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Power of Attorney & Attorney in Fact | Real Estate Prep Exam Video - YouTube
Channel: The Real Estate Classroom
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hey everyone if we're meeting for the
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first time my name is paul vachesky and
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welcome to the real estate classroom
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youtube channel where our mission is
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simple to help you pass
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your real estate licensing exam
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in today's video we're going to discuss
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two key real estate terms that you have
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to know
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and they are power of attorney and
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what's called attorney
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in fact two key real estate terms that
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you will definitely see
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on your exam so let's get to today's
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video
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so in today's video we're going to
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discuss attorney and fact and power of
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attorney and the reason i decided to
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do a video on these two key real estate
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terms is i received an email from trish
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in texas who had taken her real estate
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exam and dropped me an email about these
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terms
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and i decided to go through the
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inventory of videos that i have on this
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youtube channel and discovered that i
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really haven't talked about either one
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of these and
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and yes you need to know it for your
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exam but they are really relevant to the
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real estate sales profession
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and property management profession as
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well so only made sense that i did a
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video on them
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and there's a lot of confusion around
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these two terms as well
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so uh trish dropped me an email she said
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i had a couple of questions on my real
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estate licensing exam
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and two of the potential answers i'm
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assuming two potential answers to the
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questions were
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power of attorney and attorney in fact i
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generally know what a power of attorney
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is but i have no idea what an
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attorney in fact is can you please
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explain these terms
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and i would be glad to do that for you
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trish
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now the first term i'm going to talk
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about is what's called a power of
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attorney
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it's commonly referred to as a poa
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and here is the legal definition of what
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a poa
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is it says the power of attorney or poa
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is a legal document giving one person
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called the agent or
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attorney in fact the power to act on
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behalf of another
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called the principal the agent can have
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broad authority or legal
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or limited authority to make legal
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decisions about the principal's property
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finances medical care
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etc all right now the
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second term is attorney in fact
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and the definition of an attorney in
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fact is a person who has been
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authorized to act on behalf of another
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person usually to perform business or
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other official transactions a document
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called the power of attorney is used to
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designate someone as an attorney
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in fact and you can see by the asterisks
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down there that
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an attorney in fact does not have to be
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an attorney in fact 99.9 percent of the
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time they are not they're usually family
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members so
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those are the definitions but let me
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clarify
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a little bit better so you can kind of
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follow along with these definitions
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let me give you an example let's say
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that um i'm gonna
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i'm closing on a real estate transaction
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uh three weeks from now but i'm gonna be
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out of the country so i'm not gonna be
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here to sign these documents
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now i'm gonna have to sign all the
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closing documents i'm gonna have to
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withdraw
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money from the bank i'm going to have to
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sign mortgage notes and things like that
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i'm not going to be here so what i can
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do
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is generate a document or have my
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attorney draft a document
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called a power of attorney now that
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power of attorney is a legal document
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that outlines who is going to go into
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closing on my behalf
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to sign those documents because i'm not
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going to be here i'm going to be in a
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different country but i need to get this
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closed
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so in my example i'm going to have my
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wife be the attorney
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in fact for me so my wife
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is going to be designated in that power
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of attorney document
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as the attorney in fact now remember i
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am called the principal in this
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relationship and she will be called the
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attorney attorney in fact or sometimes
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called an agent depending on what
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what uh state you're operating in
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so i sign the power of attorney i give
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it to her
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and then i leave to go out of the
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country in three weeks from now when
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it's time for closing and all that she's
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gonna take that copy of the power of
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attorney
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where i've designated her designated her
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as the attorney in fact
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she's gonna go to the bank and use that
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document to withdraw money
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uh for the closing she's gonna show up
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to the
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the real estate closing and she's gonna
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not only sign her name on all the
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documents
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uh she's also then gonna sign my name as
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well because she is my
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attorney in fact so she is binding me
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to this decision now i can structure
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this power of attorney in a couple of
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different ways
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i can have i can give her limited
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authority or i can give her very broad
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authority
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so i may want to just say
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you only my wife who is the attorney in
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fact only has the authority to
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uh do whatever necessary that's related
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to the real estate transaction
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but nothing else or i might say hey i'm
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going to be out of the country
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for a month and i'm going to give her
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broad authority so she can basically
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make any decision on my behalf
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um because i'm not going to be here to
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take care of business so there may be
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other parts of the business and whatnot
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that i'm going to need her to basically
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handle for me so i'm going to give her a
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broad authority
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it's very important when you're drafting
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power of attorneys for yourself and
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you're designating other people as the
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attorney in fact for your decisions
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that you really look at that and decide
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how much authority you want to give that
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person that's very important
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that you uh that you take that into
