What is a "power of attorney" in real estate transactions?

A "power of attorney" is a legal document that grants one individual the authority to act on behalf of another individual in legal or financial matters. In real estate transactions, this is particularly important when the principal (the person granting the authority) is unable to be present to sign documents or make decisions regarding a property.

For example, if someone is out of the country or incapacitated, a power of attorney allows the designated agent to handle transactions such as signing deeds, closing on a sale, or managing property matters. This document must be executed with specific formalities to ensure it is legally binding, including the principal’s signature and often notarization. This arrangement gives the agent the legal backing necessary to perform tasks that the principal would typically undertake.

While the other options present potential roles in real estate, they do not accurately define what a power of attorney is. Understanding the function and legal standing of a power of attorney is crucial for any real estate professional, as it affects transactions and negotiations significantly.