Sealed with Truth: Using Affidavits in Real Estate Transactions
By Ryan Martinez
Almost every real property transaction will have some kind of affidavit for one or more of the parties involved to sign. Affidavits provide a formal means to verify important information about a property’s title, ownership and condition. Many lenders include various affidavits in their closing packages that they require the borrowers (and sometimes sellers) sign. State land title associations may have standard form affidavits for use in most transactions, while some title companies or law firms may have their own affidavits for transactions they handle.
Some states do not use or may even prohibit the use of affidavits, so it is important to understand what these documents are, when they can and should be used, and what they mean for the parties signing them, as well as the agent utilizing them in an insured transaction.
What is an affidavit?
An affidavit is defined as a written statement confirmed by oath or affirmation that the statements listed in the document are true. Since affidavits are sworn statements, they can usually be used as evidence in court. The person signing the affidavit is called the “affiant,” and they must swear or affirm the truthfulness of the statements before a notary or other official who is authorized to take oaths.
For real estate transactions, affidavits are typically used to confirm facts about the property that may not be easily proven or to fulfill legal requirements. Buyers, sellers and other parties to the transaction will usually have different types of affidavits for their side of the transaction.
Using affidavits in real estate transactions
Affidavits can serve several key purposes in real estate transactions. The most common purpose is to verify various aspects of the property, including statements from the seller that they own the property clear of any undisclosed liens, judgments, encumbrances, leases or other items of concern, and that they have the right to transfer ownership to the buyer.
Another frequent use for affidavits is to confirm the identity of the individuals involved in the transaction. This may include confirming the seller is the owner of the property or the buyer verifying to the lender that they are the person who applied for the loan.
Affidavits may also be used to disclose important information that is not immediately evident, such as known defects or disputes related to the property (or the lack thereof), or recently completed work that could implicate potential mechanics’ liens. In some situations, affidavits can help cure defects in the title, resolve any discrepancies uncovered during the transaction process, or confirm the person signing the affidavit is not the same person shown on a lien or judgment showing in the title report. Underwriting counsel may require affidavits to address open mortgages or to verify the identity of all heirs of a deceased owner to insure the transaction.
How to properly prepare and use affidavits for real estate transactions
• If you are preparing an affidavit, it is critical to ensure that all the statements are accurate and truthful. Any false statements could have serious legal consequences and could create issues with the transaction. Since the person drafting the affidavit is probably not the individual signing the document, it is imperative that the contents be discussed with the affiant to make sure everything they are swearing to in the affidavit is true and accurate. All affidavits should be drafted clearly and concisely and outline the specific facts that need to be attested. It is important to ensure that any affidavits comply with local laws and regulations.
• Next, the affidavit must be signed in front of a notary or other official who is authorized to administer oaths. This is critical since this validates the authenticity of the affidavit, and the statements listed and sworn to by the affiant. The affidavit could be used in future disputes or to support aspects of the transaction, so any affidavit must be properly attested for it to be useful later.
• Many affidavits are not required to be recorded. In fact, most affidavits should not be recorded and are rather intended to serve the parties, title companies, real estate attorneys, lenders or underwriters to facilitate the transaction. Please check with underwriting counsel if you have any questions on whether the affidavit being used should be recorded to insure the property.
• Be careful if the person signing the affidavit is acting under a power of attorney. They will need to confirm the facts being sworn to with the principal to verify the accuracy of the statements to their own personal knowledge. They cannot opine as to the principal’s understanding. Also, individuals need to sign affidavits on behalf of trusts, partnerships, companies, corporations and other entities in their respective capacities or titles, so you will need to prepare the documents accordingly if the party involved is not an individual.
3. Transactions involving divestment of the property from the federal estate tax lien.
Final thoughts
Affidavits provide a formal mechanism to disclose and verify critical information about the property, protecting both buyers and sellers. They help establish the chain of title, ensure compliance with legal requirements, and mitigate risks associated with undisclosed liabilities or disputes. However, they are not a panacea and should not be relied upon to pre-empt the need for thorough research and investigation by the title agent. Affiants have signed many affidavits with information they know to be false, leaving the agent and the underwriter to address the matter later, typically in a claim and financial loss.
For buyers, affidavits offer peace of mind by confirming essential details such as clear title, absence of liens and accurate property descriptions. Lenders sometimes rely on affidavits to assess the property’s suitability as collateral for a mortgage. Sellers benefit from affidavits by demonstrating their legal right to sell the property and may help facilitate a smoother transaction process.
By adhering to lender requirements, local practices and state laws; ensuring the accuracy of statements in affidavits; and seeking professional advice when needed, you can use affidavits to safeguard your company or practice and facilitate a smooth real estate transaction. Use affidavits sparingly, and dig deep into the facts before you use an affidavit where a little research could avoid claims. Always contact underwriting counsel if it looks fishy or just too good to be true. Doma Title Insurance agents may do so by simply emailing [STATE ABBREVIATION][email protected] (for example, [email protected]).
Ryan Martinez is Vice President, Southeast Regional Underwriting Counsel for Doma Title Insurance, Inc.