An often overlooked area on a purchase contract is who can sign as the seller. Seller deed requirements are an important area for listing agents and sellers to comprehend. This is especially true when the owner of the property is not a regular person. Let’s discuss the basic requirements listing agents and sellers should follow when the seller is a trust, company (such as an LLC), or estate. We will also go over a few helpful tips for sellers using a power of attorney.
Seller Deed Requirements For A Trust
There are several types of trusts. They mainly fall into revocable and irrevocable trusts. Revocable trusts may be altered or canceled. Irrevocable trusts may not be altered or cancelled without the permission of the beneficiary. Typically, a seller being a trust is not an issue, but it is important to have proof of a couple main items. First, the deed must be recorded prior to closing. Next, verify who may sign on behalf of the trust.
Make sure to check the following when the seller is a trust:
- Documentation proving authorized signor of the contract and deed
- Deed must be recorded prior to closing and provided to lender
- Review current recorded deed to verify ownership
- Authorized signor for the trust to sign contract
- Involve a real estate attorney
- Attorneys will ask for a “Certification of Trust” to ensure it has statutory requirements
- If it is an older trust, it may have to be updated by an attorney
- Consult the buyer’s lender to confirm trust is okay as seller
- Determine if sale involves a gift of equity to a family member
Gift of Equity
Sometimes a family member sells a home to a relative. Often in these cases, the down payment is a gift of equity. Keep in mind that gifts of equity cannot come from a trust. There will be some requirements for a gift of equity because the gift must come from a family member. A trust would not qualify as a family member. Therefore, there are requirements for trusts and a gift of equity:
- Deed into the name of the family member (family member usually needs to be the member of the trust) – consult an attorney and/or tax professional before transferring property
- Seller on the contract must be the family member and not a trust
- Gift letter must be from the family member to meet the family requirement
- Complete prior to closing
Seller Deed Requirements for a Company
A company is often the seller of real estate for various reasons. Foreclosures are a common reason for the seller to be a company. Additionally, the seller could be an investor. Investors usually have the deed in the name of an LLC or similar entity. Either way, verify who may sign. For a valid deed, the person signing the deed and contract must have legal authority to sign on behalf of the company.
Banks or companies should easily provide required documentation for authorized signors. An alternative would be to look up the articles of incorporation for the company. This can be found online. First, ask which state the company was formed. Next, find the company on that state’s secretary of state website.
If the seller is a company:
- Ensure that the seller on the contract matches the deed
- Request documentation to prove the authorized signor
Seller Deed Requirements for an Estate
There are times where heirs or an estate sell real estate. These are often complicated; primarily because estates involve multiple owners. Therefore, this means complex title searches. Attorneys must determine the heirs and who must sign the deed for a valid title transfer. First of all, ask the estate attorney to provide documentation for who is allowed to sign for the estate. As long as the estate process has been completed, the estate’s attorney can easily provide this proof.
Request if the seller is an estate:
- Proof for who is authorized to sign for the estate
- Ask the estate attorney if there is anything that could hold up a sale
Seller Deed Requirements When the Seller has a POA
For many reasons, sellers need a power of attorney. The seller may be incapacitated, out of town for extended periods, or just not able to attend closing. The key is to ask EARLY if all sellers will be available for signing the deed and other seller documents. The real estate attorney for the seller could prepare this document. A copy of the seller POA is required by the lender to confirm the seller’s authority to sign.
Request if the seller will sign by POA:
- If existing POA, request a copy and provide a copy to the closing attorney
- POA required? Start the process early
- Provide the seller POA to the lender
These seller scenarios are complicated. The best advice is to consult the closing attorney and/or lender for requirements.
Keep in mind that this is not legal advice and certainly doesn’t cover all scenarios. Discuss these matters with a knowledgeable real estate attorney.