A power of attorney is created when a person -- the principal -- creates a document giving authority to a third party – the agent – to accomplish tasks on his behalf. The agent’s authority can be very broad or narrowed to just one area. When an agent has authority to sell the principal’s home, he must act in the principal’s best interests.
A power of attorney document creates a fiduciary relationship between the agent and the principal. This means that the agent is bound to act according to certain duties, including loyalty, fidelity, full disclosure and integrity. The agent must be loyal to the principal and deal honestly within the boundaries of the power of attorney relationship. The agent cannot engage in self-dealing practices, especially if those acts would not be in the principal’s best interests. For example, an agent should not sell the principal’s house to himself for less than its market value.
To avoid even the appearance of self-dealing, an agent must be careful to keep money from his personal business separate from his dealings for the principal, including proceeds from the sale of the principal's home. If the agent mixes the principal’s funds with his own, the funds could become so mixed – or commingled – that it becomes difficult to determine which funds belong to the agent and which to the principal.
Generally, agents are entitled to reimbursement for reasonable out-of-pocket expenses incurred on behalf of the principal. Broker fees or cleaning expenses could be considered reasonable, reimbursable expenses when an agent sells a house for the principal. Reimbursement is not the same as profiting from the sale of property. Depending on the language contained in the power of attorney document, the principal may require the agent to keep receipts and records for reimbursement.
Abuse of Authority
Interested parties, such as family members or friends of the principal, may report abuse of a power of attorney to the principal or to appropriate authorities. The agent may be removed with sufficient evidence of self-dealing or a breach of the fiduciary duties. Depending on the exact circumstances of the abuse of power, the agent could even be guilty of crimes like fraud, theft or forgery.