What's the best way to set up a power of attorney in subto or creative financing real estate deals?

Q: Should my company be the power of attorney, or should I?

A: Neither is wrong, but one is better.

The best power of attorney is to an individual rather than a company.

Unless there's a very specific reason to designate a company as someone's agent, it's strongly preferred to designate a real person who can easily prove their own identity. It's even OK to designate multiple people, and you can require joint signatures or authorize them to act independently.
Creative TC's power of attorney template is set up to authorize multiple individuals to act independently.

While some people set up a company to be the POA... While this is not incorrect, it does make life more difficult.

The problem with giving power of attorney to a company...

What makes it so bad to designate a company as the agent? Validation and authentication.

When trying to use it, how can the recipient ensure the person trying to use the POA is a valid and authorized representative of the named entity? Not only does the recipient have to validate the person's identity, but also needs company documents proving that the company exists to be the agent, and that the person is authorized to act on behalf of the company... 

So yes, a properly-executed power of attorney is legally binding and valid, but when it designates an entity instead of a named individual as the agent, it becomes difficult to authenticate.

Nobody has to accept your POA, so make it easy to understand and use.

The more confusing your power of attorney is, the more risky it looks and sounds to the person you're sending a copy to. It quickly becomes not worth jumping through hoops to verify identity and authority.

Just make it easy for them: Get a good document that clearly names the agents and their mailing addresses, and which clearly and explicitly spells out what specific or categorial actions are authorized, as well as any limitations such as a particular property address, a timeline, or other specific exclusions.

Creative TC has a great power of attorney template.

How did ours come to be the best?

• We've been doing this for a while, with a heavy technical documents accuracy focus;

• We've consulted with multiple attorneys;

• We gladly review any POA we can get our hands on, and when we find something to improve, we do it

🍻 Here's to hoping there is one out there better than ours, and that we get a copy so we can update ours... 🍻

Get in touch with us today to make sure your deal is done best: [email protected] or Book a Call

Terminology in a Power of Attorney

Principal: The person granting authority to act on their behalf

The principal typically uses a power of attorney to ensure their affairs can be managed if they are unavailable, incapacitated, or simply need to delegate tasks. This authority can be as broad or specific as wanted, such as financial decisions, healthcare choices, property management, account management, or other specific tasks.

NOTE: The principal must be mentally competent when signing the POA, meaning they understand the document's significance and the powers they are granting. The POA remains in effect until it is revoked by the principal, the principal dies, or the POA's specified conditions are met (e.g., the principal becomes incapacitated or the task is completed).

Agent or Attorney-in-Fact: The person or entity receiving authority to act on behalf of the other

The agent (also "attorney-in-fact") is the person legally authorized to act on behalf of the principal. The agent has the legal authority to make decisions and act pursuant to the powers granted in the POA document.

NOTE: The agent is legally obligated to act in the principal’s best interest, following the instructions and limits set by the principal in the POA. This duty is known as a "fiduciary duty," which means the agent must be trustworthy, act with care, and avoid conflicts of interest. If the agent acts outside of the authority granted by the POA or fails to act in the principal’s best interest, they can be held legally accountable.

If you're working a subto deal, Creative TC has the best docs, which means your life is easier.

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