What is an Affidavit of Title?

Used in real estate transactions, an affidavit of title is a legal document stating certain facts regarding a property. Generally, the affidavit of title is offered by the seller of real estate and states the seller's marital status, that the seller is the owner, that the seller is not in bankruptcy proceedings and that there are no liens or encumbrances affecting the property. The document generally is signed under oath and witnessed by a notary public.

Most property transactions are conveyed with a clear title. A clear title is one where no parties other than the seller have a legal interest in the real estate. On the purchasing side, there are many parties that have a stake in the title, including the buyer, the lender and the title insurance company.

Each party is interested in avoiding matters that could result in a decline in property value or that would be expensive to resolve. A title commitment, conducted during most real estate transactions, investigates the legal ownership of a property and any potential legal issues. The title commitment research might be conducted based on available recorded documents, usually at a local government office.

Between the date of a title commitment and the recording of the deed, there usually is a gap. During this gap, additional documents pertaining to the property might be recorded, such as a lien against the property, divorce papers that convey the property to a spouse or a bankruptcy proceeding. These items would affect the title of the property and present a problem to the purchaser. Requiring the seller of the property to sign an affidavit of title is one way to reduce the liability resulting from the gap between the title commitment and the deed. If any liens or other legal issues came up after the closing date, the buyer would rely on the affidavit of title to prove that the seller is responsible for those items.

An affidavit of title also can be used on behalf of a mortgage or title insurance company. In these instances, it sometimes is referred to as a letter of indemnity. A letter of indemnity is a document in which one party excuses a second party from liability. An affidavit of title can be used to protect the lender or the title company from liability for issues arising after the title commitment date.

The potential liability in a real estate transaction can be higher when purchasing a house on a short sale or after foreclosure. If an owner is experiencing financial trouble with a property, the owner might have other financial problems as well. In these situations, it becomes even more important to investigate liens or other legal issues.