One of the most common compliance issues in real estate transactions involves determining whether the person signing actually has the authority to do so.
Many agents focus on obtaining signatures.
Fewer agents verify whether those signatures are legally authorized.
This distinction can have significant consequences.
Why Authority Matters
When a property is owned by:
- An LLC
- A corporation
- A trust
- An estate
The owner is not necessarily the individual signing the contract.
The signer must generally have authority to act on behalf of the entity.
LLC Transactions
One of the most common mistakes involves assuming that any LLC member can sign.
Before proceeding, agents should determine:
- Who owns the LLC
- Who manages the LLC
- Who has signing authority
Supporting documentation may include:
- Articles of Organization
- Operating Agreement
- Member Resolution
Trust Transactions
When a trust owns property, agents should verify:
- Name of the trust
- Trustee information
- Authority of the trustee
The trust documents may establish who can legally sign on behalf of the trust.
Corporate Transactions
For corporations, authority may depend on:
- Corporate resolutions
- Bylaws
- Officer positions
Agents should not assume that every officer automatically has authority to execute real estate contracts.
Powers of Attorney
When a Power of Attorney is involved, agents should:
- Obtain a copy of the POA
- Confirm validity
- Verify authority granted
- Coordinate with title and legal professionals when necessary
Not all Powers of Attorney provide the same authority.
Compliance Tip
Never assume authority.
Verify authority.
A few minutes of review at the beginning of a transaction can prevent significant issues later.
Final Thoughts
Obtaining signatures is only part of the process.
Understanding who has the legal authority to sign is equally important.
Strong compliance habits help protect transactions, clients, brokers, and agents alike.
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