Authorization To Release vs. Power Of Attorney

We use both Authorization to Release and Power of Attorney documents when we do deals. But how can you know which one to use in which situation?

Authorization To Release vs. Power Of Attorney

Before we begin, let me first clarify that I am not an attorney! I would always encourage you to seek advice from your own attorney before using these documents, and you may want to do your own research to find the exact definitions of these documents and how they work. For our purposes, I’m going to be paraphrasing and telling you how we utilize them.

The Authorization to Release is simply a letter that grants you the ability to act on a person’s behalf. We typically use this on the seller side—so that could be you, or your company, acting on behalf of the seller. We do this after we have a property under agreement and we’re purchasing it either on a subject-to or a lease purchase, and what it does is it allows us to speak with their bank and acquire any financial documentation that we need from their bank throughout the term.

The Power of Attorney document is a legally-binding document. If I were to ask my attorney which one he would rather have, it would be this one. We tend to use the “Limited Power of Attorney” specifically, because we’re only acting on behalf of the seller with regards to one specific property. This essentially gives us the authority to communicate with any and all parties involved and act as if we’re the seller, which includes the signing of any documents.

So, why would you may want to use one over the other? Well, at the end of the day it would be great if we could get a Power of Attorney document on every property we take on. That just makes the process easier for us, as it gives us more control and lets us take care of everything on our own, without getting the seller involved. That means less delays, hiccups, and less time going back and forth with the seller.

But the reality is that signing a Power of Attorney document takes a lot of trust. It’s a legally-binding document, and many people are naturally going to be hesitant about signing that over to you as opposed to just giving you access to some information from the bank. We totally understand this, which is why we will often resort to an Authorization to Release document when people are hesitant.

With an Authorization to Release, we can still get everything we need from the bank and work with the seller to get everything else done. And sometimes, as we continue to work with the seller and gain their trust, they may become open to signing a Power of Attorney document just to make their lives easier.

So, I hope this gives you some context into how we use these two documents and why you may or may not want to use one over the other. And again, I am not an attorney—so be sure to do your due diligence and speak with your own attorney before utilizing these documents for yourself.