A deed is a legal document used to convey a title to real property, while a power of attorney is another legal document that allows one person, the attorney or agent, to act on behalf of another person, the principal. It is perfectly legal and acceptable to use those two documents together in the same transaction.
State law governs real estate transactions and powers of attorney, so although the details often vary among different states, generally a power of attorney can sign a deed. The key is that the power of attorney must be broad enough to include either an express or implied authorization for the attorney/agent to sign deeds for the principal. Some powers of attorney may be limited to a specific type of transactions, such as finances or health care. As long as the power of attorney authorizes the attorney/agent to sign the deed, state law does not prevent that authorization.
A deed signed by an authorized power of attorney has the same effect as a deed signed by the principal. The principal's legal title conveys under the deed by signature of the power of attorney. The principal does not need to sign the deed.
The signature line on the deed should clearly state that the attorney/agent is signing under a power of attorney authorized by the principal. For example, the signature line should read: "_, as duly authorized attorney in fact for the Grantor." Additionally, the deed will need to be notarized by a public notary. The public notary will ask to see a copy of the power of attorney to verify that the attorney/agent actually has authority to sign for the principal.
Some states require a copy of the power of attorney document to be recorded with, included as an attachment to, the deed signed by the attorney/agent. In those states, if you record the deed but neglect to record the power of attorney, your conveyance will not be effective, so it is important to check your state's laws on this requirement.