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consideration
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all right so how do we terminate a power
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of attorney there are
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numerous ways but i'll kind of give you
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the five most common number one it's
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revoked by the principal so in my
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example i gave you i get back from out
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of the being out of the country and then
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i say
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uh thanks to my wife but i no longer
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need you to act on
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my behalf so i'm terminating this power
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of attorney
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if the principal or the attorney in fact
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dies now the third way is
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it expires very common in power of
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attorneys where the principal will
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include an
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expiration date for the power of
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attorney and once that expiration date
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it hits it's done it's expired court
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action certainly we know a judge can
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terminate a power of attorney
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and then it is task based
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uh we don't see these too much anymore
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because the expiration type of power of
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attorney is kind of taking over but it
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used to be very common where
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the power of attorney was for one or two
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or three specific
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things that the principal needed the the
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attorney in fact to do
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in their absence now they've pretty much
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just said it's a limited scope and
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here's the expiration date and it's
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replaced the task
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based power of attorney but they still
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do exist and you might run across
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one of those in your real estate career
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and then last but not least i just
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wanted to outline uh some examples you
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might see in the real estate profession
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where you're going to need a power of
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attorney
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this is just some of the more common
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ones and you won't even really need to
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know it for the licensing exam
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but it's a good reference number one uh
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universal agency
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in general agency we've already talked
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about these two
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categories of agency in a previous video
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and i'm going to put that link to that
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video right up here in the upper right
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hand corner
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a universal agency it gives the the
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principal
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gives the attorney in fact a greater
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uh amount of authority or broader
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authority to
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speak and act on their behalf general
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agency
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they have that power of attorney but
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it's limited in scope
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and typically we see this in property
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management
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is the most common where an owner hires
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a property manager to manage the
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property
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and then then it's just they're trying
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to determine how much authority
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that property manager is going to have
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to speak on behalf
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and make decisions on behalf of the
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owner and that is done through limited
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through power of attorneys
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uh and so it'll be a general agency or a
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universal
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agency type relationship
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certainly buyers and sellers that's
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another area it is very common
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in the real estate professional where
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one spouse shows up
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at closing with a power of attorney
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where they are the attorney in fact for
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the other spouse who is gone and if you
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are practicing real estate next to a
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military base
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you're gonna see those all day long one
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spouse is deployed overseas
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and the other spouse is uh buying a
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house or selling a house and they are
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they are signing for that deployed
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spouse because they are that
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deployed spouse attorney in fact
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and then management contracts as i
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already talked about now
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two last things before i let you go here
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agents should always obtain a copy of
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the power of attorney
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if they are listing or
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listing for lease or for sale a piece of
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property
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you want to make sure that the person
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that's signing the all the contracts the
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listing agreements and whatnot
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have the authority to do it you don't
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need the original but you should have a
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copy of
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uh of that power of attorney and just
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ask for it say
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i need a copy put it in the file now
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part two
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it's a good time at that listing
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appointment or early after
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early on after you signed that listing
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contract to educate the seller
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or that attorney in fact who has that
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document called a power of attorney
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that when closing happens the escrow
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closing company is going to need the
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original
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the original power of attorney not a
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copy the original
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they're going to need to to
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to record the deed
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with the power of attorney that's so
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important
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so they have to take both documents and
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record it now eventually that power of
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attorney is going to get or that
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attorney in fact is going to receive
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that power of attorney back
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however most places most jurisdictions
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they will not allow
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that deed to be recorded without the
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original power of attorney
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and that and also title insurance and
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those type of things
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uh the title insurance policy typically
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won't cover anything related to title
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unless that power of attorney is
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recorded with the deed so there's a lot
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of reasons why
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that is a tough conversation that you
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have to have with the client or with
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that attorney in fact because they don't
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want to give it up
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you know often what i have found in the
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business is if if the power of attorney
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is being drafted for a real estate
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transaction
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then typically the attorney that's
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drafting it on behalf of the principal
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will do
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do two originals one for the attorney in
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fact and then the other one
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to give to the escrow closing companies
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that's always the best
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win-win solutions so that is power of
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attorney
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and attorney in fact if you're going to
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continue studying here's a great video
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that you might want to check out if you
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have not subscribed to the channel
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please do so click the little circle to
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my left
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comments and questions down below i
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would love to hear from you
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that's all i got in today's video i will
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see you in my next video
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