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Powers of Attorney and Real Estate Transactions

By: Carter, Brian on in

A recent appellate court case from the Pennsylvania Superior Court, Stecker v. Goosley, is instructive on several issues concerning real estate transactions involving powers of attorney and a buyer seeking specific performance.

In 2013, Joseph Goosley used a power of attorney he purchased online for his mother, Mercedes Goosley, who signed it before a notary. (It’s important that he just bought the form online – remember that for later.) Mercedes later moved in with Joseph, and another son – William Goosley – then moved into Mercedes’ house. In late 2017 or early 2018, after Mercedes moved into a nursing home, Joseph used the power of attorney to list the house for sale with a real estate agent and told William that he would have to move out.

After the property was listed for sale, the Santos family viewed the property and Joseph, as the POA, accepted an offer with a settlement date of March 5, 2018, which was later changed to March 15, 2018, to accommodate William’s moving out schedule.

Unbeknownst to Joseph and the Santos family, on Feb. 27, 2018, well after the Santos’ offer had been accepted, William convinced Mercedes to convey the property to him instead. After learning this, the Santos family filed a lawsuit seeking specific performance since they had a valid contract in place before the property was purportedly transferred to William. The court ultimately awarded specific performance and that decision was affirmed on appeal.

The first takeaways relate to powers of attorney. Joseph, probably unknowingly, had gone online and purchased a “springing” power of attorney. A springing power of attorney means a certain condition must exist before the power of attorney can be used. In this case, that condition was Mercedes had to first be declared incapacitated or disabled by a physician before Joseph could act on her behalf.

Even though Mercedes was never declared incapacitated or disabled by a physician, the court held Joseph’s actions were proper since both he and Mercedes had always acted over the years as if there was no “springing” provision. Therefore, the court found the POA to be valid, and affirmed the contract he had signed.

The Santos were fortunate the court decided this issue in their favor. The court could have easily held Joseph lacked the authority to sell the property under the power of attorney, which means they would have lost the case. And if that had happened, there could have been questions about whether the listing agent and/or buyer agent were negligent in moving forward with that transaction without having verified that the POA was valid.

Realtors® should NOT rely upon their own review and judgment of whether a power of attorney is valid, nor on the judgment of the client. There are multiple types and combinations of powers of attorney that a principal can grant to an agent. A partial list includes durable, simple, springing, limited and out-of-state versions that are valid in Pennsylvania. Simply stated, Realtors® are not qualified to determine the validity of a power of attorney.

A Realtor® deciding the validity of a power of attorney creates potential liability for the Realtor® and the broker if that decision is wrong. Secondarily, it also opens the Realtor® to potential criminal charges of practicing law without a license. Instead, an attorney should be consulted to review and verify the validity of a power of attorney.

Whenever in a transaction involving a power of attorney, always ensure you have a copy in your file. For the listing side, it is important to have a copy of the power of attorney in recordable form since the title company handling the closing will require one for recording the deed. Realtors® should also discuss with a title company any local preferences of the recorder of deeds for recording a power of attorney.

The other takeaways relate to seeking specific performance, a topic frequently asked on the hotline. When a seller terminates an Agreement of Sale, a buyer may have an option to sue a seller for specific performance. Specific performance in this context means that a court orders the seller to convey the property to the buyer for the agreed-upon price.

A buyer, consulting with an attorney, needs to consider several things when thinking about specific performance. One of the first is that specific performance is an equitable remedy, which means a court has discretion whether or not to grant specific performance. A court finding that a seller wrongfully terminated an Agreement of Sale does not necessarily result in the court ordering specific performance. The court will consider factors such as hardship upon the seller, impossibility, or improper conduct by the buyer.

Another consideration is the time and cost of litigation. The Santos filed the complaint with the court in March 2018. The trial was held in January 2020, with the court awarding specific performance in February 2020. William then filed an appeal and the Superior Court issued its opinion in April 2021.

In my experience litigating cases, this timeline was not uncommon and may actually be a little quick. Going forward for the next year or two, I expect cases to take longer while courts struggle through the backlog caused by COVID-19. Given the timelines and cost involved, a suit for specific performance is often not going to be an effective remedy for a buyer who needs to move in the near future, though it could certainly be valid in the right circumstances.

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Comments (1)

Comments

  • Andrew Wetzel   May 21, 2021 at 12:52 pm

    Excellent post and a well-detailed explanation!

    Thank you.

    Reply to Andrew Wetzel

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