What is an ALTA Statement?
What is an ALTA Statement in Real Estate?
The American Land Title Association (ALTA) is a nationally recognized group that works on behalf of the Title industry. For over 100 years, ALTA has set the standard for documentation requirements in real estate transactions. An ALTA statement is a document executed before closing a real estate sale. The document is a statement of what the seller, buyer, and/or lender know about the property or the title to the property and anything that may affect the sale or subsequent ownership of the property.
Laying All the Cards on the Table
The process of purchasing real estate involves many different stages that sellers and buyers go through before concluding the deal and passing ownership on to the property buyer. Nobody likes surprises at the last minute and they certainly don’t like discovering a problem after purchasing property and taking title to the real estate. To ensure there are no surprises before or regrets after the deal closes, an ALTA statement is provided by all parties to the transaction to detail what is known about the property. The information disclosed in an ALTA statement should include:
- Lien notices received on the property
- Outstanding agreements involving the property
- Recent construction work performed on the property
- Fixtures or utility lines attached to or affected by the property
- Leases or rental agreements in existence for the property
- Other pertinent information or data related to the property
ALTA Statements Offer Protections
The reason ALTA statements are important in real estate transactions is they provide property buyers with protection, or indemnification, against fraud and dishonest behavior. They also protect a buyer’s mortgage or finance company by certifying the property doesn’t have any prior liens filed against the property. Mortgage lenders don’t want to be second in line behind someone else when they provide the funds to purchase the real estate and have the greatest amount of risk in the deal. This includes liens filed by government offices for unpaid taxes or other assessments. It also includes any claims that can be made against the property by third parties seeking compensation from the seller.
Indemnification is Important
It’s a big word and hard for most folks to understand but indemnification means protection. Being indemnified means your not going to be held financially or criminally responsible if something is wrong because one of the parties didn’t tell the truth. Think of it as a “Get out of jail free” card for real estate buyers and sellers also. If a property seller or buyer isn’t truthful and there are problems in obtaining a clear title free of liens or encumbrances, the ALTA statement’s indemnification clause protects buyers and sellers from making a bad deal.
What Could Possibly Go Wrong?
Real estate sales transactions are straightforward processes with recognized protocols for completing a business deal. What could affect a transaction that seems so simple and that happens all the time? A lot of things can go wrong with a real estate sale due to the complexities of property ownership, chattel (furniture and other assets) concerns, mineral rights, and a dozen other considerations. Private lenders may have a contract that states an interest in the real estate if the debt is not repaid on time without
having an official lien filed at the county recorder’s office. The property may be under consideration for condemnation by a public authority. Suffice it to say there can be a lot of unknowns involved in a real estate transaction and it’s in everyone’s interest to get to the truth and facts about the real estate in question.
ALTA Statements Help Make the Deal
There is an old saying in business – trust but verify. Taking someone’s word as fact is all well and good, but with the amounts of money, legal responsibilities, and ownership concerns surrounding real estate it’s best to get independent verification of information. ALTA statements offer an opportunity for the parties to a real estate transaction to officially acknowledge they’ve provided full disclosure concerning the property. Before concluding the business transaction by making payment from buyer to seller, an ALTA statement offers peace of mind that the future won’t be negatively affected by the transfer of the title to the property or the Deed of Ownership to be challenged by a third party.