would grant for a single transaction. Here, the limited power of attorney would provide the most security because its authority becomes void after the specifically described transaction is complete. For example, the principal may only want to grant the power to lease two properties. By specifying that the agent may conduct only the specifically enumerated transactions, the principal creates a solid barrier that prevents the agent from performing any unauthorized acts. Thus, the agent would have no access to a bank account that the principal did not authorize.

The principal could also use the general power of attorney to sell property without undue risk by limiting its duration to a specific date. If the principal cannot predict the specific transactions he will need performed, but expects that there will be several, general power of attorney might be a better choice than limited because the principal cannot limit the transactions by specifying their nature if he does not know what type of business the agent might have to conduct. Beware though, this option carries more risk of fraud because it enables the agent to conduct a broader range of financial activities.

Next, the principal must exercise care in choosing an agent. She must be someone the principal trusts, who is honest, who will understand the principal's financial needs, and who will act in the principal's best interests. Further, the principal needs to be sure that the agent is not working on behalf of the party with which the principal wants to do business. Such a conflict of interest could undermine the deal, for example, if the agent fails to get the best price for the principal's asset because the agent wanted to benefit the other party. Generally, someone you have known for a long time and who conducts her financial matters prudently is a good choice to act as your agent for financial matters.

In addition, there are formalities necessary to enable your agent to conduct business for you. Some financial institutions have their own requirements for accepting power of attorney forms, so you should check with a bank to ensure your form is acceptable before you execute it. Witnesses must sign power of attorney forms as well, as evidence that the principal was not under duress or mentally incapacitated when he executed the form. Finally, the power of attorney can lapse. To enable the agent to continue doing business for you, you want to ensure that his authority is current.

You must make sure that the power of attorney you select is a limited form. You do not want your agent to have any more powers than selling your home for the price you want, closing on the residence and sending the money in your direction. With the durable or general form, they would be able to handle all your financial affairs, which would be very risky as they could use it to make withdrawals from your bank account among other things.

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