Do They Really Have Authority? Understanding Apparent and Implied Authority in Real Estate Transactions

As a settlement attorney, one of the most common concerns I hear from buyer’s agents—especially in transactions involving entities like LLCs, corporations, trusts, or partnerships—is:

“How do I know the person signing the contract on behalf of the seller actually has the legal authority to do so?”

It’s a critical question—and one that can make or break a deal. If the wrong person signs, the purchase agreement may be unenforceable, potentially exposing your buyer to risk and putting you in an awkward position.

Here are two legal concepts that come up frequently in these situations: implied authority and apparent authority.

Implied Authority: What’s Needed to Get the Job Done

Implied authority refers to the kind of authority that is not explicitly given in writing but is reasonably necessary for someone to perform their role within an organization.

In the context of real estate, this usually involves a representative of an entity (like a managing member of an LLC or an officer of a corporation) who is presumed to have authority based on their title or position.

Example:

You’re representing a buyer, and the seller is an LLC. The individual signing the contract identifies themselves as the “managing member.” Even if you haven’t seen the LLC’s operating agreement yet, it’s generally reasonable to assume that a managing member has the implied authority to sell property on behalf of the LLC.

But be cautious: implied authority has limits. If there are internal restrictions (for example, the LLC requires unanimous member consent for property sales), then even a managing member may lack the authority—despite appearances.

Takeaway: Implied authority is based on internal roles and responsibilities within the entity, but you should never assume it without some form of documentation.

Apparent Authority: Looks Can Be Deceiving

Apparent authority is all about perception. It occurs when a business or entity creates the impression that someone has the authority to act on its behalf—even if they technically don’t.

In other words, if the seller (the entity) has allowed a person to appear as though they are authorized to sign contracts, and a third party (like your buyer) relies on that appearance in good faith, the seller may still be legally bound.

Example:

Suppose you’re dealing with a property held in trust, and a certain individual has signed contracts and handled sales on behalf of the trust for years. Even if they no longer have that authority—or never did—if the trust never corrected that public impression, a court could find that the trust is bound by that person’s actions under the doctrine of apparent authority.

The risk? If the appearance of authority wasn’t created or permitted by the entity itself, the deal may fall apart—and your buyer may have limited legal recourse.

Takeaway: Apparent authority protects third parties who rely in good faith on someone’s apparent role—but it’s not foolproof. Courts still look at whether the entity actually contributed to that appearance.

Why This Matters in Real Estate Transactions

When you’re working with an entity seller—whether it’s a company, trust, or partnership—it’s not enough that someone is willing to sign the contract. They must be legally authorized to bind the entity.

Relying solely on titles or past behavior without verifying authority can lead to:

• Voidable contracts
• Closing delays
• Litigation risks
• Unhappy clients (and possibly blame falling on you)

How to Protect Your Buyer (and Yourself)

Here are a few best practices when dealing with entity sellers:

1. Ask the Right Question Early

As soon as you learn the seller is an entity, ask:

“Who is signing the contract, and in what capacity?”

This gives you a clearer path to assess whether the signer is more than just a familiar name—they’re someone with proper legal footing.

2. Request Documentation

Always request supporting documents that confirm authority:

• LLCs: Operating agreement or resolution identifying authorized signers
• Corporations: Corporate resolution, bylaws, or board meeting minutes
• Trusts: Certificate of trust or trust agreement showing who the trustee is and what powers they have
• Partnerships: Partnership agreement or written authorization

3. Be Wary of Assumptions

Just because someone has signed on behalf of the entity in the past doesn’t mean they’re authorized to do it now. Authority can be limited, revoked, or restricted.

4. Loop In Legal Support

When in doubt, contact [email protected] – we are here to assist you. This isn’t about delaying the deal—it’s about making sure it closes correctly.

Final Thoughts

As a buyer’s real estate agent, you play a vital role in keeping transactions on track. But when entities are involved, don’t rely solely on appearances or titles. Understanding the difference between implied authority and apparent authority can help you spot red flags and prevent authority-related issues before they become legal disputes.

If a contract is signed by someone without valid authority, your buyer may not be able to enforce it—and that’s a risk no one wants to take.