ALTA stands for American Land Title Association, which is a national trade association that acts as the voice of over 6,000 title insurance agents, abstracters and underwriters. There is currently an active ALTA member in every county of the United States. It is an ALTA member’s job to protect home buyers and mortgage lenders investing in real estate by searching, reviewing and insuring land titles.
ALTA policies are the documents produced by ALTA that serve as insurance policies in real estate transactions. These policies can be either owner or lender policies. Owner policies are optional and purchased by the homebuyer. Lender policies are purchased by the homebuyer or the seller, are usually required by the lender and only protect the lender’s interest.
Protecting property title
ALTA policies are often used in commercial real estate transactions, where the stakes are higher, and the risks associated with the transfer of property are greater. The purpose of an ALTA policy is to protect the lender and the buyer from any unforeseen issues that may arise with the title to the property.
When a property is sold, the title to that property must be transferred from the seller to the buyer. This transfer involves a title search, which is a process of reviewing public records to ensure that there are no liens or other claims against the property that would prevent the transfer from taking place. While a title search can provide a great deal of information about a property, it is not foolproof. There may be hidden claims or issues that are not discovered during the search, which could come to light after the transfer of title has taken place.
Potential Problems
This is the stage where an ALTA policy comes in. An ALTA policy provides insurance to the lender and/or the buyer against any issues that may arise with the title to the property. ALTA policies can include coverage for issues such as:
- Forgery or fraud in the transfer of the title
- Third parties claiming they have a right to the property
- Invalid deeds or wills
- Defective recording of documents
- Incorrect surveys or legal descriptions
- ALTA policies can also provide coverage for zoning and land use issues, as well as environmental hazards.
ALTA policies can be customized to meet the specific needs of the lender and the buyer. The cost of the policy will depend on a number of factors, including the purchase price of the property, the type of property and the location of the property.
ALTA policies are an important tool used in real estate transactions to protect the lender and the buyer from unforeseen issues that could arise with the title to the property. If you are purchasing or financing a commercial property, it is important to understand how ALTA policies work and to consider purchasing an ALTA Owner’s Policy to protect your investment.
If you would like to learn more about ALTA policies, check out our website or contact us today to speak with one of our knowledgeable team members.