Brokerage

Never sign a document on your client’s behalf

Clients must go through proper legal channels if they want someone else to sign for them

At the recent Real Estate Connect conference in San Francisco, an agent who represents ultraluxury clients referenced the fact that her clients were too busy to deal with all the details related to closing their deal.

The question you must answer is what will you do when your client says, “Don’t bother me with the details — just sign it for me.”

A number of years ago, there was a lawsuit filed against the company where I worked regarding the California Transfer Disclosure Statement (TDS).

Our agent was representing the seller, who was in critical condition in the hospital. The agent had obtained a signed copy of the TDS. Several days later, the agent spilled a cup of coffee on the document. In attempt to be helpful, she recopied the document.

After the closing, a lawsuit was filed over another issue in the transaction. During the discovery process, the attorneys learned that the document had been recopied. Even though the agent still had the original document, the judge ruled against our company. The law specifically stated that the form had to be completed by the seller.

This led to a major change in our procedures. Under no circumstances, at no time, were you permitted to fill out any part of the TDS except the agent’s portion of the document. If the seller was unable to fill out the document, whatever the reason, you had to take the necessary steps to have someone else complete the TDS.

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In a recent interview, I discussed challenges related to paperless transactions with Jack Miller, chief technology officer of Austin, Texas-based brokerage The GoodLife Team. Miller said his agents have reported numerous instances in which agents from other companies signed documents on their clients’ behalf. Based upon the comments I heard at Real Estate Connect, this practice is widespread.

Moreover, if agents and their clients are engaging in this behavior in the paper world, it could happen even more easily in the digital world. All the client has to do is to give his agent his password and say, “Sign it for me.”

So when the owner of your listing tells you, “Just handle it,” what do you do?

Clearly, ultra-high-end clients expect concierge-level service. This means you don’t contact them with decisions about plumbers, termite inspectors, or when to turn the utilities off or on.

As the agent at Connect put it, “They’re much too busy to be bothered.”

The trap in this each of these scenarios is thinking that you have to be the decision-maker, or that this is somehow your responsibility.

Your responsibility does not include signing the documents on your client’s behalf!

So what are your alternatives?

Limited vs. general power of attorney

Granting another person limited power of attorney to act on your behalf is routine in a wide variety of transactions, especially in the stock market. If you have someone managing your investments, you have signed a limited power of attorney for them to manage trades for your account. The authorization to act on the client’s behalf is confined to the specific functions designated in the limited power of attorney.

In contrast, granting another person a general power of attorney to act on your behalf allows that person to make decisions as if that person is you. This type of power of attorney is commonly used on behalf of a minor child, someone who may be experiencing a medical condition where he is unable to make decisions for himself, or someone a court has deemed incompetent to handle his own affairs.

What to do when the client wants you to handle it

When you represent a high-net-worth individual, he will generally have an attorney or a business manager who has power of attorney to act on his behalf.

The first question to ask your client is, “Who handles your business issues when you are unavailable?”

Once the client gives you that person’s name, follow up by asking, “If you are unavailable, does this person have power of attorney to act on your behalf?”

If the client says he wants you to make the decisions in this transaction for him, respond by saying, “I’m sorry, but that’s not possible. That would create a conflict of interest and could even cause me to lose my license.”

In the case where a spouse may be unable to sign, it’s still important to have a limited power of attorney drawn up so that all signatures are legal.

This is a primary reason that mortgage and title companies require the signatories to notes and deeds to appear before a notary in person. It’s also the reason that if you are signing on someone else’s behalf, you must sign their name with “by your name” and attach a copy of the power of attorney.

So here’s the bottom line: Never, never, never sign a document on your client’s behalf.

Get the client’s brother, cousin or friend to sign the document. But always make sure that you have gone through the appropriate legal channels, such as obtaining a power of attorney, so that you and your client are both protected.

Bernice Ross, CEO of RealEstateCoach.com, is a national speaker, trainer and author of the National Association of Realtors’ No. 1 best-seller, “Real Estate Dough: Your Recipe for Real Estate Success.” Hear Bernice’s five-minute daily real estate show, just named “new and notable” by iTunes, at www.RealEstateCoachRadio.com.